Nick Leeson...Who?

by Larry Levin

Nick Leeson, once the poster boy for moronic trading, has been replaced by Jerome Kerviel. So-called "rogue trader," Nick Leeson, racked up losses of approximately $1.4 billion at Barings Bank in 1995 that led to its collapse. Convicted of fraud, he was sentenced to a jail term of six-and-a-half years. Surely, Monsieur Kerviel will be treated to the same.

Perhaps Nick Leeson will still be remembered a decade from now due to the Barings collapse, but the losses by Kerviel at Societe Generale , France's second-largest bank, will always be larger. Societe Generale stunned financial markets this morning when it announced the aforementioned trader had cost it an unfathomably large $7.1 billion in one of the largest ever frauds by a rogue employee.

Well, that's what Societe Generale wants us to believe, but I don't. So the second largest bank of France is so woefully unequipped to manage risk that it allowed one man to build up a $7.1-billion loss in less than one year? If that's true, then 100% of all depositors should withdraw 100% of their funds immediately. The bank cannot be trusted.

Personally, I believe its part of the staggering losses due to the CDO garbage on its balance sheet and the bank just doesn't want to admit it. The bank also announced a $3-billion sub-prime related write-down this morning.

It's too bad Leeson and Kerviel weren't CEO's of their banks; if they were, they'd be paid hundreds of millions of dollars to just go away. CEO's are not held criminally accountable for idiotic decisions - no matter how financially debilitating they are to shareholders.

Remember Monday's WILD sell-off that had everyone scratching their heads in surprise? That was surely created by Societe Generale (SocGen) management coming to grips with their terrible investments and bailing out...en-masse. This caused others to exit positions that wouldn't have otherwise been unwound and caused huge margin-related liquidations in both equity and commodity accounts across the globe.

What else happened due to Monday's drop? The Fed made an emergency rate cut of 75-basis points. The Fed did NOT react to economic data, but to the market. Never again should anyone question whether the Fed explicitly tries to support the market or not - it certainly does. It now looks like that move was unnecessary in light of the SocGen’s admission. What happens next week when the Fed meets? It shouldn’t cut rates, but surely will. After all, what Wall Street wants Wall Street gets.

The other big news today was the finalization of the government hand-out program. With the Fed move and the government action, things are looking up - literally (on the charts). Unfortunately, we Americans are addicted to a drug more powerful than crack cocaine: credit. And like addicts, Americans are in denial. The government and the Fed, our pushers & enablers, saw us curled up sobbing, shaking, and sweating last Tuesday morning and gave us an immediate fix of more credit and a promise of "free money."

After the last few weeks in "credit rehab," we have learned nothing: we are back on the streets desperately looking for yet another fix via Bernanke & Co. Will Ben take us back to rehab next week? No, he'll do what any pusher would do: roll up our sleeve for the next injection. Listless, we'll feel the stimulation rush through our economic veins, temporarily relieving us from our recent pain and misery. Will we vow to get off "credit" after this last fix? No way! We'll never think that far in advance. Detached from reason, we'll succumb to the pleasure of the moment and ask for more. And we'll get more, Nancy Pelosi promised that today!

All hail the Fed and the federal government.

Real Time Trading Signals*for

Trade Date: 1/24/08

E-Mini S&P Trades*
(before fees and commissions):

8:37 ID VA Buy 41.75 = +.75, +1.75, +7.00

9:28 ID VA Sell 41.75 = -1.00, -1.50

10:54 FT Buy 48.50 = -1.50 all

1:12 ID VA Buy 49.50 = +.75, +3.00, +4.75

1:51 ID VA Buy 01.00 = +.75, -1.50

E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 8:58am at 703.2 = -.7 (1 lot)

2) Sell @ 9:19am at 697.4 = +2.0 (1 lot)

3) Sell @ 9:22am at 695.0 = -1.1 (1 lot)

4) Sell @ 9:35am at 695.4 = -1.1 (1 lot)

5) Sell @ 9:48am at 696.9 = +.4 & +.5

6) Sell @ 10:13am at 695.0 = +1.0 & +1.0

7) Sell @ 10:36am at 695.6 = +1.0 (1 lot)

8) Sell @ 10:45am at 695.0 = -1.2 (1 lot)

9) Buy @ 10:55am at 695.5 = +.5 & -.8

10) Sell @ 11:49am at 689.9 = -1.2 (1 lot)

11) Sell @ 12:11pm at 689.9 = -1.2 & -1.2

12) Buy @ 1:12pm at 695.1 = -1.2 & -1.2

13) Buy @ 1:42pm at 698.6 = +1.2 (1 lot)

14) Buy @ 1:46pm at 697.9 = -1.0 (1 lot)

15) Sell @ 1:58pm at 694.8 = +2.0 (1 lot)

16) Sell @ 2:20pm at 693.4 = +.4 & b/e

17) Sell @ 2:40pm at 696.0 = +1.0 (1 lot)

18) Sell @ 2:55pm at 695.0 = +.5 (1 lot)…-$40.00


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