Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: Parsad on February 12, 2009, 02:46:23 PM

Title: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Parsad on February 12, 2009, 02:46:23 PM
Bloomberg reports that both Kynikos and SAC Capital had access to John Gwynn's preliminary analyst report on Fairfax before it was published.  As we all know, Gwynn was subsequently fired by Morgan Keegan for releasing non-public information, and it was his original report insinuating that Fairfax was nearly $5B under-reserved that stirred the hornet's nest.  This gets better and better!  Cheers!

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1gpkAyXa8iw&refer=home
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Parsad on February 12, 2009, 02:50:24 PM
What's also very interesting is that Chano's little forum called CNBC has yet to report any of this story.  Cheers!
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Parsad on February 12, 2009, 04:10:54 PM
On the updated version on Bloomberg, SAC says that they held shares of Fairfax and weren't shorting.  Now what if two or three funds colluded in driving down a stock's price? 

What if one firm bought shares and held them.  Then one or two shorted the hell out of the thing.  The one with the actual shares could also lend the shares out and receive considerable interest income.  This would also allow the others to cover positions when the stock moves in the opposite direction.  Working together by naked shorting a stock, putting out negative analyst reports and media reports, they drive the stock down until the point where the funds shorting cover and pay back the hedge fund that lent the shares out.

SAC's comments prove nothing about their intentions.  The emails being sent between the two firms indicates that there is more to this than meets the eye.  I can't wait for the trading activities at Kynikos to be unsealed.  Cheers! 
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: oec2000 on February 12, 2009, 07:53:49 PM
What if one firm bought shares and held them.  Then one or two shorted the hell out of the thing.  The one with the actual shares could also lend the shares out and receive considerable interest income.  This would also allow the others to cover positions when the stock moves in the opposite direction.  Working together by naked shorting a stock, putting out negative analyst reports and media reports, they drive the stock down until the point where the funds shorting cover and pay back the hedge fund that lent the shares out.

I don't see how this would work. Assuming SAC was a conspirator, what would they have to gain from the long position? Besides, the conspirators, in total, being net neutral, would not profit from the sell down.

The statement by SAC lawyer Klotz sounds quite unequivocal to me. Given that their trading positions are well documented and easily verified, it seems unilikely that a lawyer would make such a declaration without basis. Based solely on the "facts" from the article, I don't see how a case can be made for SAC's role in a conspiracy.

The Chanos/Gwynn link looks more promising and points to unethical and perhaps illegal activity but whether it is enough to prove conspiracy is still questionable, imo.




Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: oec2000 on February 12, 2009, 11:17:09 PM
http://online.wsj.com/article/SB123449787320481341.html?mod=testMod

Slightly more detailed and clearer article.
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: oldye on February 13, 2009, 03:30:34 AM
http://online.wsj.com/article/SB123449787320481341.html

this link seems to work without membership
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Uccmal on February 13, 2009, 04:36:17 AM
Being a lead story on Bloomberg, and in the WSJ, cant be good for business.  Oh, to be a fly on the wall at SAC and Kinkos Capital to see how they are going to manage redemptions.  In this climate investors will run so fast you will hear the wind roaring past.  No one wants to get stuck unable to redeem if there is a big fine.  The unfortunate side effect is the lawsuit will be bleeding a stone at the end. 


Never mind that the enforcement agencies are going to play "pile on the rabbit" now.  What choice have they got?  F--ers deserve everything they have coming. 
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: link01 on February 13, 2009, 07:48:15 AM
<<F--ers deserve everything they have coming.>>

raw, primal elegance...touche! couldnt agree more. the sec needs to put an end to illegal trading & market manipulation. period...exclaimation point!
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: tooskinneejs on February 13, 2009, 07:51:41 AM
From today's WSJ coverage:

"Trading records obtained by Fairfax through discovery in the lawsuit show that Kynikos put on a $5 million "short" position, or a bet against Fairfax shares, in the month after Mr. Chanos learned of Mr. Gwynn's report, including $2.5 million the day before the report came out, a Fairfax attorney, Michael Bowe, said during a September court hearing."

That pretty much says it all, doesn't it?  Seems like it should be a pretty simple criminal case for some young government attorney to earn a notch on his belt with.
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: tooskinneejs on February 13, 2009, 08:39:29 AM
Here is Henry Blodget's take on the news:

http://www.businessinsider.com/chanos-sac-snared-in-wall-street-research-scandal-2009-2#comments

His comments and the comments from readers at the bottom are kind of interesting.  Sounds like a lot of folks think insider trading and market manipulation is no big deal.
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: dual_bid on February 13, 2009, 09:35:01 AM
Legally speaking, the following factual controvercy is the most important issue:

Quote
Michael Bowe, a lawyer for Fairfax, said at a Sept. 25 hearing in the case that until receiving the advanced notice of Gwynn’s report, Chanos had been covering his short -- buying Fairfax shares to close out his short sale.

“Chanos had been covering his positions up and until the point when he receives the tip that Gwynn is going to issue his report,” Bowe said, according to the transcript. “And between that time and the time of the report coming out, he shorts over five million dollars’ worth of Fairfax shares, half of which he shorts the day before the report comes out.”

Haveles, the Kynikos lawyer, denied that.

“Kynikos continued to reduce its short position in Fairfax after receiving information in mid-December 2002 about the views of Morgan Keegan’s analyst,” he said. “Kynikos increased its long-standing short position in Fairfax by a modest amount on January 16, 2003, but it did not receive information about the imminent release of the Morgan Keegan report until after the close of trading that day and after Kynikos’s trading on that day had occurred.”

Again (http://groups.msn.com/berkshirehathawayshareholders/general.msnw?action=get_message&mview=0&ID_Message=51780&LastModified=4675703209252733350), advocating for the Devil, I think there are major illogicalities in FFH claims, regarding, principally, to the Gwynn-Market assumed correlation. Do you know if any defense was submitted?
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Parsad on February 13, 2009, 09:48:08 AM
What's so ironic is that the WSJ, who is reporting on this story, employs one of the primary culprits who assisted John Gwynn...Peter Eavis!  As virtually all of you know, Eavis is the one who wrote some 50 articles in a six month period during 2003 for the Street.com, where Gwynn and Hempton were his sources.  But I guess the WSJ hasn't figured that out yet!   ???  Cheers! 
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: smw397 on February 13, 2009, 09:52:39 AM
I'd have to see not only the timestamps on any email communications but phone records indicating the time of any conversations that occurred that day before I'd believe Kynicos' claims about when the trades occurred relative to when the information about the negative report became known to them.   I know we're supposed to presume innocence until guilt is proven and all that, but frankly if I were James Chanos and I were innocent of these charges and held material information proving that innocence, I'd be pretty quick to provide it. 
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Crip1 on February 13, 2009, 12:01:14 PM
From the Blodget article: "Based on a review of the facts we've seen, the case against Chanos and Kynikos is problematic, while the one against SAC is very weak."

This whole situation is really bizzare to me. His admonishment of SAC assumes that the information released is the only evidence which is to be presented. This assumption is either irresponsible, niave or completely biased. Would a firm like Fairfax file a $6B lawsuit with only this in hand or is it more logical to assume that they filed with this as only a portion, potentially small portion, of the total evidence they have collected. I would opt, looking at this objectively, for the latter.

Quickly now, let's sum up what has become clear in the time since the lawsuit was filed.
1) Gwynn was fired for improper actions regarding his FFH report.
2) Gwynn's original report was factually incorrect by his own ommission a couple of weeks later and his second report (The one where he said that FFH was $2B underreserved as opposed to $4B) has also shown to be wildly incorrect.
3) A noted short-seller had the report before it was published.
4) Spyros Contengious (sp?) has shown to be a slime-ball. 

Now, if these are the only bullets in FFH's gun, they have some compelling evidence, but likely not enough to have any chance to win a $6B lawsuit against all of the defendents. However, if this is the tip of the iceburg (as I think that it will end up being), then it has got to be a little disconcerting for the defendents, especially considering the dribs and drabs that come out reinforcing nefarious activities.

FFH may not get dime one from these folks, but if this curbs such nefarious activity, it is money well spent.

-Crip
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Parsad on February 13, 2009, 12:12:07 PM
There's a couple more Crip:

5)  Adam Sender of Exis Capital was associating with both Spyro and Anthony Pelicano - both in jail now
6)  Sender hired Pelicano to make a business partner's life "a living hell"
7)  Chanos was in contact with people at SAC with information that was not public

I'm sure there's a hell of alot more as well.  Prem doesn't put down a bet with his reputation unless he's got the odds in his favor.  Cheers!
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: Partner24 on February 13, 2009, 01:27:17 PM
Well, prepare your popcorn and stay tuned for more developments  ;)
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: lessthaniv on February 13, 2009, 03:10:44 PM
SAC & Chanos would like us to believe they did nothing to conspire with each other. However, if that's true, then I don't understand something ...

If one stumbles onto a piece of information that can be turned into significant profits, Is it common practice to call up one of your largest competitors across town and tell them about it? They are going to have a hard time explaining how they didn't conspire.
Time to bring out the famous chewbacca defense!
http://www.southparkstudios.com/clips/103454 (http://www.southparkstudios.com/clips/103454)

... that still makes me laugh!

<IV



Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: JackRiver on February 15, 2009, 10:57:51 AM
If two investors are colluding then one might want to take a long position as bullets to shoot down the stock price.  That is pre removal of the tick test.

Yours

Jack River
Title: Re: Chanos and SAC Saw Non-Public Fairfax Research - Bloomberg
Post by: NumquamPerdo on February 15, 2009, 05:12:39 PM
The fact that SAC was long common at the time doesn't mean they didn't have a synthetic short position on.  I remember it clearly: a huge cross would go up in Chicago at the same time as huge call and put trades.  The options market maker naked shorted stock (via the Madoff exception - I love it) to SAC or the other hedgies in the cabal, while selling them puts and buying calls from them.  I think it's called a reverse conversion.  This left the hedge fund short calls, long puts and long stock, which they could use to pound the crap out of the market.  The folks at Fairfax are well aware of this strategy and will make it clear to those in the courtroom.