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

China Coronavirus Outbreak Spreads; Hundreds Infected As Human-To-Human Transmission Confirmed

Courtesy of Zero Hedge. View original post here.

Health officials in Wuhan, China reported 139 new cases of a new mystery virus over the weekend, now rapidly spreading to other provinces and surrounding countries, reported CNN.

As of Monday morning, three people have died from the pneumonia-like illness, and globally there have been more than 200 reported cases, noted Reuters

Beijin...



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The Technical Traders

Using the copy-paste formula in the Forex market

Courtesy of Technical Traders

In Forex there are many techniques available to boost up the profit factors. However, as there are millions of people trying to make a profit it is not easy to get the right tricks. There are many brokers offering high leverage trading account to the interested traders. They also provide useful insight into the market so that the traders can make a decent profit. In fact, some brokers often sell signals to their clients so that they can start earning money in the early stage of their careers.

At present, this method has earned a huge following as many investors don’t like to spend time staring at the chart. In this article, we are going to try to bust the myth about this infamous technique...



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Phil's Favorites

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

The War on All Fact People 

Excerpted from David Brin's new book, the beginning of chapter 5, Polemical Judo: Memes...



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Members' Corner

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

The War on All Fact People 

Excerpted from David Brin's new book, the beginning of chapter 5, Polemical Judo: Memes...



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Chart School

SP500 Kitchin Cycle Review

Courtesy of Read the Ticker

The biggest known news date in the next 18 months is the US Election. The biggest unknown news date is when the US believes it is in a economic recession.

The Kitchin Cycle is still working.

We must conclude the major 900 period low is now in, and we are now in a up swing, which may top out ate 2020 or late 2021. Any future top out may only generate a 10% to 20% correction, of course this can be deemed very mild. This is expected, but the expected does always play out. 

Rolling the dice to get '7' does not always work. Post US elections seasonal's aligned with a poor start of the decade seasonal trends, add on high global recession risk, add on a stock market slump tends to occur in the years ending 9,1,2,3,4 (like 1973, 1...



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Insider Scoop

10 Biggest Price Target Changes For Friday

Courtesy of Benzinga

  • Citigroup lifted Caterpillar Inc. (NYSE: CAT) price target from $145 to $170. Caterpillar closed at $147.87 on Thursday.
  • UBS cut Twitter Inc (NYSE: TWTR) price target from $37 to $35. Twitter shares closed at $34.19 on Thursday.
  • Morgan Stanley boosted the price target for Yum! Brands, Inc. (NYSE: YUM) from $113 to $118. Yum! Brands closed at $102.16 on Thursday.
  • Jefferies lifted the price target on Ventas, Inc. (NYSE: ...


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Kimble Charting Solutions

Tesla About To Run Out Of Energy Here? Short-Term Peak Possible?

Courtesy of Chris Kimble

Tesla (TSLA) has been screaming higher of late, as very impressive gains have taken place.

Is Tesla about to run out of energy/take a break/experience some selling pressure? A unique price setup is in play, that bulls might want want to be aware of.

This chart applies Fibonacci to the 2016 lows and 2017 highs at each (1). The impressive rally of late has it testing its 161% extension level, based upon those price points.

At the same time, it is hitting its 161% extension level, it finds itself at the top of a 7-year rising channel, with momentum hitting the highest ...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Digital Currencies

Cryptos Have Surged Since Soleimani Death, Bitcoin Tops $8,000

Courtesy of ZeroHedge View original post here.

Bitcoin is up over 15% since the assassination of Iran General Soleimani...

Source: Bloomberg

...topping $8,000 for the first time since before Thanksgiving...

Source: Bloomberg

Testing its key 100-day moving-average for the first time since October...

...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

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

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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