Lamenting Libor In My Life


“It’s a big deal,” Buffett told CNBC “Squawk Box” host Becky Quick Thursday. “You get Libor, and you’re talking about the whole world.”

It’s the sort of thing that makes you seeth. When you realise that what you believed in was Right all the long except that you were cheated of the fruits of your labour because of a massive conspiracy of a global scale. The sort that would rock the foundations of banking trust itself.

I was a victim of the Libor Scam !

In 2009-2010, I was paying a lot of Sor as a result of numerous cross currency basis swaps and receiving Libor in return (the lower the libor, the higher the SOR if the swap points are unchanged). The mark to market of the Sor was horrendous as we were using swap implied rate (derived from the Eurodollar futures strip)  instead of the ABSIR fix which technically should not be much far off.  Yet the difference in those days was astronomical.

The USD leg was not much better because it was marked against the USD IRS curve and that was Libor. So I ended up paying Higher Sor for that entire period and lost a couple of million for it, and more importantly, missing out on precious bonus.

So I sat through all the angst and frustrations of the diverging Libor vs Eurodollar. Banks borrowing 3Y money at Libor + 250 bp while declaring Libor was low and under control.

For every me, how many other traders have profited or lost their jobs ? Who can I sue for this ? Can I ? When the defendant could have been my previous employer or my present one ?

I am surprised people have not run onto the streets to protest this. Perhaps the truth has yet to hit home. Would the ordinary man brush this off as they did with the CDO scandals until they find their mortgages and jobs in jeopardy ? Or perhaps it was good to know we have an invisible hand tugging the world of finance from their boardroom in New York.

And I am fast losing faith in everything and the institution. I think Gold is manipulated too. Just look at the price action of last Thursday. If you ask me, I think people are secretly happy about it. Who believes in free markets anyway ?