Nice Guys, Naughty Information?

Leo Kolivakis's picture

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Leo Kolivakis's picture

My apologies, after rereading that Jenkins article, I edited my comment:

Mr. Jenkins' argument has merits but he uses twisted logic. The stock market is rigged and it's ridiculous to hear the SEC is devoted to maintaining a level playing field between small investors and large banks and their large hedge fund clients. Joe and Jane Retail can never compete with the Goldmans, Citadels and SAC Capitals of this world. Not in their wildest dreams. To even suggest you can create a level playing field is a farce!

Clinteastwood's picture

Wall St. runs on insider information.  What could be more obvious?  How else could these boys make such money year after year unless their gig is to obtain the inside scoop before everyone else?

The regulators providing a "level playing field" for the retail investor?  Right.  They are the same yoyos whose deficit enslaves our grandchildren.

Yoyos get all wound up, they spin, and then they go down and back into the drawer.

AccreditedEYE's picture

"But this Wall Street stuff is overwhelming," he says. "The more you look into it, the less you see the way out. The government seems so completely helpless to do anything positive in this situation."

That just about sums it up Leo. It's like Simon Johnson had said way back when:

"But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them."- Simon Johnson

For any ZH'er that hasn't read this article yet, please do yourself a favor and check it out. A bit dated, but still very, very relevant.  

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

zhandax's picture

While I have great respect for Matt for bringing one of our favorite gripes to the masses,

The government seems so completely helpless to do anything positive in this situation.

makes me think we need to invite him over for a ZH-style Friday night kegger.  The boy has some more to learn.  Maybe Marla will spin some tunes.....

doomandbloom's picture

I keep asking myself why is this happening now? What else is lurking out there? Is this the beginning of a series of investigations? If so, we're in for a long, tough slug ahead.

 

I know *exactly* what you mean, Leo. Let me tell you why you're here. You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about? - Morpheus

BlackSea's picture

Classic line from a classic movie! I believe Morpheus was destroyed in the end....

BearOfNH's picture

... as opposed to Dr. Morbius who -- no, wait, he bought it in the end too. Along with the rest of Altair IV.

Withdrawn Sanction's picture

Im no lawyer (small favors), but it seems pretty straight-forward in principle to me.  Private (non-public) information is a potentially valuable asset of the company involved, and thus rightfully belongs to its owners (all of them).  Managers cannot misappropriate this asset for their own personal use anymore than they can pilfer petty cash for a haircut or bill the shareholders for a shower curtain to be used in their bathroom at home. 

In this connection, Jenkins’s parking lot analogy is a transparent straw man.  By definition, driving by the firm (on a public road) and observing one’s surroundings is a form of gathering publicly available information.  But the analogy does highlight a potential problem:  once information is in the public domain, not everyone has equal access to it, nor can they evaluate it equally well.  So equality in this instance cannot be the standard of justice. 

It really boils down, in my view, to whether the firm’s managers used the material, private information to enrich themselves at the expense of the firm’s owners. 

ALPO's picture

Jenkins casually dismisses the idea that "In the SEC's ideal world, any information originating inside a company will be reflected in stock prices only after the company has publicly announced it to the world's investors simultaneously."

 

What is unthinkable to him is exactly how I want to see the SEC force the markets to work.  Anyone acting on information that originated inside a company that was not made public is breaking the law.

barliman's picture

"Mr. Jenkins is absolutely right."

Wow, this is the first time I have been inspired to comment on one of your posts.

This WSJ article is the most amazing piece of self serving propaganda I have ever read. It is completely given over to an amoral outlook without thought to the possible destructive aspects resulting from the disclosure of insider information.

Let's pose a theoretical situation just to make sure I am not missing something. Say I have "insider" information related to the planned multi-billion dollar capital expenditure of a global manufacturing firm that has a new product that bringing to market in advance of their competitors will result in a significant increase in their profits for more than a decade. Am I correct in saying that by Mr Jenkins's logic, and by implication, yours - if I provide that information by some means to the "experts" so they can price it into the firm's share value I would be improving the overall function of the market? Even better! What if I have additional knowledge that rather that a earnings boom the current product has a material flaw that will delay the product? Is the best service to the "market" for me to provide that information to someone other the firm producing the product so I can help people outside the firm better price their shares in the market place?

Just trying to clear up any ambiguity in how you think the markets should function.

barliman

revenue_anticipation_believer's picture

re: Nice Guys, Naughty Information?

Oh sure!  CLOSED DOORS FROM HERE...confidentiality to protect the presumed innocents....Beware, the net of legalized exclusions/sealed files...all that...no more 'discussions regards items pending trial,  'influencing' outcomes/witnesses...'  the war is over 'outsiders'....FEDS will handle it from here...

 

all THAT stuff...no? yes? Scenario as follows:

"Stand aside everyone, WE the SEC, the Federal Governmental Agency has Total jurisdiction HERE...all you states, cities, civil-law suite.....everybody...YOU just hand over 'what you got..' WE, the FEDS will handle it from here..." "Been way TOO much private disclosure, and malcontents (ZeroHedge and the like bloggers)...passing on false/incomplete information...lacking in 'balance and fairness, and Federal Perspective..'" "Everyone ELSE drop your cases, drop your inuendos 'pre-judgements...presumptions of guilt...'   Let the FEDS handle this please..."

 

Final SEC Judgement scenario: NOT GUILTY

the prevasive myth of 'insider information' that played so well when Joe Kennedy was in charge of the SEC 1934..WAS/IS  a myth - so 'get used to it' ... The stock market is 'rigged', should you like to call it that...insofar as 'relevant information' requires money, manpower, 'connections', organization and full time dedication IE= a BUSINESS OPERATION............it's ridiculous to hear that the SEC is devoted to maintaining the 1934 social/communistic myth of a 'level playing field'.... between small investors, large banks,  large hedge fund clients. "Joe and Jane Retail" can never compete with the Goldmans, Citadels and SAC Capitals of this world. Not in their wildest dreams. To even suggest you can create a level playing field is a anti-capitalistic populistic farce!  in year 2010, 'preposterous'...it has ALWAYS been this way...effectively therefore a matter of settled common law...PRE EXISTING since well before 1934...'not guilty' of conspiracy/collusion to defraud...at worse, merely stupid (with other peoples money)

 

Now...about all the small timers, guilty of aggregious obvious financial white collar criminality....not a problem...just revise the 'charge sheet' to 'mail fraud/wire fraud' ..... the standard Federal Felony catch all charge...for anything that crosses state lines so to speak -> hence federal court.... no problem THATS the standard  procedure....term of punishment dependent on amount of money involved -/+ 10 % judge discretion...cut and driedsimple...a couple of years in a white collar Federal country club and a 10 year levy to pay back the entire amount ..... not a problem, really...

 

 

 

 

 

 

 

TruthInSunshine's picture

Leo, are you involved in any sell-side activities?

I am asking as a serious question.

This article penned by you insinuates that potential fraud, including but not limited to insider selling/selling on inside information, should be ignored if it has the potential to damage markets or particular investors short term.

The counter-argument is that IF the appropriate authorities do flex any muscles and bring charges and obtain convictions of those who rig and profit from these casino like markets (I think I just insulted Vegas), long term viability of markets and investor confidence increases.

If you are on the sell side, Leo, you should be required to disclose that in EVERY thing you pen for ZH or anywhere else.

Boilermaker's picture

Leo is interested in perpetuating his lifestyle.  Even if it means fraud, purse snatching, or short changing mom & pop investors.  The point is to keep it going until HE dies.  Then let the survivors mop up the mess.

IQ 145's picture

  This is correct; the original motivation was public relations; make it look policed for the retail trade. There is no insider trading legislation in Europe, and obviously things go along quite normally. It's just a fantasy.

A Man without Qualities's picture

"There is no insider trading legislation in Europe"

Say what?  I know there is in UK, Germany and France for a start....


RockyRacoon's picture

To even suggest you can create a level playing field is a farce!

I think the idea may be to tilt the field, not level it.

The big guys will always defeat the small investor on a level field.

Pondmaster's picture

When our leadership ( Congress and Senate) have Carde Blanche to trade on inside info at will and whim , why do any of us think for a New York minute that Wall St will be changed . Den of Thieves led by a coven of theives seated in the Offices of power in our nation . Respect the Office - boot out the usurpers seated therein.

A Man without Qualities's picture

Agreed.  The purpose of democracy is for elected representatives to create laws that establish a moral framework in which society can operate according to the ethics of the majority.  When those in power build such a structure, but consider themselves to be exempt from this principals, the society itself will eventually fail.  It doesn't even matter whether it is an actual democracy, most complex societies through history have collapsed as a result of the egregious exceptionalism of those in power.