Insider trading by executives is pervasive – research(bloomberg.com)
bloomberg.com
Insider trading by executives is pervasive – research
https://www.bloomberg.com/news/features/2021-09-29/is-stock-market-rigged-insider-trading-by-executives-is-pervasive-critics-say
190 comments
This feels like an extended ad for tipranks.com
Nancy pelosi's trading returns beat every well known investor, she is running far lower amounts of capital, but shes averaging 70% a year. Meanwhile, the rest of us slave away at our jobs like cattle, and listen to her speak on TV about "fighting for our rights, justice, equality"
> shes averaging 70% a year.
Source? Sounds like someone just made it up.
This page said they went from 41 to 115 in 14 years, which is more like 12% a year. https://www.opensecrets.org/news/2020/04/majority-of-lawmake...
Source? Sounds like someone just made it up.
This page said they went from 41 to 115 in 14 years, which is more like 12% a year. https://www.opensecrets.org/news/2020/04/majority-of-lawmake...
It would be nice if Nancy Pelosi were not the classic strawman here. I don't excuse her behavior either but it's totally legal for now and there are so much worse out there.
Yet they never come up it's always Nancy Pelosi and that's just creatively bankrupt. So here are 36 more...
https://www.businessinsider.com/congress-stock-act-violation...
Yet they never come up it's always Nancy Pelosi and that's just creatively bankrupt. So here are 36 more...
https://www.businessinsider.com/congress-stock-act-violation...
It’s totally legal for the people who write the laws to trade on inside information. Golly, I wonder how that came to be.
If we are requiring spouses of elected officials to divest their investment business, we should also require Presidents to divest from their businesses as well, not just wink-wink transfer to his children.
In additon there are thousands of elected officials across the country. If we need everyone to abandon/destroy their non-official form of income, nobody will join politics. It is easy to judge from that sidelines.
In additon there are thousands of elected officials across the country. If we need everyone to abandon/destroy their non-official form of income, nobody will join politics. It is easy to judge from that sidelines.
> we should also require Presidents to divest from their businesses as well, not just wink-wink transfer to his children.
Absolutely, 100% agree. We should also not let children of Presidents get entangled in billion dollar investment deals with foreign powers that are hostile to US interests[1]
There are blind trusts and other vehicles that can be used. Maybe if the ability to exploit inside knowledge for personal financial gain were limited, the people who choose to get involved in politics would be doing so because they care about making the country a better place, and not to enrich themselves.
[1] https://www.msn.com/en-us/news/world/hunter-biden-holds-stak...
Absolutely, 100% agree. We should also not let children of Presidents get entangled in billion dollar investment deals with foreign powers that are hostile to US interests[1]
There are blind trusts and other vehicles that can be used. Maybe if the ability to exploit inside knowledge for personal financial gain were limited, the people who choose to get involved in politics would be doing so because they care about making the country a better place, and not to enrich themselves.
[1] https://www.msn.com/en-us/news/world/hunter-biden-holds-stak...
> If we are requiring spouses of elected officials to divest their investment business, we should also require Presidents to divest from their businesses as well, not just wink-wink transfer to his children.
Of course, or some other mechanism.
> In additon there are thousands of elected officials across the country. If we need everyone to abandon/destroy their non-official form of income, nobody will join politics. It is easy to judge from that sidelines.
So you are saying that politics is inherently corrupt and that if you take away the appeal of corruption then no one will participate?
Of course, or some other mechanism.
> In additon there are thousands of elected officials across the country. If we need everyone to abandon/destroy their non-official form of income, nobody will join politics. It is easy to judge from that sidelines.
So you are saying that politics is inherently corrupt and that if you take away the appeal of corruption then no one will participate?
> So you are saying that politics is inherently corrupt and that is you take away the appeal of corruption then no one will participate?
I've heard rumors that quite a bit before I was born, politics was as boring and stuffy as being an actuary. One can only dream that politics gets boring like that soon.
I've heard rumors that quite a bit before I was born, politics was as boring and stuffy as being an actuary. One can only dream that politics gets boring like that soon.
Let’s play apples to apples at least right? If the president you’re referring to was to do the same exact trades as Pelosi all hell would have broken loose and would have been impeached in the house for a 3rd time.
Let's be lucky that he's really a bad investor.
It was already known in 1987 that he traded while spreading false information and after a couple of years the entire stock market ignored him.
They were really years ahead of everyone else on what to do.
It was already known in 1987 that he traded while spreading false information and after a couple of years the entire stock market ignored him.
They were really years ahead of everyone else on what to do.
[deleted]
I don't think complete divestment is really required.
Professionals deal responsibly with conflicts of interest all the time. If you mishandle them, that's somewhere between bad judgement and a punishable offense.
Professionals deal responsibly with conflicts of interest all the time. If you mishandle them, that's somewhere between bad judgement and a punishable offense.
It’s actually not legal. See: the STOCK act. It’s just not enforced.
"Not enforced" and "legal" are close enough to be considered synonyms in everyday speech. You often hear people say that marijuana is legal in Amsterdam. It is in fact illegal, but it exists in a funny grey area where it is tolerated and police don't enforce laws against recreational marijuana use. Enough that there's an entire "coffeeshop" culture that's sprung up there around marijuana use.
So yeah, hearing "there's a law against this but there's no enforcement of that law"...most people shrug and say, "ok, that's legal".
So yeah, hearing "there's a law against this but there's no enforcement of that law"...most people shrug and say, "ok, that's legal".
No one, in their right mind would confuse "legal"and "not enforced." Most people understand the difference and would not use the synonymously. For one thing, a lot of people with principals would not do something that was illegal, even if it wasn't enforced (at least not knowingly)
It is decriminalized for personal use. Not exactly the same as not enforced. Not enforced means a cop could decide to enforce this on you for leverage or personal reasons.
None of the 36 are as notable as Pelosi. She just has the biggest name, so I don't know what you expect. And I don't see any strawman argument being made.
Lol discussing legality when it's the person who makes laws doing this.
> Meanwhile, the rest of us slave away at our jobs like cattle
Dehumanizing, isn't it? Working hard to contribute to society while these people accumulate 10, 100, 1000 times our yearly salaries in seconds by playing some market. The world we live in is so absurd, it's such a joke.
Dehumanizing, isn't it? Working hard to contribute to society while these people accumulate 10, 100, 1000 times our yearly salaries in seconds by playing some market. The world we live in is so absurd, it's such a joke.
Aren’t all/most of the congresspeople millionaires?
We’re ruled over by the rich.
We’re ruled over by the rich.
They're mostly really old. At this point, retiring a millionaire or near-to-it is required to live a middle-class lifestyle.
We vote them into office. Or at least the small minority who bother to vote in the primaries do.Candidates that are closer to working class tend to lose in the primary elections despite the amount of information online and how easy it is to access compared to the past.
Is there some other world that would be less joke-like? I mean one that has actually existed, not a utopian fantasy.
The fairness that we have is a gift given to us by the winners of unfair power struggles. Things can always be more fair, sure. But it's hard to ignore losing when you're winning all the time.
70% does not come close to beating every well known investor, including her investor husband. She had a good year. When that happens 100-200% returns are not unheard of. Once you annualise the numbers it becomes far more pedestrian.
Does that 70% figure come from someone modeling out her portfolio based on the filings? I'd love to see it if it's public. Just as a gut reflex that seems high even with someone who had the amount of inside info she has, but not saying it's impossible.
> but shes averaging 70% a year.
Is there a way to "index-fund" Pelosi's investments? More generally, "index-funding" the investments made by politicians who are in a position of power would be a really interesting thing.
Is there a way to "index-fund" Pelosi's investments? More generally, "index-funding" the investments made by politicians who are in a position of power would be a really interesting thing.
A lot of this gain has to do with leverage. Her husband loves to buy stock options which juice up typical returns significantly. Not saying there's no insider information, just that the returns are heavily amplified either way.
This sort of claim really requires a reference.
This one is most memorable to me:
https://thehill.com/homenews/senate/488593-four-senators-sol...
Not only is it insider trading, it's clear that the briefing indicated the amount of suffering that was coming to their constituents.
https://thehill.com/homenews/senate/488593-four-senators-sol...
Not only is it insider trading, it's clear that the briefing indicated the amount of suffering that was coming to their constituents.
Your reference does not even mention Pelosi. It does not allege “insider trading” either, but rather suggests breach of STOCK Act. This is not the same thing as insider trading, which is about breaching fiduciary duty to shareholders.
https://twitter.com/nancytracker?s=21 theres even a Twitter tracking her shit now.
So i researched your claim, i found a twitter thread and a Greenwald post supporting you, but with no data (i did not find the 70% returns/year averages) and then i found this[0] that explain how well her husband ran during the pandemic (TBF he ran as well as i did, 40% returns, better than when i was playing online poker, with a lot less time invested).
In any case, this is distasteful and gross. Every bill should have an estimated impact on publicly traded companies, and politicians with stocks should be forbidden to discuss/mediate the bill, and only vote on it.
[1]" https://www.forbes.com/sites/forbes-personal-shopper/2021/10...
In any case, this is distasteful and gross. Every bill should have an estimated impact on publicly traded companies, and politicians with stocks should be forbidden to discuss/mediate the bill, and only vote on it.
[1]" https://www.forbes.com/sites/forbes-personal-shopper/2021/10...
> Every bill should have an estimated impact on publicly traded companies
I don't think this is feasible.
> and politicians with stocks should be forbidden to discuss/mediate the bill, and only vote on it.
But I'll go one further on this. No person holding public office above a certain level should be allowed to trade individual stocks. Either buy broad-market indices or have a third-party invest for you without your knowledge on specifics.
I don't think this is feasible.
> and politicians with stocks should be forbidden to discuss/mediate the bill, and only vote on it.
But I'll go one further on this. No person holding public office above a certain level should be allowed to trade individual stocks. Either buy broad-market indices or have a third-party invest for you without your knowledge on specifics.
Policy can move broad market ETFs just as much as individual stocks.
It's the type of imperfect solution we need. Currently Senator Manchin is holding up the infrastructure bill because its plans to combat the climate crisis will impact his million-dollar investments in the coal and energy industries [1].
These people should not be allowed to hold any kind of private or public stock other than ETFs of the S&P 500 index. This way you remove the conflict of interest in favoring one sector/company over another and instead if they want to make money through the market they can do so by helping the overall economy instead.
[1] https://www.businessinsider.com/senator-joe-manchin-half-mil...
These people should not be allowed to hold any kind of private or public stock other than ETFs of the S&P 500 index. This way you remove the conflict of interest in favoring one sector/company over another and instead if they want to make money through the market they can do so by helping the overall economy instead.
[1] https://www.businessinsider.com/senator-joe-manchin-half-mil...
Even the S&P500 isn’t free from policy implications. For one, it would lead you to policies that favor large, incumbent companies over small cap and private companies.
(It would also be infeasible to mandate the divestiture of small, closely-held family businesses in order to hold office.)
(It would also be infeasible to mandate the divestiture of small, closely-held family businesses in order to hold office.)
Tell that to Jimmy Carter.
He placed the farm into a trust rather than divesting ownership. I’m fine with that as a much more practical solution to (most of) the problem here.
He eventually sold it but only after leaving the Presidency (in large part because it was then under crushing debt, having been run by “not the people who knew and cared about the business”.)
I’d rather have us have politicians who are “like us” (who might have an LLC with a rental property in it, who own a pizza shop/dry cleaner/corner bodega, a consulting shop, etc.) than to restrict politics only to those with nothing to lose or so much to lose that if they lose some in a quest for power, it’s OK. I don’t want to shut small businesspeople out because they’ll lose everything they’ve worked to build.
We need people in government who know what it’s like to have to work to make payroll and to sign paychecks on the front.
He eventually sold it but only after leaving the Presidency (in large part because it was then under crushing debt, having been run by “not the people who knew and cared about the business”.)
I’d rather have us have politicians who are “like us” (who might have an LLC with a rental property in it, who own a pizza shop/dry cleaner/corner bodega, a consulting shop, etc.) than to restrict politics only to those with nothing to lose or so much to lose that if they lose some in a quest for power, it’s OK. I don’t want to shut small businesspeople out because they’ll lose everything they’ve worked to build.
We need people in government who know what it’s like to have to work to make payroll and to sign paychecks on the front.
Blind trusts are used in these cases.
How did you manage 40% returns, if I may ask.
Luck, and small capital. I only invested what i could loose, i estimated that to be 5000€, bought LVMH and Amazon stock at the right time (this was not really luck), and sold it at the right time too (this was luck). Got 6900€ in less than a year. Reinvested in in index fund, less hassle and time looking at a trading app (although loosing it all would not impact me, i might have a weird brain imbalance and this was not healthy).
Isn't it her husband who does her investing, and that is his trade? The claim is less remarkable with this in mind.
Is it? You don’t think pillow talk factors into this?
Factors? Sure. But I don't think its the big scandal everyone tries to make it out as. Which you can kind of tell because the story never includes any of the pertinent facts, its just boiled down to the most sensational version.
I did 400% in 2020 and over 500% in 2021. No insider trading here. It is possible.
please can we talk
?
spikezleedotgmail.com
Dont forget Chris Collins was caught for giving insider tips to his son and others and was going to jail for that when Trump pardoned him.
[deleted]
Her husband was already a successful investor before Nancy went into politics.
And because of their wealth, she could dedicate worked for the party for free for 20 years. Which got her to where she is now.
I would be more concerned with presidents who are known to spread/say things to try to influence the market.
And because of their wealth, she could dedicate worked for the party for free for 20 years. Which got her to where she is now.
I would be more concerned with presidents who are known to spread/say things to try to influence the market.
I hate that she's a hypocrite. But there are so many better people then her in the party (e.g., Wyden & AOC), and it's not like I'm going to run and join the dumpster fire known as the QOP. I mean, what is the QOP really doing to help? Nada, they've just made it 12 trillion times worse from 2000-2008 and 2016-2020 (Ignoring the 80's entirely). At least the dems are helping the middle class every day even if some are stealing while doing it. Better than just a cross-shaped boot in the face while stealing.
> "In two decades the SEC hasn’t brought a single insider trading case involving trades made under a 10b5-1 plan."
Ladies and gentlemen of the jury: the defendant changed his 10b5-1 plan multiple times, and one of those times he profited hugely from it. The defendant's excuse that his advisor told him to do it and he needed the money for his daughter's college is just unpersuasive.
Anyone see why a prosecutor might be reluctant to bring such a case? It might well be true, but the jury may or may not stay awake long enough to agree. Best to concentrate scarce resources on cases you CAN win.
Note that I'm not saying insider trading is harmless; just that it's like illegal drugs: no policies will stamp it out entirely.
Ladies and gentlemen of the jury: the defendant changed his 10b5-1 plan multiple times, and one of those times he profited hugely from it. The defendant's excuse that his advisor told him to do it and he needed the money for his daughter's college is just unpersuasive.
Anyone see why a prosecutor might be reluctant to bring such a case? It might well be true, but the jury may or may not stay awake long enough to agree. Best to concentrate scarce resources on cases you CAN win.
Note that I'm not saying insider trading is harmless; just that it's like illegal drugs: no policies will stamp it out entirely.
"No policies we have tried or are collectively willing to try will stamp it out" is the accurate version of your ending statement, whether talking about drugs or insider trading. It's unreasonable to rule out every policy as only an infinitesimal portion have been explored. How best to organize humanity might be the least solvable and most open ended problem conceivable, one worthy of a multiverse scale simulation. We can't make solid predictions about what inputs lead to what outcomes.
Species-wide conclusions about the impossibility of ending some specific immoral behavior depend on an expectation of irrationality from people, that they're unable to abandon the status quo.
Additionally, what is “immoral” is relative. I think an individual choosing to consume illegal drugs is perfectly moral, but lots of people disagree about that.
I'm more than willing to believe there's insider trading, but the data presented at the beginning is not convincing.
> Of the 496 trades [Filler has] made since 2014 in Alabama’s ServisFirst Bancshares Inc., where he sits on the board of directors, and Century Bancorp Inc. of Massachusetts, where he’s the largest shareholder, 372 of them, or 75%, have shown a profit three months later.
> Besides Filler, other TipRanks stars include Steve Mihaylo, the CEO of telephone services company Crexendo Inc., where he owns a $60 million stake. Mihaylo has turned a three-month profit on 83% of his trades over the past five years even as Crexendo’s shares have seesawed.
We've also had an unprecedented bull market over the past 10 years. If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more?
The article compares the returns to the S&P500, but that is the net performance of those 500 stocks. You'd have to compare it to the base rate of picking a random stock to see if it's actually remarkable.
Maybe the S&P 500 performed lower because 75% of the stocks in it went up and 25% went down. But that means that if you randomly pick one stock, you'd have a 75% chance of it being one of the ones that went up, and you'd outperform the S&P500. (Well, not quite, maybe it could go up, but not as much as the S&P500 as a whole. But still, most of the stocks that go up, would have to go up more than the average of the whole index in order to compensate for the ones that go down)
Later in the article, when they mention that insiders tend to reliably sell stock ahead of bad news, that seems much more damning.
> Of the 496 trades [Filler has] made since 2014 in Alabama’s ServisFirst Bancshares Inc., where he sits on the board of directors, and Century Bancorp Inc. of Massachusetts, where he’s the largest shareholder, 372 of them, or 75%, have shown a profit three months later.
> Besides Filler, other TipRanks stars include Steve Mihaylo, the CEO of telephone services company Crexendo Inc., where he owns a $60 million stake. Mihaylo has turned a three-month profit on 83% of his trades over the past five years even as Crexendo’s shares have seesawed.
We've also had an unprecedented bull market over the past 10 years. If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more?
The article compares the returns to the S&P500, but that is the net performance of those 500 stocks. You'd have to compare it to the base rate of picking a random stock to see if it's actually remarkable.
Maybe the S&P 500 performed lower because 75% of the stocks in it went up and 25% went down. But that means that if you randomly pick one stock, you'd have a 75% chance of it being one of the ones that went up, and you'd outperform the S&P500. (Well, not quite, maybe it could go up, but not as much as the S&P500 as a whole. But still, most of the stocks that go up, would have to go up more than the average of the whole index in order to compensate for the ones that go down)
Later in the article, when they mention that insiders tend to reliably sell stock ahead of bad news, that seems much more damning.
There’s very strong data on call purchases and other derivatives short of buying the specific stock, immediately before good news.
You can run into this data via reading academic stuff efficient market hypothesis, as the front running damages the theory a bit and has led to shifts in how to explain EMH (semi-EMH, etc).
This data has been around for years
This data has been around for years
Right, whether or not 75% is suspicious depends entirely on the price action of the stock. If it has been trending up, there will be relatively fewer 3-month periods where the stock is down than if it is flat or trending down. SFBS is up from 13.25 to 79.61 and CNBKA is up from 32.95 to 115.22 since 2014.
If the price movement was completely random with no bias up or down, and you entered trades at completely random times, then you would expect 50% of trades to be profitable 3 months later. So 50% is our baseline. Then consider that these stocks have been going up. THEN consider that you don't have to enter trades at completely random times; if you buy during a dip, the price merely needs to return to the mean for you to be up.
If the price movement was completely random with no bias up or down, and you entered trades at completely random times, then you would expect 50% of trades to be profitable 3 months later. So 50% is our baseline. Then consider that these stocks have been going up. THEN consider that you don't have to enter trades at completely random times; if you buy during a dip, the price merely needs to return to the mean for you to be up.
A blind chimp could have a 90% sucess rate if the endpoint is holding for 3 months in the period 2014 to 2021. What isnide information are they suggesting that the CEO of a phone services company has?
> If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more?
High, very high if you filter down to the most likely stocks that would be traded, apple etc.
> If you pick any random stock at any time and hold it for three months, what are the odds that it will be worth more?
High, very high if you filter down to the most likely stocks that would be traded, apple etc.
Statistically speaking I'd say those numbers more than warrant further investigation.
75% success rate for one trader is suspiciously high. Generally most active traders under-perform the market they're trading in, even a bull one.
> Generally most active traders under-perform the market they're trading in, even a bull one.
But if the market has been going up, even underperforming it means you can still make a profit (unless you significantly underperform). The quoted text in the gp is just talking about profit, not comparing to the market.
But if the market has been going up, even underperforming it means you can still make a profit (unless you significantly underperform). The quoted text in the gp is just talking about profit, not comparing to the market.
> 72 of them, or 75%, have shown a profit three months later.
That is surprisingly close to the number Matt Levine reported on some time ago. A group was trading almost exclusively on insider information, and (IIRC) 77% of their trades made a profit. It's a massive edge over other market participants, but only goes to show that even with that kind of information at your disposal, you are still not guaranteed to make money on every trade.
I wish I could find the article. The overlap between "Matt Levine article" and "insider trading" sets is large enough to make any search for a particular piece of news a needle/haystack problem.
EDIT: to clarify - when you are trading on inside information with the goal of making a quick buck, you are not interested in how the company will do in short term. You are trying to predict how the market in aggregate will react to that same information, once it becomes public.
That is surprisingly close to the number Matt Levine reported on some time ago. A group was trading almost exclusively on insider information, and (IIRC) 77% of their trades made a profit. It's a massive edge over other market participants, but only goes to show that even with that kind of information at your disposal, you are still not guaranteed to make money on every trade.
I wish I could find the article. The overlap between "Matt Levine article" and "insider trading" sets is large enough to make any search for a particular piece of news a needle/haystack problem.
EDIT: to clarify - when you are trading on inside information with the goal of making a quick buck, you are not interested in how the company will do in short term. You are trying to predict how the market in aggregate will react to that same information, once it becomes public.
Individual stocks are surprisingly random across three month stretches even in bull markets. 75% is significantly outperforming in terms of random individual stock picks over the last 10 years.
The real issue is people wouldn’t bring it up if the number wasn’t “shocking”. Which self selects for outliers.
The real issue is people wouldn’t bring it up if the number wasn’t “shocking”. Which self selects for outliers.
Right, stocks [which are just proxies for companies] are completely random because of <random bs paper from E. Fama from 51 years ago>. Because, of course, how would it ever be possible to predict how a company might perform? That must surely be impossible, because TradFi economics has decided it must be. And then people just continually parrot the same stuff they've heard and it becomes more and more accepted as fact.
I just hate hearing these same narratives being repeated because... they've already been repeated. Why must stock returns be random? It's predicting whether a company is going to do well or not, which has nothing to do with randomness. And yet people (like this commenter) just keep repeating this stuff, absolutely endlessly. They don't even know why they're doing it (try asking him) -- they just keep doing it.
I just hate hearing these same narratives being repeated because... they've already been repeated. Why must stock returns be random? It's predicting whether a company is going to do well or not, which has nothing to do with randomness. And yet people (like this commenter) just keep repeating this stuff, absolutely endlessly. They don't even know why they're doing it (try asking him) -- they just keep doing it.
You're misinterpreting what random paper says.
Random paper (Fama et al.) doesn't say it's impossible to predict how well a company performs. It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information? So the price of the company's stock is going to converge to some number that already reflects the known information.
Not sure where you're getting the stock returns are random bit either.
Random paper (Fama et al.) doesn't say it's impossible to predict how well a company performs. It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information? So the price of the company's stock is going to converge to some number that already reflects the known information.
Not sure where you're getting the stock returns are random bit either.
>It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information?
well one reason would be that there is something about the market at time X that means conventional wisdom is faulty, since the 1000 Ph.D. employed by trading co. inc will be following the conventional wisdom there is a chance to outwit - years leading up to 2007 housing crash spring to mind as an example where this can happen.
well one reason would be that there is something about the market at time X that means conventional wisdom is faulty, since the 1000 Ph.D. employed by trading co. inc will be following the conventional wisdom there is a chance to outwit - years leading up to 2007 housing crash spring to mind as an example where this can happen.
Housing looked obvious, but when exactly would it pop. As the saying goes “The market can stay irrational a lot longer than you can stay solvent!”
Sure, if you’re correct it’s easy to say the logic was sound, but you never learn the odds just what happened.
Sure, if you’re correct it’s easy to say the logic was sound, but you never learn the odds just what happened.
Despite the downvotes, I am in generally in support of GP.
If you read hn a lot and built a lot over the past decade it hasn’t been hard to predict better than “a 1000 phds” which companies would win.
NVIDIA, apple, even small plays like twilio. It was obvious these companies had big leads in stuff that made money.
Go back and read the Cloudflare IPO filing thread here. That opened at what, $16?
You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available. I don’t have a PhD mind you, but I would presume this will lead to entire companies moving to CF for some primitives, eventually CF pick up entire accounts.
Do PhDs at trading companies get annoyed because some AWS services still will only respond with plain/text in api responses containing json? That they have to write a custom parser as a result?
Or that the UI for AWS SNS in setting up an HTTPS subscriber kinda sucks? Like it was mostly done but worked so people got pulled elsewhere?
Do wall street PhDs realize the bundling of expensive AWS cloud primitives to use other AWS cloud products is anti-customer, and that maybe this is going to translate to devs voting with their feet when CF makes this move?
Heck, even the R2 announcement makes the egress fees issue clear in plain English. There are tons of comments validating that pain. Business people shouldn’t need a lot of convincing.
Do the above observations and experiences working with AWS and reading others experiences add up to more knowledge than 1000 PhDs?
I wouldn’t have thought so, but the value of an academic degree has been on a downward spiral for some time.
If you read hn a lot and built a lot over the past decade it hasn’t been hard to predict better than “a 1000 phds” which companies would win.
NVIDIA, apple, even small plays like twilio. It was obvious these companies had big leads in stuff that made money.
Go back and read the Cloudflare IPO filing thread here. That opened at what, $16?
You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available. I don’t have a PhD mind you, but I would presume this will lead to entire companies moving to CF for some primitives, eventually CF pick up entire accounts.
Do PhDs at trading companies get annoyed because some AWS services still will only respond with plain/text in api responses containing json? That they have to write a custom parser as a result?
Or that the UI for AWS SNS in setting up an HTTPS subscriber kinda sucks? Like it was mostly done but worked so people got pulled elsewhere?
Do wall street PhDs realize the bundling of expensive AWS cloud primitives to use other AWS cloud products is anti-customer, and that maybe this is going to translate to devs voting with their feet when CF makes this move?
Heck, even the R2 announcement makes the egress fees issue clear in plain English. There are tons of comments validating that pain. Business people shouldn’t need a lot of convincing.
Do the above observations and experiences working with AWS and reading others experiences add up to more knowledge than 1000 PhDs?
I wouldn’t have thought so, but the value of an academic degree has been on a downward spiral for some time.
A company doing well isn’t indicative of the stock price doing the same. For example Cloudflare has one of the highest P/Es on the market, meaning its future growth has been accounted for by investors. So executing extremely well doesn’t cut it. You have to find new areas of growth that investors haven’t anticipated or grow your existing lines more quickly than investors anticipate.
Everything is obvious in the stock market with survivorship bias but in reality there's just as many "sure fire wins" that don't succeed as there are ones that do.
Besides, successful trading is more about getting the timing right than it is about picking which companies will eventually increase in value.
Besides, successful trading is more about getting the timing right than it is about picking which companies will eventually increase in value.
> You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available.
Is it obvious? How likely is it that you're right - is the chance 100%? Is it even possible that you're wrong and this don't happen?
Is it obvious? How likely is it that you're right - is the chance 100%? Is it even possible that you're wrong and this don't happen?
hey, go trade, then! you can just long these equities yourself and make a lot of money if you're right. and there's a lot of very smart and very sophisticated firms that would love to be your counterparty, so you'll get great execution!
so i assume you’re a billionaire fund manager?
The “random” bit seems to be coming from Retric’s comment to which they are replying.
If you perceive some pattern in stock prices, you can bet on the continuation of the pattern. If there were commonly discernible patterns to prices, everyone with cursory knowledge of finance would become magically rich.
This can't happen because prices rise as a consequence of buying and fall as a consequence of selling. People who bet on a pattern destroy it.
The consequent randomness is easily verifiable. Try running some stock market data through a machine learning library, you won't get any interesting results.
This can't happen because prices rise as a consequence of buying and fall as a consequence of selling. People who bet on a pattern destroy it.
The consequent randomness is easily verifiable. Try running some stock market data through a machine learning library, you won't get any interesting results.
But there is a thriving industry of spotting patterns which other people haven't yet thought of. And IIRC there is some evidence that even after these patterns are discovered in the academic literature, they persist for a while, just with lowered returns. The logic of what you're saying is true in principle, but in practice markets are not quite so perfect.
It wasn't my intention to give the impression that markets are totally efficient, just that the forces at play tilt the system toward increasingly random behavior. I was responding to the proposition that markets are considered random because "TradFi economics has decided it must be".
Have you tried? You would be surprised at what can be achieved on smaller time frames.
The value of a stock is based on the overall markets prediction of how that company will perform. If you can predict how the value of a stock will change, you are not predicting how the company will perform, but are predicting how the company will perform relative to the overall market's prediction.
That market has a lot of very smart people spending a lot of time making their predictions. If you can consistently identify stocks that are undervalued then either you are smarter than the rest of the market, or you know something the rest of the market doesn't.
It is possible to be smarter than the rest of the market. Particularly if you are investing in relatively low value companies and doing significant due diligence yourself. However, if you work in Congress, it is much more likely that you got your edge by knowing something that the rest of the market doesn't, and we have generally decided that it is illegal to make trades based on that information.
That market has a lot of very smart people spending a lot of time making their predictions. If you can consistently identify stocks that are undervalued then either you are smarter than the rest of the market, or you know something the rest of the market doesn't.
It is possible to be smarter than the rest of the market. Particularly if you are investing in relatively low value companies and doing significant due diligence yourself. However, if you work in Congress, it is much more likely that you got your edge by knowing something that the rest of the market doesn't, and we have generally decided that it is illegal to make trades based on that information.
This isn't necessarily true. Not everyone has the same goals, risk tolerance, and is working with the same amount of capital in the market.
It’s not whether you predict the company trajectory (possible) but whether you predict it better than other people who are also trying to predict. It turns out the average market prediction has low bias (stock go up or down).
> It's predicting whether a company is going to do well or not, which has nothing to do with randomness.
You're right that that has little to do with randomness. But it also has little to do with investing.
You're right that that has little to do with randomness. But it also has little to do with investing.
OBVIOUSLY
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The idea that some people will not use their knowledge to game the system is absurd. I know there's ways of tracking down people via trading patterns but what's to stop an insider selling information to someone completely untied to them and profiting that way? As long as it isn't made obvious by the trader, that would be an untraceable form of insider trading.
Maybe we should just demand all information be open.
> I know there's ways of tracking down people via trading patterns but what's to stop an insider selling information to someone completely untied to them and profiting that way?
Many things: Records of communications. People talk.
Many things: Records of communications. People talk.
It’s possible to commit a crime but it’s also possible to get caught. Not sure what grounds your argument stands on.
> Maybe we should just demand all information be open.
This is both theoretically and practically impossible.
This is both theoretically and practically impossible.
Imagine an alternate reality where all stock holding info is public, with names attached, (Everyone's! Including yours!). There are also no insider trading rules.
Such a system seems possibly fairer and more efficient than what we have now.
Such a system seems possibly fairer and more efficient than what we have now.
That reality sounds pretty similar to what we have. Pretty much everything of consequence is on a 13-D, 13-F, 13-G , etc.
the reporting time might be too long for it to matter.
What is needed is instantaneous reporting.
What is needed is instantaneous reporting.
The elite would hide behind walls of shell companies.
Can someone create a system that stores and parses all this company registration data to instantly dereference the person behind any shell corporation?
Not just “shell” companies. Berkshire Hathaway is hardly a shell company, but much of its money comes from investments. Same with most insurers.
Maybe shell companies should not exist. Or be fully transparent.
Shell companies, tax havens, tax loopholes... every law has a loophole and guess who makes the laws
No, because swaps are a thing. Ie a bank will buy a stock on your behalf in its name, write a derivative to you for the economics of the price return/loss on the side. This is very common today and has the effect of defeating disclosure requirements.
Do you mean something like a distributed, immutable, permissionless database that everyone can query?
Or a well-audited public ledger overseen by democratic institutions. Bonus if it doesn’t consume the electricity of an average nation to operate.
> well-audited public ledger overseen by democratic institutions
Yes, because democratic institutions have such a great track record of managing things like this
Yes, because democratic institutions have such a great track record of managing things like this
As opposed to what? The wonderfully secure blockchain-based alternatives where redress for fraud and theft is still handled by… those stodgy old institutions?
The alternative is providing a base network that is fully decentralised (and doesn't use a resource based proof system that is terrible for the environment).
Nation states and institutions can build on top of or integrate into this base network rather than building their own walled gardens. Long term this improves auditability and protects these institutions' CBDC networks from censorship.
Nation states and institutions can build on top of or integrate into this base network rather than building their own walled gardens. Long term this improves auditability and protects these institutions' CBDC networks from censorship.
Considering that they have been going at the problem for more than half a century, and if anything, making negative progress, perhaps there is a better approach.
How about: make all trades 100% transparent in real time, and nevermind the insider trading laws? If Jack Smith, the CFO of XYZ Corp, sells 300 shares at 11:04:00 AM, you can know about it by 11:04:01. Sure, Jack still has an advantage, but now his trade is ACTUALLY providing information to the market.
It is one thing for TipRanks to provide analysis two days after, another thing for them to be able to do it in almost real-time, or setup a Fast Follower fund...
Seems there's only good to be gained here, and the insiders won't have to worry about prosecution.
How about: make all trades 100% transparent in real time, and nevermind the insider trading laws? If Jack Smith, the CFO of XYZ Corp, sells 300 shares at 11:04:00 AM, you can know about it by 11:04:01. Sure, Jack still has an advantage, but now his trade is ACTUALLY providing information to the market.
It is one thing for TipRanks to provide analysis two days after, another thing for them to be able to do it in almost real-time, or setup a Fast Follower fund...
Seems there's only good to be gained here, and the insiders won't have to worry about prosecution.
Cheating at a game does not mean the game itself is rigged.
If the game allows cheating for certain group of players, then the game is rigged.
Maybe broken instead of rigged?
Or as a collective, we don't know the game theoretic best move to get out. It all comes down to education at the end of the day, that's why we use hackernews.
Or as a collective, we don't know the game theoretic best move to get out. It all comes down to education at the end of the day, that's why we use hackernews.
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It's not rigged. If you think the stock market is rigged, you'd have to apply similar lens to the factors that influence it like inflation stats, employment numbers, gold and other metals prices, interest rates, and currently, home prices, food and fuel prices, and all the other scientifically collected data that supports policy. Markets are the sum of the information everyone has about prices (even if that's not evenly distributed), and if you could co-ordinate to rig that, you could rig literally anything. If it were even possible to rig any, let alone all, of those things, the whole thing would be as fragile as the narrative that held it together. It couldn't exist. We'd only ever be one viral tweet away from total civilizational meltdown.
I get that connected insiders need more scrutiny and maybe making some high profile examples would set the tone, but that some bad actors don't bring the whole thing down is more of a feature than a bug in this case.
I get that connected insiders need more scrutiny and maybe making some high profile examples would set the tone, but that some bad actors don't bring the whole thing down is more of a feature than a bug in this case.
> Markets are the sum of the information everyone has ...
This leaves out some key facts: different people have access to information at different times.
It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. This isn't disputed.
This leaves out some key facts: different people have access to information at different times.
It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. This isn't disputed.
I agree insider trading isn’t fair. It’s much less clear to me that insider trading harms market efficiency.
I think we accept the increased inefficiency (from barring insider trading) in the name of fairness and resulting trust in the market.
I think we accept the increased inefficiency (from barring insider trading) in the name of fairness and resulting trust in the market.
This is interesting reading:
Laffont, Jean-Jacques, and Eric S. Maskin. "The efficient market hypothesis and insider trading on the stock market." Journal of Political Economy 98.1 (1990): 70-93.
Laffont, Jean-Jacques, and Eric S. Maskin. "The efficient market hypothesis and insider trading on the stock market." Journal of Political Economy 98.1 (1990): 70-93.
> It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information.
How is this not good for market efficiency? Insiders have material information about company performance. Trading on that information means that it is (marginally) reflected in the market price. That sounds like a more efficient market to me.
Also, I’d like to see your full specification of “fairness” in capital markets. Stock markets are not casinos, they are economic tools for directing capital to its highest use. “Fairness” doesn’t seem like a relevant factor here.
How is this not good for market efficiency? Insiders have material information about company performance. Trading on that information means that it is (marginally) reflected in the market price. That sounds like a more efficient market to me.
Also, I’d like to see your full specification of “fairness” in capital markets. Stock markets are not casinos, they are economic tools for directing capital to its highest use. “Fairness” doesn’t seem like a relevant factor here.
This is debated. I'm not an expert in the field; I'm not sure how "hotly" debated it is.
Some sources to consider include:
1. From Brittanica' ProCon.org: https://insidertrading.procon.org/view.answers.php?questionI...
2. Finnerty, Joseph E. "Insiders and market efficiency." The journal of finance 31.4 (1976): 1141-1148.
From the latter:
> THE STRONG-FORM of the efficient market hypothesis assumes all available public and private information is fully [reflected] in a security's market price. The strong-form, in terms of market participants, also assumes that no individual can have higher expected trading profits than others because of monopolistic access to information. One possible test of the strong-form is to determine whether insiders earn better than average profits from their market transactions. To ascertain if the market is truly efficient will involve determining how well insiders do relative to the market in general. To date, some work has already been done in evaluating rates of return earned by insiders trading for their own accounts. ...
I would wager (in a prediction market) that many people who cite the efficient market hypothesis may be unaware of the second sentence in the quote above.
Some sources to consider include:
1. From Brittanica' ProCon.org: https://insidertrading.procon.org/view.answers.php?questionI...
2. Finnerty, Joseph E. "Insiders and market efficiency." The journal of finance 31.4 (1976): 1141-1148.
From the latter:
> THE STRONG-FORM of the efficient market hypothesis assumes all available public and private information is fully [reflected] in a security's market price. The strong-form, in terms of market participants, also assumes that no individual can have higher expected trading profits than others because of monopolistic access to information. One possible test of the strong-form is to determine whether insiders earn better than average profits from their market transactions. To ascertain if the market is truly efficient will involve determining how well insiders do relative to the market in general. To date, some work has already been done in evaluating rates of return earned by insiders trading for their own accounts. ...
I would wager (in a prediction market) that many people who cite the efficient market hypothesis may be unaware of the second sentence in the quote above.
> "...Ultimately, insider trading is an inefficient way of achieving market efficiency, because insiders earn all their profits on the lag between when they start selling and when the market figures out what's going on. This gives them every reason to hoard information, with the result that stock prices are out of whack for longer than they otherwise would have been. Markets thrive on transparency, but insider trading thrives on opacity..." -- Oct. 31, 2005 - James Surowiecki https://insidertrading.procon.org/view.answers.php?questionI...
> Markets are the sum of the information everyone has about prices (even if that's not evenly distributed), and if you could co-ordinate to rig that, you could rig literally anything.
The market being rigged (in the casual sense used here) does not require anyone to be manipulating all of the factors that affect prices; you just need to be able to cheat on some input to the system. Trading on non-public information may not always be a successful strategy because you might get unlucky and some other factors could unpredictably outweigh the impact of the insider information you're basing your trades on—but on average, insider trading works until/unless you are caught and prosecuted.
The market being rigged (in the casual sense used here) does not require anyone to be manipulating all of the factors that affect prices; you just need to be able to cheat on some input to the system. Trading on non-public information may not always be a successful strategy because you might get unlucky and some other factors could unpredictably outweigh the impact of the insider information you're basing your trades on—but on average, insider trading works until/unless you are caught and prosecuted.
Both people involved are now deceased, and while I heard this story from one of the principals, I have my doubts. But fwiw: I knew a guy who was close buddies with the outside accountant for a Fortune 500 company. One of the accountant's duties was to file a quarterly document with the SEC with the company's financial results. That was before this was done online. The contents of the document, before filing, were very confidential and using or disclosing them would have been illegal inside trading. However, as the story goes, the instant the document was in the SEC's possession, its contents were considered public and people with the info were allowed to use it (maybe not the accountant himself because of some special rules).
And so, according to how I was told, the accountant, after dropping off the document and walking out of the SEC building, would pull out his cell phone and call his buddy from the front steps with the relevant info. The buddy would then make trades on the now-"public" info that no one else yet knew, because it was still on a piece of paper in the SEC office that no one had yet looked at.
Could it really have been that easy? This would have been the 1980s or so, I think. I think they had cell phones then, but if not, they had pay phones.
And so, according to how I was told, the accountant, after dropping off the document and walking out of the SEC building, would pull out his cell phone and call his buddy from the front steps with the relevant info. The buddy would then make trades on the now-"public" info that no one else yet knew, because it was still on a piece of paper in the SEC office that no one had yet looked at.
Could it really have been that easy? This would have been the 1980s or so, I think. I think they had cell phones then, but if not, they had pay phones.
It probably happens even more now than in the 1980s.
The speed of communication outpaces the speed of government bureaucracy so it’s easy to take advantage of a technicality to make huge profits.
It’s like university exams when a friend in a morning class would take an exam and then tell others in the afternoon class about the questions and what to expect before taking the exam. The no guarantee the exams would be the say, but even if some questions overlap it makes a big difference.
In the case of university, I’m pretty sure this would be some kind of honor policy violation with repercussions if found out, and for Wall St it’s probably not even as tough as uni.
The speed of communication outpaces the speed of government bureaucracy so it’s easy to take advantage of a technicality to make huge profits.
It’s like university exams when a friend in a morning class would take an exam and then tell others in the afternoon class about the questions and what to expect before taking the exam. The no guarantee the exams would be the say, but even if some questions overlap it makes a big difference.
In the case of university, I’m pretty sure this would be some kind of honor policy violation with repercussions if found out, and for Wall St it’s probably not even as tough as uni.
I think the above specific scenario doesn't happen now, because the info is uploaded at a specific time and broadcast instantly to any interested parties. So modulo some millisecond differences that only HFT bots can exploit, everyone gets the info at the same time.
The original handheld "brick" phone, the https://en.wikipedia.org/wiki/Motorola_DynaTAC , came out in 1984. This was the beginning of the period when cellular phones were seen as expensive status symbols and specialist equipment. (In fact the phones were often still carphones and transportables https://www.mobilephonehistory.co.uk/arcticles/80s_brick_pho... .) Then in the early '90s, about the time that GSM digital service came in, prices began to drop sharply and wide adoption began. (One sign of the change which got some attention at the time was that the SWP https://en.wikipedia.org/wiki/Socialist_Workers_Party_(UK) , a somewhat ersatz radical-left UK fringe party, was seen using mobile phones to organise its then very successful steet demos.)
With paperwork usual delays it would be a superb edge.
I can witness the same structure at my job. We all see stuff (not financial related) the public is not aware of. It would be easy to take advantage of that.
I can witness the same structure at my job. We all see stuff (not financial related) the public is not aware of. It would be easy to take advantage of that.
Outlawing insider trading is simply a bad idea, just like prohibition or trying to outlaw abortion.
If you think insider trading is bad, wait til you see what the Federal Reserve board gets to do, all completely legally, in currency markets. They write their own paychecks out of thin air.
What does the Federal Reserve board get to do?
Reliably determine the direction of a $6T/day market, trade in it with no laws on insider trading or public disclosure requirements, and do it all with exemptions on leverage restrictions.
There was an Addams family episode way back where Gomez was depressed because everything he did would win big. So he decided to dump all of his shares of some stock that he knew was going to go up. And when news spread that he’d done it the stock tanked and he ended up “winning” because he saved so much money by selling before the huge dip. I’ve always thought that was interesting.
I remember that episode! It was about him being bad at losing. He lost at losing lol.
Remember, you can trade stocks without trading stocks.
What do I mean? Mark Cuban sold a collar on his Yahoo stock through Goldman for $[I forget] billion dollars. That was an off-market trade in which someone bought his entire block off of him. In today’s world, with tons of low interest (as in, single/double-digit basis points) loans and other fun weird contraptions, you have a lot more options to trade without trading.
I have no grand reveal here, but there’s probably an entire “dark dataset” regarding that activity that is missing from this conversation.
What do I mean? Mark Cuban sold a collar on his Yahoo stock through Goldman for $[I forget] billion dollars. That was an off-market trade in which someone bought his entire block off of him. In today’s world, with tons of low interest (as in, single/double-digit basis points) loans and other fun weird contraptions, you have a lot more options to trade without trading.
I have no grand reveal here, but there’s probably an entire “dark dataset” regarding that activity that is missing from this conversation.
Also a lot of shorts exist because if you are long X $1 and short Y $1 your total investment is $0.
How can you NOT insider trade once you're a C-level or politician? Your decisions literally change the market.
Unless they pass a law that monitors every single transaction of every person of interest, and even then, I'm sure my RIA would love to know if I had a juicy tidbit and could trivially hide it, I just don't see how you ever stop it.
That world isn't made for the people on HN.
Unless they pass a law that monitors every single transaction of every person of interest, and even then, I'm sure my RIA would love to know if I had a juicy tidbit and could trivially hide it, I just don't see how you ever stop it.
That world isn't made for the people on HN.
Fine, your decisions will impact the value of the stock. Prevent insider trading by requiring them to commit to a long term trading strategy. Make them commit a long period in advance if they want to make any trades. I understand there are regulations that require this of many executives, but as the article seems to make pretty clear there is still plenty of wiggle room make extra money off of secret knowledge and get away with it.
> the article seems to make pretty clear there is still plenty of wiggle room make extra money off of secret knowledge and get away with it.
Fine? That's my point. Can't be done. Like trying to forbid certain strata of civil servants from using encrypted communications.
Fine? That's my point. Can't be done. Like trying to forbid certain strata of civil servants from using encrypted communications.
Put investments in blind trusts or even index funds that do not allow for granular control by people with powerful positions. That the laws cannot stop all asymetrical knowledge is no reason to not limit the most egregious abuses. High level politicians are paid well. Choosing public service may mean you give up the chance at stratospheric levels of wealth and that is okay.
"Is the Stock Market Rigged" should become a new answer to obvious questions, similar to "is the pope catholic" and "does a bear shit in the woods".
What does “rigged” mean?
From oxford dictionary:
manage or conduct (something) fraudulently so as to produce a result or situation that is advantageous to a particular person.
"charges of vote-rigging"
Similar: manipulate arrange fraudulently interfere with influence gerrymander juggle massage distort misrepresent pervert maneuver tamper with tinker with doctor falsify forge fake engineer trump up fix cook fiddle
cause an artificial rise or fall in prices in (a market, especially the stock market) with a view to personal profit.
"he accused games manufacturers of rigging the market"
manage or conduct (something) fraudulently so as to produce a result or situation that is advantageous to a particular person.
"charges of vote-rigging"
Similar: manipulate arrange fraudulently interfere with influence gerrymander juggle massage distort misrepresent pervert maneuver tamper with tinker with doctor falsify forge fake engineer trump up fix cook fiddle
cause an artificial rise or fall in prices in (a market, especially the stock market) with a view to personal profit.
"he accused games manufacturers of rigging the market"
I don’t think you can meaningfully state that the entire stock market is rigged. There are simply too many people trying to do the rigging.
Matt Levine had a pretty good column on this the other day: https://www.bloomberg.com/opinion/articles/2021-09-29/inside...
His point, which is pretty much impossible to argue with, is that insiders always have material nonpublic information about the companies they work for, so treating “insider trading” as a categorical evil that must be totally eliminated is just denying reality. You would have to bar insiders from ever trading their own stock under any circumstances, which seems silly.
The alternative view is basically “who cares”, and that barring insiders from trading freely actually impedes efficient price discovery. A compromise might be to require insiders to at least publicly disclose all trades, so that markets know when insiders are making moves.
His point, which is pretty much impossible to argue with, is that insiders always have material nonpublic information about the companies they work for, so treating “insider trading” as a categorical evil that must be totally eliminated is just denying reality. You would have to bar insiders from ever trading their own stock under any circumstances, which seems silly.
The alternative view is basically “who cares”, and that barring insiders from trading freely actually impedes efficient price discovery. A compromise might be to require insiders to at least publicly disclose all trades, so that markets know when insiders are making moves.
Simple solution seems to be a forced delay between placing an order and it executing. So if an insider wants to sell, they place a binding order today and then it executes after N days or weeks.
Ah, interesting. Batching orders would indeed change the dynamics
>You would have to bar insiders from ever trading their own stock under any circumstances, which seems silly.
Why is it silly? It seems perfectly reasonable to me. There are 10's of thousands of other stocks to trade.
Why is it silly? It seems perfectly reasonable to me. There are 10's of thousands of other stocks to trade.
Because an equity stake is a huge percentage of compensation for a company, and it's much easier to give shares of the company rather than cash. And those receiving shares should be able to sell it.
I agree that the strictest regulations against insider trading would effectively make equity compensation impossible. But you're basically saying that it shouldn't be outlawed because it's currently legal, and currently practiced. If either of those were not true, then outlawing it couldn't be on the table to begin with.
This feels like you're begging the question, or that you left off a step or two at the end and stopped a bit short of a complete argument. Maybe something about equity compensation being a valuable tool that can provide a beneficial incentive structure that is not easily achieved through other means?
This feels like you're begging the question, or that you left off a step or two at the end and stopped a bit short of a complete argument. Maybe something about equity compensation being a valuable tool that can provide a beneficial incentive structure that is not easily achieved through other means?
Insider Trading is one of the stupid laws I have come across. There is always going to be asymmetry in information.
It’s worse than that, those tasked with overseeing the market, including Federal officials, are also trading on inside information with impunity, from Pelosi to Powell
https://www.bloomberg.com/news/articles/2021-10-01/clarida-t...
https://www.dailymail.co.uk/news/article-10004691/Fed-Chairm...
The President of Robinhood is front-running customers with impunity.
https://mobile.twitter.com/EpsilonTheory/status/144326659925...
There are regulations but no enforcement except for smaller players within the financial industry.
https://www.bloomberg.com/news/articles/2021-10-01/clarida-t...
https://www.dailymail.co.uk/news/article-10004691/Fed-Chairm...
The President of Robinhood is front-running customers with impunity.
https://mobile.twitter.com/EpsilonTheory/status/144326659925...
There are regulations but no enforcement except for smaller players within the financial industry.
That story says that Powell had owned a relatively small allocation of munis for years, before the Fed bought munis as part of QE triggered by an unexpected pandemic, which makes perfect sense given their aims. Very hard to call that insider trading in general, and it hardly even seems morally dubious compared to what people like Pelosi seem to be up to.
The chairman of the fed simply shouldn’t own the assets the fed might buy. That’s a clear conflict of interest.
But you’re right there are more clearly corrupt officials including two fed presidents. This is a systemic problem of poor enforcement and violated norms. The rule of law matters and regulators should be above reproach.
But you’re right there are more clearly corrupt officials including two fed presidents. This is a systemic problem of poor enforcement and violated norms. The rule of law matters and regulators should be above reproach.
The issue is I suppose, what can a Fed chairman invest his/her personal money in that absolves him/her of a conflict of interest?
The fed's policies affect every area of the financial system. Can't put it in a bank because they'll almost certainly be above the insured amount and will have an incentive to bail out that bank if it's in trouble, another conflict of interest.
Perhaps some special account at the fed that pays a specific interest rate and is fully insured? But then why do Fed presidents get special access to such an account that normal folks don't?
I don't know that there is anywhere he could put his money and be above reproach, him putting his money in muni's seems like a good faith effort to do that though.
The fed's policies affect every area of the financial system. Can't put it in a bank because they'll almost certainly be above the insured amount and will have an incentive to bail out that bank if it's in trouble, another conflict of interest.
Perhaps some special account at the fed that pays a specific interest rate and is fully insured? But then why do Fed presidents get special access to such an account that normal folks don't?
I don't know that there is anywhere he could put his money and be above reproach, him putting his money in muni's seems like a good faith effort to do that though.
Recently we got a new leader of our "oil fund"[1] here in Norway. The new guy, Nicolai Tangen, had started a hedge fund which he managed and there was a big discussion regarding his personal finances, given the likelihood of conflict of interest.
It ended[2] up with him transferring his personal assets to a bank account and the ownership of the hedge fund to a charity foundation he had started long before this.
[1]: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
[2]: https://www.norges-bank.no/en/news-events/news-publications/...
It ended[2] up with him transferring his personal assets to a bank account and the ownership of the hedge fund to a charity foundation he had started long before this.
[1]: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
[2]: https://www.norges-bank.no/en/news-events/news-publications/...
> Perhaps some special account at the fed that pays a specific interest rate and is fully insured? But then why do Fed presidents get special access to such an account that normal folks don't?
That seems like a solution. And yes, some leadership positions require you to restrict your private activities outside the job.
Before Trump, it also used to be common courtesy that the president-elect published his tax returns and removed himself from all projects that could lead to a conflict of interest.
That seems like a solution. And yes, some leadership positions require you to restrict your private activities outside the job.
Before Trump, it also used to be common courtesy that the president-elect published his tax returns and removed himself from all projects that could lead to a conflict of interest.
Well it did seem a good place till the fed started massively distorting the bond markets in a ‘temporary’ measure which has so far lasted a decade.
That's not an answer to the question. Where does the person who is responsible for the smooth running of the financial system put their money so they have no conflict of interest?
Because otherwise it's easy to just cynically say he's lining his own pockets when in practice the position inherently makes it impossible to have zero conflicts of interest.
Because otherwise it's easy to just cynically say he's lining his own pockets when in practice the position inherently makes it impossible to have zero conflicts of interest.
You gave some suggestions yourself. The fed could invest in an independent fund for such a purpose, they could invest elsewhere in the world. This is not a difficult problem and it is already heavily enforced for smaller fish in the financial ecosystem - e.g. traders at financial institutions are highly regulated.
Anything would be better than buying the very assets they are meant to oversee.
You’re defending the indefensible here with sophistry about how hard it is to be honest and avoid double dealing. These fed presidents dealt in the very securities they had inside information on.
Anything would be better than buying the very assets they are meant to oversee.
You’re defending the indefensible here with sophistry about how hard it is to be honest and avoid double dealing. These fed presidents dealt in the very securities they had inside information on.
They can't invest elsewhere in the world, interest rates have a direct effect on currency values and therefore the value of their investments, conflict of interest.
Traders in financial institutions can invest in assets outside their job and likely those traders don't have the financial muscle to move the values of entire sectors the way the fed can.
Again, there is nowhere existing at present that a Fed chairman can invest that is outside his/her influence, nowhere there is no conflict of interest in the current financial system.
The only real solution is some kind of defined fed official only fund as you and I have both suggested. But while this would get rid of conflict of interest it enters into an issue of equality of why should fed officials get guaranteed safe investments when the public at large do not, which is why it's probably never been done.
Traders in financial institutions can invest in assets outside their job and likely those traders don't have the financial muscle to move the values of entire sectors the way the fed can.
Again, there is nowhere existing at present that a Fed chairman can invest that is outside his/her influence, nowhere there is no conflict of interest in the current financial system.
The only real solution is some kind of defined fed official only fund as you and I have both suggested. But while this would get rid of conflict of interest it enters into an issue of equality of why should fed officials get guaranteed safe investments when the public at large do not, which is why it's probably never been done.
You know, most people simply don't have these issues because they aren't incredibly rich.
An even simpler solution would be to hire someone for this position _who lived off their salary._
The idea that these positions always have to be given to fabulously rich people is why America is in the crappy position it is now.
An even simpler solution would be to hire someone for this position _who lived off their salary._
The idea that these positions always have to be given to fabulously rich people is why America is in the crappy position it is now.
Most people aren't qualified to be fed chairman. The ones that are, probably made a lot of money in the finance industry.
If they didn't make a lot of money, they probably never rose to positions that gave them the experience they need to do the job?
If they didn't make a lot of money, they probably never rose to positions that gave them the experience they need to do the job?
Sounds like "rich people are smart and deserve more money".
When they might as well be criminals. Look at the Pandora leaks
When they might as well be criminals. Look at the Pandora leaks
There's an appreciable difference between investing in bonds or placing money in a high-interest savings account, and betting large amounts on a stock prior to a large market movement based on information you know and the market doesn't.
a blind trust
How about Treasury bonds. At the same rate as everybody else, no special treatment.
The only way to win in financial markets is to NEVER PLAY!
I was 100% out after 2008 (I saw it coming; I saw the Dot Com crash coming - I finally realized the entire system is utterly corrupt and only "the house" wins - you are NOT the house.
I was 100% out after 2008 (I saw it coming; I saw the Dot Com crash coming - I finally realized the entire system is utterly corrupt and only "the house" wins - you are NOT the house.
This means you would lose money to inflation every year.
Simply invest in a total market fund and you get the average returns of the market. Even investing in 1999 or 2007 in a total market fund would put you ahead of a savings account by now.
Simply invest in a total market fund and you get the average returns of the market. Even investing in 1999 or 2007 in a total market fund would put you ahead of a savings account by now.
Here is what I learned after 2008: yes the market goes down, but the powers that be will do everything they can to make those numbers go back up again. They will spend any amount of money to make that happen, and it will be their first priority in the face of any disaster. 2020 confirmed that a thousand fold.
Regulators have too much power and influence on markets - they're worried about market manipulation but as far as I'm concerned they are the only ones manipulating markets.
What about crypto trading? I do think that it is quite rigged, and the whales manipulate and dictate the price action.
Is it really rigged though? The main driver gains has always been information arbitrage. Where the successful investor knows something about the market that noone else does.
Nowadays a lot of information is out there and nothing stops you from trading like the Senators. The information out there. Well, it's on finclout at least.
OK then if information arbitrage is a thing of the past, is the stock market needed ?
Previously discussed:
https://news.ycombinator.com/item?id=28692640
Does HN allow multiple submissions for the same URL now?
https://news.ycombinator.com/item?id=28692640
Does HN allow multiple submissions for the same URL now?
I don't see any discussion at that link
Oh it's rigged alright.
How do you think we got that miraculous bounce post-Covid?
The Federal Reserve had to step in with ~$8 trillion and start buying stocks.
Two Fed presidents had to step down recently due to their stock holdings.
They had to do this to save everyone's retirement accounts and the housing market.
And now we have inflation and this will get blamed on the President's policies. It has nothing to do with that, it's this massive injection of cash into the system. They may have gone a little overboard.
They are trying to slowly unwind this. Until then it's "party like it's the 1920s".
https://www.cnbc.com/2021/09/27/dallas-fed-president-kaplan-...
How do you think we got that miraculous bounce post-Covid?
The Federal Reserve had to step in with ~$8 trillion and start buying stocks.
Two Fed presidents had to step down recently due to their stock holdings.
They had to do this to save everyone's retirement accounts and the housing market.
And now we have inflation and this will get blamed on the President's policies. It has nothing to do with that, it's this massive injection of cash into the system. They may have gone a little overboard.
They are trying to slowly unwind this. Until then it's "party like it's the 1920s".
https://www.cnbc.com/2021/09/27/dallas-fed-president-kaplan-...
I honestly believe the only way out of this would be to stop trading for the general population, by enacting strong regulation. Having all middle-class adults be experts on stocks, NFTs, what new fork some shitcoin is having, etc., is a huge waste, and ultimately funnels more money to the wealthy class, that obviously have information and capital advantages.
If society keeps seeing investing as an absolutely necessary thing for financial stability, we can't expect politicians and executives to not be corrupted.
If society keeps seeing investing as an absolutely necessary thing for financial stability, we can't expect politicians and executives to not be corrupted.
Nooo, the American cap markets are unfair? What a surprise.
America is possibly the most self deluded country in the world.
Go enjoy your American dream, the rich people that is.
America is possibly the most self deluded country in the world.
Go enjoy your American dream, the rich people that is.
Obviously..?
What kinda of insane naivety is required to believe the opposite?
What kinda of insane naivety is required to believe the opposite?
What's funny about this is people thinking it wouldn't be rigged in the first place for some (fantastic) reason. Economy is the new religion.