To keep experiencing the novelty and freshness of the market, and to keep from being trapped by your preconceptions, it’s important to keep distinguishing between the tape and your interpretations of the tape. View as neutral both the events and your inclination to impose your interpretations on them. You enter the market without expectations, surrendering to it rather than struggling with it for personal gain.Ultimately, you are able to fine-tune your responses.—-
Archives of “personal gain” tag
rssBook Review: Think, Act, and Invest Like Warren Buffett
This is a tough book to review, because I generally respect the author, but there are many things I don’t like about the book. Let’s start with the main one:
My friend Alice Schroeder came to speak to the Baltimore CFA Society early in November. It was a great talk, and afterward, I took her back to the Amtrak station. What was our main topic of conversation? The many authors with limited or no dealings with Warren Buffett who invoke his name in order to get better sales. I won’t name names. I have relationships with a number of them.
I will review “The Snowball” soon. Alice Schroeder spent around five years creating that lengthy book, and I can see why she would be upset over those that use Buffett for their own personal gain.
This book is another example of that. Only chapters 1 and 2 have anything to do with Buffett, and there he is quoted extensively to the point where he should be listed as a secondary author, and get a cut of the royalties. But in the next nine sections have almost nothing from Buffett; it is all the philosophy of Larry Swedroe. (more…)
5 Rogue Traders -They had Broke Banks
So, who are the rogue traders that have experienced all of this? Here’s a small sample (the ones we know of!). They are not in chronological order but in order of how much money they actually lost their banks (from the lowest to the highest):
1. John Rusnak
The guy that brought down the Allfirst Bank and incurred losses of $69.2 million.
He was sentenced to 7.5 years in prison on January 17th 2003 for hiding the losses that he incurred as a currency trader. He hid the losses for a year. He is now under confinement at his home (since January 2009, meaning that he served almost six years for his rogue trading).
He was ordered to pay back $1, 000 per month after his release from prison and despite the fact that he remains in debt to the full sum of $691.2 million he will probably never be able to pay it back. How did it all happen?
- Allfirst Bank wished to make its forex operations go from just hedging to bringing in a yield of profits and thus increase the total profits of the bank.
- John Rusnak was hired to do this.
- Rusnak was bullish on the Yen. He believed that the Yen would not fall any more after the bursting of the Japanese bubble. He believed that the Yen would rise against the Dollar.
- He neglected to hedge his forward contracts believing that the Yen could not fail to rise.
- With the onset of the Asian crisis, the Yen fell.
- He thus entered false options into the systems to make it seem as if the positions were hedged. He also asked for more money from high brokerage accounts in order to try to win back the money that he had already lost.
- The management granted this to him and he invested even more money.
- Rusnak made a personal gain of $550, 000 in bonuses plus his salary.
- The losses only came to light when the bank asked for capital to be released and they realized that Rusnak had been working in the red all the time.
- Rusnak was fired from his position and along with him he brought down 6 senior executives for failing to detect the scam.
One thing is for sure: Rusnak has kept his nose clean since getting out of prison and has managed to fall into relative anonymity. Nobody knows what he’s doing today for work. (more…)