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Herd instincts: Hillary's investment profits - ethics of Hillary Clinton's cattle futures investments - includes related article - Cover Story
National Review, Feb 20, 1995 by Caroline Baum, Victor Niederhoffer
Hillary's total score on our financial hanky-panky scale is 98 out of 100, catapulting her to the top of the class for potential commodities fraud. A detailed examination of her trades seemed in order. We started with records of each purchase and sale confirmation and all of the monthly statements that were provided by the White House. Next we looked at the high, low, open, and close on each of these days to see how her fills compared to what was available. Finally, we calculated the unrealized gains, required margin, available equity, and commitments outstanding for each day during Mrs. Clinton's ten months of trading.
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BACKED up by legions of data, we were prepared to rebut the First Lady's contention that "there isn't any evidence that anybody gave me any favorable treatment." Our analysis of the data and other documents yielded these observations:
1. Mrs. Clinton's account was undermargined by $50,000 to $80,000 during a one-month period beginning November 10, 1978. Again in July 1979, her margin requirements were approximately $100,000 for several days, when there was negative equity (minus $30,000) in the account. A normal rule of thumb for commodity traders is to maintain equity of at least five times the margin requirement. Mrs. Clinton routinely reversed this ratio, maintaining equity around one-fifth of her required margin.
2. Her total equity would have been wiped out on three occasions, taking into account the commissions due and the cost of exiting the trades. On July 17, the commissions and bid-asked spreads on newly opened positions, added to her existing deficit going into the day, could have totally wiped out the family's net worth, even without any market move against her.
3. Her name was misspelled "Hilary" on all the official brokerage statements she produced, raising the question of whether the statements were ever mailed to the detail-oriented attorney.
4. Her first two monthly statements reveal identical misalignments and faulty keystrokes on certain letters, raising doubts as to their authenticity. It wouldn't take a great stretch of the imagination to conclude that they were generated simultaneously in an effort to cover the slimy trail.
5. Withdrawals from her account consistently kept her equity below $15,000. After each big win, she withdrew the spoils. Finally, after making about $100,000 in four days in July 1979, she closed her account down. Such behavior is inconsistent with human nature, as observed any day in Las Vegas or Atlantic City, as well as with Mrs. Clinton's insistence that she reinvested her profits.
6. Two-thirds of her trades showed a profit by the close of the day she entered them, and 80 per cent of her trades, on both the long and the short sides, were ultimately profitable, percentages that are rarely achieved by the most successful professionals.
7. Commissions and slippage of her trades totaled more than 37 times her initial equity.
8. Most of her 33 trades were for five or ten lots. But on three occasions Mrs. Clinton traded fifty or sixty contracts, positions that would normally require about $1 million in equity to support. Each of these trades was entered at extraordinarily favorable levels relative to the price range of the day and was highly profitable by day's end. On two of the large trades the overnight profits pushed a negative equity into the black. Had Mrs. Clinton lost on any of the large trades, the implications for her "investment program" would have been dire.
