Rob Sequin | Havana Journal
For investors and followers of the Herzfeld Caribbean Basin Fund (I am both), we know that the price of this closed end mutual fund usually pops on any important Cuba news whether it’s on the US side or the Cuba side of the Florida Straits.
So, with the news coming out late Friday afternoon about President Obama easing travel restrictions to Cuba, it’s no wonder that one would expect the fund’s price to jump on this very significant news.
Knowing that this coming Monday is Martin Luther King Jr. day and a stock market holiday, I knew that I’d have to wait until Tuesday to see how much the fund’s price would jump at the open.
As I am preparing to write an article about the anticipated price appreciation expected for Tuesday morning, I take a look at the chart for this closed end mutual fund, symbol CUBA on the NYSE for Friday January 14, 2011.
I was very surprised to see that in the last few minutes of trading for the day, the fund’s price jumped from $7.31 to $8.26 and settling at $7.92 from an opening price of $7.28, a gain of 7.39% for the day. Also, average daily volume for the fund is about 11,000 shares per day. In the last few minutes of trading, over 170,000 shares of stock were traded.
So, why is this interesting?
Well, I found out at 4:46pm from the Latin America Working Group announcement and according to the official White House blog post announcing this new Cuba policy, it was not posted until 5:42 pm with this lead in:
“Moments ago the White House announced that the President has ordered significant changes to policies regarding Cuba.”
Who knew what and when?
Of course Representatives and Senators and their staffs were alerted to the announcement before it was made public so it’s probably safe to assume that these people were the buyers of the CUBA fund between 3:45pm and 4:00pm.
Is this insider trading? I would have to say no since they did not have inside information on Herzfeld or any of the businesses in the mutual fund but these buyers at the end of trading on Friday bought shares in this closed end mutual fund based on information not yet available to the public.
Is this unethical and against any House or Senate rules? I don’t know. Perhaps someone can comment on stock purchasing rules by politicians with non-public information.
I do know this… it’s going to cost me more money on Tuesday to buy shares in the CUBA fund because some people rushed in to buy before I had any knowledge of President Obama’s major policy announcement.