Yes in every one of these cases (LTCM, Amaranth, London Whale, Amaranth, Hubler) there were risk managers guys who spoke up and were ignored and/or overruled (watch the film Margin Call). But as JackRab says: I do think that the power of risk managers and compliance type people has increased significantly over the last few years. When I was an investment bank trader in the early 2000's the risk management department was a joke; I only saw a risk manager once, and he was easily 'snowed'. By the time it got to 2013 the chief risk manager at the hedge fund manager I was working at had an enormous amount of power. Looking again at https://en.wikipedia.org/wiki/List_of_trading_losses it seems like the frequency and size of these large losses has decreased since the 2008 crisis, and especially in the last 5 years as compliance and risk departments have been beefed up. Probably in a few years the wheel will turn back and we'll start seeing major blow ups again. I think the outright fraud cases like Kerviel / Adoboli / Leeson will be less likely however. GAT
Yes.. voices of reason are sometimes ignored and sometimes for percieved selfintrest that goes against fiduciary responsibilitie and job obligations. I traded pairs in a fully backed group where the head trader took crazy risk when he was losing and blew everything up (very large amount) in three days. I left shortly before the debacle after issuing numerous warnings and having heated arguments about position sizing. The fellow overseeing risk back on Wall Street was mostly conflicted about how the head trader traded because of precieved selfintrest and perhaps even a touch of not really understanding. One amazing fact about the situation was that the sole trading experience of the head trader was that he had blown up his account at a prop firm and went on to lose hundreds of thousands of the firm's money after talking the firm owner into letting him trade in the red- "on makeup".
I read "When Genius Failed" and enjoyed it immensely. Would you say "Hedge Hogs" is just as good as "When Genius Failed" ? Thanks
The books are a little different in format. What I liked about Hedge Hogs is they spent a lot of time talking about the personalities and backgrounds of both Arnold and Hunter. It was more personal. It spent less time explaining the natural gas market (most would find that boring) and more time on the main characters. When Genius Failed gave a more broader approach. Often getting technical in terms of explaining the fixed income markets, the structure of those markets, and less on the characters. Partly because there were a lot of people involved and to be honest, they were not terribly interesting. I think traders will find Hedge Hogs more fun to read as they will be able to see more of themselves in general in these two characters. There has been very little written about Hunter and he is actually a very interesting person in terms of his background and personality. I enjoyed both books. If you enjoy Hedge Hogs, I also suggest you read "Short" by Cortright McMeel. It's a fictional book but very entertaining. It's about the energy market as well and how a bunch of traders from different parts of the industry are trying to score a huge trade. Their storylines intersect with each and it makes for a very entertaining read and very accurate as it pertains to energy trading as it was written by a former trader.
It also seems in institutions many a times "a trade" is a result of single man i.e. superstar's initiative like Brian Hunter at Amaranth. It should rather be a committee initiative where analysts from different "trading disciplines" fundamental, technical, other quantitative, seasonal, astrological, maths etc. etc. etc. should chime their views in and a very thorough trading decision is "finally taken". This would also virtually negate the "excessive risk" taken by a single trader due to personal emotions or ego. Despite earning 100s of millions each year, many/most institutions are "bastardly cheap" in spending on the manpower to support and sharpen their research and trading ops. They would rather spend on private jets and hooker parties for client to get more AUM and feel giggily.......for a little while, till the returns sink and assets implode in many a cases.
WOW.. thanks for such a chock full of info reply,appreciate it ! As for me ,I like when they delve into all the characters (personalities/quirks) and technical mumbo jumbo I'm going to order Hedge Hogs and Short,hopefully both are available for Kindle,if not I'll just order the paperbacks. Thanks again.
Alright. Since your so damn appreciative of my suggestions, I'll offer one more. Usually I get my fingers bitten off trying to help people around here. Street Freak: A Memoir of Money and Madness Paperback – September 11, 2012 by Jared Dillian (Author) This is a great book written by a trader for traders. It tells the story of a very average, mediocre, plain vanilla kid from a state school that was fortunate enough to land a trading gig at Lehman. This book tells his story from 9/11 all the way to the collapse in 2008 and there is plenty of trader porn for the home gamers on here. Enjoy!
Good points; sounds like they did not do that much cheating , do to the small 750K CFTC fine. Sounds you know more about that big star trader than i do, mainly because i have enough stuff on my plate. Even though i seldom use the word gamblers/gambler in markets; Maverick's book link used ''lone star gambler'' She must mean stupid risk, or double down on a loser, markets are not gambling. Personal note reminder; try not to argue with a policemen; or if federal regulators ever warn not to trade last half hour, obey a lawful order.LOL I assume her info is accurate?? [except her bet words/gambling confused with markets ]
This sounds like something I will enjoy,I love these types of stories. I'll get this too and read it first! Hey,don't let em bother you ,just think of those that who do appreciate your help. Keep em coming...Thanks so much !