Most amusing story of the day? Tiny US brokerage bets the farm on Apple and needs bailing out to the tune of $1bn!

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Rochdale Securities LLC, a US brokerage firm that employs bank analyst Dick Bove, is in advanced talks to save the firm after unauthorized trades in Apple Inc. (AAPL) went sour last week.

It seems that Rochdale may announce a merger or investment as early as today in a deal to prop up the 37-year-old company.

Top Rochdale executives told potential investors that “a trader bought $750 million to $1 billion in Apple shares last month without permission”!! The stock then dropped in value by a few million dollars and depleted the firm’s cushion against losses, the people said. Closely held Rochdale had just $3.44 million of capital at the end of last year, according to a regulatory filing. According to one US blog site, the brokerage needs capital of $1bn to be bailed out. That’s right, a brokerage with just over $3m of capital needs bailing out to the tune of $1bn!!! It makes my head hurt to think of the magnitude of the position size the “rogue trader” must have been carrying into the earnings results and quite how he got away with it.

The trader seemingly bought Apple’s stock around the time of the technology company’s Oct. 25 earnings report and as the chart below shows, it’s been one way traffic since then…

Apple 10 day hourly chart

Rochdale has provided trading and research for institutional clients since 1975, according to the company’s website. Its most visible analysts include Bove, 71, who covers the biggest U.S. banks. The firm has 26 registered representatives in Stamford and six in New York.

Yet another example of how even the professionals don’t understand the basics of leverage!

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