An 'expert' loses $2 billion? Only on Wall Street
Such a whopping loss on one guy's gamble couldn't have come at a worse time for UBS, and it will likely force the bank into the red for the quarter.
We learned overnight that a "rogue" trader at Swiss bank UBS (UBS) bled out a stunning $2 billion at the company's investment division in the third quarter. These are not clients working with UBS brokers, mind you, but one yeahoo playing with house money to enrich this banking giant and its corporate overlords.
Makes you really wonder who these "experts" are.
UBS shares were slumping by 9% to $11.50 in early trading Thursday on news of the impairment charge the bank should book for the quarter as a result. It's bad enough that there are massive layoffs happening at the bank, bad housing loans that continue to take a toll, the specter of a sovereign debt crisis weighing on credit markets and all the other mayhem in the financial sector. Suffering a $2 billion loss at UBS thanks to one guy's gamble couldn't have come at a worse time, and it likely will force the company into the red for the quarter.
Post continues below.
This UBS debacle is a painful example of just how utterly run-of-the-mill many of these Wall Street "experts" really are. How much cash would you have to be playing with to lose $2 billion in a quarter? I'd like to think that I wouldn't take such extreme risks to suffer a loss of every penny. And even if I were playing fast and loose, I highly doubt I could crap out so utterly fantastically. I'm sure you feel the same way -- and probably have a shoebox of brokerage statements to prove the good calls you've made in your life.
The market flopped about 16% from its July peak to its August low, so I'm assuming that's where the trouble came in. But even if you bought a triple-leveraged ETF like the Direxion 3X Bull Financial ETF (FAS) because you somehow believed banks were magically on the mend, you would have lost "only" 37%. (Lest you criticize my math, remember that 3X funds are never a true triple up or down because of fees and other factors.)
Think about that. If UBS gave you or me $3.2 billion, then allowed us to plow every cent into a leveraged investment that was predicting a surge in the financial sector, I would have tallied the same performance as this "rogue" trader.
It's times like this that make you wonder why the heck we care a whit about what Wall Street says about the overall market trend, earnings estimates or the political environment in Washington, D.C. "Experts" don't make moves like this.
Lest you think this is an isolated incident, I distinctly remember a Merrill Lynch trader getting in deep doo-doo for a roughly $450 million currency loss amid the financial crisis and then trying to cook the books and cover his loss after the fact. There are other tales, but these two are some of the most dramatic examples in recent memory.
On the plus side, perhaps there's an opportunity for you and me in this mess. I'm photocopying statements from my brokerage account later today and sending them over to UBS as proof of my investing acumen.
I hear there will be a job opening on the trading floor very soon.
What's your biggest investing triumph of the past few years? Share it here in the comment section below and I'll pass it on to UBS!
Jeff Reevesis the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
simple........it's not his money = he does not give a chit !!!
He should go to jail !!!
Guess the "Expert" put the Chips on the Wrong Number at the Roulette Wheel.
Rogue Trader My ****. They Picked His Name out of a Hat. Probably doing EXACTLY what his
BOSSES told him to do. This whole "Rogue" thing is just a smoke screen to COVER Up the
Fact that the BOSSES don't have a Clue. Seriously. Who would Invest in a Bank that had such
poor control over what it's Employees are doing ?
This **** is just a patsy. The big boys told him, "hey, we are going to need a goat here. You are a complete waste of space anyway, so we have decided you would be the perfect front man for a 2 billion dollar shift in tax deductable "losses". OK? OK. Now go out there, make yourself accessible to the tabloids and MSN and tell them how much of a screw up you are. Your check will be in the mail".
USB head honchos would have buried this guy without anyone ever taking notice if they did not actaully want this idiot taking the fall for their inadequacy and poor financial decision making.
Pick me! Pick me! - I want a crack at the 2 billion....I think I could double it.......and if you believe that - then you probably believe only one man is responsible......
Just to answer the title, because in economics there are no experts. The picture says it all, roll the dice.
KramRegnowsin: I wish I had a job where I could be a complete screw-up and still get a nice salary and hefty bonus.Kram, hey, your dream job is now available. Yahoo is looking for a new CEO. Not only will you get nice salary and hefty bonuses, their severance package is unbelievable.
HOW DOES AN EXPERT LOSE 2 BILLION $?
Those who have been touted as experts are the same experts that put the world in the financial hardships that engulf us all...................by flaunting and showcasing those expert level skills!
the reason for the loss is management and those in the middle office or risk management office
every trade that is made must correspond to a limit as to counterparty, limit by currency, limit by
maturity date which are suppose to be monitored in real time. the back office is to keep track of the trading ticket numbers and control that a trader has no more than one 50 ticket book at one time.
this is done by paper or paperless but controlled by the back office. the back office is suppose to control confirms received by counterparties to protect from phantom trades. if people were doing their jobs a loss of this amount could never happen.
having been in charge of a middle office in the 1990's and with computer updates of today this should have been impossible.
Wall street has become a joke. The people of wall street don't care about this country or it's people.
Copyright © 2014 Microsoft. All rights reserved.
The company has made at least 4 acquisitions in the space, and few people have paid any attention.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.