The Lord of Gossips

Sometimes I feel like traders (and women, needless to mention female traders) spend their whole life seeking for the latest gossips: market rumours, tips and some insights about the colour of Lady Gaga's next pair of shoes... Those just drive (and have always driven) the financial markets, that's probably our human nature or maybe the nature of speculation itself that leads us to run an endless race to get the information and trade on it before the bad guys (the competitors). I've always dreamed to work in a position where you are an insider, I mean a real insider, a position where you GOT some valuable information, at the FED or at Moody's for instance, even as an intern I wouldn't care. Of course, that's not to profit myself from the inside information, The Lord of Trading forbids (and the FSA, SEC and all the regulators too...), but merely because I'm convinced that your life is better and you're happier in such a position: you make plenty of friends, who kindly offer you some gifts: sport cars, watches,... On the weekends, you are invited to the best spots in the world, whatever your favourite sport is, you've a seat for all the best games and I suspect that also increases dramatically your sex appeal... "The new girlfriend I've met after I began my internship at the FED looks like Megan Fox but that's weird, she spends her time asking me questions about Quantitative Easing"

To me, the best way to deal with rumours (if you're an insider, I don't think it's worth even to even think about using the information, I'm not kidding, going broke is one thing, going to jail is another...) is to consider them a bit like arbitrages should be considered : your Financial Markets professor was wrong (you knew it !!!), there ARE opportunities of arbitrage but it's wise to consider that you won't get them as there are armies of guys whose jobs is precisely to find them before you and to benefit from them and they are faster than you could imagine to be in your wildest dreams. If you hear about a rumour, it's probably too late for you to benefit from it. This being said, unlike for arbitrages, I think it's possible to profit from rumours (the thing is not to be the last guy trading it), but if you try, keep in mind the window is very very tight.

There are also some chaps who spread false rumours, like allegedly Rothschild regarding the outcome of the Battle of Waterloo according to the Legend and it has now become much easier now with the widely followed online forums (including the Hand of Scalpuman, which is the Voice of the markets ;))) ) such as ADVFN bulletin board in the UK that sees thousands of new posts every day (and MorningStar is said to have more than 6 millions registered members). Yesterday the FT reported investigations into rumours spread in online investment chatrooms and such rumours may have "triggered “flash crashes” in the share prices of small-cap companies this year". Well, could be tempting to launch a rumour "Sauros and Cheryl Cole, it's over" but once again this could lead you directly to jail. This case has to be followed closely as it could impact profoundly the online trading forums and blogs...

OK, OK, enough blah blah, now let's go to the heart of the gossips: as posted before, lately we had a lot of rumours on a potential intervention of the Japanese Sheriffs to weaken the JPY. The more rumours there are, the less impact they have on the currency. The one dated yesterday suggested that "some senior members of staff experienced in conducting intervention have been brought in" (source : IGM), soon the Japanese MOF won't be able to go to the loo without triggering some moves on the USDJPY, that's Power. Of course, I’ve kept the best for the end, and this one only motivated the topic of today's post: on Tuesday, as spotted by Batman, the Dark Trader of Analyze Capital, there were rumours the Chinese central bank governor Zhou Xiaochuan had deflected and had fled after the bank posted huge bond losses. Huge losses meaning HUGE bond losses: $ 430 billion dollars, yes $ 430,000,000,000 !!!! Don’t mess with the Chinese. The IFR, reporting the news wrote that traders didn't know whether to laugh or to cry at it, personally it made me laugh :) This said don't forget the golden rule: never trust a rumour before it is officially denied.

My final thought for the day is further to my comments in the first paragraph, even if I would be a super insider there, I wouldn't really dream of working for the Chinese Central Bank...

TLofT be with You
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FYI As this post is published: SPX 1084 // SX5E 2713 // NKY 9063 // DAX : 6078 // EURUSD 1.2815 // USDJPY 84.31 // XAUUSD : 1251