From: "Perry E. Metzger" <perry@piermont.com>
Date: Thu, 6 Jun 1996 17:10:56 +0800
To: hallam@etna.ai.mit.edu
Subject: Re: whitehouse web incident, viva la web revolution
In-Reply-To: <9606052018.AA03374@Etna.ai.mit.edu>
Message-ID: <199606052043.QAA12656@jekyll.piermont.com>
MIME-Version: 1.0
Content-Type: text/plain



hallam@Etna.ai.mit.edu writes:
> If you want to play the "who knows who in banking" game remember
> that the Oxford Union and the Swiss National Croquet team are
> probably better places to meet banking types than the Palo Alto Au
> Bon Pain.

Working for Wall Street investment banks is probably better than both.

I live in New York, not Palo Alto. Guess who I work for. Hint: if I
want to speak to a futures trader, most days I can walk down the hall.

> >The most astounding part of the trading pattern was that Hillary
> >Clinton did not "let it ride" and earn the money off of repeated
> >increases in the value of a single investment
> 
> Of course, a person _selling_ futures is going to take the profits out
> each time.

I don't think you get it.

Its one thing to put up $1000, make $4000, then put up the $5000 and
make $10,000 with it, etc. Thats a situation where you are compounding
your profits -- reinvesting them.

Its another thing to put up $1000, make $4000, withdraw the $4000, put
up $1000, make $4500, withdraw the $4500, etc.

This is not a case of someone making a profit and reinvesting it so
that she got compound returns. This is a case of someone miraculously
turning one in a million trades over and over and over again on the
same tiny stake until she got $100,000. Its almost impossible to turn
$1000 into $100,000 by reinvesting. Its dead impossible the way that
Hillary did it.

Neiderhoffer and Baum list about a dozen criteria for detecting fraud
in securities transactions like this. Hillary Clinton hits every
single one. She was a first time trader. She took gigantic risk. Her
account was full of large scale irregularities like failure to meet
margin requirments. She earned astounding profits. She was in a
position to be bribed. She made her money off leverage in tiny
movements that would be hard to impossible for people to exploit. She
stopped trading just as suddenly as she started in spite of her
miraculous success. You can read Neiderhoffer and Baum's article
yourself if you like.

I will state this for the record: Having examined the evidence, I
would say that even a non-expert who was reasonably informed about how
the futures markets work would have no choice but to conclude that
Hillary Clinton's trading pattern was impossible without some sort of
fraud being committed.

> The profits are made against the net worth of the person
> concerned. Its an _underwriting_ business Mr Metzger. $100,000 is not a 
> substantial increase in Hillary's net worth so she _can't_ underwrite
> more business. 

Huh? What are you talking about?

Futures contracts aren't an "underwriting" in any case. They are very
simple contracts. When you buy a futures contract in, say, feeder
cattle, you are buying delivery of a fixed size number of feeder
cattle on a particular date in the future. When you sell a contract,
you are agreeing to deliver that many cattle. Thanks to margin, of
course, by putting up a fairly small sum of money you can buy control
over a large number of cattle, and not have to actually put up most of
the money.

One major problem with Hillary Clinton's fraudulent trades, however,
was that she was buying enough contracts that a tiny shift in the
price of the cattle downward -- shifts of a size that would be common
in a given day -- would have more than wiped out her families entire
net worth and more. Somehow, though, her broker allowed her to take
such large positions -- without putting up the *legally*required*
margin -- and somehow in lots of trades a statistically ordinary
blip never hit her.

One wonders why someone who's husband had just been elected Governor,
and who had no history of gambling, and had no sudden financial
crisis, would be willing to gamble her family's entire future over and
over again -- unless, of course, it wasn't gambling.

> >There is an obvious trick by which this can be achieved. The broker
> >writes two tickets -- one to buy, one to sell. One ticket always loses
> >exactly what the other gains. The winning ticket is assigned to the
> >bribee, the loser to the person doing the bribing. The mechanism
> >self-launders the funds.
> 
> Oh yes, and how does one cover up the matching ticket? They would
> show up on the brokers account. 

Of course they would. Sadly, however, the broker in question
conveniently lost ALL RECORDS OF TRANSACTIONS THAT TOOK PLACE AT THAT
TIME. Sad, isn't it?

This same broker was censured repeatedly for violating securities
laws, by the way.

Does the word "coverup" mean anything to you?

> If one wishes to bribe a politician a much better way is to give them
> a huge advance on their book, or buy some tangible asset at above
> market value.

Both of those are visible. This is invisible.

> I can't see an intelligent broker risking his business when there
> are easier mechanisms available.

The trick was very common at the time, a fact that all your brilliant
friends you consulted didn't seem to know. Many brokers got snagged,
along with their clients, in pulling this game for all sorts of
reasons -- shifting assets from a taxable account held by a client
into their tax free pension account, for example. The SEC, CFTC and
IRS caught on, and the practice has been largely wiped out. Matched
trades were common, however, in the period we are talking about, and
many brokers did in fact perform them for clients.

> >Margin requirements are set by the exchanges and the CFTC, not by the
> >broker in most cases. They are required by law -- not under broker
> >discretion.
> 
> Forgive me if I am wrong but are CFTC margin requirements not 
> requirements placed on brokers as opposed to requirements brokers
> must impose on customers?

I must confess that I don't know, largely because its irrelevant, even
in this case.

> Given the four years of dirt digging over Whitewater its a safe bet
> that none of the actions were illegal as Mr Metzger claims.

Of course they were. They just can't be proven.

We are not dealing with some idiot like Spiro T. Agnew here. We are
talking about a pair of well educated, very smart and totally
unscrupulous crooks -- Bill and Hillary Clinton. There is no evidence
that you can pin on them in court. However, I'm not a court, and I'm
allowed to judge something to have been impossible to achieve without
hanky panky regardless of whether or not you can prove who the
counterparty is and why the bribe was made.


Perry