Three Ways to Make Money Fast

From a due diligence report on Galleon (excerpted in the FT), here are the three ways to make money with hedge funds. It's sort of amusing, in a bleakly comedic kind of way -- especially the first paragraph:

"You can take advantage of trading technology, but few do. You can be more intelligent than others, but few are.

"Or you can have some specialised source of sustainable information. Unless that information is from fundamental analysis - and in Galleon's case it did not all seem to be - then that's a red flag for us."

[via FT]

Comments

[Old Trader]

I suspect Galleon won't be the only fund getting caught up in this, but this opens a whole new can of worms for hedge funds, and other institutional investors....just what constitutes "inside information"?

If I run into the CFO of a company in a bar, and he's in his cups, and I ask why he's celebrating,and he says he's trying to drown his sorrows because of the numbers his firm is going to be coming out with next week, am I trading on "inside information" if I short the stock? Obviously, its a different story if I give the aforementioned CFO Super Bowl tickets, and suggest it would be "appreciated" if he kept me abreast of developments at his firm.

2009 Oct 20 10:13 AM

[Alex Filonov]

Judging by big (4+ percent) moves in small caps and midcaps with no news, with news coming several days later, Galleon is just a tip of an iceberg.

2009 Oct 20 10:38 AM

[BerkeleyBob]

Old trader, from what I can dimly recall from my law school class on Securities Regulation, I believe the answer is "yes". Maybe you can afford to hire first rate representation, maybe you win but the experience will be expensive and protracted. Moral: Don't trade on inside information.

2009 Oct 20 03:09 PM

[Old Trader]

Berkeley

Thanks...not actually knowing any CFOs, my question was hypothetical, but thanks for the "heads up", *G*.


On Oct 20 03:09 PM BerkeleyBob wrote:

> Old trader, from what I can dimly recall from my law school class
> on Securities Regulation, I believe the answer is "yes". Maybe you
> can afford to hire first rate representation, maybe you win but the
> experience will be expensive and protracted. Moral: Don't trade on
> inside information.

2009 Oct 20 05:12 PM

[ebworthen]

Consider the possibility that Goldman Sachs and the "inside" hedge funds know who will fall before it happens and can short them.

The FED could make a lot of money this way; I wouldn't put it past them, and at the least, passing prosecution tips to their friends.

2009 Oct 20 10:44 PM