Levine on Wall Street: Normal Typical Reasons

Accused insider trader actually was just trading for "you know, reasons that were normal, typical reasons."

SAC Capital traded Elan and Wyeth for "normal, typical reasons."

Mathew Martoma is on trial on insider trading charges, because his employer, SAC Capital, allegedly traded on inside information that he got about Elan and Wyeth. He was hoping to beat this rap using some old deposition testimony from Steve Cohen, which he claimed showed that SAC didn't trade on his inside information: Coincidentally, someone else at SAC wanted to make the same trades as Martoma did, and Cohen ultimately made trading decisions based on the other guy's information, not Martoma's (maybe illegal) information.

Yesterday Martoma's judge disagreed and refused to allow Martoma to use Cohen's old testimony, ruling that that testimony if anything was incriminating to Martoma: "According to Cohen, Martoma played a significant role in his decision to buy Elan and Wyeth stock, and it was Martoma's discomfort with the Elan position on July 20, 2008 that was the impetus for selling the position." The transcript is incredible on this point. Cohen got a summary of Martoma's concerns (which, again: allegedly inside information) from another trader. Cohen testified that he didn't remember Martoma's exact reasons for wanting to dump Elan and Wyeth, but "[t]hey were, you know, reasons that were normal, typical reasons." NO INSIDER TRADING HERE, JUST NORMAL TYPICAL STUFF.

Commercial paper is weird .

Companies have lots of cash on their balance sheets, which seems to create two problems, viz. (1) what to do with it and (2) a self-reinforcing desire to have even more cash on the balance sheet. The solution to both problems seems to come from a revival of the non-financial commercial paper market, in which companies raise money in short-term financing markets in order to invest it in the same short-term financing markets: "corporates are increasingly buying each other's commercial paper as a way to deploy their massive corporate cash piles, bankers say." Shhh. I know.

Leo Strine is weird too .

Leo Strine is the Delaware Chancellor, which is both a cool title and also one of the most important jobs in American corporate law: He's the chief judge of the court that does pretty much all of our M&A litigation. The one downside of the job is that he's occasionally overruled by the Delaware Supreme Court. That downside seems to have become too much to bear, and Strine is now being nominated to be the chief justice of that court, taking him out of the M&A trial game (though he still gets to hear appeals). Strine is famous for all the good reasons -- he is smart, funny, outspoken, eccentric, and a fount of cultural references -- and his promotion will be a loss for merger-related comedy. Though, Delaware, if you're looking to replace him, I've got a law degree somewhere.

Bridgewater had a bad year .

I have a whole elaborate justification for why it's not fair to make fun of Bridgewater Associates' $70 billion All Weather fund when it has a bad year -- it's a "risk parity" strategy based on a reasonably transparent methodology designed to give you a specific well documented exposure, so you should invest in the fund if you want that exposure, not because you think the fund will always go up or because you think "Ray Dalio is smart and will change strategies so that I never lose money," and so occasionally the exposure that All Weather's investors transparently wanted and got will turn out to be a bad one -- but, yeah, it was down 3.9 percent in 2013, versus up 30 percent for the S&P 500, so not all weathers, huh?

The Wolf of Wall Street invented internet comments .

Yeah, it's pretty weird. Really he was so litigious at Stratton Oakmont -- suing people who called him a con man, heh -- that Congress passed Section 230 of the Communications Decency Act, which allowed internet platforms to avoid liability for dumb stuff that users posted on those platforms. And thus was eventually born Twitter and so forth. So I guess we all owe him royalties. Which he still owes to his victims.

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    To contact the author on this story:
    Matthew S Levine at mlevine51@bloomberg.net

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