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On May 22nd, as Chris Hohn's hedge fund was rallying the "event driven" community to join his call to action in court vs. CSX management, we first called this "activism" exhibition out onto the carpet. Timing, as Hohn evidently knows well, is critical in understanding that tops are processes, not points.

Since 5/30, after the stock was conveniently marked at its 52 week high on month end for May 2008, CSX has fallen -7.1% from $69.06. Deutsche Asset Management and 3G Capital were the 2 other recipients in the top 3 holders of this wonderfully ironic month end performance result.

In between then and now, we've had the ruling Judge in the CSX case (Judge Kapplan) look a lot like a toreador furiously waving a red flag in the face of an SEC bull:

Some people deliberately go close to the line dividing legal from illegal if they see a sufficient opportunity for profit in doing so. A few cross that line and, if caught, seek to justify their actions on the basis of formalistic arguments even when it is apparent that they have defeated the purpose of the law.

It's likely that the entire nature of the Total Return Swap business will change dramatically with this ruling as regulators and banks realign their perceptions of the product. I recommend reading the ruling - it's a fascinating document that comes complete with charts detailing the transactions in question.

Wall Street's fascination with "activism" will be looked back upon as simply another silly function of the cheap money leverage cycle.
KM