This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Five Dumbest Things on Wall Street This Week: June 29

Stocks in this article: VTUS AMLN CHK GS BCS

2. Falcone's Failure

Harbinger Capital founder Phil Falcone once had it all. Too bad he was so full of himself that he failed to spread it around.

The Securities and Exchange Commission initiated a lawsuit against the formerly high-flying hedge fund manager on Wednesday, accusing him of illegally borrowing $113 million in client money to pay personal taxes in 2009.

Falcone is also being sued by the government over a sweetheart deal that allowed Goldman Sachs (GS) (who else?) to flee his flagging flagship fund while other investors were still locked up, as well as manipulating the prices of distressed high-yield bonds by engaging in an illegal "short squeeze."

"Today's charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully," said Robert Khuzami, Director of the SEC's Division of Enforcement.

Poor Phil. If only he adhered to the investing adage that diversification is the only free lunch on Wall Street. If he had he might have avoided this sorry situation. Alas, instead of seeing the light, Falcone saw 4G wireless provider LightSquared and totally lost it.

And when we say "lost it" we mean both his mind and his money. Not since Klaus Kinski went over the falls in Fitzcarraldo have we seen such suicidal devotion to a single idea.

Falcone's fanatical wager on the now bankrupt high-speed wireless network wiped out most of his fund's nearly $3 billion investment. Even worse, it caused Falcone to allegedly skirt the law to save his own skin. At last check the fund, which peaked at $26 billion in assets in 2007, was down to $3 billion.

Look, we understand that concentrated bets occasionally payoff. And we also appreciate the fact that most of the world's richest people became that way by betting on their own transformational vision as opposed to the market's conventional wisdom. Heck, that's how Falcone amassed his pile in the first place, by betting big against subprime mortgages before they collapsed.

The very smart ones, however, realize that those once-in-a-lifetime trades are exactly that. Once they make their big score, they check their egos to prevent themselves from giving their winnings back.

The very dumb ones, on the other hand, believe the hype, give it all back and occasionally, like our good friend Phil, get sued by the government for breaking the law.

4 of 5

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs