Talking of ' going short ' reminds me of the incredible story in
"The Rogue Trader" where the young Englishman working on the
Singapore/Tokyo futures exchanges eventually sent the merchant bank he
was working for ( forget their name ) into liquidation to the tune of
some 200M pounds. His problems started when one of his operatives made
the mistake of buying instead of selling on a sizeable transaction.
He opened a ghost account to cover the discrepancy and from then on all
adverse transactions went into this account. In trying to clear the
account, with ever larger transactions, the position became worse and
worse. This went for a couple of years.
The story would be unbelievable, if it wasn't true. The Chairman
of the Bank was quoted as saying that "it wasn't really difficult
making money in futures" He only saw the apparent gains, the
losses were all in that ghost account, and he hadn't a clue as to how the
futures system really worked. It was all left to the ' blue eyed boy' in
Singapore" who was making them lots of money. All the senior
management worked on commissions running into 100k amounts so they were
more concerned with counting their future loot than checking to ensure
all was above board. Even the auditors didn't unravel the mess until the
very end.
The book is well worth a read, it's in the library. It must be the
classic on "how not to make a fortune"
Cheers
BG
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