Rajat Gupta called his buddy RajRaj near the close on Sept 23 2008 to tell him that Warren Buffett would be making an investment in Goldman Sachs. The deal was announced after the close. The stock closed at $125, which is probably about where the tippee could have bought his shares. It opened the next morning at . . . $128. Wow. Less than 3% gain on that insider tip. Doesn't really seem worth it, does it? Gupta was just sentenced to two years in jail. He will get out when he is 65.
What I find truly funny is that Rajat Gupta didn't profit a dime from passing on the tips. Why he did it? He should have kept his mouth shut. Even junior level people know what information is sensitive and what is not and what should be kept private and what information can be shared. I don't understand why a seasoned professional like Rajat Gupta didn't keep his mouth shut and didn't refuse to pass on the information to RajRaj.
If you've ever lived in a dysfunctional society, you know that screwing people over and taking advantage of weakness is almost a matter of personal honor. "Your honor, the car was unlocked. I had to steal the radio as a matter of principle. That kind of behavior cannot go unpunished."
. Wow. Less than 3% gain on that insider tip ----------------- Remember back when the mutual fund trading scandal? Those guys would risk 4 bucks to make a penny on a sure thing. Now that hardly seems worth it but does say something about the risk and people perhaps get fed up not finding an opening to trade (or edge) hence the inside trade.
I thought the mutual fund thing was more money. They essentially got a free days worth of pnl. So if the market was up 1%, they could get the t-1 price and capture the 1%. I don'tknow why Rajat did this. It's shocking. Here's a guy who for 30 years was working with Heads of State, Captains of Industry, and the most prestigous institutions in the world. His credo must have been descretion. And the argument that he wanted to be a billionaire doesn't make sense to me. Obama, Buffet, and the Queen of England would have taken his call.
Why did Bill Clinton have an intern blow him in the oval office? Arrogance breeds the belief in indestructibility. In Clinton's case, the belief appears to have been justified. In this case, no.
One of three things must be true; re. passing insider info. He did it all the time and was really good at hiding it, but fell apart just this once. (Perhaps that how he got to his high position?) He had never done it before. (Everyone makes mistakes. The law of averages says that some will make mistakes very early in their career, and some very late.) He did it off and on, here and there, no one ever made a fuss about it until now. (Just chatting with friends, who doesn't sometimes say things they wouldn't want printed in the paper?)
Life in a major sense is an attempt to be on the inside rather than on the outside. It shouldn't take anyone too long to see that who we are and all things we do or want to do are our attempts to be on inside. I do not regard the criminalisation of so-called insider trading as anything other than a Roman Circus where selected targets are fixed up as scapegoats - 'sacrifices' prepared and sanctioned for the sheep-like approval of the general public. The public are thereby given these 'sacrifices' because they are not part of the successful richer minority of society.