The Iron Yuppie

My girlfriend's sister correctly mentioned that I was going to blog about this.

There have been a few articles about Deep Throat recently that have just been mind-bogglingly one sided. Here's a good example from Ben Stein.

A counter point is here.

Maybe I'm horribly naive, but unless I'm mistaken here are the facts:

• Burglers broke into the Democratic Nation Comittee Head Quarters - this is illegal


• Individuals in the Nixon administration funded this break in - this is illegal


• Nixon participated in the conspiracy that supported these break-ins - this is illegal

How do people now come out and say that Mark Felt aka Deep Throat was anything but honorable in helping reveal this illegal behavior? I don't care if his motives were that he was pissed that he got passed over, or if he was worried that the vast army controlled by Sonny and Cher were amassing to take over the world, he did what should have been done in the situation and made sure the law was enforced (no matter how round-about his methods).

Yesterday, I got into a fairly heated discussion about Elliot Spitzer and the mutual fund late trading/market timing issue. For the interested, this is a fairly decent NPR round up of market timing.

Here is a round up of a sample story (not prosecuted by Eliot Spitzer but by the U.S. Attorney Carlos Castillo)

In count 28 of the Second Superseding Indictment, Sharma, Wadhwa, Geek Securities, and Geek Advisors are alleged to have conspired in a mutual fund trading scheme to make money by engaging in mutual fund "market timing" and "late trading" from 2001 until late 2003, in violation of Title 15, United States Code, Sections 78j(b) and 78ff(a), Title 17, Code of Federal Regulations, Section 240.10b-5, and Title 18, United States Code, Section 371. These defendants are alleged to have conspired to make money trading shares of various mutual funds by [...] circumventing mutual fund rules in order to engage in prohibited mutual fund "market timing" and "late trading." [...] "Late trading" refers to the practice of placing orders to buy or sell mutual fund shares after the close of the market at 4:00 p.m. EST, but paying the price as of the 4:00 p.m. EST close. "Late trading" typically enables the trader to gain an advantage by capitalizing on news and information that occurs after 4:00 p.m. Otherwise put, the late trader profits from market events that occur after the 4:00 p.m. EST market close, but that are not reflected in that day's closing price.

According to the NPR story, the average household has $75,000 in mutual funds and lost about $40 a year to this scam. 95 million households own mutual funds, I don't know what percentage of them specifically ran into this problem. All in all, a total of $4-5 billion a year lost to "late trading" and "market timing".

Again, I hate to be glib, but the facts seem pretty straight forward:

• Average citizen is restricted to trading based on published prices and during open hours


• The mutual fund advisors permitted a limited group of people to trade in ways that broke these rules


• The people who allowed this should go to jail.

My girlfriend's brother in law says that confidence was lost in the market (by the average investor) as well as the amount of damage to an average investor was so small that it did not deserve the publicity that this received. I'll cede BOTH those points, but that doesn't make Eliot Spitzer wrong. People broke the law, they stole money by breaking the rules and they should pay the penalty and go to jail. I don't care if Eliot Spitzer's motives were that he wanted to run for president or see how many times his name could get mentioned on the radio. He enforced the law to create a fair and balanced marketplace. I'm not sure how there's another side to this discussion.