Monday morning in Foster City.The sun broke through this morning after last week's storms. We only have a few hours to get in our natural Vitamin D fix before the rains return.
The TV ads and phone calls from the political campaigns (we're not picking up, so the voicemail speaker adds to the household din) will ratchet up until Super Tuesday, Feb. 5th. However, we should be safe on Sunday afternoon; any politician who dares interrupt the Super Bowl may as well concede now.
A derivatives trader has lost €5 billion (over $7 billion) for the French bank, Société Générale. He didn't enrich himself directly; it appears that he was trying to make back his losses by means of fraud and ever-riskier bets just to protect his job.
Today's Wall Street Journal distills what happened into the following graphic:
In our rapidly changing complex world (clichés are overused because they're true) advances are so rapid that we don't have time to design and install controls that will protect against disaster without bringing the whole enterprise to a screeching halt. The bright people who can understand the system well enough to play defense are making a lot more money and glory by pushing the envelope forward, not by trying to watch the(ir) rear.
I can't wait for the same regulators that stopped future Enrons by giving us Sarbanes-Oxley to weigh in on what kinds of hedges are appropriate for which kinds of forward contracts. So I hope the banks and finance companies enjoy this interlude; if they think their audit bills are high now, they ain't seen nothing yet. © 2008 Stephen Yuen