Difference between revisions of "Fanciful rumour"

The Guardian (London)

September 25, 2001

Notebook :

SECTION: Guardian City Pages, Pg. 22

...

Fanciful rumour

Punter : "So what's cooking, Bill?"

Broker : "Well Ben, some supposedly knowledgeable money's been knocking out BA. Very aggressive. Kicked off with a 1,000 Dec puts at 80. Apparently, the Liffe guy handling the trade spilt his coffee on the news."

Punter : "Nosy business, was it?"

Broker : "Other side of the tracks, I'm told. Some outfit called the Islamic Army of Aden, with the name Tariq Anwar Al-Syyid Ahma on the ticket. That'll keep settlements on their toes.

With a persistence matched only by an ignorance of how the stock and derivative markets operate, various newspapers keep telling us that bin Laden and his followers may have financed the terror in New York by betting on which stocks would follow the towers into the rubble. The allegation is almost certainly untrue.

The evidence seems to rest on the fact that there were sudden spikes in the number of put options taken out on the likes of American Airlines and British Airways, together with insurers such as Munich Re just before the attacks.

But this ignores the reality that the various markets in individual stock options in London, New York and elsewhere are notoriously thin. Sudden bouts of derivative interest in particular shares are nothing new, and tend to do little more than give rough guides to moving investment fashions. Most short selling by the likes of hedge funds is car ried out through so-called contracts for difference - a form of over the counter derivative handled by the big investment banks. We never see the figures.

Prior to September 11, stock markets were seeing daily bouts of frenzied selling across numerous sectors as speculators tried to bet on which companies would succumb to warning about profitability as economic conditions deteriorated. Anything and everything tech-related had already had the colour knocked out of it. The banks had been targeted; insurers and airlines were next in the queue.

As far as bin Laden is concerned, the supposed insider story also ignores the fact that it is notoriously difficult to deal anonymously in the stock market. Insider dealing thrives because the authorities can rarely prove inside knowledge - not because those trading do so secretly. It is right that the authorities are investigating leads but bodies such as the SEC and the FSA also know it is fruitless.