Reports: 4 US senators sold stocks before coronavirus market crash

[masterswimmer]

What are my insider trading guidelines again? I have forgotten.

You said it's fair game. No restrictions on insider trading. You know what you said Darth. No games necessary.

 

[Darth]

You said it's fair game. No restrictions on insider trading. You know what you said Darth. No games necessary.

Correct.

So what restrictions did I propose?

 

[spat]

Absolutely disagree 100%. Insider trading goes WAAAY beyond knowing what's going to happen due to a crash.

When a company is looking to do a leveraged buyout of another company, get notification of a pending FDA approval for a drug, sign a massive contract, lose a massive contract, merge with another company, fire a CEO, increase dividends, split the stock, etc., having inside knowledge of any of these or a myriad of other various influencing factors should unequivocally preclude an insider or anyone they tell of the pending occurrence from being able to trade that stock. With this inside information large blocks of stock can be bought and sold before the gen pop gets word of it. Those large blocks traded can and do swing share price prior to the market getting notification of the information. This puts every 'little guy' out there at a distinct disadvantage. Those on the inside can benefit with massive profits. Insider trading creates millionaires overnight.

There's a reason the SEC requires corporate officers to file Form 4 (disclosure of any purchase or sale of their corporate stock). The amount of money that would be made on insider trading is staggering if left unchecked.

I'm kinda with Darth on this one.

Sure, it's not fair.

Ever go to a casino ? Don't bet against the house.

What would end up happening is that all the algorithmic trading going on would end up watching all the insiders like a hawk. Milliseconds after every trade of theirs the whole market would react.

Really though, "the little guy"'s best option is just to play the market with giant blocks of stock like index funds anyway. Anyone whose trying to out guess the market in individual stocks is due for disappointment with or without these laws.

Better to just eliminate the pretense that things are "fair" and accept that they aren't.

The SEC should prevent fraud, because that is actual theft, anything more is overreach.

 

[masterswimmer]

I'm kinda with Darth on this one.

Sure, it's not fair.

Ever go to a casino ? Don't bet against the house.

What would end up happening is that all the algorithmic trading going on would end up watching all the insiders like a hawk. Milliseconds after every trade of theirs the whole market would react.

Really though, "the little guy"'s best option is just to play the market with giant blocks of stock like index funds anyway. Anyone whose trying to out guess the market in individual stocks is due for disappointment with or without these laws.

Better to just eliminate the pretense that things are "fair" and accept that they aren't.

The SEC should prevent fraud, because that is actual theft, anything more is overreach.

And I'm glad the SEC works to level the playing field against the cheaters.

 

[Darth]

Share the wealth.

Government knows what's best.

 

[spat]

And I'm glad the SEC works to level the playing field against the cheaters.

I don't view it as cheating. It's business, not some kids game.

If some company knows how to make their widgets better and cheaper than their competitors, they don't have to share their secret, they can hoard that knowledge and exploit it to the fullest.

I don't see why that should be any different just because your widgets are "trades".

 

[Grimscale]

Ok, now it's sounding even MORE like a "that's not fair" participation trophy.

Why is this the government's issue instead of the shareholders going after those "in the know" with pitchforks?

Who forced you to invest with said companies?

When it is the politician's job to set policy, approve mergers, etc., then it is not just a case of "WAAAHHHHH, it's not FAIIRRR!!". It is now a case of "Why are you allowed to write the laws that only benefit yourself".
You effectively lock the general populous out of being able to trade stock. There's no way they would ever be able to see a return on their investment.
This would further the gap between the "elites" and the rest of the population. Businesses would literally be at the mercy of the government: "Do as we say or your stock takes a nosedive".

Is this really what you want?

 

[masterswimmer]

I don't view it as cheating. It's business, not some kids game.

If some company knows how to make their widgets better and cheaper than their competitors, they don't have to share their secret, they can hoard that knowledge and exploit it to the fullest.

I don't see why that should be any different just because your widgets are "trades".

The very definition of cheating is when one person has an unfair advantage over another.

Trading on inside information is not akin to counting cards or cheating in a casino. When cheating in a casino for instance, the cheater does not gain an advantage over the other gamblers (excluding poker type games). They gain their advantage over the house. Conversely, trading on inside information affords the 'cheater' an unfair advantage over every other investor looking to trade that stock.

And using your widget analogy, if the manufacturer of that superior widget is so sure he can outperform other widget manufacturers they should already be making more money through their sales. AND, they are permitted to trade in their own stock. What constitutes the unfair advantage, hence insider trading, is when they make trades based on information the public has no knowledge of, ie: large pending contracts, changing of upper management, stock splits, etc. not divulging their 'secret sauce'. They can absolutely trade on that information.

 

[Jmac00]

Ok Im giving Kelly Loeffler a pass. why you ask?

Im glad you asked, because Her husband is the Chairman of the NEW YORK STOCK EXCHANGE.

theoretically, every single trade her broker makes, could be considered insider trading. Her husband IS THE insider.

and, if you have a third party handling your portfolio, WHICH SHE HAS MADE ABUNDANTLY CLEAR, and made sure she was following the law as to her portfolio/holding before she was sworn in as a congressperson, then I see no issue with what HER BROKER DID.

She appears to be out of the loop, when it comes to her portfolio.

what I don't get, is why these supposedly intelligent individuals simply don't use a "stop loss" If they use a 'stop loss', the trade will automatically dump that stock as soon as the market hits the target price? THAT is just good planning, NOT insider trading

 

[BDinPutnam]

If you think that's bad you haven't been paying attention.

Members of congress didn't exempt themselves from insider trading laws for nothing.

Tell that to Chris Collins.

 

[Darth]

When it is the politician's job to set policy, approve mergers, etc., then it is not just a case of "WAAAHHHHH, it's not FAIIRRR!!". It is now a case of "Why are you allowed to write the laws that only benefit yourself".
You effectively lock the general populous out of being able to trade stock. There's no way they would ever be able to see a return on their investment.
This would further the gap between the "elites" and the rest of the population. Businesses would literally be at the mercy of the government: "Do as we say or your stock takes a nosedive".

Is this really what you want?

That sounds exactly, to a T, like why the government should not be involved.

 

[spat]

The very definition of cheating is when one person has an unfair advantage over another.

Trading on inside information is not akin to counting cards or cheating in a casino. When cheating in a casino for instance, the cheater does not gain an advantage over the other gamblers (excluding poker type games). They gain their advantage over the house. Conversely, trading on inside information affords the 'cheater' an unfair advantage over every other investor looking to trade that stock.

And using your widget analogy, if the manufacturer of that superior widget is so sure he can outperform other widget manufacturers they should already be making more money through their sales. AND, they are permitted to trade in their own stock. What constitutes the unfair advantage, hence insider trading, is when they make trades based on information the public has no knowledge of, ie: large pending contracts, changing of upper management, stock splits, etc. not divulging their 'secret sauce'. They can absolutely trade on that information.

You misunderstand my examples.

I was not talking about counting cards, or any other forms of gambling that are considered "cheating". I was talking about the unfair advantage that the casino holds over the players in virtually all the games.

The widget example uses the companies superior knowledge of widget production to give it a patently unfair advantage over it's competitors in the market.

If I figure out how to make a widget for a $4 cost when my competition is spending $6 to make the same product, how is that not an "unfair" advantage ?

 

[masterswimmer]

Serious question for both @Darth & @spat....

Are you guys saying that the owners of a company should be able to trade stock based on the inside knowledge of the workings of the company?

 

[spat]

Serious question for both @Darth & @spat....

Are you guys saying that the owners of a company should be able to trade stock based on the inside knowledge of the workings of the company?

Yes.

And everyone else trading in that stock should do so with the full knowledge the the owners and executives are doing so.

 

[Darth]

Serious question for both @Darth & @spat....

Are you guys saying that the owners of a company should be able to trade stock based on the inside knowledge of the workings of the company?

Yes.

 

[masterswimmer]

Yes.

And everyone else trading in that stock should do so with the full knowledge the the owners and executives are doing so.

Yes.

Thank you for your honesty.

Question #2:
Would it be fair to say that all owners of a company should be privy to this inside information for insider trading?

 

[spat]

Thank you for your honesty.

Question #2:
Would it be fair to say that all owners of a company should be privy to this inside information for insider trading?

Depends on the structure of the company.

In publicly traded corporations the owners are *not* generally privy to operational details, just the executives.

Under my model "barb in accounting" would probably know some juicy detail she could trade on long before the CEO or stockholders.

 

[Darth]

Thank you for your honesty.

Question #2:
Would it be fair to say that all owners of a company should be privy to this inside information for insider trading?

No. And you would need to define "fair."

Would the fair thing be for all employees to have access to the same compensation?

If I get up at 6AM and go to work every day to get the morning briefing , and you wheel in at 10:30, why should I be responsible for making sure you have the same info I do?

But that's all a little irrelevant. If you are that worker that comes in late, and you hate missing out, you are forced by nobody to stay there.

 

[masterswimmer]

No. And you would need to define "fair."

Would the fair thing be for all employees to have access to the same compensation?

If I get up at 6AM and go to work every day to get the morning briefing , and you wheel in at 10:30, why should I be responsible for making sure you have the same info I do?

We're not discussing employees. We're discussing the owners of the company exclusively.

 

[masterswimmer]

Depends on the structure of the company.

In publicly traded corporations the owners are *not* generally privy to operational details, just the executives.

Under my model "barb in accounting" would probably know some juicy detail she could trade on long before the CEO or stockholders.

'Barb' should be arrested, just like the executives who trade on the information they know before the other minority shareholders.

 

[Darth]

We're not discussing employees. We're discussing the owners of the company exclusively.

I'm referring to "anyone involved in the process." From the janitor to the CEO.

Nobody is entitled to any info.

 

[masterswimmer]

I'm referring to "anyone involved in the process." From the janitor to the CEO.

Nobody is entitled to any info.

As I've stated, I'm glad the SEC sees it as I do. Fortunately for me and millions of other investors your opinion doesn't matter. Of course you're entitled to it but that doesn't mean it'll make a difference.

 

[Darth]

As I've stated, I'm glad the SEC sees it as I do. Fortunately for me and millions of other investors your opinion doesn't matter. Of course you're entitled to it but that doesn't mean it'll make a difference.

Yeah, no argument there. Many people feel entitled nowadays and want to government to step in a spread the wealth. You are in the majority.

#FeelTheBern

 

[spat]

'Barb' should be arrested, just like the executives who trade on the information they know before the other minority shareholders.

Under the existing model, yes.

Not under my model.

That is not to say that corporations can't impose their own rules against trading by their insiders. "Barb" could be prevented from trading on that information as a condition of her employment for instance.

Then you as a savvy investor would have the choice of investing in Barb's company with strict insider trading rules or their competition where you could be caught flat footed by their insiders.

I would even support the major exchanges imposing rules requiring that "want to be listed on the NYSE, you need strong insider trading protections".

Just not the government.

 

[masterswimmer]

Yeah, no argument there. Many people feel entitled nowadays and want to government to step in a spread the wealth. You are in the majority.

#FeelTheBern

We all know about opinions. Everyone's got one.......

 

[masterswimmer]

Under the existing model, yes.

Not under my model.

That is not to say that corporations can't impose their own rules against trading by their insiders. "Barb" could be prevented from trading on that information as a condition of her employment for instance.

Then you as a savvy investor would have the choice of investing in Barb's company with strict insider trading rules or their competition where you could be caught flat footed by their insiders.

I would even support the major exchanges imposing rules requiring that "want to be listed on the NYSE, you need strong insider trading protections".

Just not the government.

The existing laws are written to protect all investors. Those trading with information not known to all investors have the opportunity to manipulate the market. If you don't see how that should be controlled, yes I said that dreaded word, then the only way to make any gains in the market would be though luck. Any financial analysis would be worthless because those on the inside would be able to control the share price movement, up or down.

 

[Darth]

We all know about opinions. Everyone's got one.......

I am quite familiar.

Here's the thing...I don't think "insider trading" should be a crime.

Unpopular opinion, sure. But if I had a ton of money in stocks, and I found out that they were going to crash in a few days, you, by law, are forcing me to lose my money and go down with the ship? Fuck you.

"Insider trading" laws scream "everybody gets a trophy."

"But he knew something we didn't, and that isn't FAAAAAAIR! :'("

"It's ok baby, we'll punish those bad money savers."

How's that work with "I stocked up on guns and ammo before the zombie outbreak and now my friend wants some. I told him to piss up a rope."

"But that's not FAIIIIIIR! Sharing is caring!"

"You're right honey, we'll punish those evil hoarders."

 

[Darth]

The existing laws are written to protect all investors. Those trading with information not known to all investors have the opportunity to manipulate the market. If you don't see how that should be controlled, yes I said that dreaded word, then the only way to make any gains in the market would be though luck. Any financial analysis would be worthless because those on the inside would be able to control the share price movement, up or down.

It's almost like you've have to invest in trustworthy companies instead of relying on the government to choose the winners and losers.

But personal responsibility is the work of the devil.

 

[spat]

The existing laws are written to protect all investors. Those trading with information not known to all investors have the opportunity to manipulate the market. If you don't see how that should be controlled, yes I said that dreaded word, then the only way to make any gains in the market would be though luck. Any financial analysis would be worthless because those on the inside would be able to control the share price movement, up or down.

Investing is supposed to be just that, not the gambling racket it has become.

The purpose of stocks and corporations is to allow someone to make an investment in a company without risking more than the money they have invested.

That is it. An investment in a company, not a gamble on what their stock will look like tomorrow.

The complex financial instruments and short term investing that the market has devolved into does not benefit the economy or investors in general.

If you are buying stock for the long term, in companies you have researched, then the insider trading is irrelevant.

Who cares if the CEO buys a bunch of stock the day before news of their great new deal comes out. The way the market *should* work most investors should have beenou planning on holding that stock for years anyway.


You need to step back from the current "markets are a casino game" mentality and look at *why* we have corporations and stocks to begin with.

 

[masterswimmer]

Investing is supposed to be just that, not the gambling racket it has become.

It is exactly that, an investment. No gambling to it in my mind. That's why I preach, and practice what I preach, to commit a percentage of every paycheck to our 401-k. Dollar cost averaging is my mantra. If it were gambling I'd never do that.

The purpose of stocks and corporations is to allow someone to make an investment in a company without risking more than the money they have invested.

Correct
Not sure where that came from regarding this discussion.

That is it. An investment in a company, not a gamble on what their stock will look like tomorrow.

That is only partially true. Depends on what type of investment approach you employ. If you're an investor who looks for income via dividends then your approach is accurate. However, many companies do not pay dividends at all, ie: Amazon. People who invest in non dividend paying companies are doing so exclusively for growth. Why would you expect an investor to make any investment in a non dividend paying growth company if they weren't looking to profit on share price increases?

The only way a company distributes their profits is through dividends. Without that distribution, the only profitability is through growth.

The complex financial instruments and short term investing that the market has devolved into does not benefit the economy or investors in general.

Those types of investors have just as much right to bet that the market will change daily (hourly, or by the minute) , go up, go down, as any long term investor. How they effect the market is of no concern one way or the other.

If you are buying stock for the long term, in companies you have researched, then the insider trading is irrelevant.

Of course it's relevant. If insider trading was legal and every corporate exec did it, they could control the market.

Who cares if the CEO buys a bunch of stock the day before news of their great new deal comes out. The way the market *should* work most investors should have beenou planning on holding that stock for years anyway.

In a privately held company it's totally legal. There can be 1,000's of shareholders in a company that is not listed on any stock exchange because the shares are not publicly traded. The company is privately held by those 1,000 shareholders.

Once that company goes public they assume a fiduciary responsibility to disclose their financials and pertinent corporate decisions to those shareholders. If they don't want to follow the rules they should keep their company private.

You need to step back from the current "markets are a casino game" mentality and look at *why* we have corporations and stocks to begin with.

My casino analogy was nothing more than just that, an analogy. If I haven't displayed to you that my understanding of equities, corporations, investing and general business knowledge transcends casino games then the blinders need to come off, you.