I’ve always found insider trading fascinating, in part because it has such a weird element of hubris and stupidity to it. I recently wrote about it for Investor Uprising, and I have been watching the financial press like it’s TMZ. IBM’s Robert Moffatt threw away his family, his career, and his freedom to pass on tips to his mistress, Danielle Chiesi, who is trying to get a lighter prison sentence by arguing that she engaged in insider trading because of a toxic sexual relationship with her boss, Mark Kurland of New Castle Funds.
I’ve taken the CFA exams. I haven’t managed a full suite of boyfriends. But I suspect that all CFA exams are easier than keeping track of a tipster, a boss, and – apparently – a civilian boyfriend, as Chiesi did.
I don’t think hedge funds have inherent insider trading problem, not at all. I do think that it’s brutally hard to beat the market on a consistent, risk-adjusted basis, and that creates temptation. Add to that a culture of wealth, power, and Masters of the Universe prestige, and it’s just asking for trouble.
The current spate of insider trading scandals will put fear into everyone, then they’ll blow over when another scandal hits. And then, about five or ten years from now, we’ll see another big new insider trading case.
It’s just craziness, isn’t it?
