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Wired
I know a fellow who used to run a decent amount of equity money. His
specialty was retail stocks. He had a good track record. He took maximum
advantage of the quarterly income reporting cycle of a few medium
sized, well know big box retailers. He played that game from both the
short and the long side. If you catch that right you can make some good
money.
This group hired a number of part-timers around the country. These
people would sit outside a specific store with a hand counter and
measure traffic. Traffic does not equal sales. But if you have hard
numbers on traffic your estimate on sales will be better than most.
So they had an edge. They earned it and benefited from it.
Could you define the information they obtained as “material”? Sure you could.
Could you define this information as "non-public"? Sure you could.
Should we be in the process of unfolding the onion of what has been
defined as insider trading there is going to be a very big surprise. I
think that all successful hedge funds and big investors have “counters”
that are gathering/reviewing data. They all have (or try to have) an
edge. What do you think they are paid 2&20 for?
I have said this forever. If you’re a small investor relying on public
information you don’t have a chance. The S&P is ‘unched’ for a
decade. Wired money made a few hundred percent.
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Never said it was. But I think this back channel stuff is taking us in this direction.
Your question defines the bigger picture problem; individual or retail investors are at a perpetual disadvantage and are being punished for investing, saving, and trying to be responsible.
If the "wired" money can make a few hundred percent off of inside information, even information they have paid for with traffic counters, they do so at the advantage of the general public.
Every individual, pensioner, retirement plan (401K, A, B), and IRA investor (and a majority of mutual fund/investment houses) are beholden to Wall Street hedge funds and insiders. A majority of Americans provide the capital for the insiders to make their money doing nothing but making money leveraging someone else's capital.
The bigger question then, is not about insider trading but whether or not hedge funds and investment banks and investing firms should be allowed to charge commissions or even to exist at all as they have become parasitic to the society; bleeding out capital and talent away from productive enterprises that would benefit said society.
The worn out argument that such services "create capital" is really the denial of the addict.
What we see is parasitism involving the collusion of corporations and government at the expense of the individual, the middle class, and ultimately the society.
The essential second step of this parasitic cycle is the cutting of already taxed and promised entitlements, increased taxes, and "austerity" for individuals (austerity which was nowhere to be witnessed when banks, insurers, and corporations needed money).
What we are witnessing now is part II of "Operation Peasantry", designed to wipe out the middle classes and restore the Aristocracy via fiat currencies, engineered debt crises, and privatized gains with socialized losses.
It could have been planned consciously, sub-consciously, or is simply a confluence of circumstances; the greed, corruption, lust for mammon, and all the other evils and weaknesses of the human spirit creating a river of pain that a few ride upon but most are drowned in.
Counting shoppers is DIFFERENT from obtaining the very same data by paying big bucks the district manager or the store manager, or paying a few dollars to greeter at the entrance, a security guard at the exit or a vallet lot attendant.
There is fundamental difference here - having to do the count OUTSIDE the store, or get the info from the INSIDE. To do the count in PUBLIC vs. receiving a spreadsheet from a person who would not talk to anyone else. Ok, ok, he'd talk to others. But only with those with at least $500mm AUM.
what's missing of course is "what does insider trading mean to a government official"? in the media the routine is "it's in the eye of the beholder" but in fact "that beholder is called a government official." in short "the government official is doing a Wall Street, too." They're gathering information--just not on you and me right now (we are called 'persons of interest' in case your wondering.) and "thus it starts." the 'publicans got destroyed by Wall Street and the Fed. I'm no insider but "if they've decided to turn their sights on Wall Street as their enemey number one" then they are very wise indeed. Obviously "you can't prevent insider trading." You can "round up the usual suspects" however.
Exactly, not so funny how there was prior information leaked to the media (who knows where else) that firms were going to be served. The height of hypocrisy.
Insider trading is like Drug prohibition it only makes the price go up but does nothing to prevent abuse, if it was legal every1 would get the information becase the 'insiders' would not hold back and not try to obscufate their action thed be a week ahead of others at best
There is something called the mosaic theory that says that if you put together a whole bunch of small items of data to come to a big conclusion, where none of the items by themselves would lead to that conclusion, then it is not inside information. Check out ERISA etc.....
Data from one store does not warrant an investment / trading decision. Data from many of the stores put together does.
As everyone said implicitly above - it's MATERIAL non-public information that is the hook.
The information is certainly public - anyone can stand in public and count customers. It is as public as the financial statements of the company's financial statements, as it is only "public" to those who take the time to read it. Counting customers is also probably more believable that the contrived financial statements of most companies.
Bruce, there is a world of difference between counting foot traffic for retail and planting false info and/or getting undisclosed scientific data from a biotech company...
Well, what you are describing is not something that I would have easy access to, so yes, it is insider trading.
This whole insider trading probe is about as pathetic and shameless as a drug addict trying to convince everyone that they are not one.
Yeah? Who's the insider? Do you know what an "insider" is? It is not anybody who knows more than someone else. An insider is an employee or agent/consultant of a publically traded traded company.
There is no sure way to play any of the markets. Everyone is trying to find the bell cow, be the first behind the bell cow, or know when not to follow the bell cow. My grandfather lost seven cows when the bell cow lead them through a kudzu patch at the edge of a gully and the side gave way, all falling more than 60 feet to their death. The bell cow was his favorite. He had to pick another bell cow, but not until he fenced off the gully.
Would this metaphor be more relevant to trading if the "Oracle of Omaha" said it?
If the moo came from Warren, we can be assured it has been pasteurized and homogenized. The biggest snow job of the last 30 years has been the humanizing of Warren so that his milk is considered unquestioningly safe.
I have no doubt that Warren front runs his own interviews and published comments. And based upon what I hear him say and what he actually does, he's a first class viper of the chameleon class. We can thank Becky Quick for putting the bow on that little public relations Coup D'etat for the past 6 or so years.
The Anacle of Omaha.
The anecdote is based on my life's experience. The metaphor seems appropriate in that I see little distinction between followers of financial "bell cows" and "sheeple" being herded.
.... he's a first class viper of the chameleon class.
This old fool really believes he is special!
Fortuitous birth year and then all rationalizations aside, this man defines the sociopathic nature of the basic premises of the last 40 years in this carnival-land called the USA.
Please.
Today in, "Celebrity Quotes", WB said this well thought out piece of divine inspiration:
"It's ok if you do just a few things right; as long as you don't too many things wrong".
I'm having this tatooed on my golden retriever's ass.
It sounds like you're speaking like an insider who wishes to justify past practices. Or someone who has been so assimilated into the system that it's nearly impossible to reject your own arm or leg.
Either way the choice you present is false. The game is rigged and preys on the retail investor and most of the average financial salesman as finger food. And the rules and training are mostly designed to justify and rationalize the process in place. It's an incestuous affair.
The hammer is coming down now not because anyone is doing anything different this time but because the peasants are getting really pissed off and the powers that be need to put a few heads on the pikes at the front gate to cool the crowd down. Then it's back to business as usual.
And the rules and training are mostly designed to justify and rationalize the process in place.
Exactly
Sorry Bruce, really dumb post.
Read the Epic Deal man, he knows what price your Soul will go for when you stay long enough.
NONE of this is really about "Counters" in front of Best Buy!
That was the very first thing that came to my mind..
Yea it does, Lets shoot Mike in the face for Thanksgiving.
Let's call Cheney and see if he's up to it.
We'll video it for YouTube.
How about this example:
The three bigest brokerage houses pool their information about when and how much money comes in from the countries (and the worlds) top retirement plans and pension accounts, and into what specific investments it goes. Using this accumulated data , they are able to front-run the key stocks,bonds,etc. before the money gets there and then sell just as its reaching its peak.
They can do this month-in and month-out, As a matter of fact when they see the redemption orders coming in heavier they are able to sell ahead of the redemption orders. The house wins, bonuses are paid. On top of that the "owners" of the firms front-run the firms using offshore numbered accounts.
This sounds more like it.
More like:
THIS is IT.
Yeah
Warning: False choice, strawman.
1. When the feds bust guys with a clicker counting fat asses walking into WalMart, please let us know.
2. So it's "allow unfettered insider trading" vs. "bust people for freely available data they work hard to gather and synthesize" as the only choices?
With all due respect, Fuck You, asshole. You're part of the obfuscation, part of the problem.
go take alot at those forecasters http://www.forecastfortomorrow.com/news
they are saying when theh fed have to buy back securities its all over. They also expect a mortgage back crisis coming soon. They have been quite good in the past, and called the market crash and the republicans winning a large section of congress. These guys know there stuff.
what do you think is goign to happen in 2011....not a recovery like obama said. He is a liar. Why do u think the us people used thier vote recently in the elections, they know what is coming a complete collapse not a recovery like the dimwit president keeps craming down their throat.
When the Fed have to buy back securities? Isn't that what they do during POMOs? Surely that should be 'sell'?
Anyway, not that I'm an Obama supporter, but surely people realize Bernanke would be forced to monetize under McCain just as well? This crisis has been 30 years in the making...
+100 & thank you, Mike! Bravo!
You miss one important element my friend. Sending out monkeys to count beans does not involve a violation of fiduciary trust.
Inducing officers of public companies to sell material non-public information to the highest bidder does.
Was going to note almost exactly the same thing.
As usual from WB a crystal clear summation. Information on traffic moving in and out is available to anyone that wants to bother to collect it. Therefore it is public information. Outcomes of things like as yet undisclosed regulator rulings or contract signings isn't.
Bingo, William
The former in the example at hand ia fact-based, non-judgemental, proprietary research. Whoever performs and utilizesit is 100% just doing a solid job. Good old fundamental bottoms up analysis. The type of effort which is expected of a serious company/industry analysis. Getting an edge through personal ideas and effort that others can replicate, as a matter of fact.
It's line the beverage analyst tasting Coke and New Coke to decide for himself what all the hub-bub might be about, and asking friends for their inputs as well.
And there's no reason why they cannot or should not sell such.
But, a company officer sharing proprietary sales and traffic information with a few select individuals is by definition, distribution of non-public, potentially material, confidential inside information.
I agree WB. Those bean counters are nothing more than researchers. If the hedgies pay for the info that is open for anyone else (who is going to stop others from doing the same), it is kind of hard to call it insider information.
People decide over what they want to believe.
If a guy outside the system on small means wants to think he is level with a guy inside the system on big means, that is his decision.
People want to believe. They need to believe.
Bruce, hitting the wine and trytophan early? Your worst post ever!
Still cool though, your average is better than Teddy Ballgame.
Now take 4 days off and get recharged.
Why not just let it come out (the info) and then trade on it ?
just a novice here but why stop insider info thats how you learn about whats going on in a situation ? i've heard some pretty good sources that agree with this .?
Erm, watching and counting the public walk in and out of stores, from a public space, sure counts as public information. Many others had that information as well - they just didn't know its importance.
Also, those part-time guys were not affiliated with those stores.
Btw., they have done some rather nifty aggregation and data mining on that public data. Clever folks.
It sure reads for me like counts as information on the public.
Is information on the public forcefully public information? Private and public, the confusion of powers seem to grow less relevant by the day.
Besides, never paid attention to this, but from where do they collect the information? Inside the shop or outside the shop? What is the law relative to the space before the front door of a shop? All this to imply that the information could be collected from a private place.
I agree with Schwarzenegger.
This information is publically available, the fact that other people did not use it is their problem.
Paying for proprietary info and using it to trade is and should be illegal.
When are PIMCO and the PDs going to get investigated?
I'm still surprised people think "insider trading" in itself should be illegal... unless there is fraud involved I just don't get it.
Someone always has more info than you do... and why is it again you can't sell info?
Insider trading laws only make things worse by creating a false illusion that somehow outsiders are on equal footing.
Unless there is fraud involved there is no victim, unless you count whiny morons who think they will ever be in equal footing with insiders... what a joke.
I bet a lot of this stuff going on lately is witch hunt, even if some of these people might also be guilty of fraud... but if they are... that is what they should be charged with... not "insider trading". I'm surprised to see so many on ZH ready to jump onto the witch hunt bandwagon.
Oh wait... I forgot some of you are Chomsky fans like Cog Diss... so not too surprising... guess we should just find some reason to lynch some of the rich since obviously their wealth must be redistributed to the lower classes forcefully.
Full disclosure: I'm an average joe who makes jack shit and lives in a tiny house. I don't even trade.
Right, so if I were the CEO of Microsoft, knew the upcoming FQ was horrible, and told my friends to get out before the QR were released, as a common shareholder you wouldn't have a problem with me and my friends cashing in on basis of what is in essence your money?
As an outsider, there's fuck all chance I would invest anything in a market which operated like that.
Oh and I can assure you I am not a "Chomsky fan" before you generalize.
+1.
A few years ago, I was at a dinner with a bunch of judges and they were having a go at me for insider trading. I pointed out that trading without inside information was simply gambling -- and that was illegal in many states, including the one we were in! They basically agreed and started asking me to share some info......
+++ i-dog,
i love the simple sensibility of your point.
i do have a problem when the players go from responding to a context within the market, to moving the markets because they can.
it's worse than gambling. it's auditable fleecing. i choose not to play.
and i have a double problem when policy *makers* invest, then tweak the rules to their book. sure it's illegal... but that doesn't seem to matter much.
cheers.
for all intents and purposes it is legal. sure they'll slap martha stewart on the wrist, but she was a minnow. just don't steal from people, yo
imo true insider trading (not really like b. k.'s example) is market distorting and a negative for efficiency, transparency and liquidity. however compare it to the enormous and hideously bipartisan control frauds fused with the police power of the world reserve currency's nation state that we have observed in particularly vivid relief over the past two years. seems like stealing gumballs from the five and dime versus bernie madoff.
That statement is quite obviously wrong. As an investor you can still be smarter at interpreting available public data than the rest - that can give you a profitable edge. No gambling involved.
That judges accepted this flawed argument from you unchallenged sounds weird - they are usually pretty smart fellows and their day job is finding good sounding but flawed arguments.
Just look at the fine example in this article: it's all fundamentally public data, applied in a smart way. That gave them an edge - no gambling involved.