The Wolf of Wall Street

This book by Jordan Belfort tells the tale of how his firm used its army of brokers to sell stocks at inflated prices to rich retail investors.  This is secretly one of the best books on short selling.  By understanding the criminal point of view, I started realizing more of the footprints that pump and dump-style frauds leave behind.

The book does have its flaws.  The author isn’t exactly a reliable narrator.  Jordan Belfort is not a “wolf of Wall Street” at all.  The book talks about how he specifically kept his offices and those of his affiliates away from Manhattan.  As well, most of the book does not talk about securities fraud.  Nevertheless, if you want to develop a gimmicky skillset that is only useful for short selling, I highly recommend this book.

The book was also adapted into a Hollywood movie.

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KMI and the $1 club

Kinder Morgan’s CEO has voluntarily taken $1 in salary for a very long time.  The chief operating officer, Steven Kean, looks like he will follow in his boss’ footsteps.  Kean will still get paid stock so his overall compensation won’t be as low as Richard Kinder’s.  Still, I think it reflects very well on management’s integrity.  From the proxy statement:

In 2013, Mr. Kean made a similar request to Mr. Kinder to change his annual base salary to $1. Mr. Kean also requested that he receive no annual bonus from us or any of our affiliates. As a result, Mr. Kean’s total compensation consists of a restricted stock grant received in 2013 which is subject to six-year cliff vesting, dividend equivalents paid on that restricted stock, and benefits available to our U.S. employees generally (such as healthcare, life insurance and 401(k) plan benefits). There are no plans at this time to grant additional restricted stock to Mr. Kean until the vesting terms of his 2013 grant have been met.

What I learned about HFT from day trading

Years ago, I briefly tried my hand at day trading with a company called Title Trading.  Title Trading is a proprietary day trading firm similar to Swifttrade (the pioneer) and somewhat similar to SMB Capital (SMB has an excellent blog).  These firms will take almost anybody, sit them in front of a computer and get them to trade very small amounts of money.  The end game is to find talented traders to day trade the company’s capital.

China 2.0

Apparently there is a new wave of Chinese stocks hitting US exchanges.  Some of them are Web 2.0 related.  Needless to say, I am extremely skeptical about these Chinese stocks.  Historically, there has been an extreme level of blatant fraud from China.  This is mainly because these Chinese stocks were listed on foreign exchanges around the world and because scumbags gravitate towards reverse mergers.  (To be fair, these China 2.0 stocks are not reverse mergers.)  The underwriting of these China 2.0 stocks seem rather loose.  They do not have to comply with all parts of Sarbanes-Oxley thanks to the JOBS act.  At least 3 of these companies (GOMO, WBAI, WUBA) have identified material weaknesses in their internal controls.