Alternative Investor

Some Historic Insider deals

Insider trading has been a part of the market since William Duer used his post as assistant secretary of the US Treasury to guide his bond purchases in the late 1700s. Here are some of the largest United States insider deals.

 

 Albert H. Wiggin: The Market Crash Millionaire
During the Roaring '20s, many Wall Street professional, and even some of the general public, knew Wall Street was a rigged game run by powerful investing pools. Suffering from a lack of disclosure and an epidemic of manipulative rumors, people believed coattail investing and momentum investing were the only viable strategies for getting in on the profits. Unfortunately, many investors found that the coattails they were riding were actually smokescreens for hidden sell orders that left them holding the bag. Still, while the market kept going up and up, these setbacks were seen as a small price to pay in order to get in on the big game later on. In October, 1929, the big game was revealed to be yet another smokescreen.

After the crash, the public was hurt, angry, and hungry for vengeance. Albert H. Wiggin, the respected head of Chase National Bank, seemed an unlikely target until it was revealed that he shorted 40,000 shares of his own company. This is like a boxer betting on his opponent – a serious conflict of interest.

Using wholly-owned family corporations to hide the trades, Wiggin built up a position that gave him a vested interest in running his company into the ground. There were no specific rules against shorting your own company in 1929, so Wiggin legally made $4 million from the 1929 crash and the shakeout of Chase stock that followed
Not only was this legal at the time, but Wiggin had also accepted a $100,000 a year pension for life from the bank. He later declined the pension when the public outcry grew too loud to ignore. Wiggin was not alone in his immoral conduct, and similar revelations led to a 1934 revision of the 1933 Securities Act that was much sterner toward insider trading. It was appropriately nicknamed the "Wiggin Act".

2. Levine, Siegel, Boesky and Milken: The Precognition Rat Pack 
One of the most famous cases of insider trading made household names of Michael Milken, Dennis Levine, Martin Siegel and Ivan Boesky. Milken received the most attention because he was the biggest target for the Securities and Exchange Commission (SEC), but it was actually Boesky who was the spider in the center of the web.

Boesky was an arbitrageur in the mid-1980s with an uncanny ability to pick out potential takeover targets and invest before an offer was made. When the fated offer came, the target firm's stock would shoot up and Boesky would sell his shares for a profit. Sometimes, Boesky would buy mere days before an unsolicited bid was made public - a feat of precognition rivaling the mental powers of spoon bender Uri Geller.
Like Geller, Boesky's precognition turned out to be a fraud. Rather than keeping a running tabulation of all the publicly traded firms trading at enough of a discount to their true values to attract offers and investing in the most likely of the group, Boesky went straight to the source - the mergers and acquisitions arms of the major investment banks. Boesky paid Levine and Siegel for pre-takeover information that guided his prescient buys. When Boesky hit home runs on nearly every major deal in the 1980s - Getty Oil, Nabisco, Gulf Oil, Chevron (NYSE:CVX), Texaco - the people at the SEC became suspicious.

The SEC's break came when Merrill Lynch was tipped off that someone in the firm was leaking info and, as a result, Levine's Swiss bank account was uncovered. The SEC rolled Levine and he gave up Boesky's name. By watching Boesky - particularly during the Getty Oil fiasco - the SEC caught Siegel. With three in the bag, they went after Michael Milken. Surveillance of Boesky and Milken helped the SEC draw up a list of 98 charges worth 520 years in prison against the junk bond king. The SEC charges didn't all stick, but Boesky and Milken took the brunt with record fines and prison sentences.

 

3. R. Foster Winans: The Corruptible Columnist
Although not high-ranking in terms of dollars, the case of Wall Street Journal columnist R. Foster Winans is a landmark case for its curious outcome. Winans wrote the  "Heard on the Street" column profiling a certain stock. The stocks featured in the column often went up or down according to Winans' opinion. Winans leaked the contents of his column to a group of stockbrokers, who used the tip to take up positions in the stock before the column was published. The brokers made easy profits and allegedly gave some of their illicit gains to Winans.
Winans was caught by the SEC and put at the center of a very tricky court case. Because the column was the personal opinion of Winans rather than material insider information, the SEC was forced into a unique and dangerous strategy. The SEC charged that the info in the column belonged to the Wall Street Journal, not Winans. This meant that while Winans was convicted of a crime, the WSJ could theoretically engage in the same practice of trading on its content without any legal worries.

4. Martha Stewart: The Homemaking Hoaxer
In December 2001, the Food and Drug Administration (FDA) announced that it was rejecting ImClone's new cancer drug, Erbitux. As the drug represented a major portion of ImClone's pipeline, the company's stock took a sharp dive. Many pharmaceutical investors were hurt by the drop, but the family and friends of CEO Samuel Waksal were, oddly enough, not among them. Among those with a preternatural knack for guessing the FDA's decision days before the announcement was homemaking guru Martha Stewart. She sold 4,000 shares when the stock was still trading in the high $50s and collected nearly $250,000 on the sale. The stock would plummet to just over $10 in the following months.

Stewart claimed to have a pre-existing sell order with her broker, but her story continued to unravel and public shame eventually forced her to resign as the CEO of her own company, Martha Stewart Living Omnimedia. Waksal was arrested and sentenced to more than seven years in prison and fined $4.3 million in 2003. In 2004, Stewart and her broker were also found guilty of insider trading. Stewart was sentenced to the minimum of five months in prison and fined $30,000.

Hardwood Growth

There is a saying that the best time to plant hardwoods is 20 years ago! No one knows what the future will bring over the next 25 years, but money is made because people look at the potential risk and compare them to the potential returns.

It takes 20 to 25 years to grow a tropical hardwood tree to final harvest. That's a long time, and a lot can happen to a country, to the climate and to the land in which the tree is rooted. Many investors like to look for a return over a short or medium term because in the imagination there is more to go wrong over a longer period.

Even with these considerations many people are placing a percentage of their portfolio into what is considered to be one of the greenest investments available, the growth of marketable woods in sustainable managed woodlands.

Many of the trees that provide the greatest return for example Mahogany or Teak only grow quickly (20/25 years) to maturity within a tropical environment.
There are many factors to be considered before deciding to invest in hardwood and these should be considered before placing any of your cash, don’t be fooled by a pretty brochure and do some in depth homework.

Here are a few considerations to examine before investing:

Government — The stability of the government is critical. This is one of the main reasons for the growth of smaller plantations in places that have a long standing stable government.
 Most governments are very encouraging to investments made in foreign currencies and some offer incentives. For example, if you invest in reforestation in Costa Rica, you can apply for residency.

Squatters — Losing your land to squatters is a concern in the tropics. In many countries a squatter or wanderer can camp on your land and if you do nothing they start to establish a claim.  For this reason many plantations may be in remote areas where there is no benefit in establishing a claim. Some plantations are going so far as establish themselvesaround underground water sources so that if there is a threat of claim the water drawing equipment may be quickly removed or destroyed thus removing the incentive to settle that land.

Natural catastrophe — Fires, earthquakes, volcanoes, hurricanes, and other acts of nature can destroy a plantation.  In the tropics, the climate is very stable. It does not have the wild fluctuations of the North. The temperature stays pretty much the same for the entire year, and the periods of daylight and nighttime are consistent. Thankfully, when it comes to storms, the tropics do not have as severe weather as farther from the equator. 
Most counties have had their weather patterns mapped by educational or scientific institutions. This information is usually in the public domain or available for a small charge.

Fire — If you plant in an area with a very pronounced dry season, fire can be an issue, especially to younger trees. Teak seems to be pretty much immune to a small forest fire after it is 3 years old, but it is best if you can avoid it. One thing is to beware of settlements of people who may be starting fires near your chosen plantation. They may do this for the purpose of removing brush, etc. In the dry season, it is very easy for a fire to get out of control.

Pests — make sure that the plantation you invest in has a qualified forestry engineer either on staff or providing regular service. There are numerous pests in the tropics that will have to be dealt with.
Also, look for a plantation that plants a mix of species instead of monocropping, a mix of species means you can reduce the chance for a disease to spread through the whole plantation.
In some countries large animals can be a problem when the trees are young, but it is hoped that environmental considerations such as long standing migration routes are avoided as plantation sites.

Neglect  - This is the biggest and most serious risk. 25 years is a very long time, and it would be easy for a plantation owner to lose their enthusiasm or financial resources. Make sure that you invest with an established grower who has the financial resources to continue over a long period of time.

Market Risks

There is little chance that the demand for tropical hardwoods will drop. They are in very high demand now and have been for generations. They are essential for indoor and outdoor furniture, flooring and paneling, decking, and shipbuilding
No one knows what the future will bring, but it is sure that continual harvesting of tropical hardwoods from the rain forest will stop, if not for any other reason than that there will be no more to harvest.
Because only 1% of tropical hardwoods come from plantations, for the current demand for tropical hardwoods to be satisfied in the years to come, many more plantations will have to be established. Most industry experts expect that the price of tropical hardwoods will skyrocket in the not-too-distant future, primary cost increase will be due to scarcity.

Teakwood wholesale selling prices are posted each month by the International Tropical Timber Organization or ITTO. ITTO is an independent, international trade organisation that brings together producers and consumers of tropical timber to develop policies and information on all aspects of the world tropical timber economy.

Over the last 30 years, Teakwood prices have increased more than 10 fold, increasing at an average annual rate of 8.3%. In the last five years, the lowest inflationary 5-year period (average 2.3%) in the last 35 years, Teakwood continued its impressive upward trend with wholesale prices increasing at an average annual rate of 7.1%.

Betting on the Bank of England

Interest rates have plunged to an all-time low as the Bank of England’s Monetary Policy Committee attempts to get the economy moving.
For many people this has meant good news with mortgage rates being forced down and those on tracker deals enjoying reduced monthly payments.
But savers have been feeling the effects with annual returns on investments greatly reduced.
So how can individuals best position themselves to benefit financially from any future interest rate movements?
Well, placing a spread bet on any potential forthcoming rises or reductions is just one way for smart investors to profit from the moves.
Financial spread betting traditionally works by speculators trying to predict future increases or falls across a variety of financial instruments from global indices or shares to currencies to commodities.
Spread betters usually ‘buy’ if they feel prices will rise above a spread company’s prediction, or ‘sell’ if they feel prices will fall below a firm’s quote.
However, spread betting on interest rates is unique in that it works in the opposite way.
For example, if you were looking to place a spread bet on interest rate movements with spread experts Spreadex, you would need to look at the company’s UK Short Sterling market.
Here, figures relate to a 100 point index and the quotes relate not to the Bank of England’s base rate but on the future prediction of Libor rates – the rate banks use when lending to each other.
Let’s say you see a quote of 98.46-98.50. This would represent a view that the future Libor rate will be between 1.5% and 1.54% (100-98.5 = 1.5 and 100-98.46 = 1.54).
So if you felt rates were going to drop to 1% you could choose to ‘buy’ on the price with a view on the level moving to 99.
But if you felt rates were going to rise to 2% you could opt to sell on the quote with a view on the level shifting to 98.
You spread bet by betting on each per 0.01 point movement. So, in each case above, if you had bet £10 per point movement you would have made either £500 (£10x50 points movement if the price moved from 98.5 to 99) or £460 (£10x46 points movement if the price moved from 98.46 to 98).
Obviously if you had got the trade wrong and the prices moved the other way, you would have lost money.
However, any losses can arguably be compensated for particularly if you were using this method of trading as a way to try and hedge against changes in monthly tracker mortgage payments.
For example, in the current market conditions, if one were to correctly forecast when rates were to ‘bottom out’ or to start rising again, they could offset any increase in their monthly payment.
In this case, if the individual made a winning ‘sell’ spread bet on the UK Short Sterling market (ie correctly predicting future Libor rates were going to rise) then any increase in the monthly payment would be compensated for by their winning spread bet.
However, if they got this wrong and rates did indeed continue to go lower then any loss in the spread bet would be compensated for by the resulting reduction in the monthly tracker mortgage payments.
All this may seem confusing at first glance and it is true that spread betting on interest rates has typically been an area only usually tackled by experienced or specialist traders.
However, more and more savvy speculators are being attracted to this area especially given the rate of reductions seen at the end of 2008 and the beginning of 2009.
Indeed, one Spreadex customer made more than £100,000 by correctly forecasting the Bank of England’s surprise 1.5% interest rate cut in November when the cut was reflected by a similar drop in the Libor rate.
Again, it should be remembered that the Bank of England’s base rate and the three month Libor rate can often be different figures.

How to be a succesful gambler Pt2

Accommodating Gambling Within Your Personal Life

Gambling successfully will inevitably have a considerable impact upon your personal life both in terms of time spent and in terms of financial resources.

It goes without saying that you should consult fully with any person in your life, who will be affected by your actions.

In order to gamble successfully you need to minimise external pressures.  It is a sad fact that many gamblers’ partners in life are unaware of the scale of their activity.

Gambling Styles

Our view is that you need to try gambling and analyse the effect it has upon you before you can be fully prepared to make the transition from a novice to a lifetime winner.
There are 5 gambling styles, in which you may find yourself participating. 
The Five Gambling Styles
* Professional
* Semi-professional
* Investor
* Entertainment
* Kamikaze

Professional

The gambling professional is focused solely on winning.  He/She is not in it for fun or for adrenalin surges. They carry out considerable research and operate a proven staking system in a disciplined manner in order to generate annual income, sufficient to meet their targets.

My lifetime friend and business partner Andrew Cork and I achieved an annual return of over £100,000 on a betting bank of £40,000 for 4 successive years before launching the Centaur business by adopting a professional approach to gambling

This method of gambling is the most successful.  However, it may not suit everyone’s psychological make up and requires an understanding life partner.

Semi-Professional Gambler

Typically someone who has a rewarding profession that they do not want to give up enjoys horseracing and has a winning mentality.

He/She will adopt a systematic approach to betting, which generates profit without involving the same degree of research, typically by specialising on a particular category of horseracing or sports betting.

This is perhaps the most realistic goal for most would be gamblers in that horseracing betting can become a very enjoyable and financially rewarding hobby.

Investor

The investor is someone whose betting is based on information from an advisory or tipping service. There are many racing advisory services or tipsters on the market but few provide a credible service.

Before joining any racing tipping service ensure that there is proven independent verification of their results by a public body and that this proof and detailed previous results are available for consideration before you join.
Centaur Racing Service results are independently verified and can be seen in full www.centaurglobal.com

Entertainment

Most people operate in this gambling style. Examples are:

* Going racing socially and having a £5 bet per race
* Having a flutter every Saturday on the horses, football or lottery.
* Watching a football match or golf tournament on television and betting on the outcome.

Entertainment gambling can be hugely enjoyable and can also result in profits. Thousands of people in the UK participate daily. Where people set themselves an annual, monthly or weekly budget for gambling, there is absolutely no problem with entertainment gambling and it can help to brighten up many otherwise dull and monotonous lifestyles.  A day at the races with friends can, in particular, be a highlight within the annual social calendar.

However, when entertainment gambling takes place without budgetary control, people’s financial stability can be put at risk particularly where the chasing your losses scenario begins to take effect.

So, my advice is to keep a record of your bets and returns so that you can accurately assess what gambling is costing or gaining you each month.

Kamikaze

As implied, the kamikaze punter is heading for a spectacular and early end to their gambling career.

Visit your local betting shop and you will see many people who fit this mode which involves an inability to leave the shop each day without putting their entire funds at risk.

As the day progresses they progressively increase their stakes in a desperate attempt to recover losses incurred.

Key Success Factors

Taking the plunge to gamble professionally involves putting significant funds at risk.  You should not take this step until you have developed the correct psychological approach.

The following acronym COLDER describes the key success factors you need to have in place to gamble successfully.

* Courage in your convictions
* Organisation
* Learn from your mistakes
* Discipline
* Effort
* Research

Full information on these principles is available on the Centaur Professional Gambling DVD.

This article is based upon a DVD published by Centaur Global Limited which covers the subject in greater depth. This DVD can be purchased for £29. Centaur also provides group and individual one to one seminars on professional gambling. Ring our client services team on 08717-121110 if you would like further information

Conclusion

In articles 1 and 2 I have covered the mental approach required to gamble successfully on horse racing. In the final article of this series I will show you how to get started using proven methods.
HOW TO BECOME A SUCCESSFUL GAMBLER

HOW TO BECOME A SUCCESSFUL GAMBLER

Introduction

Over 1 million people in the UK gamble on horseracing every week. At the beginning of the 21st century, research estimated that less than 2% of gamblers showed a profit each year.

Since the introduction of the Betting Exchanges in 2001 this figure has increased to 9%.

Over the course of the three articles I hope to demonstrate how YOU can become part of that select group and develop a lifelong winning approach to gambling on racehorses by;

* Developing an appropriate personal gambling style
* fitting in adequate time for a meaningful personal life!
* Setting  up and maintaining an effective trading bank



Steps to becoming a successful gambler

There are 3 key steps to becoming a winning gambler:

STEP 1 - Know and manage yourself
STEP 2 - Adopt a professional approach
STEP 3 - Stake to win

In this first article we will deal with STEP 1

Self Knowledge

If you are to be a successful gambler, you need to be prepared to cope with the range of temptations and pressures which overcome over 90 per cent of the people, who enter the gambling market.

The two most difficult hurdles to overcome are:

* dealing with the adrenalin surge that accompanies winning bets and
* chasing your losses

You also need to dovetail gambling successfully with your personal life if you are to become a lifelong winner.

The adrenalin surge

Imagine you have gone horse racing for the first time.  You have decided to have £10 on each of the six races.  You pick a horse in the first race and ask the bookmaker what price it is. He tells you it is 10/1.

You are watching the race and near the end of the race your horse is in 4th place.  Then all of a sudden it starts to pass the three horses in front of it and puts its head in front just before the winning post.

You have just won £100 (10 x £10).

More importantly, it is very probable that you would have experienced the adrenalin surge or sense of elation that gambling on horseracing can produce.

Enjoyable? Yes – many hardened gamblers, mainly losers describe this experience as “the next best thing to sex”

Dangerous? – Definitely. It is this experience that creates addictive gambling.  Go into any high street betting shop and you will see scores of punters/ gamblers who bet on every single horse or greyhound race from England, South Africa or Germany.  

This is betting for betting’s sake. Of course they back winners - they even have the odd winning day.  However, logic dictates that they cannot continue to defy the odds and win over a longer period of time and these people contribute to the huge profits made annually by the High Street bookmaking chains like Ladbrokes, William Hills and Corals.

Do not for one minute think that there is no way that YOU could end up gambling in this manner.  Hundreds of highly educated people, many running their own companies or in senior management positions have ruined their lives by becoming addicted to gambling.

So, we have seen that winning can in fact be dangerous.  It can cause gamblers to increase their stakes on subsequent bets and lead them to gamble more than they can afford.

However, with the right strategies you can make gambling pay, outwit the competition and to keep the bookmakers in funds so they can continue to pay you!!

Chasing Your Losses

Many people have a competitive streak in their nature and hate to lose.  Gambling amplifies this tendency.
 
This can result in the common phenomenon of chasing losses. You can see this in casinos regularly where many gamblers lose all of the money they have with them by doubling up on red or black.  They convince themselves that after 8, 9 or 10 reds that it must be black next time.  Not so, the odds are still even money black or red.

This philosophy is even more dangerous when applied to horse racing when the odds of finding your next winner are far higher than even money.

A high percentage of horseracing gamblers fail to understand
that to be successful you need to judge your performance over the longer term, ideally an annual horizon.  Many increase their stakes
progressively on a daily basis if their first bet or bets have lost in an attempt to recover losses.

This is foolish.  Horseracing takes place 350+ days a year and your staking plan needs to recognise this.

Conclusion

In article 1 we have given you the necessary health warning.
In articles 2 and 3 we will set out key factors to adopt to gamble successfully and to size your betting bank.