This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Five Dumbest Things on Wall Street: Oct. 23

Inept Insider Trading

NEW YORK ( TheStreet) -- For such a wealthy, smart guy, Raj Rajaratnam looks like one poor, dumb criminal.

Rajaratnam, the billionaire founder of the Galleon hedge fund, is alleged to have conspired with six other people to make illegal trades based on insider information that brought in $20 million in profits, according to a pair of criminal complaints filed in U.S. District Court in Manhattan last Friday. Some of those sketchy transactions involved shares of Google (GOOG) and IBM (IBM). Another score for Raj and his merry band of tipsters was Internet infrastructure provider Akamai Technologies (AKAM), which they successfully shorted after receiving non-public earnings information from an unidentified person at the company.

Too bad he allegedly blew it all -- and more -- on a failed attempt to game shares of chipmaker Advanced Micro Devices (AMD - Get Report).

According to The New York Times, Galleon Group bought $85 million to $90 million worth of AMD stock from August 2008 to October 2008. The purchases were made after Raj and alleged co-conspirator Danielle Chiesi clandestinely learned from an IBM executive in that the government of Abu Dhabi would invest billions of dollars in AMD. Chiesi worked at New Castle Funds, a hedge fund closely associated with Galleon, which also took part in the trade.

Alas, the best laid plans of rats and men often go astray. The market tanked in September and October of last year, taking AMD along with it. By Oct. 6, Galleon's AMD investment was worth only about $68 million, a loss of roughly 25%. And on Oct. 7, when AMD finally announced its deal with Abu Dhabi -- no surprise to Raj and his crew, of course -- its stock closed about 8% percent higher that day, but still well below Galleon's purchase price.

Galleon held on to nearly all its AMD stock after the deal was announced, says the Times, only to see it resume its plunge during the rest of October. In total, Galleon lost about $30 million on AMD, more than wiping out his gains from his other allegedly unlawful trades. The hedge fund manager is now out on $100 million bail and proclaiming his innocence, despite wiretaps and extensive evidence pointing to the contrary.

Then again, we'd also be loath to admit we knew the next pitch but whiffed anyway.

Dumb-o-meter score: 95 -- Sorry, Raj, but the Justice Department likely won't be content with simply telling you, "Cheaters never prosper."
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $675.34 0.62%
AMD $2.38 1.71%
MGM $22.92 -0.17%
PG $75.90 -0.72%
SHLD $22.46 9.56%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs