jjd Posted June 12, 2004 Share Posted June 12, 2004 Selling of large blocks of stock will cause it's value to go down. This is pretty simple shit really... It's doubtful that most CEOs hold enough stock to move the market significantly. It is also unlikely that they would liquidate their entire position even if they did. Let's assume for argument's sake that they do. If you know that a)the price of the stock is going down and b) the CEO is liquidating his entire portfolio, that is probably a good sign to sell. If you have this information and don't act upon it, it's your own fault. Quote Link to comment Share on other sites More sharing options...
JoshK Posted June 12, 2004 Author Share Posted June 12, 2004 The north koreans are dirt poor and frankly don't employee too many intelligent folks as far as I can tell. I said nothing regarding the north korean populace, martlet. I'm sure they have a ton of really smart people in that country and their talent goes largely unexploited due to the country they live in. Quote Link to comment Share on other sites More sharing options...
JoshK Posted June 12, 2004 Author Share Posted June 12, 2004 Selling of large blocks of stock will cause it's value to go down. This is pretty simple shit really... It's doubtful that most CEOs hold enough stock to move the market significantly. It is also unlikely that they would liquidate their entire position even if they did. Let's assume for argument's sake that they do. If you know that a)the price of the stock is going down and b) the CEO is liquidating his entire portfolio, that is probably a good sign to sell. If you have this information and don't act upon it, it's your own fault. It's often too late at that point. You know there was a reason they made insider trading illegal in the first place, I'm not sure why all of sudden you would think it's a good idea to open the stock market back up for abuses? Quote Link to comment Share on other sites More sharing options...
cj001f Posted June 12, 2004 Share Posted June 12, 2004 The CEO selling his stock does not in itself do anything to harm you. Proponents of making insider trading legal believe, as do I, that requiring immediate disclosure of trading by insiders would be adequate. If you know that insiders are selling massive positions while simultaneously touting the company's prospects, one can question whether they are truthful. It could be argued that by watching insider trading, you get a better signal about the company's prospects than you do currently. The problem with your theory is that there is no way to know who posesses insider information (trading on inside information is illegal). It wouldn't be far fetched to have a CEO hold his stock while pumping it publically, while telling all his friends to dump it (harming the public) Monitorring who exactly is a friend of the CEO who would be impossible. Quote Link to comment Share on other sites More sharing options...
Fat_Teddy Posted June 12, 2004 Share Posted June 12, 2004 The north koreans are dirt poor and frankly don't employee too many intelligent folks as far as I can tell. I said nothing regarding the north korean populace, martlet. I'm sure they have a ton of really smart people in that country and their talent goes largely unexploited due to the country they live in. So what you're saying then, sphincter boy, is only dumb North Koreans can get work? Quote Link to comment Share on other sites More sharing options...
cj001f Posted June 12, 2004 Share Posted June 12, 2004 They are soo far ahead of us it isn't even funny. Thing is though. These kids are the top 10% of 1%. At what? Book knowledge - certainly. A large number of the Chinese I've met, including PHD's, are often useless when required to do something non regurgitory or theoretical. Quote Link to comment Share on other sites More sharing options...
jjd Posted June 12, 2004 Share Posted June 12, 2004 The problem with your theory is that there is no way to know who posesses insider information (trading on inside information is illegal). It wouldn't be far fetched to have a CEO hold his stock while pumping it publically, while telling all his friends to dump it (harming the public) Monitorring who exactly is a friend of the CEO who would be impossible. If an insider is able to legally sell on this inside information, they will. Telling his/her friends that they should sell and not doing so himself is pretty far-fetched without the presence of insider trading laws. Let's assume we do have an irrational CEO who wants to lsoe money. If enough people are selling in large enough quantities to move the market, you will have sell signals. Read the links below to read some of the thinking behind repealing insider trading laws (specifically the problem of identifying what is insider trading and what isn't). http://www.webleyweb.com/tle/libe231-20030713-04.html http://www.fff.org/freedom/fd0310b.asp Quote Link to comment Share on other sites More sharing options...
jjd Posted June 12, 2004 Share Posted June 12, 2004 It's often too late at that point. You know there was a reason they made insider trading illegal in the first place, I'm not sure why all of sudden you would think it's a good idea to open the stock market back up for abuses? I would submit that it never should have been made illegal in the first place. That aside, with the ability to move information virtually instantaneously at little or no cost, there is no reason why that information (the insider trading) can't be obtained in plenty of time. I would challenge you to find a case where insider trading truly caused harm to investors. I suspect if they exist at all, they are very few (I don't think you'll find any). Quote Link to comment Share on other sites More sharing options...
scott_harpell Posted June 12, 2004 Share Posted June 12, 2004 They are soo far ahead of us it isn't even funny. Thing is though. These kids are the top 10% of 1%. At what? Book knowledge - certainly. A large number of the Chinese I've met, including PHD's, are often useless when required to do something non regurgitory or theoretical. So what are you saying? That they are genetically predisposed to being stupid? Anyways, the people I am going to school with are the uber elite... They have to pay the government off to let them study here... more of insurance that they don't try to leave as some of the money is returned when they return. Quote Link to comment Share on other sites More sharing options...
jjd Posted June 12, 2004 Share Posted June 12, 2004 Quote: -------------------------------------------------------------------------------- Quote: -------------------------------------------------------------------------------- They are soo far ahead of us it isn't even funny. Thing is though. These kids are the top 10% of 1%. -------------------------------------------------------------------------------- At what? Book knowledge - certainly. A large number of the Chinese I've met, including PHD's, are often useless when required to do something non regurgitory or theoretical. -------------------------------------------------------------------------------- So what are you saying? That they are genetically predisposed to being stupid? Anyways, the people I am going to school with are the uber elite... They have to pay the government off to let them study here... more of insurance that they don't try to leave as some of the money is returned when they return. There are quite a few Asians, Chinese included, here at UC Davis. I don't really see a difference between them and other non-Asian students. Quote Link to comment Share on other sites More sharing options...
klenke Posted June 12, 2004 Share Posted June 12, 2004 jjd: Here is just one description of insider trading and why it is illegal. There are many examples. (Illegal) insider trading is bad for the ordinary investors among us. Period. It may be good for those in the know (CEOs, etc.) but it's bad for people like me who buy public stock. I ought to be able to know what the CEO knows. And if I don't know it, he must tell me. He can't have an advantage over me. This is what is called transparency. It is not translucency or opacity. Excerpt from above link [read it carefully]: "Using non-public information for making a trade violates transparency, which is the basis of a capital market. Information in a transparent market disseminates in a manner by which all market participants receive it at more or less the same time. Under these conditions, one investor can gain an advantage over another only through acquiring skill in analyzing and interpreting available information. This skill is based on individual merit and awareness. If one person trades with nonpublic information, he or she gains an advantage that is impossible for the rest of the public. This is not only unfair but disruptive to a properly-functioning market: if insider trading were allowed, investors would lose confidence in their disadvantaged position (in comparison to insiders) and would no longer invest." Quote Link to comment Share on other sites More sharing options...
jjd Posted June 12, 2004 Share Posted June 12, 2004 I guess I don't see a problem with having investors make inferences based upon what insiders are doing. As one of my links above states, allowing insiders to trade will bring the information to light through their actions. I would also submit that "ordinary investors" are at a disadvantage when it comes to acquiring information - it is costly. However, if you the see stock price going down and insiders selling, you've got a pretty good reason to sell yourself. Perfect transparency in the markets is an illusion, in my opinion. Quote Link to comment Share on other sites More sharing options...
klenke Posted June 12, 2004 Share Posted June 12, 2004 But how do you know (in real time) that a CEO or other insider is selling at the time a stock is going down? How do you know it is not just external market forces? It's okay to make inferences on available data. This is the skill statement in the above exerpt. But how can someone draw inferences from data unknown to them, data that is only available to the privileged few (the insiders)? If the privileged few have secret data, act on it in real time (sell before an impending loss that occurs in real time), then this ought to be illegal. The difficulty is obviously proving that the data was indeed secret. That's why a lot of insider trading incidences are hard to prove. I think the key is in the last sentence: "This is not only unfair but disruptive to a properly-functioning market: if insider trading were allowed, investors would lose confidence in their disadvantaged position (in comparison to insiders) and would no longer invest." Quote Link to comment Share on other sites More sharing options...
scott_harpell Posted June 12, 2004 Share Posted June 12, 2004 JJD... insider trading essentially caused the Great Depression didn't it? Quote Link to comment Share on other sites More sharing options...
eternalX Posted June 12, 2004 Share Posted June 12, 2004 I'm closer to a libertarian than anythhing else. The reason is because I believe it's probably the most pure of the parties. By that, I mean the whole point of the libertarian party is to put everyone at the same level. It's not about pushing any particular interests.; For example, the Ds would like you to believe that welfare is more important than say lower taxes. The Naderites would have us believe the environment is where we need to invest government money and make laws, etc. The Libertarian stance is we all have our personal views. Let's stop spending money and making decisions at the government level and bring it back to the people. In other words, let's get rid of the lobbyists and special interest groups determing where billions of government money go, cut taxes, and then people can spend their money on what they are interested in themselves. The counter argument to this is that nobody would ever give anything to anyone if that were the case. The Libertarians believe that if taxes were somewhere around the 15% level (which is where the Ls believe it woudl be if our government would focus on one thing, National Defense), we'd be more inclined to spend a little bit more on our own self-interests. We can pick and choose the programs that matter to us. The way the insider trading thing fits in here is that as soon as you start putting the responsibility on a government agency to protect YOUR investments is the exact same time when you stop taking responsibility yourself. I think we saw this at the end of the dot com era. Everyone blamed everyone else for their portfolio evaporating. All the data was there before the bust, the investors chose to ignore it. Because people believe the government is protecting them, there wasn't any group setup to rate investment companies with their activties. When it went boom, people came down on the government to do something about it. Everyone KNEW that there's a big conflict of interest for an investment firm to pump up the stock of a potential customer. This is pretty much the take on all problems for the Libertarian party... THe problem most people have with it is that they don't believe any of this stuff would ever happen. Quote Link to comment Share on other sites More sharing options...
eternalX Posted June 12, 2004 Share Posted June 12, 2004 Also, Alan Greenspan is a Libertarian Quote Link to comment Share on other sites More sharing options...
scott_harpell Posted June 12, 2004 Share Posted June 12, 2004 eternalX... that system was tried before the great depression. There is no way that a casual investor can know enough about their portfolios to be sure that they are not going to be screwed. They just don't have the time. Hell, full-time investors got hammered on some of those deals. Quote Link to comment Share on other sites More sharing options...
willstrickland Posted June 12, 2004 Share Posted June 12, 2004 Gimme a break. Full-timers got hammered because they were, as one person eloquently stated, "irrationally exuberant". They weren't duped, they were greedy...and the greedy pigs get slaughtered. The information available for free to the casual investor is far and above what even the most sophisticated has access to in 1920s. Alot of the market "gurus" of the past century made their money on informational arbitrage. That's simply not possible anymore. Insiders are already required to file with the SEC when they are going to buy/sell/exercise options. These insider transactions are available for you to see, again for free, at sites such as Yahoo finance, or your discount brokerage website (I use Scottrade). The fact is, insider trading problems revolve around information not available to the public being selectively distributed. This is common, so legal or illegal it happens all the time. The argument that anyone can just observe the insider transactions and then act on that is bogus because when there is a mass exodus on a stock, the exchange (NYSE, NASDAQ, etc) will often halt trading in the stock. An example from about a month ago is Genta. Biotech firm who was about to get a ruling from the FDA on one of their technologies. On the lead-up to the ruling date the volume was off the charts. Options were also trading like crazy. FDA report was bad, stock sold off hard until the exchange halted the trading. Genta lost something like 75% of it's market cap. Somebody knew enough to have put options and others knew enough to sell off their position during the pre-ruling flurry the week prior. Whether that info came from Genta, the FDA, or whoever the point is that insider trading will not cease due to SEC oversight. I still believe that requiring the actual company insiders to disclose their trading is a positive thing. And anyone who didn't see the bubble coming didn't want to see it. Aggregate P/E, and PEG, was sky high. I went to all cash 6 months before the big slide. Plenty of people made alot of money in those 6 months, but most of them suffered the consequences when the correction hit. A much bigger problem to me is the blatant manipulation by the MMs and the big houses, particularly with the big houses analysts making horrible calls all in order to generate transactions. Sector rotation and the short term self-fufilling prophecies they create are all based on making you transact and generate fees for the brokerage houses. Underlying value is an afterthought in many cases. Quote Link to comment Share on other sites More sharing options...
Fairweather Posted June 12, 2004 Share Posted June 12, 2004 Our north korea policy is screwed tho. Clinton made some decent progress and shrub threw it out the window. I think this is one of the stranger ideas you've put forth. Clearly Clinton did try to bring the North Koreans into the world community, but the agreement that he and Carter inked with the "dear leader" was based entirely on trust. Trust that the North would stop its nuclear ambitions in exchange for food, fuel oil, and a light-water nuclear reactor. They took our good will and SPIT on us. Additionally, Clinton and Albright were so fucking dumb that they "forgot" to include uranium enrichment bomb production methods in the agreement. Clearly the North K's knew the intent of the deal and went forward with their entire program anyhow! You say that Bush "threw it out the window"??? I say he's been pretty patient. If China won't control their rabid neighborhood dog, I say we shoot that dog. Quote Link to comment Share on other sites More sharing options...
olyclimber Posted June 12, 2004 Share Posted June 12, 2004 "Ra-di-a-tion. Yes, indeed. You hear the most outrageous lies about it. Half-baked goggle-box do-gooders telling everybody it's bad for you. Pernicious nonsense! Everybody could stand a hundred chest X-rays a year!" Quote Link to comment Share on other sites More sharing options...
Fairweather Posted June 12, 2004 Share Posted June 12, 2004 Huh???? Quote Link to comment Share on other sites More sharing options...
JoshK Posted June 12, 2004 Author Share Posted June 12, 2004 I can't even believe we are arguing about insider trading. jjd, the laws were there for a reason, without them people got screwed, they are nescessary to avoid the corp types from beating down on investers. this topic is so absurd it isn't even worth arguing. Quote Link to comment Share on other sites More sharing options...
Off_White Posted June 12, 2004 Share Posted June 12, 2004 Huh???? Repo Man quote. If you've never seen it, you really should. Quote Link to comment Share on other sites More sharing options...
jjd Posted June 12, 2004 Share Posted June 12, 2004 JJD... insider trading essentially caused the Great Depression didn't it? If you ask 10 economists what caused the Great Depression, you're likely to get 10 different answers. If you want my opinion, a combination of poor monetary policy (monetarists didn't even exist yet) and poor fiscal policy combined to create an awful economic situation. I don't believe insider trading caused the Great Depression. Insider trading will merely allow equities to move to their "true" value quicker. Quote Link to comment Share on other sites More sharing options...
JoshK Posted June 12, 2004 Author Share Posted June 12, 2004 And allow execs to maintain as much of their cash as possible while screwing outside investors... but, no, I think you are right, I dont think it is what caused the great depression. I can tell you that it was a wonderful democractic president that got us out of it quicker... Quote Link to comment Share on other sites More sharing options...
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