INSIDER TRADING SHOULD BE LEGAL? A SERIOUS WTF

15 comments

Posted on 27th November 2012 by Darwin in Politics

In what may be one of the dumbest articles to grace the front page of CNBC’s website, a so-called author Carol Roth advocates for the legalization of insider trading.  This piece of excrement was published here, but within, you’ll find a point by point rebuttal of this screed.  Here’s a sneak peak “what I am saying is that it is time to do away with the laws against insider trading entirely.”  Ms. Carol makes the following points which are followed by my common sense and fact-based rebuttals to each point:

 

I do want to clarify that my argument focuses on the legality of trading on insider information. It should be noted that I do also believe that those with access to information should ethically and morally respect confidentiality agreements and fiduciary duties with the companies where they are accessing the information, but that is a separate civil, not a criminal, matter.

 

  • OK, so she clarifies that this should be solely a civil matter, not criminal.  That doesn’t lessen the stupidity of this argument in any way.  Should Bernie Madoff not be behind bars, but only have been sued for recovery of the funds he embezzled?   This is moronic.  I mean, where is the deterrent?  It would be insider trading gone wild.  If every executive, CFO and low-level admin or analyst with access to insider information prior to publication knew that the worst penalty they’d face is to simply return some or all of the ill-gotten gains they just cheated from the retail investing public, we’d see insider trading activity skyrocket.  Sharing a cell with a large man named Bubba is much more of a deterrent.  It works.  While insider trading cases in the US make big headlines, if you think about the sheer number of major mergers and acquisitions, earnings beats and misses, material events that companies release to the public and more, it is truly remarkable how little we see insider trading, volatility prior to public announcements and options activity and the like.

Here’s where she touts how Insider Trading actually benefits us all.  Oh thank you, may I have another!? WTF. Read on for a complete point by point takedown of:

An Ode’ to Insider Trading from an Imbecile

 

15 Comments
  1. harry p. says:

    just to play devil’s advocate in regards to the reality of insider trading.

    so insider trading is illegal, but does that stop it from happening? they caught bernie but what percentage actually do it and don’t get caught, i suspect he isn’t even a snowflake on the the tip of the exposed iceberg.

    if it were made “legal” there is the possibility that people would then see that it is happening and price that risk into their decisions. the fact that is illegal, naive people believe that it is being policed effectively has them putting faith in something that doesn’t deserve it. They falsely think they have the info everyone else has going in. It also leads to a statute that is selectively enforced, typically when it is politically advantageous, which leads to even further corruption.
    The market is rigged, believing that insider trading should be illegal or legal is irrelevant. the fact is that it can’t be policed and anyone who thinks the market isn’t rigged and insider trading can be policed is only kidding themselves.

    just my $0.02

    27th November 2012 at 9:37 am

  2. Eddie says:

    Too bad your rebuttal isn’t on the CNBC front page….the problem is that if enough idiots say something in the media enough times, then the disinfomation becomes the gospel. I think that’s what it’s about. A big lie is sometimes an easier sell than a small lie, and you CAN fool most ot the people most of the time, and that’s what matters in the world of propaganda.

    I’d say this artidle of hers is a direct response to the current SEC investigations, and aimed at influencing public sentiment. Trying to make John Q. Public say “Hey, everybody does it. It’s not that bad. It should probably be legal anyway, since we can’t stop it from happening.”

    27th November 2012 at 9:46 am

  3. ThePessimisticChemist says:

    Banksters steal millions/billions and get asked not to do it anymore. Someone on the street robs $50 from a convenience store and they get 10 years in a federal pound me in the ass prison.

    27th November 2012 at 10:08 am

  4. Darwin's Money says:

    Harry – interesting perspective; I suppose if everyone priced in Insider trading in their decisions, it might have the effect of investors being more conservative, and of course, having even less confidence in markets. This would probably depress stock investing even more amongst the retail class while further enriching the elite since they would not only have an added advantage, but have an increasing share of total ownership of the market. I’d be curious to see some comparisons with other countries where insider trading is more prevalent.

    Eddie – I think she’s trying to “shock” people with a contrarian argument to get some more clients. She’s a total cheeseball and lists here “clients” as companies I’ve never even heard of. She picked the wrong topic IMO – should have stuck with something she knows – basic M&A, raising capital, etc.

    27th November 2012 at 10:17 am

  5. Chuck says:

    Oh, come on, Ms. Roth’s problem and the root of her resentment over insider trading laws is obvious to anybody with a brain. She is offended that a few of her closest friends and relatives are ending up in the slammer….many, many too few, in my view.

    27th November 2012 at 10:34 am

  6. Eddie says:

    DM
    You’re probably right about her motivation…but why would an editor of a supposedly socially responsible major news outlet publish that trash, if not to misinform. It’s no an accident, nor is it simply to sell ads. It serves the master.

    27th November 2012 at 10:37 am

  7. ecliptix543 says:

    You all do realise that insider trading is already legal for those useless fucks that call themselves Congress, right? Just thought I’d toss that out there…

    27th November 2012 at 11:21 am

  8. harry p. says:

    darwin,
    I look at it like how I look at fdic insurance, it is all about tricking people to be confident in “the system” and thinking their money is safe or relatively safe regardless of whether it deserves that confidence or not. It can’t be made “fair”, only the illusion of it being “fair” can be created. The people who cheat the system need the dupes to think it is fair so they show up to the game with a wadful of cash that they likely won’t leave with. I don’t typically subscribe to conspiracy theories but I think the big-time insiders benefit more by keeping it “illegal”. They can pay up with the right people at the SEC and keep out of jail. I think Bernie got his not for the actions he committed but because of who the cheated, who are powerful people. It is nothng more than a scam IMO.

    does anyone asctually believe the PM markets are wrought with insider tradiing and manipulation? personally I assume insider trading/manipulation is going on at almost every level, if evryone knew that it was and priced it appropriately for them it absolutely would reset the markets to a lower level and depress the volume of trading.

    it would likely keep casual investors out much like the casual basketball enthusist who plays the occasional pick-up game at the park shouldn’t expect to successfully compete with those in the the NBA.

    like i said, i don’t particularly care about judging whether insider trading should be illegal or legal, I am interested in whether it’s existence needs to be considered when investing.

    http://thestrangestbrew.com/

    27th November 2012 at 11:23 am

  9. Pirate Jo says:

    “If every executive, CFO and low-level admin or analyst with access to insider information prior to publication knew that the worst penalty they’d face is to simply return some or all of the ill-gotten gains they just cheated from the retail investing public, we’d see insider trading activity skyrocket.”

    Isn’t that already happening? What was the penalty for Muppetgate, again?

    27th November 2012 at 11:32 am

  10. Darwin's Money says:

    -” “If every executive, CFO and low-level admin or analyst with access to insider information prior to publication knew that the worst penalty they’d face is to simply return some or all of the ill-gotten gains they just cheated from the retail investing public, we’d see insider trading activity skyrocket.”

    Isn’t that already happening? What was the penalty for Muppetgate, again? ”

    –> I’ll just say this. I’ve been involved in due diligence assessments for acquisitions of small biotechs before where I could have made a complete killing if I acted on insider information. I also got advanced notice of contract manufacturers that were about to be acquired because they needed our blessing that we would allow the “change in control” provision to be ignored and retain our business as part of the requirement to close the deal. This was usually the day before the announcement. I mean, if it’s a $4 stock and they were acquired at $9 and I bought some out of the money calls at $7.50, I could have made hundreds of times my initial investment. And I’m not a high level executive by any means. There are literally hundreds of people at each large multinational who get info like this during a career and don’t act on it. You can go to jail, lose your ability to ever work in industry again – basically, ruin your life. To me, ruining my life over making any amount of money would never be worth it.

    The deterrent is quite high. Both the likelihood of being caught AND the penalty are what prevent people from doing this. If both of these barriers were removed, it would be completely out of control.

    27th November 2012 at 11:55 am

  11. AWD says:

    The only people legally allowed to insider trade are politicians. Yup, it’s legal for them to do it, why not everyone else?

    27th November 2012 at 2:01 pm

  12. llpoh says:

    AWD – they should not be allowed – classic example of two wrongs not making a right.

    27th November 2012 at 6:01 pm

  13. Darwin says:

    And now… Stossel is tweeting that insider trading should be illegal. Come on, I like the libertarian cause and all, but the whole “remove ALL regulation” of everything is just annoying. I can’t get behind him on this one.

    27th November 2012 at 9:43 pm

  14. ThePessimisticChemist says:

    Congressional Trading:

    Didn’t the STOCK Act put an end to that? Or does it contain a myriad of loopholes making it an act in name only?

    27th November 2012 at 10:15 pm

  15. Darwin says:

    It was watered down completely; would you expect anything less?

    Best footage ever was 60 Minutes calling out Skeletor (pelosi) on her and her husband’s investments in IPOs while on banking oversight committee. priceless these shameless slimeballs.

    27th November 2012 at 10:43 pm

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