Mark of Desperation

When I was in high school, I was no saint and explored the boundaries of what I will politely term in hindsight as 'partially misspent youth'. But when it came to my studies, for whatever reason, I never cut corners. Indeed, I liked to learn, and remain, to this today, both curious, and a proponent of "there are no shortcuts to success". This may strike many hedge fund managers as unnecessarily Calvinist and puritanical, particulalrly those, who, contrary to my assertion, have conjured amazing wealth overtly looking for, and taking shortcuts.

I recall an AP History final that I took, which I aced something unsurprising since I passionately loved history. One day, my teacher, who'd taught me several occasions prior and who I admired profoundly, appeared before and was very cross, calling me into his office. He was red-faced (more than usual) with anger , and looking very disappointed and point-blank accused me participating in a cheating scam. I was distraught, disavowed all knowledge of any wrong-doing, and assured him that in any event (which was the truth), since I would never do such a thing, purely out of principal and conviction. What had transpired was that a friend who was sitting behind me, less conscientious and honest than I, had copied my (perfect) answers from my paper despite my best stealth efforts. This in itself would not have been problematical for my erstwhile friend had he not transposed a letter and number early-on, giving him a run of perfect answers, only they were off-by-one below the transposition point, for a grand total of 23%. That reality meant he was caught with his hand in the cookie jar in a manner that was beyond dispute. Amazingly, serially cheating (something he continued to pursue at univ I am told by friends who attended with him) didn't prevent this guy (now no longer my friend) from going to Univ. Pennsylvania Law School and qualifying for the bar in PA and NJ, an occurance that always causes me to look with suspicion upon ALL lawyers and people who take public oaths.

Markets are apparently no different. Cheats are rarely caught, and even more seldom called-out. For in American finance, one can resolve a potentially criminal matter quite conveniently without admitting or denying guilt. But if one looks, one can see highly probably examples of it all over the place. Whether it is price erosion before a poor earnings announcement, or accelerated gains and volume prior to takeovers or other positive news-flow, or periodic window-dressing for calendar periods, or option expirations, such "cheating" is everywhere.

Sometimes such cheating is more profoundly obvious and egregious than others, but the world is a big place, and the regulatory authorities really do not have the resources, nor as de facto trade associations, do they really care about run-of-the-mill window-dressing or market manipulation. Since I am in the proverbial trenches, however, I see more than my fair share (excluding those that might be subject to various behavioural biases). The one highlighted here is Toda Construction (TSE Code #1860), and the date is this past Wednesday, April 30th. On this day, someone felt compelled to buy sufficient quantities of stock, all day and particularly into the close, to assure a near 14% gain at its closing denoument. Blimey!

The obvious question is "who" might be so interested and what might be their interest? To the inset (right) you can see a holdings report, and recent filers. Could any of those have a concentrated interest, given their concentrated benefit, in seeing the price 14% higher at the close of the day (and month-end) than at the beginning?? Oh yes, it could be a mere coincidence. But such "coincidence" ex-news, ANY news or earnings report, or recommendation change, is more the exception than the rule. Yes there are many other potential explanations. But nonetheless, as a not uninterested observer of such phenomena (I am unashamedly short this puppy, let it be said, in smll quantity), what would Ockham say? And WHO would the ultimately attributed time & sales point to as the culprit? And finally, what excuse would they find to justify such buying ebullience, and would it both plausible and legal? I wonder if my "friend" is involved in such securities law?