Steve Schwarzman, the head of private equity giant Blackstone, has found himself in hot water after he made some remarks at his firm’s boondoggle at Florida’s Boca Raton Resort & Club. In an early morning session, Schwarzman was noodling over Blackstone’s failed attempt to buy the mortgage company PHH, a deal that collapsed when Blackstone discovered no one was willing to lend it money for the acquisition, Peter Lattman explains on DealJournal. To illustrate just how radioactive the mortgage industry has become to financial players, Schwarzman decided to exercise his well known penchant for world history.

“Trying to buy a mortgage bank in the midst of the subprime crisis was the equivalent of being a noodle salesman in Nagasaki when the atomic bomb went off. Not a lot of noodles left, or even a person, and that’s what happened to us on this deal,” Schwarzman said.

Some are now speculating that this remark could have some serious fallout with Blackstone’s business efforts in Japan. If it does mushroom into a major issue, it could cast a cloud over Blackstone's many important Japanese connections. Apparently, some of those Japanese types don’t find noodle salesmen appropriate material for homey, jokey anecdotes.

Steve Schwarzman’s Take on the Subprime Mess [DealJournal]

Blackstone closed yesterday below $20. Right this second, it's at $18.45. I bet a lot of you are saying to yourselves, "Yeah, and? No big d." That's because you're one dimensional thinkers. This is a big d, for four* reasons. 1. Blackstone IPO looks more and more like the physical manifestation of the top tick on the private equity bubble. 2. The Chinese, pissed at buying 8.7 percent of this garbage, now have yet another reason for an arms race with the U.S. 3. It means the follow-up to the bukkake party of IPOs was a bust, and all those yelling "Buy shares on my face! Buy shares on my face!" last spring are now suffering from PCD (that's Post Coital Depression** to those who, I have no idea why, don't know). 4. CRAB HANDS, THE GRAPHIC.

Blackstone shares drops below $20 [Reuters]

*The first three don't really count, I just like the build-up.
**NB: That's a Hahn-ism you're reading right there.

Not that I sit around cackling at the idea of middle aged billionaires groveling for money, but, true or false: there's something mildly amusing about the idea of a man who has pinchers where, anatomically speaking, hands should be, down on his crab hands and knees, begging for some clams?

Steve's Sorry [NYP]

Hey guess what? Stephen Schwarzman and Henry Kravis might have the same personal net worth, even though Blackstone is worth significantly more than KKR. Who gives a shit? I'm going to go out on a limb and say this guy.

At a conference hosted by the Confederation of British Industry yesterday, a visibly shaking Stephen Schwarzman said that private equity is "a force for good" whose only goal is to help the children. Then he bemoaned the fact that his industry is seen as a "destructive force with a short-term perspective, levering companies and stripping their assets to enrich a few nasty people (like me), who then don't even pay taxes on all that they get in such an unsavory manner," just before yelling "good bye, cruel world" and throwing himself off a second-story balcony. (Schwarzman also offered this rave review of himself, courtesy of his own family, on the way down: “My wife and children were not ashamed to have me sit with them at the Thanksgiving table on Thursday.” You know what? Sold. I don't even know what he's selling, but sold.)

Stephen Schwarzman Speaks [DealBook]

Stephen Schwarzman threw his son Teddy and new daughter Ellen a lavish Jamaican wedding last weekend blah blah blah $20,000 barbecue blah blah blah$8,500 4-hour fireworks display blah blah blah bought up the entire hotel for a $50,000 flat fee blah blah blah $150,000 open bar blah blah blah $1,000 wedding cake blah blah blah that’s a lot of money for flour, eggs and milk blah blah blah. No. This little gathering was a drop in the bucket compared to the $3 million birthday party Stephen threw himself last year. The subtext here is that Schwarzman is a bad father. The excuse that Blackstone just lost $113.2 million holds no water because we hear Schwarzman has plans to put stone crabs on the endangered species list by the end of the year. (Last complaint, because we’re really not trying to be negative about the whole thing, it’s just happening organically but 4 hours of fireworks? Seriously? That’s like half the workday. Wouldn’t your neck start to hurt? Wouldn’t your ears start to ring? What am I missing here? I’m really asking. Educate me.)

Earlier: Crab Hands Jr. Is Off The Market

Like Pa, Like Son [NYP]

Stephen and Ellen Schwarzman’s son, Edward “Teddy” Schwarzman, was married off Saturday evening to Ellen Maria Zajac, daughter of Ellen and John Zajac. (Ellen DeGeneres performed a couple of sets during cocktail hour and just before the cutting of the cake, and Ellen Barkin sat at table 19. Over dinner, someone mentioned something about Teddy finally fulfilling his life-long dream of marrying a woman with the same name as his favorite actress, Grey’s Anatomy star Ellen Pompeo.) So sad and, yet, kind of meh (call us when Daniel Loeb’s unborn son is no longer available, then we’ll be upset. NB: Carney does not share the indifference. When I’m finished with this, I’ll go try and talk him off the ledge). One DealBreaker spy in attendance for the nuptials reports that “there were fireworks after dessert” and talk that Schwarzman junior had been encouraged to “marry for money,” on account of the family business falling on hard times.

Ellen Zajac and Teddy Schwarzman [NYT]

Hey-o, we’re hearing from the Wall Street Journal, Bloomberg, CNN, the New York Times, MarketWatch and Claudia, our Starbucks barista, that Blackstone maybe didn’t have such a good third-quarter? That it maybe recorded a net loss of $113.2 million, or 44 cents per share, compared to a net income of $372.5 million a year earlier? (Voice getting higher pitched) That the loss is being attributed to $802.60 million of non-cash compensation charges and some stuff related to a so-called credit crisis? That Stephen Schwarzman wishes they’d “never gone public”? (Only dogs and people whose ears are trained to register extremely high pitches can hear me at this point) That he can’t even afford imitation crab meat anymore? Yeah? Yeah? (Voice returns to normal) How embarrassing. Doesn’t it suck when you’re a public company and are required by law to disclose your failures for the entire world to see? Merrill Lynch knows what we’re talking about. (A tip for next time: take a cue from Goldman Sachs and just lie.)

Honestly, though, don’t worry about BX and Stephen (and the shareholders who must be thrilled about Blackstone falling 8 percent this morning)—they’re going to be fine. Not just because the exceedingly wealthy always manage to land on their feet, but because they have a plan, and that plan is to do something so crazy and seemingly stupid-sounding that it just might work (or not work, it’s one of these two things). According to president and CEO Hamilton James, Blackstone took a vote between going bowling or believing in subprime, and the latter won. James says that while the “subprime black hole is appearing deeper, darker and scarier than [banks] thought,” the bottom is not far, which is why BX is “starting to go long the subprime market.” Sounds pretty different from what everyone else on the planet is saying/doing, but okay. We have to assume that Schwarzman is doing everything in his power to bring those $4 billion crab claws back into his life, and not just throwing a bunch of bad ideas against the wall and waiting to see what sticks.

Blackstone skids on quarterly loss [CNN Money]
Blackstone posts loss from IPO charges [Reuters]

John Studzinski, senior managing director at Blackstone, worked in soup kitchens as a teenager in Massachusetts, where he also helped start a toll-free number to educate adolescents about sexually transmitted diseases. Today he gives away half of his cash compensation after taxes to the arts, the homeless, and human rights. He’s pledged $10.2 million toward the expansion of the Tate Modern which, considering Blackstone’s stock performance, is quite generous. He’s the vice-chair of Human Rights Watch, and was instrumental in the founding of The Passage, London's biggest homeless day center where he regularly volunteers. He says it’s “dangerous” to not help those who come to him in need. Without knowing anything else about him, one could make the argument that he’s a pretty selfless, decent human being.

Based on his previous writings about charitable giving, you know Studzinski’s generosity of time and money toward the less fortunate nauseate John Carney. But, quite obviously more importantly, how do you think it makes Studzinski’s boss, Stephen Schwarzman, widely known for his staunch opposition to using his excessive wealth to help others, feel? It’s pretty common knowledge that sucking up to the guy above you on the food chain by pretending to share the same interests is a good way to get that promotion, or to at least ensure the preservation of your current job. (Like this, see—Carney: What are you up to this weekend? Me: Oh, you know, probably just going to head over to the Port Authority, little unprotected sex with trannies here, little intraveous drug usage there. And my regularly scheduled Klan rally on Sunday, of course.) Essentially outright saying that you don’t share his beliefs—and pretty much making the guy look like what some people might call a "cheap bastard"—can’t be good for business.

Blackstone's Studzinski Gives Millions Nurturing Tomorrow's Art [Bloomberg]

Blackstone big Steve Schwarzman may have gone into hiding but he’s still the talk of the town. Especially if your plot of land in that town—Greenwich, East Hampton, etc—was bought with private equity tax-advantaged dollars.

“Whenever group of private-equity guys gets together nowadays, the conversation inevitably turns to Steve Schwarzman,” the Economist reports today.

“It was all going so well until Schwarzman went over the top,” one will say. “Yeah, why did he have to hire Rod Stewart to sing at his birthday party?” replies another. “And then make quite so much money in the Blackstone IPO? Now everyone hates us, no one wants to lend to us any more, and Congress wants to tax us to hell and back.”

The forces of envy and political rent-extraction had been aiming at private equity for quite some time but there is little doubt that Schwarzman and the Blackstone IPO provided them with a much easier target. It’s always harder to attack abstractions than actual people. One of the Okies of The Grapes of Wrath once asked, “Who can we shoot?” Schwarzman accidentally volunteered his head—or, well, claws—for the rifle scope.

But it’s not just the politicians, labor unions and tax-eaters who have Schwarzman in their scopes. Another special interest group is looking askance at Schwarzman—his own industry. According to the Economist, a popular question among private equity hochos is “Well, what’s Schwarzman going to do to clean up this mess?”

The suggestion of the Economist editors is philanthropy. That’s a popular decision among the super-wealthy but we’re not sure it’s the right one. For starters, we can’t remember a single malefactor of great wealth whose reputation was rescued within his lifetime by charitable donations. Most of those who have made huge donations recently—say, Warren Buffett or Bill Gates—were already hugely popular. Schwarzman is no Buffett.

What’s more, there’s little evidence that huge donations to institutional charities are effective at accomplishing the presumed goals of the charities. Schwarzman may simply be throwing good money after bad if he pumps up the coffers of our giant charity industry. So what’s a down-on-his-luck private equity king, who brags about his own skill as a counter-puncher, to do to rescue his rep?

Saving Steve Schwarzman [Economist.com]

Despite winning the distinction of Worst IPO in the History of IPOs (real title: Worst IPO of the Year), with the BX stock dropping 23% from its initial $31 offer, a cornucopia of Wall Street firms gave the P.E. goliath “buy,” “outperform” or “overweight” ratings today. Citigroup’s Prashant Bhatia wrote that “Blackstone is positioned to generate double-digit earnings growth driven by its superior over-the-cycle investment performance,” and analysts from Merrill Lynch, Lehman Brothers, Morgan Stanley, Deutsche Bank, Credit Suisse, and Bank of America all laid the toothy-smile emoticon on thick, with Lehman Brothers even going so far as to use the lips ‘n mole prostitute face. Some—Reuters’ Jonathan Keehner for one—would like to know how, in spite of the dwindling stock, some stuff going on with the credit markets and the 15 vs. 35 issue, no one thinks Stephen’s Crab Shack by the Sea is a “sell.”

If we were cynical, we’d say it had to do with every “sell” rater being an underwriter on the IPO, and that the “Chinese Wall” provides about as much protection as the rhythm method (more than the “But it’s my birthday” method, less than “If we do it like this, we don’t need condoms, and God will still love us” method). If we were really cynical we’d say: because Blackstone capitalized on the inside information that analysts have no ethics, all of the analysts rating BX are under 5’6”, and maybe B’stone really is buy-worthy. But you’d know better than us. Do tell.

Wall St. rates Blackstone’s stock a (you guessed it) “buy” [Reuters Blog]
Despite analysts' rave Fortress, Blackstone plunge [Reuters]

Steve Schwarzman is selling state secrets to the Chinese. Is Schwarzman trying to pull a Jack Bauer's father in last season of 24 (Schwarzman is the only PE fund guru as "tall" as Keifer Sutherland, after all)?

For the low, low price of $540 million dollars, or a nice $23 million a day, the Chinese government has been studying the U.S. buyout market, courtesy of Blackstone's IPO. The first lesson is an awfully bitter fortune cookie - PE fund IPOs allow shrewd fund partners to cash out while passing impending turmoil onto investors.

China used its increasingly hard to employ $1 trillion "rainy day fund" of foreign exchange holdings to pump money into a 10% stake in Blackstone's IPO. China bought shares at a 4.5% discount and watched Blackstone's share price fall 18% in 24 trading days.

China is watching patiently, slowly developing the script for taking the PE reigns from the West, and the script for "Shaolin PE Investing," starring Stephen Chow.

(Pictured: Some Chinese investors have lost their shirts in the deal, others just have an axe to grind.)

Blackstone share slump costs China $540 million [MarketWatch via Deal Journal]

Let’s see what two guys (Kurt Andersen and a friend, who asked requested his name be withheld) had to say about the matter:

* Guy New York contributor Kurt Andersen knows who works around private equity “snarls” when he says the name “Steve,” and “blames the current anti-private-equity spasm not on whiny anti-business liberals, but on Steve Schwarzman”

* “The fucking birthday party” (attribution to same “guy”)

* “Where no one gave a toast, by the way, not one” (same party, same guy)

* “We’re where we are right now because of the unbelievable egos of guys running the private-equity firms like Blackstone. They put big targets on their backs by what I consider stupid actions like throwing these big parties.” (same party, different guy—head of the National Venture Capital Association)

* “Ostentatious, churlish, megalomaniacal, tone-deaf—and a hypocritical dissembler to boot.” (Andersen, in cahoots with “guy”)

It is often said that in his early days, the rapid ascent of Steve Schwarzman was attributable to the fact that due to his stature, Schwarzman was able to provide "support" to his superiors without resorting to ankle holding. This worked wonders for his endurance and longevity on most projects, and lessened the long term wear and tear of a financial career (the difference between the Emmitt Smiths and the Earl Campbells of the financial world). After all these years, Schwarzman's ankles remain virtually unscathed (pictured).

While many full-sized people can endure ankle holding for a year or two, its effects on posture and well-being act as a barrier to career progress. It is no secret that he who controls the path to safe and effective ankle holding controls the financial industry, which is why Blackstone is quietly amassing the "largest non-operative orthopedic-rehabilitation company in the world."

The Blackstone portfolio company ReAble Therapeutics agreed to buy DJO for $1.6 billion. DJO specializes in post-surgery pain therapy and leg/ankle braces. Blackstone bought Encore Medical Corp in 2006 and changed the company's name to ReAble, embodying the hope the given to perma-hunched associates. Along with last year's acquisition of Aircast, ReAble's purchase of DJO forms an entity that offers an unprecedented number of safe ways to go deep into the Blackstone night.

Blackstone endorsed the DJO acquisition based on the recent paper "Influence of passive or active holding ankle position on pelvic floor muscle strength in Blackstone associates" that demonstrates the positive effects of extended ankle-holding, primarily on the Pelvic Floor Muscle, or PFM.

Here's a summary of the study, from an abstract of the paper:

Method: Blackstone associates participated in testing of PFM strength changes in different ankle positions. PFM strength was measured by an intravaginal probe with surface electromyographic (EMG) electrodes. Each subject was asked to perform the PFM contractions while assuming a series of nine positions (e.g. - DCF, Cost of Capital Analysis, Deal Sourcing, Diligence) during which EMG recordings of the PFM were made.

Results: Greater PFM activity occurred in active holding ankle positions than passive holding ankle positions.

Conclusions: An upright standing posture that includes active holding ankle positions effectively facilitates PFM strength through muscles co-activation and synergy. Thus, we can apply active ankle positions in PFM training to enhance the effect of exercise in future.

Blackstone's ReAble to Acquire DJO for $1.6 Billion [Bloomberg]

The Blackstone Group’s $26 billion bid for Hilton Hotels has certainly ignited speculation about whether another big hotel chain—perhaps Hilton rival Marriot or Starwood—might also get taken out by private equity or whether some group might try to roll-up smaller companies to take advantage of economies of scale and branding.

Supposedly, everyone’s all excited about the hotel business now! Private equity’s here! Chuck Prince is still willing to lend money to keep the music playing! Let’s get this party started! Hot!

All too often the smaller, human-scale stories of the deals get left in the dust while everyone keeps talking about earnings multiples and leverage-to-ebitda ratios. And the story we want to tell is a story of the friendship of two very special young women. A friendship that was torn apart but now, it seems, has been repaired by the healing forces of private equity.

We’re talking, of course, about Lindsay Lohan and Paris Hilton. According to the website Gossip Girls, the “longtime rivalry” between the two favorites of the gossip pages “is over.” It seems that the stint in jail has Hilton rethinking her feuds. But, perhaps more importantly, Hilton has apparently been in good spirits since news of the Blackstone bid broke. A friend of Hilton’s tells the girls that “she’s got to be in a good mood after the Blackstone Group bought the Hilton Hotels, boosting her inheritance.”

Apparently the renewed friendship became public when Hilton attended a birthday party for Lohan on July 3. Somewhere out in St. Tropez, Blackstone chief Steve Schwarzman can breathe the sea air and relax with the ease of a man who knows he has restored a friendship that had long been torn asunder.

Paris Hilton’s Frienaissance With Lindsay Lohan [The Gossip Girls]

You’d think that a man who could get Tom Wolfe to accidentally wander in a side door on the floor of the New York Stock Exchange on B-Day, the day his private equity firm went public would get some attention in St. Tropez but apparently you’d think wrong. Oh yes, you’d think wrong (you’d also think: Es ist mir scheiss egal).

On Saturday, Tommy Hilfiger—TOMMY HILFIGER, not Ralph Lauren, but TOMMY HILFIGER— reportedly “drew a bigger crowd of admirers” at Club 55 than Stephen Schwarzman and his wife Christine. We don’t know about you, but we can’t think of anyone we’d rather gawk at/fawn over/ask for an autograph from/tell we’ve loved since he acquired Prime Hospitality and converted thirty-seven Wellesley Inns to the Extended StayAmerica brand than old crab hands. Or can we? Can we list some? What about: Christian Bale, Eric Bana, John Kraskinski, GOB, Paul Rudd.

Actually, that was our LIST. But, really, gets lets serious for a second—you would gladly trample Stephen Schwarzman for a moment with ______?

Riviera Retreat [New York Post]

Alert the National Guard: Goldman has now been left out as a major underwriting playa in two—count ‘em, two—IPOs. First there was the Blackstone slap in the face, and now KKR is jumping on the “Don’t touch me there, Goldman” bandwagon. The same banks who lead the B-stone deal, Citigroup and Morgan Stanley, will be underwriting KKR’s as well.

What’s with 1-2 punch? When it happened the first time, many believed that GS and JP were working on another P.E. IPO, there was a non-compete and so on and so forth. Others wondered if Goldman’s own “aggressive pursuit of private-equity deals alienated Steve Schwarzman,” failing to take into consideration that a 5’6” tall man probably has pretty thick skin. But Blackstone’s in the past—what’s the deal with the second snub?

As Reuters points out, JPMorgan doesn’t have a private equity arm capable of competing with KKR, but Henry Kravis may “have beef with the bank,” re: First Data Corp.

Reuters reported in April that Henry Kravis and crew were fuming at the way JPMorgan handled its proposed takeover of First Data Corp. Long story short, JPMorgan owns a majority stake in a First Data joint venture. KKR tried to reassure JPMorgan that the JV was not under threat, but JPMorgan pushed back, offering to buy out First Data’s 49 percent stake in the venture or dissolve the partnership altogether, sources told Reuters. That didn’t sit well with Kravis, sources say.

So that’s JP Morgan, okay, but the lack of Goldman is still coming as a shock to those who believe Goldman Sachs rules the world and all of its inhabitants (really, though, Goldman does have the ability to make it rain). So what’s up there? Some theories:

• Goldman’s private equity arm competes directly with KKR for deals.
• As noted by the ‘Bookies, in March, Lloyd Blankfein said, “It’s impossible for us to be in every piece of business,” which is kind of like hearing your deity admit to being human and will thusly be chalked up to Blankfein being drunk, and struck from the record.
• Goldman has different looting and plundering strategies from those of KKR
• Goldman needs a nap
• There can only be one bald supermogul per IPO
• Goldman is advising Apollo, Citadel
• Goldman is the midst of a herpes outbreak
• Kravis just doesn’t think Goldman’s all that good at the private equity business
• Goldman has told KKR in the past that it would underwrite its IPO—when small mouth bass rule the world

Goldman, JPMorgan out in the cold for second private equity IPO [Reuters]
Underwriting Henry: Who’s In and Who’s Out [DealBook]
Goldman’s Hedge Fund Alumni Network [Deal Journal]

Kids today. They all want jobs in hedge funds and private equity, and, what’s more, they don’t just want to work in the aforementioned fields—the little punks want to run them. They all want to be James Simons, they all want to be Steve Schwarzman; they all want wicked cool beards, they all want to tower over the crowd at a perch of 5’6”. Where do they get off?

There are two and a half reasons for the career aspirations of today’s youth. 0-1 is that Simons made $1.7 billion last year, with the combined income of the top 25 HF managers exceeding $14 billion. So that’s somewhat appealing. (Schwarzman also did okay for himself). 1-1.5 enables 0-1: favorable tax treatment, i.e. 35% v. 15%, the latter of which saved Simons a few hundge mill in taxes last year. If you’re a kid and you’re saying to yourself “15 or 35, what shall I do?” you probably don’t need much time to come up with an answer. (We know 15 is for carried interest and not total income, we’re just trying to make a point, so settle down trigger finger commenters and save your vitriol for whatever grammatical error is bound to come next).

1.5-2.5 boils down to stupidity and arrogance being a bad combination. Robert Frank writes that the market is a “winner-take-all market— essentially a tournament in which a handful of winners are selected from a much larger field of initial contestants.” Why is the field so overcrowded? Because people overestimate themselves and think that they, not the guy next to them or the guy next to him, have what it takes to earn $1.7 billion/yr. Apparently more than 90% of workers believe they are more productive than their average colleague.

It’s probably true that 90% of your colleagues are incompetent and lazy. But who’s reading Dealbreaker.com right now when you could be doing work? This “overconfidence bias,” according to Frank, puts talented people into an oversaturated field when their skills could be better used elsewhere (like I-banking!), adds no economic value and puts us further and further from achieving our goal of peace in the Middle East. That’s why he advocates making the “after-tax rewards…a little less spectacular,” so that less people want to work in hedge funds and P.E. and raises the attractive quotient of other fields, “ones in which extra talent would yield substantial gains.”

Raise the tax. Don’t raise the tax. Whatever. Let’s attack the problem at the root and lucky for us, the Wall Street Journal has a list of HF and PE enemies on hand. Who or what caused an entire generation to ballpark its earning potential at $1 billion-or-so/yr? Mr. Rogers.

That’s right—you can send your pipe bombs to the estate of late Fred Rogers, who told all small children that they were “special,” even the ugly ones.

"Mr. Rogers spent years telling little creeps that he liked them just the way they were. He should have been telling them there was a lot of room for improvement. ... Nice as he was, and as good as his intentions may have been, he did a disservice."

Indeed! Because of Mr. Self-esteem and that puppet king in the bizarre alternate universe, everyone thinks they can eat $40 crab legs. And you know who else is to blame? The parents. Too much “A for effort,” not enough “you’re a moron.” Too much “I believe in you,” not enough “You will fail.” Too much, “You can be Stevie Cohen when you grow up,” not enough “hopefully McDonald’s is hiring.”

The overcrowding of these fields as a result of coddling and child-rearing techniques that foster confidence and self-worth (read: entitlement) is a problem that must be stopped.

We’re doing our part. When we held our six month-old niece a few weeks back, we didn’t look into her eyes and say “You can do anything you want!” like we’re sure our brother and sister-in-law do on a daily basis. We said “Listen, the bottom line is you’ll probably be overeducated but not necessarily that gifted. And you’re also a woman and a (1/2) Jew to boot. And your father couldn't tell time until he was 13. So I’m not exactly sure what we’re looking at but I know it’s not ‘hedge fund manager,’ at least not at a reputable shop. Let’s set the bar at eye-level and check back in a few years. Good talk.”

A Career in Hedge Funds and the Price of Overcrowding [NYT]
Blame It on Mr. Rogers: Why Young Adults Feel So Entitled [WSJ]

Late Tuesday Blackstone made a $26bn bid for Hilton, trying to find the only thing that could potentially steal press from the KKR IPO. Shares of Hilton (NYSE: HLT) closed at $36.05 on Tuesday, and shot up over 26% to above $45 a share by this morning. Blackstone's bid is for $47.50 a share.

Unsurprisingly, there was rampant insider trading preceding the Hilton deal. The number of Hilton call options traded on Tuesday before the bid announcement exceeded the average daily trading volume by an ever-so-subtle 600%. The Hilton daily call option volume is usually around 2,900 but shot to 22,000, all before the deal was announced.

One fact that is sure to restore the confidence of the average investor is that not all of the inflated Hilton option volume was a result of insider trading. Some options were traded by following the lead of insider trading. From Dow Jones:

That's exactly what prompted Jon Najarian, a trader who tracks unusual activity for OptionMonster.com to buy call options on Hilton last week. He spotted a buyer of an unusually large amount of call options on June 27, he said, something that prompted him to alert his clients and add his own position in the calls.

Traders Bought Options Just Hours Before Hilton Deal News [Dow Jones via CNN Money]
Hilton Deal Bolsters Rivals as World Markets Climb [New York Times]