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-   -   Reopening Insider Information Debate. (http://archives1.twoplustwo.com/showthread.php?t=557711)

eastbay 11-30-2007 03:47 PM

Re: Reopening Insider Information Debate.
 

I think David is assuming there is an unambiguous law. I think there is not. "Insider" trading is illegal if certain people say it is, not because there is some objective criteria which make it so.

eastbay

DesertCat 11-30-2007 04:04 PM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
Not sure why everyone is speculating. I'm also not sure why the consensus of people on an internet board would justify a conclusion.

SEC Page on Insider Trading

Or just email the SEC.

[/ QUOTE ]

you understand the SEC definition isn't necessarily correct, don't you? The SEC is constantly trying to push the boundries in defining IT, and occasionally gets its wrist slapped by the courts for doing it. The SEC believes that a vague definition will prevent more bad acts, and a strict, consistent defintion will open unforseen loopholes.

DesertCat 11-30-2007 04:10 PM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
I'm wondering why no one seemed too concerned about the fact that people here had wildly different takes on whether or not my scenarios constitute insider trading and that no conclusion was reached.

Simple question. I have come upon information that gives me an irrefutable giant edge because no one else has it. Or because those others who have it are precluded from trading on it. I came upon this information without breaking any laws. (It may or may not be by accident. You tell me if that matters.) I am not an "insider". But the guy who is taking the other side of my trade has saved himself money because of my willingness to trade on my knowledge.

[/ QUOTE ]

DUCY?

ahnuld 11-30-2007 04:12 PM

Re: Reopening Insider Information Debate.
 
= he was going to sell at market price anyways and your inside information enticed you to buy pushing the price up allowing him to sell at a higher price.

TWCReborn 11-30-2007 10:42 PM

Re: I Think I Have A Partial Answer
 
What if one to suspect that another player on a virtual stock game (based on the real stock market) were acting upon inside information. First of all, buying and selling virtual stock on inside information is unfair to the other competitors (and unethical) but surely not illegal. And if someone were to act upon a mere suspicion that this person had inside informaion, but if he also did his own homework-- would this be illegal? Perhaps not.

Nonetheless, I think people who always try to walk the hazy gray line, probing the boundary of legal and illegal are bound to find themselves in trouble, or with their reputations tarnished. In the long run, cheating doesn't pay. Why? Because you could have been the world's most successful stock trader and one incident of insider trading could put you in the history books as a cheater (besides the jail time). Forget jail, fines, lost business opportunities due to a loss of trust-- if a cheater were attuned enough, he would notice that people have forever changed the way they look at him.

Every sensible player in most every game knows where the clear white areas are, where the black areas are, and where the hazy gray line is. Forget legality, acting on inside information is unethical. People who want to dance around the boundary of legal and illegal are usually smart enough to do well straight-up but feel better about themselves sticking a foot in the dark side trying to con the system.

TWCReborn 11-30-2007 10:45 PM

Re: I Think I Have A Partial Answer
 
BTW I have a related question: Who thinks putting a standard sized stop loss (or trailing stop) on a stock is unethical or illegal if the reason to do so were partially influenced by information that is non-public (but not confirmable as to whether it is mere heresay or true insider information)?

Shoe 12-01-2007 01:17 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
[ QUOTE ]
Is this insider trading?

I am the only person to study a company's annual report. I make my decision based on that. But I am the only person who read the annual report, therefore, that gives me an irrefutable giant edge because no one else has it. Is that insider trading?

[/ QUOTE ]

Presumably you are the CFO so yes. Otherwise you are constructing a nonsensical edge case.

Oh and where's your crown [censored]?

J

[/ QUOTE ]

Sorry, just didn't think we needed a 2nd thread on this considering the other one only had like 40 posts and was only a day old. Obviously my example would not be insider trading.

David -- I understand you are very smart and like to do a lot of deep thought excercises or explore certain theories. But I just feel like you are trying to turn some of your late night thoughts/theories into fact and won't listen to many of the logical posters in this forum, such as DesertCat.

To me, it seems you have made up your mind and are going to ask a lot of questions, and start a lot of threads in this forum, but yet you are only willing to listen to those who agree with you, while completely ignoring/berating anyone who disagrees with you, whether for right or wrong.

I definitely consider you to be one of the top authorities when it comes to poker. But just because you are a poker expert does not make you a stock expert (in other threads more so than this one). And although the stock market does have a few similarities to poker and sports betting, the same logic does not apply. You have the right set of skills to become great at stocks as well, but it isn't as easy as 1, 2, 3.

stephenNUTS 12-01-2007 10:39 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
David -- I understand you are very smart and like to do a lot of deep thought excercises or explore certain theories. But I just feel like you are trying to turn some of your late night thoughts/theories into fact and won't listen to many of the logical posters in this forum, such as DesertCat.

To me, it seems you have made up your mind and are going to ask a lot of questions, and start a lot of threads in this forum, but yet you are only willing to listen to those who agree with you, while completely ignoring/berating anyone who disagrees with you, whether for right or wrong.

I definitely consider you to be one of the top authorities when it comes to poker. But just because you are a poker expert does not make you a stock expert (in other threads more so than this one). And although the stock market does have a few similarities to poker and sports betting, the same logic does not apply. You have the right set of skills to become great at stocks as well, but it isn't as easy as 1, 2, 3.

[/ QUOTE ]

Although they may be thought stimulating,and somewhat entertaining at times....his constant attempts of theoretical comparisons are in no way,shape or form ...a realistic REAL world view of Wall Street trading/investing

SF [img]/images/graemlins/smile.gif[/img]

PairTheBoard 12-01-2007 03:32 PM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
[ QUOTE ]
I'm wondering why no one seemed too concerned about the fact that people here had wildly different takes on whether or not my scenarios constitute insider trading and that no conclusion was reached.


[/ QUOTE ]

Really? Let me help, hypotheticals like this do not make any profit for us in this forum.

[/ QUOTE ]

This topic is not really about what constitutes illegal insider trading. It's really a followup on Sklansky's proposal that fundamental analysts could make more money if they factored the market price into their calculations of intrinsic value. You see him alluding to that point when he says,

[ QUOTE ]
DS -
The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat.

[/ QUOTE ]

although his DesertCat aside puzzles me unless it's sarcasm.

His idea is that there is likely to be a lot of information of this kind that is embedded in the market price and beyond the scope of the fundamental analyst's due diligence. Therefore, the FA must "guess" at how much of the difference between market price and FA-Value is due to information available to the market but not to the FA, and factor that guess into his calculation of intrinsic value. That is, unless the FA has special insight into the market price that allows him to apply Sklansky's fundamental theorem.

This Insider Trading topic is just Sklansky's way of providing some examples to support his proposal that we should look to his Fundamental Theorem of Investing to make more money in the market.

PairTheBoard

David Sklansky 12-01-2007 04:05 PM

Re: Reopening Insider Information Debate.
 
"His idea is that there is likely to be a lot of information of this kind that is embedded in the market price and beyond the scope of the fundamental analyst's due diligence. Therefore, the FA must "guess" at how much of the difference between market price and FA-Value is due to information available to the market but not to the FA, and factor that guess into his calculation of intrinsic value. That is, unless the FA has special insight into the market price that allows him to apply Sklansky's fundamental theorem.

This Insider Trading topic is just Sklansky's way of providing some examples to support his proposal that we should look to his Fundamental Theorem of Investing to make more money in the market."

Not a bad analysis. Except that I don't think that the reason that the market's valuation's are sometimes more accurate than the FA is just because of insider information that is bordeline illegal. It is often due to perfectly legal information that even a great FA is not privy to, or hadn't realized might affect the stock price. In other words it might not be so smart to say "what does this stock price have to do with the price of tea in China?". When actually it might.

Also, it should be noted that information not taken into account by the FA is often probalistic. And when it doesn't pan out, the FA mistakingly thinks he made a good bet. In other words some people realize that ABC has a 20% chance of having a thirty point slide. So they keep the stock at a level five dollars below what it would be without this danger. An oblivious FA thinks he came up with a good buy and pats himself on the back when the unseen danger subsides and he picks up his predicted five dollars. Which will happen 80% of the time.


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