Some funds engage in rumor mongering to drive down

  • No School
  • AA 1
  • 172

This preview shows page 104 - 105 out of 172 pages.

Some funds engage in rumor mongering to drive down the prices of companies they are shorting. Some funds “spray their flow all over the street”—they try to game Wall Street banks against one another to get the best price for themselves. While this is not illegal, Wall Street firms don’t like to get played—they like to be the ones doing the playing. At worst, some clients—like Raj Rajaratnam, founder of the $7 billion Galleon fund and always highly charitable with his personal wealth—show bad judgment and trade on inside information. In October 2011, he was sentenced to eleven years in prison. Then there’s the Simple Client. You would be appalled at how backward and badly run certain large asset managers and pension funds can be. There’s a huge discrepancy between the sophisticated ones and the unsophisticated ones, even though they may be of equal size and look almost identical to the outside world. The bad ones are big and bureaucratic, have outdated systems, and still use fax machines for trade confirmations. They generally move very slowly—sometimes too slowly. These are perfect prey for Wall Street, and after they get fed one cup of wine, they are forced to eat bitter herbs. An example of a Simple Client would be a client whom a longtime salesperson on the floor dubbed the Queen of Wall Street. She was a piece of work: volatile, quirky, and given to peculiar utterances and outbursts. She liked to break in the new kids—once, when a scared first-year analyst named Jonah was doing some trades for her, she shrieked, “Jonah, if I could, I would reach through the phone line and bite your fucking head off!” Poor Jonah wasn’t the same for a while after that. Though the Queen was responsible for trading billions of dollars in futures, options, and other derivatives, she was strangely unsophisticated about the business. She had a special paranoia about trading the incorrect amount of futures contracts. She would say crazy things like “I don’t care what the price is; I just don’t want to overtrade”—that is, accidentally trade too many contracts, an error on her part that could get her into trouble with her boss. For anyone on Wall Street, this was an insane thing to hear, since getting the right amount of contracts is the most basic of calculations; a rookie should get it right every time. The important thing is, what was your execution? Did you buy low and sell high? What was the price? The Queen’s wackiness was especially egregious in light of the fact that thousands of people’s pensions were tied to her decision-making processes. We used to hold the Queen’s hand, and treat her like a queen. We assumed a fiduciary responsibility to tell her when she was doing something wrong or making poor decisions. But, sadly, the Queen of Wall Street is the type of client many people on Wall Street are looking to prey on.
Image of page 104
Image of page 105

You've reached the end of your free preview.

Want to read all 172 pages?

  • Fall '19

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors