Posted on 11/25/2010 5:48:59 AM PST by MeneMeneTekelUpharsin
NEW YORK — The Wall Street insider trading investigation may lead everyday investors - already rattled by a stock market meltdown, a one-day "flash crash" and the Madoff scandal - to finally conclude that the game is rigged. "A large part of trading has to do with trust, and I don't have it," says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks.
"When a stock moves up 10 percent, you don't know why," he added. "We can pretend that everyone has access to the same information, but they don't." Even before news broke that federal investigators were looking into whether hedge funds traded on inside information, small-time investors were pulling their money out of stocks - despite a remarkable run for the market since the spring of 2009.
Americans have pulled $60 billion out of U.S. stock funds this year...."
(See more at link)
(Excerpt) Read more at chron.com ...
The scripture alludes to the present situation in 2 Timothy Chapter 3:
2 Timothy 3:13 But evil men and impostors will proceed from bad to worse, deceiving and being deceived.
2 Timothy 3:14 You, however, continue in the things you have learned and become convinced of, knowing from whom you have learned them;
Scriptures seem out of place when dealing with markets.
There should be no laws regulating insider trading. Trading is what business is all about.
The scriptures apply to everything in life. The rejection of the scriptures has some pretty incredible consequences.
I guess I don’t understand your statement “The Sell to Buy ratio among corporate officials is stunningly high right now (2400 to 1 or something like that)”. The Sell to Buy has to be one to one by definition, doesn’t it?
It would be great. You know your company is about to be acquired you mortgage your house if you have to and buy every share you lay your hand on. You’d be a multi millionaire.
You know your company is getting a big government contract. Buy, buy, buy right before the announcement.
Everyone at the FDA would be billionaires. They could buy a week before a drug approval is announced.
No...the percentage of corporate officers selling their stock vs. the percentage of officers buying. Insiders have to report the buys and sells by law. The selling is heavily weighted right now.
He’s talking about insider buys and sells. It’s allegedly high right now but I don’t know if that’s true. Sells are always much higher then buys anyway. People selling their optioned stocks and the like.
He is referring to insider buying and selling. High level executives and board members are classified as insiders. They must report their trading activities in their own company’s stock to the SEC.
If they feel their company stock is undervalued or they have a good forecast for future growth, they would be buying their stock. The ratio now says that most insiders think that their stock is not a good future investment.
When a stock moves up 10 percent, you don’t know why,” he added. “We can pretend that everyone has access to the same information, but they don’t.”
You are never going to level the “information” gap—its useless to even try. What does rankle me are gimmicks like High Frequency Trading. These use technology to expliot gaps in the system to get rich.
That being said, Hedge funds are not perfect—they go bust too. Eventually, everything regresses to the mean.
but I don’t think there is any moral problem with insider trading. It is not fraud or stealing. It is just a matter of fairness.
“Everyone at the FDA would be billionaires. They could buy a week before a drug approval is announced.”
so they’d be easy billionaires. Good for them but they wouldn’t be taking any money from you.
The Wall Street Journal has done some good journalism on the “huge” insider trading case underway at present. The prediction is that it will scare lots of people in the industry, bankrupt and smear many of them, but in the end lead to few prosecutions because the idea of “insider trading” is being so overstretched. Sounds like a good way for the Obama administration to create some new bogeymen on Wall Street, though.
Unless they bought one minute before you on info they acquire illegaly. Then you lose pennies and they make pennies. Billions of them.
To the market on whole yes, but an individual can sell or buy some or all of his holding, i.e. the individual is not trading with himself.
You seem to be only considering the purchase of shares as opposed to the sale of them. Also, individuals in a position requiring fiduciary responsibility should not be permitted personal motive to intervene in any manner, it's destabilizing.
A wide open, no holds barred insider trading regime would be endless boom and bust with a very few profiting enormously and the market at large being completely wrecked. That is not in the interest of business or the society at large.
Do you see any problem with Chertoff being closely associated with the manufacturer of these controversial TSA security scanners? That represents a conflict of interest, and it is insider trading of a sort. It's not just a matter of "fairness," it's immoral precisely because it's fraudulent, and tantamount to stealing. It's malinvestment perpetrated for the individual gain of a few, foisted upon the entirety of the country, at a great cost in money, time and individual liberty.
The FBI couldn’t figure out the ACORN vote fraud campaign so they’re going after easier pickings.
For the insiders to buy anything, someone else has to sell it. The poor schmuck that didn't have that inside information sure as hell lost a bunch by selling at the lower price.
Ditto for the CEO that sells his just before he the stock will crash, because he knows in advance that it will.
RegulatorCountry is on to something.
Consider this scenerio. You are the vice-president of development of a large corporation. And it’s decision time. You have to decide if a new product is ready for market. In your opinion, the product is not ready.
Your duty is to report that more time is needed before releasing the product.
Now suppose that there were no insider trading laws. If you were less than ethical, you could buy up a ton of your company shares, then report the product as ready for market.
When the product comes out, the stock price rises, and you sell.
Now, who gets hurt by this insider trading? Everyone, except the insider trader. When the product fails, the company suffers. The long-time shareholders suffer. And folks who bought stock on the strength of the new product suffer.
There are many variations on this scenerio, with pretty much the same result.
It is more than just fairness. If capital markets are seen to be corrupt then capital markets will stop serving their purposes: 1.) allowing investors to defer the right of present consumption into the future (saving for education, retirement, buying a house, a rainy day) by investing in capital goods that increase future productivity, and 2.) increasing the wealth of the country by encouraging the investment in captial goods.
The misallocation of resources by our capital markets (into e.g. derivatives, condo and retail mall development rather then wealth increasing investments) has already run our country into the ground, and now we discover that these same folks were mostly trading for their own accounts?
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