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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Phil's Favorites

The US overtakes Hong Kong to rank first among world's most competitive economies

 

The US overtakes Hong Kong to rank first among world's most competitive economies

The US has broken back into the lead. shutterstock.com

Courtesy of Arturo Bris, IMD Business School

The US has leapfrogged Singapore and Hong Kong to top IMD’s latest World Competitiveness Rankings. The top five most competitive economies in the world remain the same since 2016, but their order has changed. With the US at the top, Hong Kong has dropped one spot to second and Singapore remains third. Germany has fallen two spots to 15th and the UK has slipped one position to 20th.

We compile the rankings using 258 ...



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Zero Hedge

How To Hack The Price Of A Hotel Suite

Courtesy of ZeroHedge. View original post here.

Submitted by Priceonomics

Suites are the crown jewel of the hotel experience: generally, they’re more spacious, more meticulously appointed, and well-suited to house larger groups looking to share a space. 

There’s only one problem: they’re typically a lot more expensive than standard ho...



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Chart School

Second Day of Bullish Defense

Courtesy of Declan.

The market had initially reacted to Trump's decision to cancel his North Korean summit before coming to its senses and finishing where it left off yesterday.

For the Russell 2000 it was a bullish doji to follow the 'hammer'; those brave enough to buy the morning dip will be feeling confident as technicals remain bullish.

...

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Insider Scoop

A Peek Into The Markets: US Stock Futures Down Ahead Of Economic Data

Courtesy of Benzinga.

Related SPY The Market In 5 Minutes: GE, Tariffs, Summit, Jobless Claims And More Analysts Weigh In On US-China Trade Developments...

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Digital Currencies

How the US Government Could Effectively Use Crypto

The US government could start, or officially endorse an existing crytpo coin. What they would do is build a fee into the software protocol that went to a single address that they control. This is effectively a tax. The fee could be a transaction fee, a percentage of the next block award, or a combination of both. How this works is every single transaction that occurs everywhere wihtin the system, the fee scalped goes directly to this single address that is owned by the IRS, in this case, the "New-IRS." Forget postcards. We're down to a single dude in one office chair in front of one computer. Imagine that being the IRS, because that's where this is going. The consequences of this mechanism are dramatic. First off the IRS is now one guy. Granted, this guy controls the private key for the most valuable thing in the world. This key would be the single most important key right up there with the nuclear launch code, but the system would most definitely still work. More strikingly, the US...

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Biotech

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

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

 

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

Courtesy of John Bergeron, McGill University

In 2013, Kyoto University’s Shinya Yamanaka was awarded one of the first Breakthrough Prizes in Life Sciences for his discovery of “induced” stem cells that enabled researchers to convert adult cells back into stem cells.

The Breakthrough Prize is not to be sneezed at. Founded in 2013, the prize “honours transformative advances toward understanding living systems and extending human life.” It’s also the most financially attractive aw...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



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OpTrader

Swing trading portfolio - week of September 11th, 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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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.

Join our webinar, free, it's open to all. 

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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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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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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