Tuesday, 4 December 2012
And so yet another saga of a trader who bet on AAPL rising, just before it tumbled, ends in tears, this time with what appears to be near certain incarceration of another small, 2-bit trader.
As we previously reported, back in November, as AAPL stock was in freefall, none other than the firm of everyone's favorite financial permabull, Rochdale, ended up being a proud if involuntary holder of nearly $1 billion in AAPL stock. The scapegoat for AAPL's price drop: one ex-trader David Miller. What Miller is accused of, is buying 1.6 million shares of AAPL on the day of the company's last earnings announcement in hopes, of course, the stock would surge. It didn't. Furthermore, Miller was in reality executing a trade for a client who had only wanted to buy 1,625 shares, but Miller was confident enough the stock would go up, he bet the firm's money to buy the difference. Sadly, neither the AAPL earnings announcement, nor its stock price, did quite as planned. End result: $5 million loss, Miller terminated and now arrested and charged, and Rochdale left scrambling for a bailout.
That's not all: as Dealbook reports, "Separately, Mr. Miller was talking to yet another brokerage firm, leading it to sell short or bet against Apple shares. This was done, according to the complaint, to hedge against his other position. Fortunately this brokerage house was able to trade out of the position at a profit. Mr. Miller, according to the complaint, had been planning this trade for some time and in the weeks leading up to Apple’s earnings he had made false representations to the brokerage firm that shorted the stock in order to help facilitate the trade." Miller then piled insult upon injury by lying, claiming he made a mistake in the order.
Of course, the reason why we italicized the word 'scapegoat' above is that had Miller's coin-toss proven accurate, and if AAPL had not posted its 3rd consecutive earnings miss in a row, and the stock had soared, he, his clients, and his firm would have all made lots money, Miller would now be expecting a fat 7 figure bonus, and Rochdale would not be in dire need of a rescuer (who refuses to come).
Alas, it, and everyone's favorite permabullish financial seer of seers, and the man who said to buy Lehman days ahead of its bankruptcy, is now left hanging, although as the NY Post reports, Rochdale rivals are "courting star analyst" Bove:
Bove is being courted by a bevy of rival firms with Rochdale teetering on the edge after it was rocked by $1 billion worth of unauthorized Apple trades.
The small brokerage, run by CEO Dan Crowley, blames a rogue trader, identified as David Miller, for making the massive bet without approval. The Federal Bureau of Investigation, along with regulators including the Financial Industry Regulatory Authority, are probing the matter.
Bove has pledged to stay at the firm while Crowley looks for a white knight willing to pony up $5 million or more to allow the Stamford, Conn., firm to continue operating as a broker-dealer.
If Rochdale, however, cannot find a cash infusion in the next few weeks, Bove will jump ship to another Wall Street firm, according to several sources close to him.
It is unclear just who this competing firm that will retain Bove's service is: the Home Shopping Network comes to mind.
Finally, one wonders just how close Messrs Miller and Bove were. According to Miller's FINRA dossier, his professional career is a mirror image of that of Dick himself. Was Miller merely expressing the bullish views of Mr Bove, whose permabullishness is usually amusingly contagious to those who know little or less about the true functioning of the financial world.