Posts Tagged ‘insider information’

Insider Trading Is Legal For Members Of Congress – And They Refuse To Pass A Law That Would Change That

Insider Trading Is Legal For Members Of Congress – And They Refuse To Pass A Law That Would Change That

Courtesy of Michael Snyder at The American Dream

Is insider trading wrong?  Most Americans would say that it is.  In fact, some very wealthy and very prominent Americans (including Martha Stewart) have gone to prison for it.  It just is not right for those with inside information that is not generally available to the public to make huge profits in the stock market by making key trades based on that information. 

But there is one group, members of the U.S. Congress, that can do all the insider trading they want and get away with it.  That is because insider trading is perfectly legal for members of Congress.  Yes, you read that correctly.  So how would that work?  Well, for example, a member of Congress may know that a law that is about to be proposed would have a very positive effect on a particular company and could buy up a ton of stock in that company a few days before that law is introduced.  Isn’t that wrong?  Of course.  Is there any law against it?  Not at all. 

You would think that some of the more ethical members of Congress would want to close this glaring loophole, but it just isn’t happening.  Legislation has been introduced from time to time that would end this practice, but it has gotten very, very little support.  The Wall Street Journal recently published an article about this issue which described the current situation this way….

"A few lawmakers proposed a bill that would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. The legislation has languished since 2006."

But even though insider trading is legal for members of…
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Do Hedge Funds Trade On Insider Information?

Do Hedge Funds Trade On Insider Information?

Courtesy of Tyler Durden

A very interesting research paper currently in publication by a team from York University headed by Nadia Massoud asks "Do Hedge Funds Trade on Private Information? Evidence from Syndicated Lending and Short-Selling" and analyzes whether or not hedge funds actively trade in the public securities of companies that had approached said hedge funds with private, capital structure specific (in this case loan syndication and amendment) information. The paper focuses on the period between 2005 and 2007, when the first wave of second- and third-lien debt that had been issued by crappy companies to hedge funds, was starting to become impaired and led to wave after wave of covenant and other bank loan amendments, designed to allow the borrower some breathing room.

Massoud also tracks whether or not in the days preceding the public announcement of a covenant amendment, traditionally seen as a sign of weakness by any borrower company, there was a spike in short-selling activity by hedge funds, courtesy of an interval between January 2nd 2005 to July 6th 2007, when RegSHO had made public extensive detail on equity short-selling data (why this is no longer the case one has to ask the corrupt SEC, but that is a question for after the next 10,000 point Dow flash crash when the SEC’s headquarters will finally be surrounded by rioting former investors who have had enough). The paper finds conclusive evidence that companies that come to lenders in hopes of amending syndicated credit facilities do indeed see aggressive shorting of their stock into the days preceding the formal announcement, implying that there is obviously material non-public information abuse and frontrunning. Here, the authors of the paper however, make a blatantly wrong assumption that this frontrunning originates almost exclusively from within the hedge funds that had been approached with the material non-public disclosure of weakness. We are happy to demonstrate that not only is that not necessarily the case, but to explain why certain sections of FT holding company Pearson can charge over $100,000 a year for premium subscription to their content by rich hedge fund subscribers, thereby once again creating a very tiered information market. We speak of course of Pearson niche media subsidiary www.debtwire.com

First, a brief observation of the York paper’s conclusions. As the charts below summarize, there is almost no doubt…
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HOW LONG WAS GALLEON TRADING ON INSIDER INFORMATION?

HOW LONG WAS GALLEON TRADING ON INSIDER INFORMATION?

Courtesy of The Pragmatic Capitalist

Raj Rajaratnam, GalleonReader DanH was nice enough to forward us a recent copy of Galleon Groups performance going back to 1992.  It turns out that the fund was Madoff-like in its performance.  These guys just couldn’t lose.  Whether the market was up or down they cranked out 25% returns like they were printing money.  It makes you wonder just how long these guys were trading on insider information?

I have run the risk adjusted returns on hundreds if not thousands of portfolios throughout my career and I have never seen numbers like these.  NEVER.  There is virtually ZERO downside volatility in these figures.  Their largest one month drawdown was -6.19%!  That is simply unheard of for a portfolio with such high returns.  Gauging from the returns I would be willing to bet the insider trading was going on for most of Galleon’s existence and was likely much more rampant than currently reported:

Galleon 1Galleon2

 


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Insider Trading: Raj Rajaratnam Of Hedge Fund Galleon Group Charged

Insider Trading: Raj Rajaratnam Of Hedge Fund Galleon Group Charged

Courtesy of Market Folly

Raj Rajaratnam, founder of hedge fund Galleon Group has been charged with insider trading in a $20 million case as he and five other people were allegedly involved, including a former Bear Stearns executive and an IBM executive. The charges say that the six accused used insider information in two schemes where they traded shares of Google (GOOG), Polycom (PLCM), Hilton Hotels, and Advanced Micro Devices (AMD).

This case is interesting in that it is the first time wiretaps have been used to target insider trading. The insider information apparently came from numerous sources, including other hedge funds, investor relations firms, and the companies listed above whose shares they traded. Rajaratnam faces 12 total fraud and conspiracy counts, many of which have up to a 20-year maximum sentence. Prosecutors had been investigating this case ever since 2007 when a non-named person began complying with the FBI. That person apparently had been using insider information and tipping off Rajaratnam since 2006.

The Wall Street Journal has dug into one particular case of the insider trading events regarding shares of now private Hilton Hotels. They write,

"The deal is the early July LBO of Hilton Hotels. According to the regulator, on July 2 at 2:20 p.m., Hilton executives called the lead analyst covering the hotel for Moody’s. The purpose of the 7-minute call isn’t detailed. The SEC does say that at some point in the call the Hilton executives informed Moody’s that their company was being taken private by Blackstone Group and that the deal likely would be announced sometime before the Fourth of July.

There are two Moody’s analysts mentioned in the complaint, a vice president and senior analyst that was the credit rater’s lead analyst on Hilton and an associate analyst “involved” in rating Hilton. The lead analyst took the Hilton call. One analyst then told someone identified as “the cooperating witness” of the pending deal. The SEC says it reviewed phone records for the Moody’s analyst’s cellphone that show the analyst made three phone calls to the cooperating witness from 3 p.m. to 3:15 p.m. that same day. The cooperating witness provided the Hilton information to Rajaratnam, saying that it was “a sure thing.” The SEC says trading records show that Galleon…
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Zero Hedge

The Real Story Behind Goldman's Q2 Trading Loss: How A $100M Gas Bet Went Awry

Courtesy of ZeroHedge. View original post here.

Goldman Sachs FICC-trading income was an unexpectedly ugly blemish on what was already a poor Q2 earnings report. And while the FDIC-backed hedge fund initially blamed the decline on lower trading revenues, lack of volatility and depressed client activity...

... there was more to the story. T...



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ValueWalk

The Entire Medical Industry Is About To Change

By The Sovereign Investor. Originally published at ValueWalk.

The doctor straightened and pulled the stethoscope from her ears. “I don’t hear anything on the right side.”

Sometimes silence is a good sign. When it comes to listening to my husband breathing, it’s not.

One quick X-ray later and we discover that his right lung had collapsed. There was also air putting pressure on his left lung.

The fix was easy. The doctor inserted a slender tube into his chest, sucking out the air. His lung reinflated in a matter of minutes.

I caught the doctor later and asked her why this had happened. When the pain started, he’d been watching TV.

She shrugged and admitted that sometimes it was just something that happened to men who are tall and thin.

Of course, the answer to the question of “How do we avoid this?”...



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Phil's Favorites

Investment Advice in Four Words: Have Patience, Avoid Bubbles

Courtesy of Mish.

A relations manager for Ted Thomas reached out last week and asked: “What is your most valuable advice to people who are beginner investors so that they can get great results in the long term?”

The answer form had no formatting options. Here is a detailed response, with links.

Have Patience, Avoid Bubbles

The TINA theory (there is no alternative other than stocks and bonds) is a path to poor returns.

Cash and gold are indeed options. I discussed TINA in Median Price-to-Revenue Ratio Higher in All Deciles vs 2007, 90% vs Dot-Com Bubble: THE Choice

I recently discussed gold in ...



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Insider Scoop

Things To Like, Things To Watch At The Gap

Courtesy of Benzinga.

Related GPS 20 Stocks Moving In Friday's Pre-Market Session A Peek Into The Markets: U.S. Stock Futures Edge Higher Ahead Of Consumer Sentiment Repor...

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Chart School

Volatility on the Rise

Courtesy of Declan.

Today's losses look big on current charts but in a historic context, they weren't too severe. However, big red bars are not to be ignored and 'market leading' Small Caps have felt the full brunt of the selling from July which is bad news for the broader market.  Today's losses in the Russell 2000 undercut the 200-day MA leaving 1,345 as next support (of which I would not be too confident of it holding).


If the Russell 2000 gives up 1,350s then a drop to 1,150s could be on the cards. Things could get ugly if this scenario pl...

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Digital Currencies

Ukrainian Lawmakers Disclose $45 Million In Bitcoin Holdings

Courtesy of ZeroHedge. View original post here.

As Ukraine's crackdown on corruption continues, three lawmakers from Ukraine’s ruling party revealed this week that they own a combined $45 million in bitcoin, according to a report by RIA Novosti, a Russian foreign news service.

Their holdings came to light during mandatory financial disclosures by members of the Ukrainian parliament, part of an IMF-approved strategy to tamp down corruption in Ukraine. The country's democratic institutions, which were never very robust to begin with, have been further destabilized by...



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OpTrader

Swing trading portfolio - week of August 14th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Biotech

Editing human embryos with CRISPR is moving ahead - now's the time to work out the ethics

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Editing human embryos with CRISPR is moving ahead – now's the time to work out the ethics

Courtesy of Jessica BergCase Western Reserve University

There’s still a way to go from editing single-cell embryos to a full-term ‘designer baby.’ ZEISS Microscopy, CC BY-SA

The announcement by researchers in Portland, Oregon that they’ve successfully modified the genetic m...



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Members' Corner

Why we need to act on climate change now

 

Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...



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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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