Wednesday, November 06, 2013

1249 Wall Street Thieves

1249 Wall Street Thieves

Call it the Milken effect.  Insider trading.  Hedge funds.  Financial products you understand less after the explanation than before.

Leave it to one of our favorite billionaires, Steven A. “Teflon Steve” Cohen, owner of the giant hedge fund SAC Capital, larger than life wheeler dealer, to pay out between 1.2 and 1.8 billion dollars in insider trading fines without trading pinstripes for insider jail stripes.  At least so far.

Steve is an oval-faced, bald, benevolent looking guy who you’d never take for the 43rd richest man in America, worth, according to Forbes, 9 plus billion.

SAC issued one of those fuzzy statements when it reached a plea agreement with the US Attorney.  It used the “a few bad apples” defense.

A judge still has to sign off on the deal.  But judges don’t generally come tabula rasa to these affairs.  If they’re not directly in on the talks, chances are they have a way of knowing the outlines and indicating a thumbs up or down.

Insider trading is when you have info on a company that the public doesn’t.  Often, that’s a doorway to buying low with the expectation of a sudden uptick or selling high when you know someone’s about to pull a skeleton out of the closet.

The charges the agreement aims to resolve does not mention Teflon Steve by name.  It calls him “the owner.”




Teflon still faces criminal counts not covered by this deal.  He is charged, in effect, with knowing about the problems and not stopping them.

Milken -- remember him -- was the junk bond king and briefly a guest of the federal government.  Now, he’s head of a think tank and through a foundation, gives away gazillions to educational causes.

And his fortune has been put at a relatively paltry two billion dollars.

So what do we learn from these two proud grads of the Wharton School at the University of Pennsylvania?

Insider trading is possible at just about any level of investment.  And if you don’t understand something, don’t buy in.

The SEC may come up with some more regulations to clamp down on this kind of thing.  But like computer hackers, the bad guys are generally a dozen steps ahead of the good guys.

There are Cohens and Milkens and, for that matter, Madoffs lurking all over the financial world.  We just don’t know yet who they are and who they aren’t.

Shrapnel:

--De Blasio whomped Lhota in the election for mayor as New York returned to its roots after an eight year dalliance with The Toughest Guy in the room and a 12 year dalliance with The Smartest Guy in the Room.  He gave an old fashioned stem winder victory speech, full of promise.  Okay, Bill, good going… now show us what the watch does after the stem is wound.

--Everyone thinks Bill is really really tall.  But he’s actually only 5’4”.  When his feet once again touch the ground, you’ll see the difference.

--Over in Jayzee, Governor Pillsbury’s big win sent a message to the tea party:  get out of Dodge.  With any luck, that’ll start a trend. But will he have time to govern between presidential campaign stops?

I’m Wes Richards.  My opinions are my own but you’re welcome to them. ®
Please address comments to wesrichards@gmail.com
© WJR 2013





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