Billionaire Nabbed In Largest Hedge Insider Scheme

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In the news (:http://www.bloomberg.com/apps/news?pid=20601087&sid=asliefsvW5Zc)

“Oct. 16 (Bloomberg) — Raj Rajaratnam, the billionaire founder of Galleon Group, and ex-directors at a Bear Stearns Cos. hedge fund were among six people charged in a $20 million insider trading scheme federal prosecutors called the biggest ever involving hedge funds.

Also accused were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion.

“The defendants operated in a world of, you scratch my back, I’ll scratch your back,” U.S. Attorney Preet Bharara in Manhattan said at a press conference today. “Greed, sometimes, is not good.”

My Comment

The biggest hedge scam – there you go. Anything Westerners can do, Easterners can do better. We’re not going to settle for any penny-ante crime anymore.  Now you know how at least one South Asian billionaire got rich so fast. Nothing like having an edge…

What’s interesting is that this is the first time that the Fed’s used wire-tapping to target insider trading on Wall Street. Until now that tool has been the reserve of organized crime and drug cases.

Fraud On the Run: Goldman Cop On SEC Beat (ROTFLOL)

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In the news, to be filed under – What parallel universe does New York live in?:

“Oct. 16 (Bloomberg) — The U.S. Securities and Exchange Commission named Adam Storch, a 29-year-old from Goldman Sachs Group Inc.’s business intelligence unit, as the enforcement division’s first chief operating officer.

Storch, who joined the SEC Oct. 13, was named to the newly created post of managing executive in the enforcement unit, charged with making the division more efficient, the SEC said today in a statement. At New York-based Goldman Sachs, he had worked since 2004 in a unit at that reviewed contracts and transactions for signs of fraud.”

My Comment:

Personally, I’ve come to nurse a kind of contemptuous respect for, an appalled amusement at Goldman Sachs. It’s the contrarian in me.

In-your-face-corrupt, shameless, self-promoting, out-of-touch, sanctimonious, and bottomlessly greedy –  It’s a firm made for our times…

If Goldman Sachs didn’t exist, we’d have to invent it.

Mid-East, Europe, Africa Securitizations Will Deteriorate More, Says Moody’s

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From the Global Arab Network:

“The performance of many asset classes in the Europe, Middle East and Africa (EMEA) securitisation sector will continue to deteriorate throughout the rest of the year and into 2011, says Moody’s Investors Service in a new Special Report. The report examines the prospects of recovery for international securitisation in several asset classes and geographies: EMEA Auto ABS, UK Credit Card ABS, UK Non-Conforming RMBS, Spanish ABS and RMBS, Asia Pacific ABS and Global Derivatives. The rating agency expects performance volatility and uncertainty to decline in the coming months, although it cautions that a drop is predicated on achieving some level of economic moderation if not slight improvement, combined with the seasoning of securitised loan portfolios.

Moody’s says that although GDP growth is expected to turn positive in many countries in EMEA later this year or in early 2010, employment and home prices will continue to deteriorate well into 2010, which will lead to securitised loan losses remaining at elevated levels throughout 2011 and 2012.”

Alexander Cockburn On the Ethics of Gotcha Journalism

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Alexander Cockburn on the reality of tell-all journalism:

“Dempster, a public-school boy in the twilight of Great Britain, is franker than many of his American counterparts about the realities of the trade: that almost all journalism in the end is gossip, and that the handmaidens of gossip are treachery, envy, and spite; that while many journalists may prattle on about the public’s right to know, they are in their bones talking about their own need to tell.”

Prechter On the Falling Money Supply

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Robert Prechter on the falling monetary base:

“As a consequence of the lack of demand for loans, the unwillingness of banks to lend money, and subsequent response of U.S. monetary policy, effective U.S. monetary policy is one of tightening. That lack of growth in the U.S. money that followed from all this will ultimately have an impact on financial markets, the value of the U.S. dollar in the short-term, and the price of $Gold. Further, inflation is not likely to flow from this monetary policy, and deflation is again a risk. Importantly, the consequences of this situation may not be that of the broad consensus.

With no growth in the quantity of U.S. dollars since February, the dollar is becoming rarer relative to other currencies. Ultimately, unless corrected, the value of the U.S. dollar should rise in the short-term. Such an event might come as a surprise to those plunging into Gold and Silver on the back of margin debt.”

Consensus Tip Is Cash, Gold, and Commodity/Oil Stocks

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A summation of the inflation-deflation debate, and some practical advice arising from it:

“The pair trade of being long gold and short equities that has worked since 2000, might have a few more years to go, especially if equities get more headwind from multiple-contraction and government interfering in the economy. But in the long-run, time is against that trade too, since equities have the income component. So, one might not short the lower-multiple or certain consumer-staples and commodity-related stocks. Without shorting, being long the latter stocks, being long gold, and having some cash (1/3 each) is probably the common-sense approach, and with a little luck, one can deploy the cash in the next “deflationary” wave should it occur.”

My Comment:

One third-gold looks awfully high to me, but only if you’re buying now. If you’ve been holding for years, take your bow. I’m assuming this division doesn’t include people’s homes. Otherwise, surely, paid-up real estate is a secure asset and a potentially income producing one as well.

I’d rewrite this: One third in your paid up house, a farm or income property of some kind. Another third in diversified currencies or in your currency of choice, either as cash or perhaps even in some select funds – though I’ve never held funds and wonder if they perform like the currency itself. My sense is they don’t. The last third in precious metals, commodities, water, and energy ETF’s, or if you’re knowledgeable enough, stocks. Here too, the funds don’t perform like the underlying commodity at all, USO being a case in point.

Correction: (October 27): Rereading this, it sound like I am recommending ETF’s for all the last part. I don’t. I recommend ETF’s for water and energy, because for the average person it’s easiest to buy that way. You should get physical gold for the long haul, and maybe an ETF to trade – which, is the question.