junior's toks

Greed is good......?

China Oil Aviation loss more than $550 mm in trading losses. (Some reports say it is $900 mm). But it does not matter, 550 mm is still a lot of money to lose.

Wednesday 01 December 2004
'Speculative trading' is to blame for China Aviation Oil's losses
A Singapore-listed Chinese company that sources jet fuel for China is in deep trouble after losing $550 million in speculative oil trades, triggering concern over other China-linked stocks there. China Aviation Oil (Singapore) Corp's losses, announced by the company late on Tuesday, equal its market capitalisation of $549 million and raise serious questions about its future.

How can they loss so much money on derivatives trading? It is again due to another rouge trader - Chen Jiulin (well, he is not convited yet. So, this is just the general belief at this stage).

Who the hell is Chen Jiulin? I really have no idea. But I guess his english name should be Nick or Leeson. You might say, why all these bad things happen in Singapore ha? How come Malaysia dont have ha? Well, the answer is simple, because derivative trading is strictly controlled in malaysia. You do not have that many 'things' to play. That is why Liama is only playing futures (and his...er.............er..............2 inches...er........er.....nose...which is not so interactive). I said before, finance is a black box. Sometimes I really feel like buying some gold and keep it under my bed. Anyway that is not the point.

The point is, how could he do it? Dun forget, China Oil Aviation has this Compliance Committee, Audit Committee and Internal Control SYSTEM. It has everything under the risk management book. How could it fail? Well, if your CEO bends the rule, would you go and tell him 'hey, we should not do this you know, this is risky....'? You can have the best system, but the system is IMPLEMENTED by HUMAN. Human has one thing in common, they see high to worship, they see low to step on.

Unfortunately, Chen JiuLin is the CEO (ie. very high). A naive CEO, when you do not even have a stop loss price, you are worse than Mao-mi. Even my cat has a stop loss in trading. When you can keep the forest, why are you worried that you have no wood to burn? Also, if u ask me, I would bet my last single sen that this happened because the CEO Chen started his trading 'game' with some WINNINGS. Easy money is everyone's dream and usually win praises. There was surely a lot of incentive for him to perform. And trading options, futures were certainly the quick way. Once he started winning. He began to feel like god (whoa, I am writing as if I know him personally....)

Michael Douglas said something really 'cool-ly' in the movie 'The Wall Street'. He said - 'GREED IS GOOD".

Ya rite. Only if you are winning. But in many financial game, it is a zero sum game (actually stock market is not really zero sum game. Only futures and options etc) meaning - if someone is gaining, surely someone else is losing.

I would only say to CEO Chen, you deserve it because you dont even have a stop loss......and you think you know trading...

Junior

posted by Junior @ 11:48 PM