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

David Sklansky 11-30-2007 02:02 AM

Reopening Insider Information Debate.
 
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 cost himself money because of my willingness to trade on my knowledge. Is this illegal or not? This thread doesn't end until everybody agrees.

mtgordon 11-30-2007 02:11 AM

Re: Reopening Insider Information Debate.
 
Or until you decide to start a new thread about it?

I mean come on, I understand you kind of run this place but this seems a bit ridiculous.

johndenver 11-30-2007 02:14 AM

Re: Reopening Insider Information Debate.
 
afaik:

trading on non public info is illegal

if one of your friends or associates who is an insider gave you this info, it is illegal, and you stand a good chance of being prosecuted

if you overheard this info or stumbled upon it in some way, it is illegal, but you stand no chance of being prosecuted

Shoe 11-30-2007 02:15 AM

Re: Reopening Insider Information Debate.
 
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?

SenatorKevin 11-30-2007 02:25 AM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]


Simple question. I have come upon information that gives me an irrefutable giant edge because no one else has it.

[/ QUOTE ]

More information is needed to come to a conclusion here. In some cases you could be considered trading with inside information and sometimes you wouldn't be.

[ QUOTE ]

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 cost himself money because of my willingness to trade on my knowledge. Is this illegal or not? This thread doesn't end until everybody agrees.

[/ QUOTE ]

Different story now. (The way you worded this, it sounds like two different scenarios) 90% of the time this would make you an insider. The other 10% is that legal gray area that you really would want to avoid.

SenatorKevin 11-30-2007 02:30 AM

Re: Reopening Insider Information Debate.
 
[ 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 ]

Impossible scenario. Someone has to audit those statements before they're published. :-)

jaydub 11-30-2007 02:45 AM

Re: Reopening Insider Information Debate.
 
[ 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

David Sklansky 11-30-2007 03:04 AM

I Think I Have A Partial Answer
 
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

SenatorKevin 11-30-2007 03:13 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

So does this example of the Monopoly machines match the scenario you used in the original post? If it is, then I think your original post is very misleading. Making some observation about slot machine usage would hardly give you a huge edge in trading. There are so many inputs that you don't know about. Such as the configured payout. Perhaps the machines are paying out a significantly higher percentage in order to win over new players and such.

David Sklansky 11-30-2007 03:51 AM

Re: I Think I Have A Partial Answer
 
The fact that my information is not a slam dunk is beside the point. Maybe the terrorists will chicken out. An edge is an edge.

Tater10 11-30-2007 08:19 AM

Re: I Think I Have A Partial Answer
 
My 2 cents...

During an ethics course for cbot floor traders, there were many different scenarios thrown at you. For example, you heard the broker has a huge buy stop at 110.00. Is it ethical try and run the stop? (buy everything below 110.00, trade a 1 lot at 110, and have the broker buy all his 110s from you.) Of course, they kept changing the scenario just a little bit until you and the broker were basically in kahootz, and you were sharing profits at lunch.

What the exchange was trying to imply was this: As soon as a trade does not involve risk for both buyer & seller, it is certainly against exchange rules. If the risk is not the same for each party, you are in a grey area, and you better hope for a jury that sees it your way.

adios 11-30-2007 08:58 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. ....

[/ QUOTE ]

Not necessarily.

ahnuld 11-30-2007 11:06 AM

Re: I Think I Have A Partial Answer
 
but david, what you said is not insider information. It is available to anyone of the public who wants to do a thourough investigation. Would you buy a retailer without first going into the store and at least getting a feel for the clientel and vibe the store is trying to give off? I know I wouldnt. Thats a standard part of investing, along with the numbers.

Thats why desertcat will often call the CEO/CFO of those small companies hes investing in, or visit them if he has the opportunity. Its similar to your monoploy machine example. Its NOT inside information, but buried information that anyone with a shovel and go find easily. The other guy isnt getting screwed due to II but due to his laziness.

Mark1808 11-30-2007 11:34 AM

Re: Reopening Insider Information Debate.
 
It has always been my understanding that it is illegal to trade on MATERIAL NON PUBLIC information. Where there is a direct link to a company insider the guilt is obvious, however their can be instances where their is no direct link and guilt can't be so easily determined. It is therfore up to the SEC and the Courts to decide what MATERIAL NON PUBLIC information is.

The laws are intended to help those that are not on the inside but actually they hurt market participants who do not see all information reflected in market prices.

In the three cases you cited I personally would not trade on any because I belive they all constitute MATERIAL NON PUBLIC information. In reality I believe most insider trading cases are never discovered or prosecuted.

johndenver 11-30-2007 11:41 AM

Re: Reopening Insider Information Debate.
 
The knowledge that there is a line for a monopoly product in a public place is not private info, DUCY?

In your terrorist example, the terrorists are not insiders of any company, therefore it is not insider or illegal trading, its the equivalent of knowing a good weatherman who says there will be a lot of hurricanes this season and then you go out and short oil stocks. perfectly legit.

CrushinFelt 11-30-2007 11:50 AM

Re: Reopening Insider Information Debate.
 
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.

Mark1808 11-30-2007 11:58 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

The SEC does not outlaw having an edge, if they did it would be illegal to use TA.

CrushinFelt 11-30-2007 12:27 PM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law.

[/ QUOTE ]

This is so obviously insider trading.

[ QUOTE ]
As far as someone overhearing executives and then trading on it, my take would be that he gets off

[/ QUOTE ]

He'd only get off if they couldn't prove he was acting on information that he overheard. If they could absolutely prove that he had the knowledge, and that that knowledge led him to purchase the stock, he would most certainly be guilty of insider trading.

[ QUOTE ]
... that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

I'm not sure exactly what you mean by "reimburse", whether you mean the executives shell out their own cash or if they do something with company money. Either way I've never heard of this happening. Each decision the executives make should be to maximize shareholder value, regardless of what has happened in the past.

[ QUOTE ]
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.)

[/ QUOTE ]

It does not matter if you came upon the information accidentally or not.

Jimbo 11-30-2007 01:40 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.


[/ QUOTE ]

Really? Let me help, hypotheticals like this do not make any profit for us in this forum. It is akin to people who wonder why you don't play in the "Big Game". In some forums I imagine people really care whether or not you could beat the game or not, here unless we could profit on you playing your existence in or out of the game doesn't matter at all.

Jimbo

Groty 11-30-2007 02:23 PM

Re: I Think I Have A Partial Answer
 
There is a big difference between "insider information" and material non-public information. Hedge funds happily pay for information they think will give them an edge. They retain the services of industry specific consultants, market research firms, forensic accounting specialists to identify bogus accounting at firms to short, bankruptcy specialists and valuation specialists when they're looking at distressed situations, etc. Anything for an edge.

Suppose I'm a hedgie who exclusively retains the best market research firm in the world who specializes in identifying sales trends at retail establishments.

I want information on sales trends at ABC Corp. and XYZ Corp. The firm I retain spends 6-8 weeks conducting surveys at malls, counting customers browsing the stores in various cities, conducting interviews with suppliers of both ABC and XYZ, etc. Finally, the firm reports back to me that based on its world class research, it believes ABC Corp. will have a terrific selling season, offering few promotions and discounts. It believes XYZ Corp. missed an important shift in a fashion trend, sales will go poorly, and it anticipates alot of promotional activity and discounting to clear inventory. I review the sell side research and believe the Street expectations underestimate the strength at ABC and the weakness at XYZ, so I go long ABC and short XYZ.

I paid the market researcher to give me what I believe is proprietary information that is not being fully discounted by the market. I laugh at the guys selling their cheap ABC shares to me, and snicker at the guys who are taking the other side of my XYZ shorts.

This type of thing happens every day.

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.

PairTheBoard 12-01-2007 09:06 PM

Re: Reopening Insider Information Debate.
 
[ QUOTE ]
"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.

[/ QUOTE ]

That's what I thought you were getting at. Your monopoly machine example is not even close to a borderline insider problem. It really serves to illustrate the points you wanted to make which are quoted above. Even better is the hedge fund example given by Groty about privately conducted market research on retail sales trends.

The problem is that there is generally no systematic way of determining reasons for the FA-Value/Price differential. Even your special insights amount to guesswork. Yet the fundamental analysis method has proved very successful for many investors. Spending their time trying to find special situations for applying the Sklansky Theorem might very well be better spent simply doing more FA research.

I don't think anyone here would argue there isn't value in obtaining special information like your monopoly machine info, or Groty's hedge fund market research. Information which either isn't available to the general market. Or knowledge about how the market is specifically misevaluating information that is available to it. Such information or knowledge is valuable by itself and I can't see how it wouldn't add value to a fundamental analysis - which I think was the point of your thread on that topic. If you have ideas on how to obtain such specific information I'm sure people here would like to hear them. The thing is if you don't, it doesn't do us much good listening to you tell us that it would be nice to have.

PairTheBoard

Jason Strasser (strassa2) 12-02-2007 02:08 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

holy cow david lol... this is almost as funny as the time you approached me in the Rio saying "hahah you are that idiot who insults me online" when you were with that black escort (for which it is fun to tease you for).

This is obviously NOT insider information. Anyone CAN go to a casino and see a line of people.... There is absolutely nothing illegal or insider about this. This is just called doing your homework.... Hearing a CEO whisper on the phone about great earnings then using that to make a trade, or hearing information about a terrorist attack and then shorting the building they are about to blow up is obviously insider trading.... This example is like saying "everyone loves this one biotech drug but I got my hands at it at the store over the counter and I am certain that this drug is a piece of [censored] so I sell it".... Also, just because you saw a long line of people doesnt mean that the stock is going to go up, but that is just an aside.

love you still,
Jason

David Sklansky 12-02-2007 02:49 AM

Re: Reopening Insider Information Debate.
 
"I don't think anyone here would argue there isn't value in obtaining special information like your monopoly machine info, or Groty's hedge fund market research. Information which either isn't available to the general market. Or knowledge about how the market is specifically misevaluating information that is available to it. Such information or knowledge is valuable by itself and I can't see how it wouldn't add value to a fundamental analysis - which I think was the point of your thread on that topic. If you have ideas on how to obtain such specific information I'm sure people here would like to hear them. The thing is if you don't, it doesn't do us much good listening to you tell us that it would be nice to have"

You are still missing the point. My claim is that you need not have any information. What you need is to be a good anticipator of prices. You are agreeing with me and disagreeing with DesertCat about how often there are people who know something you don't. Yet DesertCat and not you seem to realize the strategic implications if he is in fact wrong.

David Sklansky 12-02-2007 02:56 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
[ QUOTE ]
Most of you, including Jason Stausser are wrong. I'd make a small bet on it. Just using pure thought.

When I saw a long line at the newly installed Monopoly machines I immediately bought Williams. And I screwed the seller. Except that he should have realized that someone might have been doing that to him. It is a legitimate part of the game. And as unpalatable as it might sound, the same is true if I overhear two terrorists on their way to bomb the Bellagio (especially if I report them first). The possibility that something along those lines is going on should be part of your calculations. Unless you are DesertCat. It is ridiculous to have laws that expect people to refrain from stuff like that.

The only time the answer is unclear, I would think, is if the information is specifically related to undisclosed aspects of a business that is only privy to insiders. That is why I would think the executive who sells a competitor's stock short when he can't buy his own, is likely breaking the law. As far as someone overhearing executives and then trading on it, my take would be that he gets off but that the executives reimburse those who lost money due to their carelessness.

[/ QUOTE ]

holy cow david lol... this is almost as funny as the time you approached me in the Rio saying "hahah you are that idiot who insults me online" when you were with that black escort (for which it is fun to tease you for).

This is obviously NOT insider information. Anyone CAN go to a casino and see a line of people.... There is absolutely nothing illegal or insider about this. This is just called doing your homework.... Hearing a CEO whisper on the phone about great earnings then using that to make a trade, or hearing information about a terrorist attack and then shorting the building they are about to blow up is obviously insider trading.... This example is like saying "everyone loves this one biotech drug but I got my hands at it at the store over the counter and I am certain that this drug is a piece of [censored] so I sell it".... Also, just because you saw a long line of people doesnt mean that the stock is going to go up, but that is just an aside.

love you still,
Jason

[/ QUOTE ]

She's a nurse.

And I'm still sure you are wrong even if my analogy was poor. I overhear officers of the NAACP planning a boycott of some product because of a racist commercial and I short the stock. That's illegal? You might be right about information insiders are expected to keep secret, but you can't be about the terrorist example.

Jason Strasser (strassa2) 12-02-2007 03:39 AM

Re: I Think I Have A Partial Answer
 
the terrorist example is vague enough where it might not be insider trading, but it is definitely unethical. whether it fits strictly under insider trading or not, i guess you might have a legal bone to pick, but there is no question that acting on this information is wrong. there is no rule that you are free from getting in trouble of insider information even if your inside information is bad... i'd say if you got a tip from a CEO but he turned out to actually be wrong (or lied to you), you'd definitely still be guilty of insider trading because your intent was to trade on information you knew was nonpublic.


hot nurse by the way david!

bills217 12-02-2007 03:51 AM

Re: I Think I Have A Partial Answer
 
[ QUOTE ]
the terrorist example is vague enough where it might not be insider trading, but it is definitely unethical. whether it fits strictly under insider trading or not, i guess you might have a legal bone to pick, but there is no question that acting on this information is wrong.

[/ QUOTE ]

If we're not talking about legality, then why is acting on the information unethical? Who is harmed?

Frankly, I don't see any moral reason why insider trading should be illegal. It is simply in the best interest of everyone in the financial industry for the markets to be as transparent as possible (or at least create an image of transparency) to ensure investor confidence. But as far as morality goes, I can't think of any reason that insider trading is immoral. It's not fraudulent or aggressive in any way.

Maybe you can make an argument that insider trading is unethical (if not immoral) for someone who works in the financial industry, since they directly benefit from the image of transparency that the markets have created and their action might potentially harm that image. But I see no reason why Average Joe on the street in David's terrorist example is doing anything wrong by trying to profit from his knowledge, any more than I am doing something wrong when I bet against Kentucky's football team because a friend who's a manager tells me our best wide receiver has looked gimpy in practice.

David Sklansky 12-02-2007 04:25 AM

Re: I Think I Have A Partial Answer
 
"i'd say if you got a tip from a CEO but he turned out to actually be wrong (or lied to you), you'd definitely still be guilty of insider trading because your intent was to trade on information you knew was nonpublic."

It would be illegal. But not because the information was "non public". It would be because the information "knowingly" was disclosed from the "inside".

Oh well. Obviously the market is just like poker was thirty years ago. I had to ask a few qustions at first to get the hang of things. Then I quickly realized that if I wanted more complex answers, I'd have to ask myself.


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