Can Turtles Fly?

Some articles I either read or am planning to read in the near future... (Highly Recommended) "A Dirty Business" (The New Yorker): In this excellent article, George Packer gives us a detailed look at the prosecution of the hedge fund manager, Raj Rajaratnam, who ran a large hedge fund called Galleon. If appeals aren't successful, this case will likely go down as the biggest insider trading conviction of a fund manager in American stock market history. Conversations with Charlie Munger - the final edition (Ben Claremon for GuruFocus): This is likely one of the very last detailed conversations with Charlie Munger. He is ending the annual Wesco conversations now that the company was taken private and is too old. Nothing earth-shattering in the material covered in during this meeting. (Recommended for contrarians) Howard Marks & distressed debt investing (Bloomberg Markets magazine): The article chronicles Howard Marks' journey in the distressed investing worl...

Reading material for a sunday... and beyond... Unintended consequences of China's capital controls (WSJ China Realtime Report): Found a good blog on China by The Wall Street Journal. Maybe it was always there but I never looked at it much before. China followers and commodity investors should check out that blog. Anyway, this story deals with how some in China are hoarding soybeans in a convoluted scheme to raise capital. None of it makes any sense—some of you may have heard of stories a few years ago about hoarding copper and steel but soybeans?—until you think about China's capital controls and how it severely distorts currency and interest rates. Stephen Elop & Nokia (Report on Business magazine): Lengthy profile of Nokia's CEO, Stephen Elop, and some history of Nokia. I've been following Nokia for a little over an year and thinking of making an investment in it. (Highly Recommended) "Should you buy Microsoft?" (Geoff Gannon for GuruFocus): Geoff...

In probably the biggest insider-trading-related conviction in several decades, Raj Rajaratnam of hedge fund, Galleon, was found guilty on all counts put forth to the jurors: Raj Rajaratnam, the hedge-fund tycoon and Galleon Group LLC co-founder at the center of a U.S. insider-trading crackdown, was found guilty of all 14 counts against him in the largest illegal stock-tipping case in a generation. A jury of eight women and four men in Manhattan returned its verdict today after hearing evidence that Rajaratnam, 53, engaged in a seven-year conspiracy to trade on inside information from corporate executives, bankers, consultants, traders and directors of public companies including Goldman Sachs Group Inc. He gained $63.8 million, prosecutors said. The trial came as Manhattan U.S. Attorney Preet Bharara promised to crack down on “rampant” illegal trading on Wall Street. Rajaratnam was convicted on five counts of conspiracy and nine counts of securities fraud. Prosecutors today said h...

(Correction to the last sentence made on April 12, 2011, 9:45PM EST) Perhaps the biggest investment-related corporate trial in 20 years, the insider trading charges against Galleon hedge fund manager, Raj Rajaratnam, just got underway. The New York Times' DealBook has good coverage of the case and some of you may find it interesting. Unlike many other trials, prosecutors have lengthy recorded conversations and you can listen in on them. Although brief, it sort of gives an idea of what happens in some of these (trading-oriented) hedge funds. Here are some articles you may find interesting: Accused insider trading network (according to SEC) Who will be called to the stand? Recap of first day of the trial Select audio recordings Transcript of trader talk One good thing about fundamental investing is that tips don't necessarily make or break you, since you are in it for the long run and short-term price movements are a small bump on a long-term chart. However, the diffe...

As I was speculating a few weeks ago, the Galleon insider-trading case appears to be entangling many leading companies and prominent individuals. In fact it appears to be the largest insider-trading case in American history*. The latest leak seems to imply that Hector Ruiz, former CEO of AMD, the 2nd largest microprocessor manufacturer in the world, was a key insider leaking information to the accused. MarketWatch reports : Shares of Advanced Micro Devices Inc. fell sharply Wednesday as the chip giant reeled from reports of insider-trading allegations involving its former chief executive, Hector Ruiz. The allegations could even cost him his current job. AMD stock plummeted more than 6% at $4.83, as some analysts said the revelations could cause a short-term shock, but likely won't have any longer-term impact on the company or on GlobalFoundries -- the new company spun off from the Sunnyvale, Calif.-based chip maker earlier this year. Ruiz, who serves as chairman of GlobalFoun...

It looks like the Galleon case is not as fool-proof as it seemed. The Huffington Post picks up a New York Times story revealing one of the major moles is Roomy Khan, apparently a California-based ex-employee of Galleon. A problem for the prosecution is that she apparently had financial problems and appears to have turned on Raj Rajaratnum when he refused to let her back into his firm. This sounds like some desperate move and who knows if she attempted black mail before co-operating with law enforcement so I'm not sure what a judge or jury will think. Furthermore, it appears the Khan family has had two prior legal problems, including a now-settled lawsuit with a housekeeper. They apparently also defaulted on a loan by Deutche Bank, which was settled after being paid with interest. So, it appears, at least to me, that the Khan family is very shady and unreliable. This doesn't let Rajaratnum off the hook—the government has other informants as well—but the case is not as st...

The Rajaratnum case that I was referring to in my prior post has the potential to be a spectacular blow up for Wall Street. Depending on how far the government takes it, we may be looking at the largest criminal investigation ever conducted on Wall Street. Unlike other popular criminal cases, such as the Bernie Madoff case, Enron, or Worldcom, this insider trading scheme appears to impact many firms and involves a huge network of insiders. Let me quote the thoughts of Michael J de la Merced , a New York Times reporter: As I report in the Times article, the case is fascinating on multiple levels. The sheer size of the purported network, riddled with unnamed co-conspirators and tipsters, is tantalizing. Who was the unnamed investor-relations employee who allegedly illegally spilled the beans on Google’s quarterly earnings? Who was the Akamai executive who did the same? The Moody’s Investors Service analyst who divulged that Hilton Hotels was about to be acquired by the Blackstone Group...

Behind every great fortune there lies a crime —Honore de Balzac Passage in Le Pere Goriot (aka Father Goriot ) very loosely translated* Honore de Balzac is credited with the saying in the above quote and, although I don't feel is accurate in a country like America, I do think it applies very well to the period Balzac was living in (18th and 19th centuries) and to modern day developing and undeveloped countries with non-existent or corrupt legal systems. I never even heard of Raj Rajaratnum before the scandal broke late last week. I never even knew a Sri Lankan Tamil was a billionaire—he's the same ethnic group as me grr :(—let alone some major Wall Street player in technology investing. Although it's too early to say for sure, and I'm reserving judgement until the courts rule, it does appear that Rajaratnum was involved in a major insider trading ring. Law enforcement used techniques typically used to bring down organized criminals, including extensive wiretaps...