logicalthought

The Implications of Insider Trading in Hedge Fund Land

Davidbdc:

I wish there were an "edit" function on the comments, because I didn't mean to imply that the SEC shouldn't go after these guys-- hell, it pisses me off as much as the next guy that they did this. I was really just pointing out that ironically, what this guy did (lol, make that ALLEGEDLY did-- I don't want to get sued by a billionaire!) actually probably BENEFITTED the people whose stock he bought, whereas the "big picture stuff" that went on cost us all TRILLIONS.


On Oct 18 02:15 PM davidbdc wrote:

> This isn't a waste of government resources, rather its one of the
> few legitimate actions our government actually undertakes.
>
> Lets not pretend this is some isolated incident. There is an incredible
> "cozy" relationship between the firms that pay for Moody's, Standard
> & Poors reports/rating and the analysts at these firms. From
> help to structure products to get certain ratings to passing along
> information in this case. What is really sad is that the analyst
> is obviously not a very good negotiator - he/she got 10K for a $4MM
> tip? Good grief.
>
> This is extremely important. How many times do you read an analyst
> at such and such bank is "upgrading" the company after meeting with
> company officials and being impressed with blah, blah blah......think
> his/her firm's funds haven't jumped in before you? Of course they
> have.
>
> We need about another 50 of these type of arrests to start to clean
> up the joint.

The Implications of Insider Trading in Hedge Fund Land

Should we go after folks like Rajaratnam? Sure, but the reasons for it are purely psychological, in that the fear is that folks won't participate in the markets if the markets are perceived to be "rigged." In reality, Rajaratnam bought from willing and anonymous sellers and probably gave them a better price than they would've otherwise gotten, because if he hadn't had that info he wouldn't have been a buyer, and thus those willing and anonymous sellers wouldn't have had as many parties bidding for their shares.

Meanwhile, of course, while the government was spending three years and who knows how much money investigating this alleged crook over his $20 million profit, the large banks were costing us taxpayers TRILLIONS of dollars with the seemingly legal but completely non-commonsensical "investment instruments" they were creating and actively pushing upon each other and, even worse, upon our naive municipalities and pension funds.

This is a long-winded way of saying that in a cost-benefit analysis, government resources (as usual) were grotesquely misallocated.