Former Dell Execs Involved In Massive Insider Trading Probe 149
DMandPenfold writes "Two former Dell employees, including a former investor relations manager, were part of a $62 million record-breaking insider trading scam, involving the company's shares as well as Nvidia stock, according to the FBI. The news comes as the U.S. authorities step up their pursuit of inside traders. Two months ago, Galleon hedge fund founder Raj Rajaratnam was sentenced to 11 years in jail for his role in a scam involving AMD, IBM and 3Com stock. Yesterday, Sandeep Goyal, an employee at Dell's U.S. headquarters between 2006 and 2007 before becoming a financial analyst, was arrested. An unnamed co-conspirator in Dell's investor relations department from 2007 to 2009 is also alleged to have been part of the scam. ... Goyal allegedly made $175,000 by providing inside information about Dell to a hedge fund. He has pleaded guilty to charges of securities fraud."
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So is Nancy Pelosi and a lot of other senators and congressmen. Does anyone think they should be immune from arrest due to insider trading?
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You fail to get the point.. read about MF Global and what Corzine did there.
Re:And yet... (Score:5, Informative)
Oddly enough, insider trading is LEGAL for members of Congress. Ain't that just awesome?
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Just curious, but what about former members of Congress? What if the crimes are committed while they're not in office?
Re:And yet... (Score:5, Insightful)
The short answer is no.
The trick here is that a representative’s knowledge of pending legislation, regulatory actions, etc. (i.e. knowledge from his day job) is technically not insider information – which of course if big enough to drive a very large truck though.
So congressmen can still be charged with insider trading if they got their knowledge outside of their day job Congressmen have been prosecuted when outsiders have bribed them with inside information (less paper trail then giving them money) but it’s been rare.
Re:And yet... (Score:5, Insightful)
Mod this up. Congress doesn't even try to hide their corruption these days.
And this is how SOPA/PIPA will play out: A new version will be introduced just after the elections that includes exemptions/protection for the big players like Google and Facebook. This version will be passed no matter how much "the people" scream, as long as congressional donations aren't in jeopardy.
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The "new version" has been in play since last year. [opencongress.org] Good luck trying to rally anyone to fight on the side of child pornographers.
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No, they should all be locked up in Federal "Pound Me In The Ass" Prison, but as the people that make the laws are the people that benefit from that little loophole, I suppose that will never happen...
Hell, even if by some miracle these assholes did get locked up, you know there would be pardons handed down somewhere. They take care of their own...
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Corzine didn't trade on inside information. He simply traded using his customers funds.
And just in case you thought that was illegal...well, it turns out using clients money to trade in "secure" assets like treasuries was always legal. Unfortunately, the financial industry successfully lobbied for the definition of "secure" to be broadened considerably in the last decade.
Personally, after 4 years of this, I have no sympathy for anyone in the financial industry, broker or client. It's a den of iniquity and d
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So to be clear, OP is complaining that someone who didnt actually break a US law isnt actually in prison. How terrible.
it's good to be the king (Score:2)
"piss boy! oh, piss boy!"
- mel brooks
at this rate ... (Score:4, Insightful)
Re:at this rate ... (Score:4, Insightful)
Libertarianism and insider trading (Score:3)
Free market! (Score:5, Funny)
A truly free market would solve it!
How?
I SAID A TRULY FREE MARKET WOULD SOLVE IT!
Re:Free market! (Score:4, Informative)
A truly free market would solve it!
How?
I SAID A TRULY FREE MARKET WOULD SOLVE IT!
Yes, you did say that. In fact, you can sell parts of your company to anyone you want, barring monopolistic actions. Until you make a public offering. That would be the stock market. Ownership is now public, so you are responsible to the public and private trading most certainly should be fraud.
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How?
Because IT is not a problem.
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For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.
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For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.
And I can refuse to buy, because it's a free market.
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It solves problems because it's an ideal.
What you don't understand is that an "ideal" is not something that one either must achieve perfectly or not bother doing. An ideal is something that must be continually strived to uphold, by all members. The extent to which people do not strive for that ideal, they will see the negative consequences of their actions. I could write a perfect free market constitution in 10 minutes, but if people do not actually try to uphold that constitution, the results will not be a free market. The purpose of discussions
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The extent to which people do not strive for that ideal, they will see the negative consequences of their actions
The extent to which people do not strive for that ideal, they get to enjoy the befits of others' work while keeping the benefits of their betrayal.
Oh sure, it will catch up eventually, but by then they'll have taken their golden parachute and it will be someone else's problem.
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I'm not claiming that there's any nightmare world, I'm simply claiming that the free market is like a game where the first person to quit wins. Eventually someone will play the regulatory capture card they were keeping up their sleeve for the big bucks, the only question is how fast the card table will fall down when the fat cats playing around it all try to slam down their ace of spades first.
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Eventually someone will play the regulatory capture card
A free market would not have regulatory agencies for which to capture.
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Except for the ones created by the first people to scream "think of the children!" and throw their money at the problem.
Which is sort of how we lost lawn darts the first time around, I believe.
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I SAID A MAGICAL PRINCESS RIDING A PINK UNICORN WILL SOLVE IT!
I, for one, grow weary of this mythical "truly free market". Rather I would like some practical solutions for the problem at hand.
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There is some debate among Economists whether such a beast can ever truly exist. See Wikipedia for a brief intro.
Re:Libertarianism and insider trading (Score:4, Interesting)
It doesn't strike me as being an easy thing, either way; on the one hand, it's a kind of fraud, which is one of the legitimate reasons for having a government (institutionalized and monopolized force). On the other, information is always diffused and imperfect in any market, so arresting and incarcerating people for not providing it is not likely to work well if only for political reasons (Google Harry Markopolos for an example of why). In that sense, the SEC gives people a false sense of security that the government is doing some aspect of due diligence for them that is not in reality happening.
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Insider trading, to the extent that there is anything wrong with it, is a fairly straightforward violation of the trusted agent/principal relationship. The shareholders of a company (the principals) hire agents (the managers / high-level employees) to represent their interests; the agents then take advantage of information and influence they receive in the course of that relationship to benefit themselves, either by trading on that information, by selling it to third parties, or by diverting supplier contra
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I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, with
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I think most (all?) libertarians support some sort of enforcement of contracts. So, one option is for stock exchanges to require all traders to sign some sort of contract stating that they won't engage in insider trading, and if they do, they're subject to some kind of sanction (fines/jail time).
Only an idiot would trade at a stock exchange that didn't require this kind of contract. Sadly, there's enough idiots that it probably wouldn't work.
Re:Libertarianism and insider trading (Score:4, Insightful)
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If the equities market worked the way you propose, it would be essentially lawless and there would be no participation by the majority of the public. This would then be effectively equivalent to the situation in China currently. The vast majority there invest their savings in real assets because there is no presumption of honesty or equality in public markets.
Whether you think this is good or bad, you have to realize this makes it much harder for companies to obtain equity financing from the free markets
Gilded Age, not Modern China (Score:3)
I think you go too far when you go into China territory.
I think it would be more fair to compare it to the Gilded Age of Robber Barons. Insiders who tilted the rules of the market in their own favor. Jay Gould and Daniel Drew would be good examples. These people gained control of corporations and tilted it towards their own gain vs. the shareholders. Took control of banks and choked off competition. Etc.
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Why is it "fraud"? Who are you defrauding? Why is it not being intelligent and using all of the information at your disposal?
I think there should be some insider trading laws, but I think they could be more limited than they are now. For example, if a CEO knows that they're going to introduce a huge product tomorrow, or that they're going to announce a huge loss tomorrow, trading on that information today would be bad, IMHO.
But if a peon hears something in a hallway, should that necessarily be illegal?
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So, do you also think that people who got mortgages they can't afford (with legally required APR statements) were defrauded? They had access to the information that they couldn't afford it.
Re:Libertarianism and insider trading (Score:5, Insightful)
Re:Libertarianism and insider trading (Score:5, Insightful)
Truly free market, you say? Last I looked, one of the conditions for a "truly free market" was perfect knowledge for all the parties. Quite the opposite to "inside knowledge".
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When the product in question isn't what it is advertised to be, that's ignorance on the part of the buyer and fraud on the part of the seller.
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When the product in question isn't what it is advertised to be
If it can be objectively demonstrated that the advertising was knowingly done in a false way, that is fraud, and the seller would be held liable. This is an aspect of a free society.
that's ignorance on the part of the buyer
It is not simple ignorance, which is lacking information, but actual misinformation. If a company lied about their performance to their stockholders, so that the execs could dump their stock, that is misinformation and fraud.
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Too bad the Supremes have been stripping away the rights of people to sue and get just compensation.
It's Fraud (Score:2)
Follow the logic
I own company X (shareholder)
I hire a agent in a posistion of trust (a C.E.O., for example)
The manager takes / gives away valuable property (i.e. insider information)
At a disadvantage (i.e. lacking insider information) I trade at a disadvantage. (I sell stock too low, I fail to invest, etc.)
Wealth is transferred from me to the insider.
It’s a breach of fiduciary reasonability. Liberations believe in playing hardball, but cheating is another thing.
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Follow the logic I own company X (shareholder) I hire a agent in a posistion of trust (a C.E.O., for example) The manager takes / gives away valuable property (i.e. insider information) At a disadvantage (i.e. lacking insider information) I trade at a disadvantage. (I sell stock too low, I fail to invest, etc.) Wealth is transferred from me to the insider.
Where is the lie, deception, or contract violation that would render this scenario equivalent to fraud? Simply selling when you know there is a problem with a company does not involve any lie, deceit, or fraud. If the CEO told stockholders that the company was fine, in order to buy himself time to dump the stock, then that lie would be fraudulent.
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"freedom" is the ability to choice what you want. For that you need to know what your options really are and why so, yes, ignorance goes against freedom.
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""freedom" is the ability to choice what you want.
Actually, that is free will, or volition, not "freedom"."
Well, not exactly. Free will is the ability to choose without the need or the limitation of external influences (i.e.: search for Buridan's ass).
I thought that freedom -at least in the phylosophical sense, requires knowledge (thus, perfect freedom requires perfect knowledge) was a settle issued from some centuries ago now.
"Your ability to act volitionally is not dependent on your knowledge of the choi
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Truly free market, you say? Last I looked, one of the conditions for a "truly free market" was perfect knowledge for all the parties. Quite the opposite to "inside knowledge".
Perhaps there would be no "inside knowledge" as such, and "insider trading" would be simply "trading by insiders" and not "trading using insider-only information". But forcing companies to allow public visitors at management sessions could prove tricky...
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To be fair, it's not a "truly free market" that requires perfect knowledge, but closer to an efficient market requirement (strict form).
I've been cultivating the idea that it's not "free markets" that we need now as much as "competitive markets". Free markets seem good for personal freedom, and can lead to competitive markets. Competitive markets, on the other hand, are what drive an economy to grow. In the US, we seem to have a good amount of "free markets", and need to focus more on the "competitive" a
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"I've been cultivating the idea that it's not "free markets" that we need now as much as "competitive markets"."
Perfect argument. I bow to yeh, sir.
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Or some kind of Borg mind-link system.
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Of course yes. We already knew that no perfect free market is possible without the help of a government so your point is?
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That's not "free market". That's "wild market".
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Apply some logic:
1. Insider trading is profitable because it capitalizes on the information disparity between public knowledge and insider knowledge.
2. There is a profit motive to seek insider knowledge.
3. If insider trading were legal, long-term outcome would be that every trader would seek (and receive) insider knowledge.
4. When every trader has insider knowledge, there is no longer information disparity, and insider trading is no longer profitable.
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3. If insider trading were legal, long-term outcome would be that every trader would seek (and receive) insider knowledge.
I sense a gaping hole in your logic. What incentive would there be for those with insider information to provide it to those who lack it, other than monetary incentive. Making insider trading non-profitable by making the selling of insider secrets more profitable seems like a hollow victory.
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Everyone believes in limited government; the disagreement is where the limits should be.
Libertarians just want to live in some Mad Max fantasy. Of course, they'll be the bandits raping, pillaging and enslaving rather than the victims. Because, you know, they're so much bigger and tougher than anyone else.
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You obviously understand nothing about Libertarians. The belief that one should be permitted to conduct your own life how you wish, as long as it does not infringe on the liberties of others. You akin us to anarchists. Government and its rules will always be needed to ensure the liberty of its people since not all people are equal and some will need more help to have freedom than others but there should be a limit to that. Make government too powerful and you will end up just like you would without g
Did pay off the right people? (Score:5, Interesting)
See Quest's CEO as an example. He refused to allow the NSA to spy on Quest's customers and suddenly he is in jail for "insider trading." Opps.
It's nice to see some action... (Score:3)
It's nice to see some action on insider trading scams and valuation fraud, but how about nailing the big fish instead of tossing us minnows and thinking we'll be satisfied. I want to see the sharks hanging on a hook: the Wall Street traders and bankers who've cost the US and global economy literal BILLIONS.
Hey, (Score:2)
if it's good enough for congress....
Insider.. it's all insider.. (Score:5, Insightful)
Yesterday Google announced earnings. At 4:01pm EST, exactly. I was able to get the page at 4:01:05pm EST, and just as a joke at the exact same time I checked out after hours trading on GOOG. It was already down 8%, though 5 minutes earlier it was holding around even on close. Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.
The system is already so corrupt and broken that anybody who isn't on the "in" shouldn't ever try to invest except for extreme long term. I don't know why a case like this would surprise anyone.
Re:Insider.. it's all insider.. (Score:5, Interesting)
It's possible due to automated trading. If Google reported that their earnings were lower than expected even if only a small amount that could lead to some automated selling. That wouldn't require an analyst to read the report and decipher it before making a decision to sell/buy/hold.
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Of course you'd need to have some plausible deniability.
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That's not really the definition of insider trading. Insider trading would be someone at GOOG who sold (or sold short) stocks before the announcement after knowing material information that would reduce the price of the stock (poor earnings).
If your definition of "insider" here refers to "professional trader": Yes, tautology lolcats will tell you that the professional trad
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Exactly, I'm surprised the change was so little. I bet quite a few waves of buying and selling went on before the GP saw the price.
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I have an uncle (in-law) who does exactly this. But does it for gov't stuff. Automated parsing of press release, trades based on those parsings. Tune for next release.
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I've assumed for a long time that large shifts in stock valuations that don't appear to have a trigger are just insiders reacting to documents that will become public at a later date. By that time, all the information is already reflected in the price which stays relatively static on the "official" announcement. It's just the way the system works.
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If you really believe that the price impact of the official announcement has already been completed, you may as well bet on it. Anyone who is "late to the party
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You do realize that automated trading platforms do lexical analysis, right? They get a copy of all press releases and electronically decide if it's good or bad and do trades based on it. Even basic lexical analysis can tell you a statement of "loss" or "failed to meet expectations" is generally bad news (SELL!), while "higher than expected revenue" and "largest profit" is good news (BUY!).
In
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Yeah, If I were a Corperate executive important enough to merit a regular mention in press releases on earnings, I'd totally change my name to "Record Profits" .
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For example, you already know analyst/market estimates for revenues and profits. All of the markets know it, so it is priced in. If the actual numbers are higher, it is a surprise and the stock will go up. Else it will go down. So you just build in a news parser - Reuters/Bloomberg etc. can provide you the news in many formats. SEC also has reports in xml. So parsing it is trivial. After that it is just a matter of feeding it into your trading platform, which is
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It's all automated. In the four seconds you mention a program parsed the document and noted certain key words. The computer than initiated a trade based on those key words. In all likelihood those trades were initiated well within .4 seconds of the release.
Think of it this way when trying to understand just how prevalent automated trading and latency have become for trading. You know when you see pictures of a stock exchange and surrounding it you see skyscrapers? Those skyscrapers are largely filled with d
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Their commercials said it first (Score:5, Funny)
DUH! (Score:2)
Anybody surprised? (Score:2)
I'm shocked! Shocked! (Score:2)
To see insider trading going on at a respectable company like Dell of all places. I mean, look at the quality of their products and their stellar technical support (cough, cough).
Excuse me, I must mop up that sarcasm that's been dripping on the floor.
Free Market != unregulated market (Score:2)
You can have an un-regulated market which does not exhibit Free Market behavior, e.g. monopolies. And you can have a regulated market which comes *much* closer to a Free Market.
Example. The NYSE has at least 3 layers or regulation. The rules of the NYSE is the first layer, and require such things as publicly signalling buy and sell prices which allows efficient , fair, and fast pricing. The the State of NY and and the SEC regulate the market to prevent fraud.
Libertarianism will destroy Free Markets, IMO.
Real insider trading (Score:4, Insightful)
Real insider trading is done in government, before it releases a law or decision upon a company's future (like knowing whether FDA will deny or allow a new drug to the market), and Senators / Congressmen being bribed in stock options where straight up cash would be considered an illegal bribe, because they voted themselves this little neat trick.
Insider trading idea is a bunch of crap. The only problem is FRAUD, all other trading that is done privately is done based on some form of information.
For a top manager to bet against his company and then tank the stock by doing something that would undermine the company's value is FRAUD.
For a top manager to bet against his company because he THINKS that the company is going in the wrong direction - that's not fraud, that's common sense.
For a government official to accept a bribe in form of a stock option or to short stock of a company before passing a LAW that would hurt that company financially - that is REAL insider trading fraud.
Most companies don't allow shorting or hedging (Score:2)
Most companies don't allow shorting or hedging company stock, at least to higher level employees. Some don't allow it for anyone. This creates conflict of interest.
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Well, if that's in the charter, then it's their right to forbid that.
However holding long is also 'insider trading', isn't it?
Holding 'long' is based on insider information of how the company is doing. But it's not perfect knowledge. Nobody actually can predict future, thus nobody knows that a company will be OK in a year from now for real.
Back in 2003 Kodak still had 64000 employees.
Re:More Internet related crime (Score:5, Funny)
Folks...
You can't refer to the regular posters as "folks", post AC, whip out a scare tactic, and support censorship all in the same breath.
(Actually you CAN, but expect it to be pointed out.)
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They don't need the money... what can they buy with it that they already can't afford?
Small private jets run 20-100M, airliner-size ones can run up to 0.5B.
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Why isn't the company they worked for ALSO shut down?
I remember sitting in class in elementary school when the teacher would hold the whole class responsible for something that one individual did. That sucked then, and it would still suck now.
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Re:How dare they make information public too soon! (Score:4, Interesting)
This affects things such as rational pricing of goods, as well as supply and demand. Insider trading is also a momentary arbitrage. While there is nothing inherently wrong with arbitrage, those privy to the information are those that get to take advantage of it while the non-informed parties will suffer. This is not conducive to a true free market.
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While there is nothing inherently wrong with arbitrage, those privy to the information are those that get to take advantage of it while the non-informed parties will suffer. This is not conducive to a true free market.
You are simply reasserting what I have already stated is not the case. The "free" in free market refers to the freedom individuals have from force, threat of force, or fraud, and the judicial recourse they have when such rights violations do occur. There is no freedom from ignorance, nor a right to perfect, equally-accessible knowledge.
State, precisely, what the crime is committed when someone who is more well-informed sells sooner than someone who is less well-informed. What rights are violated by such
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I see what you mean about any regulation as being non-free market, but you are taking it to an irrational extreme. You really don't make it sound rational when you equate regulation or government interference as theft. The logical conclusion of a system which al
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Then let me put it into terms that you might more easily understand. It would result in theft of the other non informed players in the game because of the existing arbitrage.
You and I both own stock in company ABC. You find out that the company is cooking its books. You sell your stock. you are taking it to an irrational extreme
In what sense is consistently applying a principle an "irrational extreme"? What does "extreme" even mean in this sense, other than to apply a negative connotation? Why should consistency be avoided?
You really don't make it sound rational when you equate regulation or government interference as theft.
Theft is taking someone else's property without their consent, either by force, threat of force, or fraud. Do you disagree with this definition? Does the gov
Troll? Really? (Score:2)
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hi tech industry is highly subsidized.
How much compared to healthcare or finance? Does the tech industry feature government unfunded liabilities around $100 Trillion? (Medicare, Medicaid, Social Security) Or over $5 Trillion in government-guaranteed loans and debt? (Fannie and Freddie)
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Consider, that stock prices are based on demand, not the value of the company.
Isn't demand based on the value of the company? If not, what is demand based on? What is your evidence that a person's willingness to pay a certain price for a stock is not related to the value that person sees in the company....?
All insiders? Or just the one who want to prop up the company? Information has a way of leaking out one way or another, and only laws against insider trading can interfere with such a leak.
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If there was going to be a cover up, the insiders wouldn't sell.
All insiders? Or just the one who want to prop up the company? Information has a way of leaking out one way or another, and only laws against insider trading can interfere with such a leak.
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Note also that so-called "worker bees" would still have been left with $0.009/share stock in such a scenario. Regulation can't prevent fraud and loss of wealth, but judicial recourse allows stockholders to recoup some of the losses from those who committed the fraud.
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