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We have written a string of posts recently on the dark side of trading with the UBS rogue trader and the SEC case against another ponzi-like scheme out of Atlanta.

You Have To Want To Lose $2 billion

Character Is What You Do When No One Is Looking

Well it doesn’t stop! In a recently revealed trading incident, a London Broker for PVM Oil Futures, traded company funds while drunk, moving the oil price more than $1.50 and when all was said and done losing $9,763,252.

What’s more as a broker he was only authorized to enter trades on behalf of his clients. Yet he was able it seems, with ease, to trade PVM’s risk capital.

The broker, Steve Perkins had one savage hangover phone call from his boss the morning after asking what he’d done with $520 MM of the firm’s money.

Initially he lied saying he had been trading alongside a client. The story fell apart when he couldn’t put the client on the phone to corroborate his story.

The rub of it all is that he had been drinking all weekend at a company golf weekend which he was rounding out with a day off. He traded $520 MM in orders through the night being responsible for 69% of the total traded volume.

Early the following morning he sent a text to the Managing Director trying to pull a sick day when presumably it all began to soak in.

Despite the losses he will receive a fine from the FSA (the UK equivalent to the SEC) of only £75,000 (just over $121,000) likely reduced from £150,000 due to financial hardship.

Here we have yet another case of both trading without emotional or moral reflection and another company whose risk management procedures are ridiculously lax.

Although in the same industry it’s staggering the difference all too often seen between independent traders and those trading OPM.

Since Intentions = Results; both the broker and firm are long overdue some introspective work.

How a broker spent $520 MM in a drunken stupor and moved the global oil price

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Google

Is Wall Street truly a secretive, evil machine, designed to suck the public savings with lack of transparency and other shady methods?

If your goal is to make money trading the markets, then Wall Street is an evil machine ONLY for those traders that constantly look for someone to blame for their losses, their lack of success, their mistakes and their lack of emotional balance. In reality, Wall Street is extremely transparent if you know where to look. (Hint: price & volume, supply & demand.)

Take a look at Google. On July 17, following a downtrend of a few months, Wall Street was extremely transparent. The chart told anyone that took the time to observe the daily chart that someone big is buying the stock. No, you did not receive the name of the buyer or their phone number, but you got a huge transparent message for the next three days: massive accumulation by a large buyer, and a downtrend-line break in a company you use everyday. What more can you ask for?

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Sihuan Pharmaceutical Holdings Group Ltd

On paper, China’s healthcare sector should be entering a major bull trend for the next few decades, a trend every investor would want to ride. But as an investor, if you thought healthcare is a mess in the west, you haven’t seen nothing yet.

Massive aging population, increased chronicle diseases (sadly) due to industrial pollution and change in diets (hello junk food!) have pushed China to the number one spot, the world’s worst health record.

Of every 100 deaths in China, 85 are from chronic diseases. Compare that to the worldwide average of 63. It’s 70 in the U.S. and you can clearly see the side effects of “command industrialization.”

So, with increased demand for care, medication, surgeries etc… massive population, and still, lack of healthcare facilities, how can China’s healthcare trend be a bad investment? The answer: Government

The Chinese government literally owns the healthcare sector, not the shareholders. Since 2000, the Chinese government has cut medication prices 20 times — most recently a week ago — with a 17% cut for cancer and related medications. As a healthcare company, you are at the mercy of NDRC political panel, they, and only they, will decide what you can charge for your new revolutionary medicine, new x-ray machine, new healthcare facility etc..

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Recently reading the New York Times article CEOs and the Pay-’Em-or-Lose-’Em Myth I couldn’t help but think how very different this is for traders.

The article covers how peer group benchmarks are often used to define appropriate pay brackets and how this is indeed a big driver for the ever increasing compensation that is being seen. The reasoning behind this has been due to the idea that you have to pay ’em or lose ’em.

Recent research shows that the fear is bogus as CEOs rarely are able to transfer their skills to the new company and in fact often flop in their new roles. The use of peer group benchmarking only pushes their pay up.

The authors of the study even show that there are numerous examples that there isn’t really a hot market for interchangeable CEOs and that selection from within the company usually means better performance than that gained by choosing an outsider.

“There is no conclusive empirical evidence that outside succession leads to more favorable corporate performance, or even that good performance at one company can accurately predict success at another…. In short, executive skills cannot pass the most basic test of generality: transferability.”

Compare and contrast this to a (large) independent trader. It is completely performance pay. A certain level of confidence can be obtained by a track record but the trader knows that the past is no guarantee of the future. Traders eat what they kill and if they don’t hunt well then there is no pay. Ivy League education and benchmarking is irrelevant. The market will not bow to your wishes however good you think your Jedi mind tricks are. Which is why historically commodity trading legends from Chicago come from all levels of society’s strata. Working class boy or Ivy League background – performance based on skill, grit, and determination is all that counts.

This kind of pay debate is largely irrelevant to a trader. If you aren’t comfortable with the harsh judge that the market is then you are in or looking at the wrong business.

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I came across a surprise while looking into some supply and demand figures for coffee.

I had always thought the US ranked atop the list as a country that loves its coffee. You know the ubiquitous New Yorker with his ‘cup of kawfee?’ I thought this was likely based on some truth. Seattle is known for its coffee and it is where Star-yucks, originated. You certainly get offered coffee and see coffee everywhere when in the US.

But the biggest consumers in the world? The US…? Italy…?

Not even close.

The #1 coffee drinkers in the world, consuming 26 lbs per head, goes to….

FINLAND!

The Nordic countries love their coffee.

Surprised? I was too. To see where you stack up take a look at this list of countries by coffee consumption per capita

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