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Saturday, February 21, 2009

Splain, please

American Scofflaw

Hillary Clinton’s financial disclosure for the year 2007 shows that the former first lady liquidated her entire equity portfolio, approximately $20 million, in may 2007. Her market timing was almost perfect as she sold all of her stocks only 500 points and 5 months before the market peak. Is Senator Clinton a star investor or did she know something?

Past Insider Trading Allegations
Hillary Clinton has been suspiciously lucky before. In 1979, the then First Lady of Arkansas, scored big by placing a $1,000 investment in a cattle futures contract, which returned $100,000 only a few months later. The transaction did become the subject of considerable controversy as accusations of insider trading surfaced.

Marshall Magazine, a publication of the Marshall School of Business, did a study regarding the probability of her successful trades and had this to say:

These results are quite remarkable. Two-thirds of her trades showed a profit by the end of the day she made them and 80 percent were ultimately profitable. Many of her trades took place at or near the best prices of the day.
Only four explanations can account for these remarkable results. Blair may have been an exceptionally good trader. Hillary Clinton may have been exceptionally lucky. Blair may have been front-running other orders. Or Blair may have arranged to have a broker fraudulently assign trades to benefit Clinton’s account.

Those of us who’ve been in the business have an idea of what occurred. In those days, all trades were made via hand written tickets. The broker would take the orders from his/her client in the morning and submit them at the end of the trading day. Keep in mind that clients had no way of knowing the actual prices because there was no internet to look them up on. They relied completely on their broker. It was very easy for the broker to give his “better” clients the better price by writing their name on the order ticket which coincided with the better price. Considering that Hillary trades were usually at or near the best price of the day tells me she got favorable treatment from her broker. Doesn’t seem unreasonable to think that favors were made to the First Lady client. I should mention that Mrs. Clinton denied any wrongdoing and she was never charged with a crime relating to this.

2007: Hillary dumps all of her stocks
Below is a list of Mrs. Clinton’s stock transactions for 2007 (courtesy of opensecrets.org). Notice that there are about 170 transactions which are all sells. The transactions included a few bonds but 90% were stock. Notice further that there were no buy transactions -NONE.

This information is easily available. Elected officials must disclose their financial holdings each year. If you’re wondering what she did with the proceeds of the sales, the answer is cash. She shows up to $50 million in cash on deposit, and a few hundred thousand dollars in US treasury/Agency bonds.

One has to wonder why anyone with such incredible talent for trading would ever waste their time in politics?

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