Losers with a capital L

Here are some of the biggest trading losses ever reported in the media.

1. Nick Leeson and the downfall of Barings Bank. Leeson lost an estimated $1.4bn.
2. John Rusnak and the Yen. Rusnak lost an estimated $691m.
3. Yasuo Hamanaka aka Mr Copper. Hamanaka was a trader at Sumitomo Corp, losing S$2.6bn in copper trades
4. Jerome Kerviel and Societe Generale. He lost more than $7bn speculating in European futures.

Just like in the previous note, Losers begets losers, these so called 'superstars' were doing very well before disaster struck. When these traders started losing, they went out to look for ways to magnifying their bets and try to win back the losses. Apparently, luck has deserted them when they needed it the most.

My 2 cents - It was not that luck has deserted them. It was that they took on too much risk. To seek expectional returns one has to take on equally exceptional risks. There is no magic trick. Investors ought to play great defense and not great offense, i.e. one should manage risks and the returns will take care of themselves.