"No, Mr Gekko, that wouldn't have been legal. That's insider information, isn't it?"
--Bud Fox (Wall Street)
I have never been a big proponent of insider trading laws. Discerning what constitutes publicly available information is difficult and practically unenforceable. Witness the pathetically low number of cases actually pursued vs the plethora of big price/volume moves ahead of news.
It is often said that insider trading laws level the playing field for the Little Guy. This is pretty laughable when you look at the Little Guy's performance vs the Big Guy since the enactment of insider trading laws. Moreover, if the Little Guy is coaxed to enter stock markets and trade 'em under the perception that insider trading rules make things fair, then who exactly benefits from these laws? Don't all Little Guys have to open brokerage accounts, pay commissions, pay asset management fees?
There's a nice case to be made that insider trading rules have created a huge windfall for the Big Guys.
If there is one group where insider trading rules should apply, then it is government officials. Because government officials can reallocate resources by force, it would be very easy for them to front run markets. A Washington official who has advanced notice that the federal government will award a big contract to, say, General Electric (GE) or Lockheed Martin (LMT), could scoop tens of thousands of shares ahead of the announcement and make a killing.
Not surprisingly, however, insider trading laws applicable to everyone else do not apply to Washington. And guess what? Studies show that the stock portfolios of members of Congress beat the market by 6 to 10 percent annually.
These are what academics like to call 'abnormal returns.' The best hedge fund managers in the world would simply call them 'enviable.'
Hey, now there's a thought for getting our debt situation under control. Capitol Capital, a hedge fund managed by the Hill's best traders that applies its abnormal returns toward our $14 trillion in public debt.
no positions
Subscribe to:
Post Comments (Atom)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
1 comment:
Murray Rothbard argued that every firm on Wall Street is technically engaging in "insider trading." If they literally relied only on information that was available to the public, how could they make any money? Thus, the government has the statutory authority to harass or even shut down anybody in the financial sector who doesn't play ball.
~Robert Murphy
Post a Comment