When forced to provide answers to dumb “security questions”, I will typically use a password manager to both generate a random “answer” and to store the question-answer pairs. I generate new strings for each site that asks the same dumb question.
For sites that demand to know my birthday when all they really need is a boolean declaration of adulthood I use 1 January 1901. (I’ll admit that when I first started this practice I used 1 April 1901).
The negative of that is quite interesting. Take SEC web server logs and look for invest firm subnet addresses. Firms not appearing in those logs do 1.5% worse.
What sort of “mobile tracking info” do you have in mind, and where could you obtain this information for an individual? Maybe (maybe!) you can get their physical location with the right access to certain ISP datasets, but the website info? Is that something that is available for sale on an individual basis?
The article states that the trader obtained his information by hacking into poorly secured corporate email accounts and configuring auto-forwarding rules to send himself copies of incoming emails. Specifically, he triggered password reset flows with “security questions” and data mined open sources for metadata like family names which helped him guess the answers to the security questions. So overall, it wasn’t a very sophisticated hack, and certainly seems more straight forward than “getting the mobile tracking info of M&A bankers.”
In the US, there are commercial companies selling this data. Probably not associated with a name, but you could buy the data (I think they sell the whole dataset for a relatively affordable price), figure out who is a M&A lawyer by checking which IDs show up at their headquarters + some other relevant location, then track them from there going forward.
The data is likely collected from ad and analytics SDKs in various unrelated apps, so you just need the lawyer to be using one of these apps.
Journalists have demonstrated that the data is good enough to identify and track e.g. intelligence service employees.
Interestingly some M&A banks keep (or used to, at least) discreet residential addresses where the crucial meetings between senior people can take place over dinner rather than them being obviously seen to meet at the banks or their own offices.
I can't remember seeing security questions securing a system in the last decade. Are they still used and I just don't see them or this was some unusual company config?
They were pretty much only ever used as a blocker for your email being spammed. As in there's very very few sites that would reset a password on a security question alone. The security questions purpose was just to avoid people triggering emails/resets to the wrong second factor. Despite the common belief they are worthless security questions they are perfectly fine when they don't reset the password directly and merely block users from mistakingly triggering a reset to a second factor on an incorrect account.
Do you know the common alternative to not using security questions in the above step? Doing absolutely nothing and allowing randoms to annoy you hitting your second factor with password resets. The ultimate place you rely on either way was the second factor and the questions were always better than nothing at all.
As a ceo, you just call the IT department directly and that is that. In the it’s just tubes analogy sense, it is all just people at the end of those tubes eventually.
Have real people go to the office of the CEO and have the CEO make the reset request in person. Even by phone a reset is harmless if the computer the ceo is using is known to be trusted and company managed. The defense is in depth not circumstantial to one single phone call or method. You can also authenticate the request through other channels.
And here I am with all answers to my security questions as random strings of letters and numbers stored alongside my password in my password manager. I hope I don’t have to give someone that answer over the phone.
I probably raised a fair bit of suspicion last week when I told the Wells Fargo rep handling a declined CC transaction that I had to look up my mother’s maiden name in my password manager.
At this point anyone handling passwords must have encountered enough of us to know that some family names need to be looked up in a password manager, and it isn’t that suspicious. Isn’t that right, my cousin? I can never remember how to spell grandma 38!;&,90-@3!;8,’s name.
I don't remember where now, but I have run into sites that disallow numbers and non-alpha characters in the "secret" question answers. They were actively trying to thwart people from entering random gibberish there. Of course that's silly, but so is thinking that a person's maiden name is some kind of secret, or that people will be able to reliably remember things like "the title of their favorite book."
My only fear of doing this is that someone could call in and say "oh sorry, I just typed in a bunch of random numbers and letters" and the rep will go "haha, don't we all!" and let them reset the password.
Well technically any website which has a ticker watchlist has valuable data because they can correlate it with the data about ticker detail page access patterns and infer something. Whether that is valuable is something else. But if you have the data on people in the industry then it might be valuable.
Another way to see that would be the Supreme Court affirming that if the SEC accuses you of what is clearly common law fraud, and wants to penalize you millions of dollars, they are required by the Constitution to bring those charges to Article III courts where you can exercise all the rights of the accused recognized by the Constitution (most specifically in this case, trial by jury).
I'm not sure why the parent comment decided to bring politics into it. You'd think the idea that the government shouldn't be able to accuse you of a crime and take your money without a trial would be bipartisan.
> I'm not sure why the parent comment decided to bring politics into it.
The Federalist Society and their fellow travelers have been politicizing the Supreme Court for literal decades. To talk about the Supreme Court while avoiding any mention of politics is a itself a stridently political act.
Further back then that. Supreme Court has been a political institution all along. (The Marbury vs. Madison decision was an interesting political maneuver.)
There was a recent video by John Oliver going deep into the politics of the supreme court, so it's in the public discourse enough recently that the two concepts of justice and politics are probably linked for some folks.
It's one of those annoying things that tends to happen a month out from presidential elections I guess.
John Oliver has enough bad takes and lies that I'm at the point that if he says something, I assume it's a lie at this point. Or at least his conclusions are lies
Yeah I tend to take it more as satire or wild exaggeration than real investigative reporting.
When his buddy Joel McHale, who also acted on the fictional TV show "Community" along with John Oliver, tried making his own hot take comedy news show, it really put things in perspective for me.
Now I watch it for the comedy aspect as much as anything I see on other news media these days. Take what I see with John Oliver amped up to a solid 9 or 10, divide it by 10, and that's probably how serious or impactful the thing actually is that he is reporting on.
So you request a jury trial. I don’t get what your point is. Its a civil penality because the SEC isn’t a law enforcement agency and it enforces regulations. Regulations have been around since George Washington was president when the Whiskey Act was passed allowing the government to form regulations on taxing whiskey including levying fines on people.
You couldn’t “request a jury trial”. That was the point of the suit.
Yes, civil penalties are a thing. But the argument that prevailed was that this was not a penalty for speeding or not paying enough tax, this was a penalty for alleged actions that amounted to common law fraud & Congress can’t delegate the adjudication of common law—civil or criminal—to an administrative agency.
And regulations are still enforceable. What is not enforceable is to make a regulation that parallels an existing law, and deny a federal trial because it’s now a “regulation”.
Gensler met with FTX fraudster Sam Bankman-Fried and had a secret zoom call with him as the press later found out. FTX always advertised how they were "regulated". Yet despite not even having proper book-keeping¹, they were never investigated by the SEC, which has been focused on hassling legitimate businesses such as Coinbase - a public company with proper compliance and actual audits.
Should have been quite clear when Madoff ran a 20 billion USD ponzi for multiple decades and he got caught because his own sons turned him in at the FBI.
The SEC was not involved in Madoff at all (other than to make it worse my "auditing" Madoff multiple times and publishing that "all is fine nothing to see here").
The SEC is a government marketing agency to keep up the veil of US markets being fair and functional.
Anyone else read all the way down and see the bit about "everything is securities fraud"? Great ongoing bit by Matt on another way attorneys in the US bilk the public.
I don't think that's bilking at all. In the US we generally favor private enforcement over public regulation. E.g., the SEC doesn't go after every small bit of fraud and dubious corporate behavior. They're the big guns, and the small stuff is dealt with via private lawsuit from investors who think they've been harmed.
If we got rid of both private and public enforcement, fraud costs would balloon massively, costing the public wildly more. First for retail investors they were ever more often the suckers in the fraud, and then for everybody as we lose the robust public markets that are a major driver of business investment.
Somebody's got to keep the greedy, amoral people in line. I'm not sure doing it via predatory lawyers is more efficient than skilled bureaucrats, but it's definitely more in line with the free market principles that tend to win out in the US.
I agree with private enforcement via the courts, but I disagree with securities fraud which is just highway robbery of the public and investors to enrich lawyers.
Should have needed. I recommend listening to (or reading the transcript of) https://darknetdiaries.com/transcript/118/ about someone doing account hijacking/password reset as a service. Even good services sometimes have zero-days.
"Microsoft Entra self-service password reset (SSPR) gives users the ability to change or reset their password, with no administrator or help desk involvement. If Microsoft Entra ID locks a user's account or they forget their password, they can follow prompts to unblock themselves and get back to work."
Which isn't actually quite as crazy as it sounds like it should be.
It should use 2fa and another email. For corporate just internal IT right? Security here seems lapse. Ideally reports are links to an internal system not attachments.
Unpopular opinion, but I suspect this is actually how a lot of hedge funds have historically outperformed the markets. The amount of nonpublic data needed to get an edge is surprisingly small.
My mostly uninformed hunch is that much of the fancy "public information" analysis that hedge funds claim to do to have their edge is actually parallel construction for insider tips. I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
These things sound way too specific to just perform on a hunch, and even then, you might get the analysis wrong if you don't have the insider tip to check your math.
But it's probably enough to keep the SEC investigator from having a case unless they find the insider link directly.
> I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
This is really common and basically table stakes for sophisticated firms now (those that invest in relevant sectors). They track everything from parking lots to freighters and oil tankers to crop yields via satellite imagery and flyovers.
It's gotten cheaper with drones so more important areas like major ports might get daily fly bys to track containers and boat traffic. Some have static cameras pointed at these things
The use of aerial imagery for institutional asset tracking is older and much more widespread than we'd think.
Back in 2005/2006 my university maths professor (in Finland) had an established side gig in the US. He had polished a process to manufacture aerial drones - still called UAVs at the time - and had put together a fairly slick software pipeline to combine GPS tracking with digital imagery. One of his longer-term clients at the time was Harvard University; they had contracted his firm to get routine data on how their land endowments were doing.
An associate professor at the CS department has had a similar thing going on since ~2005. His company does drone imagery for land owners in Finland. Rather surprisingly a notable fraction of his business at the time was coming in from families and corporate offices wanting "just" nice looking shots of their various farm buildings.
At the time the university in question was rather well known for their computer vision unit.
Try 1910's. Reminiscences of a Stock Operator describes Jesse Livermore collecting unique public data on shops and use for trading. The founder at my first trading job gave me this book to read, and I am eternally grateful.
> With that in hand it’d be pretty easy to know if, say, Apple will beat or miss revenue for a given quarter.
Wow, seems so easy! That's not how the market works though. You've got to know if Apple's going to beat the analysts' expectations of how Apple is going to do. All the analysts have access to that data and that's table stakes.
Apple's guidance on revenue is only like 30% of the equation.
Typically, because they make so many bets, a hedge fund needs to be only 53-54% accurate with their predictions to make money.
The stock of every company will move a decently large amount on the day quarterly revenues are published, whether it's Apple or a smaller firm. You can make a lot of money via options maturing on such days. When you need to be right only 53% of the time, these signals _really_ add up.
>Typically, because they make so many bets, a hedge fund needs to be only 53-54% accurate with their predictions to make money.
Wouldn't that imply that every bet the fund makes is roughly of the same $$ value? I would figure more senior traders or more successful ones would vary the size of their bets relative to certainty or uncertainty of an event outcome (could be quarterly earnings, a political/geopolitical event, etc)?
Don't think of it like buying a stock on the spot market like retail investors typically do. Many hedge funds place their bets by using the options market, which limits the downside on a bad bet (see e.g. the butterfly strategy [1]).
The size of the bet also depends on a lot of factors. Many hedge funds don't work like monolithic entities, rather they have a bunch of portfolio managers (PMs) who have their own allocated pools of assets from investors. These PMs decide on placing their bets based on lots of different things like their liquidity position (e.g. you don't want to lock up your cash in one position even if you're sure it'll make money when there's a risk of being margin called because of another trade) in addition to signals such as the one dicussed above.
The only thing I can speak to is crop yields. Satellite imagery S flyovers won't really teach you a lot outside of a binary yes/no r field is alive.
The technology farmers use teams yields to the square foot. I'm betting you can buy that from John Deere and others. That's probably where they get that?
I don't know how effective the project was because I left before it finished but we were working on using the normalized difference vegetation index, normalized difference water index, and a bunch of other data points to try to predict crop yields.
Farmers might get that kind of stuff from flyovers for the extra resolution but that was cost prohibitive for our purposes except when validating data from the satellites.
This year in university I took a course where I had to imagine creating a startup and we ended up mocking up an agritech business that dealt with drones and satellites data. We discovered that Sentinel 2, a European satellite, has a resolution for ndvi that goes as low as 10/20m. This improves nasa's modis sitting at a resolution of ~250m.
Furthermore, this is free. There are companies providing paid images with higher resolution from their own satellites (Constellr comes to mind). I'm sure the resolution isn't going to be exact to the square foot, but for some cases you probably don't need such a high resolution
> I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
That actually is public information. I know it's hard for your typical member of the public to obtain, but the key thing is that it didn't wasn't communicated directly by someone working at the company. That's legitimate and no parallel construction is needed (except to mislead your competitors – maybe that's the real motivation).
> These things sound way too specific to just perform on a hunch, and even then, you might get the analysis wrong if you don't have the insider tip to check your math.
This is suggested as the parallel construction for the actual insider info.
Ordering satellite imagery and counting cars is just a weekend project. The last time I looked at ordering imagery, the main obstacle was the minimum order size, so it'd actually scale better for monitoring every store car park than for looking at a single car park.
So if Macy's parking lots have 11% more cars than the same time last year, is that a buy or a sell? Are people actually buying more, or are they more cash strapped and spending more time looking for value?
How busy are the car parks by their dispatch center? are the cars staying longer because people are working overtime? how many UPS trucks are visiting?
you buy data flow data from ISPs at all tiers, so even though they're encrypted, knowing how much traffic is going to Macy's.com vs JCPenney.com gives you information you can act on.
We know this is being done, because of reports that say Netflix is X% of Internet traffic. The undredacted reports from those same data sources have much more detail. It's also why some apps that don't appear to have any business model are actually quite valuable.
Personally I think those things sound like the natural result of ex-intelligence agents wind up working in finance, sort of like the advertising boom seen from the ex-WW2 propagandists.
The SEC could still have a case - timeline, corroborating intrigue, etc. - but as an underfunded revolving door, there's little pushing them to even try to hold these firms accountable. The exchange between a congressperson/senator and an SEC rep a few years ago - "How many cases do you take to trial?" "It's more efficient for us to settle," or something along those lines - was pretty damning. (I apologize, the exact details escape me and every single search function on the internet has apparently been degraded into uselessness.)
I recall learning this lesson pretty early on. In high school, the econ teacher ran a stock trading game - you get some starting capital, you make trades, at the end of the quarter whoever had the most got some kind of reward.
At the time we had a family friend that was working for a company about to announce a stock split along with a very good earnings report. He told me when to go all in on that stock, and i did exactly that. The day after that split my portfolio had more than doubled, beating the class record by a significant margin. Said record stood until the teacher retired.
Not sure if it was the lesson he meant to impart though since I think most took away from it that to win you need to lie, cheat and steal.
I knew someone who won a similar stock trading contest held by a radio station about 30 years ago. He put all his pretend money into a low volume penny stock. Then in real life he bought enough of that same penny stock to raise the stock price substantially. He'd somehow calculated that the cash prize would exceed the cost of manipulating the stock. IIRC the stock price got another boost when they announced his winning trade on the radio, enabling him to make a tidy profit.
That's exactly how clients beat bucket shops as well. If they don't set their risk limits low enough and fees high enough, you can profit by manipulating the underlying markets.
I won a similar contest by being the only student who never bothered to log into my trading account, thus keeping all my assets in cash by default. The market had a down week, so everybody except me was in the red.
I think the lesson, which has served me well, is to not make short-term trades.
When I studied abroad, I lost my debit card and had to get it mailed to me internationally. I was down to nothing and spent a week living off of rice and furikake.
What saved me is one of these trading contests for my school's business club. I signed up for it and dumped all of my "money" into playboy and forgot about it. Turns out they won some big lawsuit and the stock spiked just in time. First place was a $200 dollar fine. I had to have the club president spot me the train ticket to go pick it up.
The lesson is that in a win/not win contest, you want to do something no one else is doing. Maybe things go your way or maybe they don't. But you avoid the risk of being narrowly beat.
short term trade is gambling unless you really have data and speed that you know how to use. Most trader uses charts and whats hot, the profits then runs on the greater fool theory.
You can go long and sell if there is a significant breakout. Then you hunt down the next value stock. A return is a return.
If you got into Nvidia ten years ago you would have to be dumb not to pull it now. There is market timing foolery, and then there is just being realistic.
> At the time we had a family friend that was working for a company about to announce a stock split along with a very good earnings report. He told me when to go all in on that stock, and i did exactly that. The day after that split my portfolio had more than doubled, beating the class record by a significant margin. Said record stood until the teacher retired.
That family friend seems like a complete idiot for passing on that information.
Plus a stock split on its own has no change to the value of a stock. There’s no reason for it to double overnight. In fact the direct effect on the price is the opposite as you have twice (or K times) as many shares and each is worth half (or 1/K). So the net effect is zero.
In theory you are right that stock splits have no bearing on returns, but in practice it is well documented (see e.g. [1]) that "stock splits and reverse splits often result in short-term abnormal returns even though such split events do not change any fundamental factors affecting the valuation of a firm's stock."
> We provide evidence that the incomplete adjustment of share prices to splits or reverse splits can be attributed to heterogeneity in traders' cognitive abilities.
The split was followed by the stock very quickly regaining it's previous per share value over the course of the trading day, though maybe it was over the next week; this was a few decades ago.
And i agree that he shouldn't have told me. A few years later i actually told him something along those lines. I appreciated it but he exposed himself to a lot of legal risk.
Nothing ever bad happened when societies trade high trust for low trust. No sir. All roses and sunshine. Certainly worthwhile for me to bend or break any rule keeping me from my best life.
It would if said cheaters were socially ostracized. Instead we make big budget movies about them, they get famous, and then earn money from the newfound attention.
Do you have a particular answer in mind, or a point to your question? Yes, societal rules in some sense depend on everyone enforcing them. But there are also people/organizations/etc. with more power to fund or support these violations of social rules, so presumably they’re more at fault too.
So your point is that if we fundamentally change society, ignoring the fact that this is integral to human nature itself, then we can fix this problem? That's about as helpful as saying we can have peace in the Middle East if we all just got along. It's comical how disconnected from reality it is, and yet you seem to think people should take it seriously.
No, I’m saying that people have stopped enforcing social rules and therefore cheating is increasingly a valid way to succeed. That’s what the point of the thread was about. Lots of things are fundamental to human nature; society is the process of controlling and channeling them.
IME the reality is that trust erodes as cheating becomes widespread. The consequences of less trust are significantly higher costs and more stress and fear.
FWIW, I don't advocate blind trust.
Perhaps you meant to say we should teach the reality that cheating exists and is bad; not to pretend it doesn't exist? Or that it's hopeless to be honest and trustworthy because some others may not be? Which leads to ... apathy or more cheating and less trust.
I never said cheating is moral. I said cheating is advantageous. You think cheaters care that they're hurting society? You can't be a cheater without being selfish.
The whole rhetoric of high trust society sounds like a fallacious argument from consequences against well deserved distrust by claiming it will basically lead to the collapse of society.
> hedge funds have historically outperformed the markets
According to Investopedia:
"From January 1994 to June 2023—through both bull and bear markets—the passive S&P 500 Index outperformed every major hedge fund strategy by over 2.8 percentage points in annualized return."
Good article. The grandparent comment is about hedge funds that outperform. Rather than offering the automatic diversification most people seek from hedge funds, his/her point is that some which are highly correlated to the market are laundering insider info.
Congressional democrats, and i am sure republicans too can outperform S&P 500
--
>"
An exchange-traded fund (ETF) that tracks the stock trades of Democratic members of Congress has been outperforming the S&P 500 since its launch in 2023.
"
There is the fun example of a trade that was made before that information should have been physically able to arrive, based on speed-of-light limits. [1] (2013)
The article says "Presumably there will be a hard look into what exactly happened..." but I wonder how hard that look was, and how often that stuff still happens.
The regulators looking at gold futures would have been contending with manipulators placing massive orders in bad faith, trying to trigger stop loss. That all led up to the flash crash.
One thing I rarely hear people talk about is how many libertarians believe insider trading shouldn't be a crime. There are lots of libertarians in the financial industry, so there are likely lots of people in the financial industry who believe that laws against insider trading are evil.
So when I picture insider traders, I don't picture shady organized criminals doing things they know are bad. I picture cowbows believing themselves to be the good guys for freedomizing the market.
And when you think about all the people who believe that insider trading is a positive good, you kind of have to conclude that it's rampant. It's financially lucrative, hard to detect, harder to prove, relatively easy to hide, relatively easy to pin on someone below you in the org, and people think they're good for doing it. What force is keeping it in check?
Different POV: Insider trading should be legal because is fundamentally impossible to police fairly or effectively. The one caveat is ALL trades must be public in real-time (and not via shell corps, but showing the real beneficial owner). This way, insider trading can do public good by providing good market signals. Transparency would also reduce the advantages of insider trading.
Someone can correct me if I'm wrong (which I probably am), but my understanding is that legally the harm of insider trading is to the shareholders not to the fairness of the market.
So if I have insider knowledge of some earnings at BigCo and I trade on that, I've breached my fiduciary duty and in some sense stolen that info from BigCo.
I don't see how your scheme would address that.
Or, less abstractly, if you're preparing the earnings announcement for BigCo and you trade knowing earnings are bad, then you've leaked the announcement. And that gets worse, not better, if all trades are public and real time.
So I think total transparency in trading and insider trading interact in non-obvious ways.
> harm of insider trading is to the shareholders not to the fairness of the market.
no, insider trading doesn't harm the shareholders, except the ones who sold (or bought) without using said information (compared to someone who did have it).
The harm is indeed to the market - information assymetry means the other market participants, like the above shareholder, is not buying/selling as "correctly" as the ones doing insider trading.
This also leads to mis-pricing - something that decreases market efficiency.
But being so difficult to enforce, insider trading can't be fixed tbh. The best we can do, imho, is to make the signal go faster (which is what transparency aims to do). By making the signal go faster, insiders actually have very little time to actually "inside trade".
> leaked the announcement
the market _should_ know the earnings are bad. In fact, the market _should_ be making a prediction about the earnings in the aggregate. The information from an insider trader, if it were fully transparent, means that a company's shares will accurately reflect their earnings even if they didnt annouce it, and this makes the market more efficient.
If the market had all information then there would be no trading as the price would be correct and nobody would want to buy or sell, as doing so would be money-losing.
The market works because of different information, opinions, ideas that are available to different participants.
Trading on insider information is like doing a pump and dump, and should be illegal.
> there would be no trading as the price would be correct
the trading would happen when your personal risk is different from another trader. Future events (that have not yet happened) will also make each individual trader do trading based on their predictions.
It's absolutely not true that there's not going to be any trading. After all, unless every trader's internal risk rating and funding are _exactly_ the same, trading must happen, especially if information is very transparent.
> should be illegal.
just because it's declared illegal, doesn't mean it doesn't happen, nor people don't get away with it. It's why i claim that the next best thing is to _make_ it legal, but force the trade to be revealed instantly rather than have a 1 month time gap.
In the event that an insider (or potential insider) starts making large trades, there will be people observing and making similar trades, and thus the insider information (despite being obscured) is transmitted out via this trade signal. The faster this signal gets transmitted, the less insiders will have an opportunity to profit unfairly.
>>nobody would want to buy or sell, as doing so would be money-losing.
Somewhat related, there is a saying that caused me great hesitation for many years: "Remember, whatever trade you make, someone else is making the exact opposite bet; what is the likelihood which of you is wrong?". Now, in large, this hesitation is largely good, but not to excess.
I then realized that on the exact same trade people can have very different legitimate perspectives that do NOT invalidate yours, i.e., many situations where you can both be right, for your goals. E.g., a trader may have a great reason to sell a stock this minute while a long-term investor has an equally great reason to buy and accumulate the stock. Or, stocks can go in/out of specific investing criteria such as for growth, value, momentum, etc., and different portfolio managers will be selling and buying the same stock at the same minute and both be completely correct about the stock meeting their goals.
>>You’d be prosecuting people for concealing ownership.
Yes, and concealing ownership over the long term is more difficult (in many cases, impossible, e.g., for executives with stock packages — exactly the set of most likely insider traders) and investigating and prosecuting it is far easier vs insider trading.
> It's, sadly I'd say, a totally insignificant chunk of the population and yet at every opportunity there shall be people like yourself using any excuse to accuse them of wrongthinking.
I don't understand where you're going with this paragraph. Whether they are wrong is unrelated to how many there are. And you don't need very many people to make insider trading happen.
And why are you using the term "wrongthink"? This is a discussion about actions and rules. Nobody's being punished for their thoughts and opinions, just called wrong in an internet comment. If I say people shouldn't like hot dogs I'm not accusing Chicago of wrongthink.
There are tons of libertarians in the US. If you're in Luxembourg (judging from your profile?) you may have fewer of them.
There was a big push in the 70s. Most of the ones I've known well grew up in the 70s and read more or less the same literature. The had some influence in econ in the 70s and 80s and their influence is less mainstream now, so you may have fewer younger ones. There are still lots of them in tech, especially in the bay area. Perhaps they still skew older, I don't know much about the demographics these days.
It's partially an American phenomenon because of the cold war and because it became a way for conservatives to --racism and ++drugs. Nowadays you don't need a third party for that.
Plus many more. Google around for "insider trading" plus some of the standard libertarian economics keywords like "coasian" or "austrian" and you can find some of the literature. I haven't tried smoking any of it, though, and can't advise it.
Also pretty easy to hide in the noise of a trading algorithm. Eg. Make bets that hold a collection of biotech firms on the day that the fda approves their treatment.
You could also up the exposure by choosing to hold N small market segments, that all overlap with the stock that’s being insider traded.
I think it's the market makers and algorithmic traders. Not sure if they are corrupt. When things get famous the retail traders come in and the algos drop off and then the market makers start futzing over the arbitrage.
That is a single article. Are we really supposed to call into question the entire credibility of the past and present of a news organization because of a single questionable article from years ago? Bloomberg is great at breaking financial news faster than any of the other financial news orgs. That one article you linked wasn't even their specialty like this post's article is.
I don't think it's a question of raw intelligence so much as where the smarts are applied. Doing the crime and stepping back to put the crime in context and analyze the paths are two different topics and two different sets of behaviors.
As an analogy, as a developer I think it's pretty easy to write code that's bad in some way that you don't notice at the time. And that's even true if you are able to spot the same code as bad when, say, joining a new job.
Can't dig up the source but I remember hearing that it's often people that have an overly high value on having things immediately. E.g. thinking about the lifestyle they could live now with the money. They're acting irrationally from a long term perspective.
https://archive.ph/uMNA7
Proof that security questions on websites are one of the most garbage "security" practices out there.
When forced to provide answers to dumb “security questions”, I will typically use a password manager to both generate a random “answer” and to store the question-answer pairs. I generate new strings for each site that asks the same dumb question.
For sites that demand to know my birthday when all they really need is a boolean declaration of adulthood I use 1 January 1901. (I’ll admit that when I first started this practice I used 1 April 1901).
I'm probably sure everyone knows my first pet's name by now.
My first dog t7xW6q+WX-i9$G4*&^sY was a beautiful creature. I remember her fondly.
only if you tell the truth
Most people do.
Wouldn't it be easier to get mobile tracking info about M&A bankers and figure out which companies and websites they're visiting?
The negative of that is quite interesting. Take SEC web server logs and look for invest firm subnet addresses. Firms not appearing in those logs do 1.5% worse.
https://news.ycombinator.com/item?id=16648323
What sort of “mobile tracking info” do you have in mind, and where could you obtain this information for an individual? Maybe (maybe!) you can get their physical location with the right access to certain ISP datasets, but the website info? Is that something that is available for sale on an individual basis?
The article states that the trader obtained his information by hacking into poorly secured corporate email accounts and configuring auto-forwarding rules to send himself copies of incoming emails. Specifically, he triggered password reset flows with “security questions” and data mined open sources for metadata like family names which helped him guess the answers to the security questions. So overall, it wasn’t a very sophisticated hack, and certainly seems more straight forward than “getting the mobile tracking info of M&A bankers.”
In the US, there are commercial companies selling this data. Probably not associated with a name, but you could buy the data (I think they sell the whole dataset for a relatively affordable price), figure out who is a M&A lawyer by checking which IDs show up at their headquarters + some other relevant location, then track them from there going forward.
The data is likely collected from ad and analytics SDKs in various unrelated apps, so you just need the lawyer to be using one of these apps.
Journalists have demonstrated that the data is good enough to identify and track e.g. intelligence service employees.
Maybe "ad targeting info" is more accurate
https://www.wired.com/story/how-pentagon-learned-targeted-ad...
Interestingly some M&A banks keep (or used to, at least) discreet residential addresses where the crucial meetings between senior people can take place over dinner rather than them being obviously seen to meet at the banks or their own offices.
...or track SEC agents instead
https://www.bloomberg.com/opinion/articles/2024-09-11/hertz-...
https://archive.is/o/TTQ2A/https://papers.ssrn.com/sol3/pape...
Wow. I didn't think anyone was actually doing it but now I think it must be going on.
Tangentially related: https://youtu.be/RM1gfvAsrg8
I can't remember seeing security questions securing a system in the last decade. Are they still used and I just don't see them or this was some unusual company config?
They were pretty much only ever used as a blocker for your email being spammed. As in there's very very few sites that would reset a password on a security question alone. The security questions purpose was just to avoid people triggering emails/resets to the wrong second factor. Despite the common belief they are worthless security questions they are perfectly fine when they don't reset the password directly and merely block users from mistakingly triggering a reset to a second factor on an incorrect account.
Do you know the common alternative to not using security questions in the above step? Doing absolutely nothing and allowing randoms to annoy you hitting your second factor with password resets. The ultimate place you rely on either way was the second factor and the questions were always better than nothing at all.
As a ceo, you just call the IT department directly and that is that. In the it’s just tubes analogy sense, it is all just people at the end of those tubes eventually.
What you just described is incredibly prone to social engineering.
Have real people go to the office of the CEO and have the CEO make the reset request in person. Even by phone a reset is harmless if the computer the ceo is using is known to be trusted and company managed. The defense is in depth not circumstantial to one single phone call or method. You can also authenticate the request through other channels.
Oh so I guess the "please fill in your reset email" counts as a security question. Makes much more sense thank you.
USPS uses them. Their customer service rep wasn't amused when I told her my favorite food is heroin.
And here I am with all answers to my security questions as random strings of letters and numbers stored alongside my password in my password manager. I hope I don’t have to give someone that answer over the phone.
I probably raised a fair bit of suspicion last week when I told the Wells Fargo rep handling a declined CC transaction that I had to look up my mother’s maiden name in my password manager.
At this point anyone handling passwords must have encountered enough of us to know that some family names need to be looked up in a password manager, and it isn’t that suspicious. Isn’t that right, my cousin? I can never remember how to spell grandma 38!;&,90-@3!;8,’s name.
I don't remember where now, but I have run into sites that disallow numbers and non-alpha characters in the "secret" question answers. They were actively trying to thwart people from entering random gibberish there. Of course that's silly, but so is thinking that a person's maiden name is some kind of secret, or that people will be able to reliably remember things like "the title of their favorite book."
My uncle is called Robert'); DROP TABLE Students;--
Duhangit Bobby
My only fear of doing this is that someone could call in and say "oh sorry, I just typed in a bunch of random numbers and letters" and the rep will go "haha, don't we all!" and let them reset the password.
Yeah, it is pretty awkward.
My forst car, sure: Capital-double-you, dollar sign, eff, nine, you, bee, gee, capital kay...
Windows still uses them when creating a local account.
Well technically any website which has a ticker watchlist has valuable data because they can correlate it with the data about ticker detail page access patterns and infer something. Whether that is valuable is something else. But if you have the data on people in the industry then it might be valuable.
https://archive.today/UqYa9
The supreme court, and its now usual right leaning bias neutered the SEC a bit more: https://www.whitecase.com/insight-alert/supreme-court-rules-...
Another way to see that would be the Supreme Court affirming that if the SEC accuses you of what is clearly common law fraud, and wants to penalize you millions of dollars, they are required by the Constitution to bring those charges to Article III courts where you can exercise all the rights of the accused recognized by the Constitution (most specifically in this case, trial by jury).
There's no other way to see it.
I'm not sure why the parent comment decided to bring politics into it. You'd think the idea that the government shouldn't be able to accuse you of a crime and take your money without a trial would be bipartisan.
> I'm not sure why the parent comment decided to bring politics into it.
The Federalist Society and their fellow travelers have been politicizing the Supreme Court for literal decades. To talk about the Supreme Court while avoiding any mention of politics is a itself a stridently political act.
Further back then that. Supreme Court has been a political institution all along. (The Marbury vs. Madison decision was an interesting political maneuver.)
> I'm not sure why the parent comment decided to bring politics into it.
It's the standard way to denounce decisions you don't like.
There was a recent video by John Oliver going deep into the politics of the supreme court, so it's in the public discourse enough recently that the two concepts of justice and politics are probably linked for some folks.
It's one of those annoying things that tends to happen a month out from presidential elections I guess.
John Oliver has enough bad takes and lies that I'm at the point that if he says something, I assume it's a lie at this point. Or at least his conclusions are lies
Yeah I tend to take it more as satire or wild exaggeration than real investigative reporting.
When his buddy Joel McHale, who also acted on the fictional TV show "Community" along with John Oliver, tried making his own hot take comedy news show, it really put things in perspective for me.
Now I watch it for the comedy aspect as much as anything I see on other news media these days. Take what I see with John Oliver amped up to a solid 9 or 10, divide it by 10, and that's probably how serious or impactful the thing actually is that he is reporting on.
So you request a jury trial. I don’t get what your point is. Its a civil penality because the SEC isn’t a law enforcement agency and it enforces regulations. Regulations have been around since George Washington was president when the Whiskey Act was passed allowing the government to form regulations on taxing whiskey including levying fines on people.
You couldn’t “request a jury trial”. That was the point of the suit.
Yes, civil penalties are a thing. But the argument that prevailed was that this was not a penalty for speeding or not paying enough tax, this was a penalty for alleged actions that amounted to common law fraud & Congress can’t delegate the adjudication of common law—civil or criminal—to an administrative agency.
And regulations are still enforceable. What is not enforceable is to make a regulation that parallels an existing law, and deny a federal trial because it’s now a “regulation”.
Are SEC the good guys? I can't keep up.
Gensler met with FTX fraudster Sam Bankman-Fried and had a secret zoom call with him as the press later found out. FTX always advertised how they were "regulated". Yet despite not even having proper book-keeping¹, they were never investigated by the SEC, which has been focused on hassling legitimate businesses such as Coinbase - a public company with proper compliance and actual audits.
¹ https://arstechnica.com/tech-policy/2022/11/new-ftx-chief-sl...
FTX was receiving inquiries from SEC in early 2022, before its collapse: https://prospect.org/power/congressmembers-tried-to-stop-sec...
Also “doing audits” and “having compliance” and “being public” doesn’t insulate a company from scrutiny.
The real world is messier than Disney’s “good guys bad guys” dichotomy.
No, they're not.
Should have been quite clear when Madoff ran a 20 billion USD ponzi for multiple decades and he got caught because his own sons turned him in at the FBI.
The SEC was not involved in Madoff at all (other than to make it worse my "auditing" Madoff multiple times and publishing that "all is fine nothing to see here").
The SEC is a government marketing agency to keep up the veil of US markets being fair and functional.
They can be incompetent without being bad. It is a mistake to assume nefarious intent.
You don’t have to be nefarious to be bad. Being incompetent definitely makes an federal agency with powers of enforcement bad.
"Bad" can also apply to results or execution (performance, in/competence), not just intent.
Anyone else read all the way down and see the bit about "everything is securities fraud"? Great ongoing bit by Matt on another way attorneys in the US bilk the public.
I don't think that's bilking at all. In the US we generally favor private enforcement over public regulation. E.g., the SEC doesn't go after every small bit of fraud and dubious corporate behavior. They're the big guns, and the small stuff is dealt with via private lawsuit from investors who think they've been harmed.
If we got rid of both private and public enforcement, fraud costs would balloon massively, costing the public wildly more. First for retail investors they were ever more often the suckers in the fraud, and then for everybody as we lose the robust public markets that are a major driver of business investment.
Somebody's got to keep the greedy, amoral people in line. I'm not sure doing it via predatory lawyers is more efficient than skilled bureaucrats, but it's definitely more in line with the free market principles that tend to win out in the US.
I agree with private enforcement via the courts, but I disagree with securities fraud which is just highway robbery of the public and investors to enrich lawyers.
Strong scent of bovine effluence.
In order to reset their email password he would’ve needed access to their email.
Should have needed. I recommend listening to (or reading the transcript of) https://darknetdiaries.com/transcript/118/ about someone doing account hijacking/password reset as a service. Even good services sometimes have zero-days.
Microsoft supports self-service password reset: https://learn.microsoft.com/en-us/entra/identity/authenticat...
"Microsoft Entra self-service password reset (SSPR) gives users the ability to change or reset their password, with no administrator or help desk involvement. If Microsoft Entra ID locks a user's account or they forget their password, they can follow prompts to unblock themselves and get back to work."
Which isn't actually quite as crazy as it sounds like it should be.
No? If you're resetting your email password, it's probably because you're locked out of your email and thus the reset process shouldn't require email.
It should use 2fa and another email. For corporate just internal IT right? Security here seems lapse. Ideally reports are links to an internal system not attachments.
Unpopular opinion, but I suspect this is actually how a lot of hedge funds have historically outperformed the markets. The amount of nonpublic data needed to get an edge is surprisingly small.
My mostly uninformed hunch is that much of the fancy "public information" analysis that hedge funds claim to do to have their edge is actually parallel construction for insider tips. I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
These things sound way too specific to just perform on a hunch, and even then, you might get the analysis wrong if you don't have the insider tip to check your math.
But it's probably enough to keep the SEC investigator from having a case unless they find the insider link directly.
> I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
This is really common and basically table stakes for sophisticated firms now (those that invest in relevant sectors). They track everything from parking lots to freighters and oil tankers to crop yields via satellite imagery and flyovers.
It's gotten cheaper with drones so more important areas like major ports might get daily fly bys to track containers and boat traffic. Some have static cameras pointed at these things
The use of aerial imagery for institutional asset tracking is older and much more widespread than we'd think.
Back in 2005/2006 my university maths professor (in Finland) had an established side gig in the US. He had polished a process to manufacture aerial drones - still called UAVs at the time - and had put together a fairly slick software pipeline to combine GPS tracking with digital imagery. One of his longer-term clients at the time was Harvard University; they had contracted his firm to get routine data on how their land endowments were doing.
An associate professor at the CS department has had a similar thing going on since ~2005. His company does drone imagery for land owners in Finland. Rather surprisingly a notable fraction of his business at the time was coming in from families and corporate offices wanting "just" nice looking shots of their various farm buildings.
At the time the university in question was rather well known for their computer vision unit.
Try 1910's. Reminiscences of a Stock Operator describes Jesse Livermore collecting unique public data on shops and use for trading. The founder at my first trading job gave me this book to read, and I am eternally grateful.
Don’t forget the easiest dataset to use: they buy consumer transaction data directly from Visa and Mastercard.
With that in hand it’d be pretty easy to know if, say, Apple will beat or miss revenue for a given quarter.
> With that in hand it’d be pretty easy to know if, say, Apple will beat or miss revenue for a given quarter.
Wow, seems so easy! That's not how the market works though. You've got to know if Apple's going to beat the analysts' expectations of how Apple is going to do. All the analysts have access to that data and that's table stakes.
Apple's guidance on revenue is only like 30% of the equation.
Typically, because they make so many bets, a hedge fund needs to be only 53-54% accurate with their predictions to make money.
The stock of every company will move a decently large amount on the day quarterly revenues are published, whether it's Apple or a smaller firm. You can make a lot of money via options maturing on such days. When you need to be right only 53% of the time, these signals _really_ add up.
>Typically, because they make so many bets, a hedge fund needs to be only 53-54% accurate with their predictions to make money.
Wouldn't that imply that every bet the fund makes is roughly of the same $$ value? I would figure more senior traders or more successful ones would vary the size of their bets relative to certainty or uncertainty of an event outcome (could be quarterly earnings, a political/geopolitical event, etc)?
Don't think of it like buying a stock on the spot market like retail investors typically do. Many hedge funds place their bets by using the options market, which limits the downside on a bad bet (see e.g. the butterfly strategy [1]).
The size of the bet also depends on a lot of factors. Many hedge funds don't work like monolithic entities, rather they have a bunch of portfolio managers (PMs) who have their own allocated pools of assets from investors. These PMs decide on placing their bets based on lots of different things like their liquidity position (e.g. you don't want to lock up your cash in one position even if you're sure it'll make money when there's a risk of being margin called because of another trade) in addition to signals such as the one dicussed above.
[1] https://en.m.wikipedia.org/wiki/Butterfly_(options)
The only thing I can speak to is crop yields. Satellite imagery S flyovers won't really teach you a lot outside of a binary yes/no r field is alive.
The technology farmers use teams yields to the square foot. I'm betting you can buy that from John Deere and others. That's probably where they get that?
I don't know how effective the project was because I left before it finished but we were working on using the normalized difference vegetation index, normalized difference water index, and a bunch of other data points to try to predict crop yields.
Farmers might get that kind of stuff from flyovers for the extra resolution but that was cost prohibitive for our purposes except when validating data from the satellites.
Yeah good luck getting accurate NDVI measurements down to the square foot from satellites.
This year in university I took a course where I had to imagine creating a startup and we ended up mocking up an agritech business that dealt with drones and satellites data. We discovered that Sentinel 2, a European satellite, has a resolution for ndvi that goes as low as 10/20m. This improves nasa's modis sitting at a resolution of ~250m.
Furthermore, this is free. There are companies providing paid images with higher resolution from their own satellites (Constellr comes to mind). I'm sure the resolution isn't going to be exact to the square foot, but for some cases you probably don't need such a high resolution
Luckily corn fields go on for miles so we didn’t need that resolution.
Fields vary wildly within relatively small spaces. Just because it looks uniform doesn't mean it is uniform.
Our 100 acre bottom field this year averaged 274 bushels of corn per acre. Some places were around 360, some were around 50.
If you're trying to predict crop yields to beat the market, granularity is wildly important.
> major ports might get daily fly bys to track containers and boat traffic
Shipping traffic has transponders these days, no different to air. Don't even need drones.
> I've heard it claimed that some funds have flown helicopters over oil storage fields to measure the shadows in the tanks to know how much oil is stored, or bought satellite photos to analyze the parking lot use of major retailers during the Christmas season.
That actually is public information. I know it's hard for your typical member of the public to obtain, but the key thing is that it didn't wasn't communicated directly by someone working at the company. That's legitimate and no parallel construction is needed (except to mislead your competitors – maybe that's the real motivation).
> These things sound way too specific to just perform on a hunch, and even then, you might get the analysis wrong if you don't have the insider tip to check your math.
This is suggested as the parallel construction for the actual insider info.
Ordering satellite imagery and counting cars is just a weekend project. The last time I looked at ordering imagery, the main obstacle was the minimum order size, so it'd actually scale better for monitoring every store car park than for looking at a single car park.
So if Macy's parking lots have 11% more cars than the same time last year, is that a buy or a sell? Are people actually buying more, or are they more cash strapped and spending more time looking for value?
You’d have to have historical data to see if more cars mean more spending.
What if Macy‘s parking lots have fewer cars but they’re selling more and more online now?
How busy are the car parks by their dispatch center? are the cars staying longer because people are working overtime? how many UPS trucks are visiting?
Ok fair, so you need to have a model for every one of their revenue streams.
you buy data flow data from ISPs at all tiers, so even though they're encrypted, knowing how much traffic is going to Macy's.com vs JCPenney.com gives you information you can act on.
We know this is being done, because of reports that say Netflix is X% of Internet traffic. The undredacted reports from those same data sources have much more detail. It's also why some apps that don't appear to have any business model are actually quite valuable.
2024 answer: just train a predictive AI with that rarely measured data and avoid thinking about the innards of the black box.
In terms of parallel construction, can you tell the difference between insider trading and confident-sounding tips from WallStreetBetsLM?
It’s an indicator they’re getting more traffic. Which you can then feed into your model to decide if it’s a buy or a sell, based on all other data.
For instance, is the stock and/or expected earnings > 11%, while traffic seems to be only 11% - or vice versa.
The helicopter and satellite tricks though are legal, right? They do not involve any leaks from insiders.
>> parallel construction for insider tips
That is almost certainly the case.
I know a guy who's been making and winning steep-odds bets on baseball games based on wind patterns at stadiums on game days.
Personally I think those things sound like the natural result of ex-intelligence agents wind up working in finance, sort of like the advertising boom seen from the ex-WW2 propagandists.
The SEC could still have a case - timeline, corroborating intrigue, etc. - but as an underfunded revolving door, there's little pushing them to even try to hold these firms accountable. The exchange between a congressperson/senator and an SEC rep a few years ago - "How many cases do you take to trial?" "It's more efficient for us to settle," or something along those lines - was pretty damning. (I apologize, the exact details escape me and every single search function on the internet has apparently been degraded into uselessness.)
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I recall learning this lesson pretty early on. In high school, the econ teacher ran a stock trading game - you get some starting capital, you make trades, at the end of the quarter whoever had the most got some kind of reward.
At the time we had a family friend that was working for a company about to announce a stock split along with a very good earnings report. He told me when to go all in on that stock, and i did exactly that. The day after that split my portfolio had more than doubled, beating the class record by a significant margin. Said record stood until the teacher retired.
Not sure if it was the lesson he meant to impart though since I think most took away from it that to win you need to lie, cheat and steal.
I knew someone who won a similar stock trading contest held by a radio station about 30 years ago. He put all his pretend money into a low volume penny stock. Then in real life he bought enough of that same penny stock to raise the stock price substantially. He'd somehow calculated that the cash prize would exceed the cost of manipulating the stock. IIRC the stock price got another boost when they announced his winning trade on the radio, enabling him to make a tidy profit.
That's exactly how clients beat bucket shops as well. If they don't set their risk limits low enough and fees high enough, you can profit by manipulating the underlying markets.
I won a similar contest by being the only student who never bothered to log into my trading account, thus keeping all my assets in cash by default. The market had a down week, so everybody except me was in the red.
I think the lesson, which has served me well, is to not make short-term trades.
When I studied abroad, I lost my debit card and had to get it mailed to me internationally. I was down to nothing and spent a week living off of rice and furikake.
What saved me is one of these trading contests for my school's business club. I signed up for it and dumped all of my "money" into playboy and forgot about it. Turns out they won some big lawsuit and the stock spiked just in time. First place was a $200 dollar fine. I had to have the club president spot me the train ticket to go pick it up.
Just to be clear... It was a prize, not a fine right?
3rd place in our class was a student who dropped out two days into the stock game and never logged in.
The lesson is that in a win/not win contest, you want to do something no one else is doing. Maybe things go your way or maybe they don't. But you avoid the risk of being narrowly beat.
short term trade is gambling unless you really have data and speed that you know how to use. Most trader uses charts and whats hot, the profits then runs on the greater fool theory.
You can go long and sell if there is a significant breakout. Then you hunt down the next value stock. A return is a return.
If you got into Nvidia ten years ago you would have to be dumb not to pull it now. There is market timing foolery, and then there is just being realistic.
> At the time we had a family friend that was working for a company about to announce a stock split along with a very good earnings report. He told me when to go all in on that stock, and i did exactly that. The day after that split my portfolio had more than doubled, beating the class record by a significant margin. Said record stood until the teacher retired.
That family friend seems like a complete idiot for passing on that information.
Plus a stock split on its own has no change to the value of a stock. There’s no reason for it to double overnight. In fact the direct effect on the price is the opposite as you have twice (or K times) as many shares and each is worth half (or 1/K). So the net effect is zero.
In theory you are right that stock splits have no bearing on returns, but in practice it is well documented (see e.g. [1]) that "stock splits and reverse splits often result in short-term abnormal returns even though such split events do not change any fundamental factors affecting the valuation of a firm's stock."
[1] https://www.sciencedirect.com/science/article/pii/S016726812...
> We provide evidence that the incomplete adjustment of share prices to splits or reverse splits can be attributed to heterogeneity in traders' cognitive abilities.
What a colorful turn of phrase.
The split was followed by the stock very quickly regaining it's previous per share value over the course of the trading day, though maybe it was over the next week; this was a few decades ago.
And i agree that he shouldn't have told me. A few years later i actually told him something along those lines. I appreciated it but he exposed himself to a lot of legal risk.
> Not sure if it was the lesson he meant to impart though since I think most took away from it that to win you need to lie, cheat and steal.
Better to teach reality than ideology, assuming you want to be a practitioner instead of a theorist.
Nothing ever bad happened when societies trade high trust for low trust. No sir. All roses and sunshine. Certainly worthwhile for me to bend or break any rule keeping me from my best life.
Hating cheaters does nothing to change the reality of it being an effective method for getting ahead.
It would if said cheaters were socially ostracized. Instead we make big budget movies about them, they get famous, and then earn money from the newfound attention.
And who’s fault is that exactky
Presumably people that break the rules in a high-trust society, or at least those that enable the rule-breaking.
So…. everyone?
Do you have a particular answer in mind, or a point to your question? Yes, societal rules in some sense depend on everyone enforcing them. But there are also people/organizations/etc. with more power to fund or support these violations of social rules, so presumably they’re more at fault too.
So your point is that if we fundamentally change society, ignoring the fact that this is integral to human nature itself, then we can fix this problem? That's about as helpful as saying we can have peace in the Middle East if we all just got along. It's comical how disconnected from reality it is, and yet you seem to think people should take it seriously.
No, I’m saying that people have stopped enforcing social rules and therefore cheating is increasingly a valid way to succeed. That’s what the point of the thread was about. Lots of things are fundamental to human nature; society is the process of controlling and channeling them.
Fair enough.
Only in narrow circumstances and only to a point. Or at least that's my (limited) understanding of game theory.
You're a caricature of my original point and you don't even realize it.
IME the reality is that trust erodes as cheating becomes widespread. The consequences of less trust are significantly higher costs and more stress and fear.
FWIW, I don't advocate blind trust.
Perhaps you meant to say we should teach the reality that cheating exists and is bad; not to pretend it doesn't exist? Or that it's hopeless to be honest and trustworthy because some others may not be? Which leads to ... apathy or more cheating and less trust.
I never said cheating is moral. I said cheating is advantageous. You think cheaters care that they're hurting society? You can't be a cheater without being selfish.
The whole rhetoric of high trust society sounds like a fallacious argument from consequences against well deserved distrust by claiming it will basically lead to the collapse of society.
I like Margin Call's quote - "be first, be smarter, or cheat".
Is what he did there illegal?
> hedge funds have historically outperformed the markets
According to Investopedia:
"From January 1994 to June 2023—through both bull and bear markets—the passive S&P 500 Index outperformed every major hedge fund strategy by over 2.8 percentage points in annualized return."
https://www.investopedia.com/articles/03/121003.asp
Good article. The grandparent comment is about hedge funds that outperform. Rather than offering the automatic diversification most people seek from hedge funds, his/her point is that some which are highly correlated to the market are laundering insider info.
Not just hedge funds.
Congressional democrats, and i am sure republicans too can outperform S&P 500
--
>" An exchange-traded fund (ETF) that tracks the stock trades of Democratic members of Congress has been outperforming the S&P 500 since its launch in 2023. "
https://markets.businessinsider.com/news/etf/etf-named-after...
Hillary Clinton cattle futures controversy - Wikipedia https://en.wikipedia.org/wiki/Hillary_Clinton_cattle_futures...
ETF Named After Nancy Pelosi, Tracking Congressional Democrats' Stock Trades, Surpasses S&P 500 with Tech Triumph | Markets Insider https://markets.businessinsider.com/news/etf/etf-named-after...
Sssh, we don't speak of the chicken man's chicken monies.
There is the fun example of a trade that was made before that information should have been physically able to arrive, based on speed-of-light limits. [1] (2013)
The article says "Presumably there will be a hard look into what exactly happened..." but I wonder how hard that look was, and how often that stuff still happens.
[1] https://www.washingtonpost.com/news/wonk/wp/2013/09/24/trade...
The regulators looking at gold futures would have been contending with manipulators placing massive orders in bad faith, trying to trigger stop loss. That all led up to the flash crash.
One thing I rarely hear people talk about is how many libertarians believe insider trading shouldn't be a crime. There are lots of libertarians in the financial industry, so there are likely lots of people in the financial industry who believe that laws against insider trading are evil.
So when I picture insider traders, I don't picture shady organized criminals doing things they know are bad. I picture cowbows believing themselves to be the good guys for freedomizing the market.
And when you think about all the people who believe that insider trading is a positive good, you kind of have to conclude that it's rampant. It's financially lucrative, hard to detect, harder to prove, relatively easy to hide, relatively easy to pin on someone below you in the org, and people think they're good for doing it. What force is keeping it in check?
Different POV: Insider trading should be legal because is fundamentally impossible to police fairly or effectively. The one caveat is ALL trades must be public in real-time (and not via shell corps, but showing the real beneficial owner). This way, insider trading can do public good by providing good market signals. Transparency would also reduce the advantages of insider trading.
Someone can correct me if I'm wrong (which I probably am), but my understanding is that legally the harm of insider trading is to the shareholders not to the fairness of the market.
So if I have insider knowledge of some earnings at BigCo and I trade on that, I've breached my fiduciary duty and in some sense stolen that info from BigCo.
I don't see how your scheme would address that.
Or, less abstractly, if you're preparing the earnings announcement for BigCo and you trade knowing earnings are bad, then you've leaked the announcement. And that gets worse, not better, if all trades are public and real time.
So I think total transparency in trading and insider trading interact in non-obvious ways.
> harm of insider trading is to the shareholders not to the fairness of the market.
no, insider trading doesn't harm the shareholders, except the ones who sold (or bought) without using said information (compared to someone who did have it).
The harm is indeed to the market - information assymetry means the other market participants, like the above shareholder, is not buying/selling as "correctly" as the ones doing insider trading.
This also leads to mis-pricing - something that decreases market efficiency.
But being so difficult to enforce, insider trading can't be fixed tbh. The best we can do, imho, is to make the signal go faster (which is what transparency aims to do). By making the signal go faster, insiders actually have very little time to actually "inside trade".
> leaked the announcement
the market _should_ know the earnings are bad. In fact, the market _should_ be making a prediction about the earnings in the aggregate. The information from an insider trader, if it were fully transparent, means that a company's shares will accurately reflect their earnings even if they didnt annouce it, and this makes the market more efficient.
If the market had all information then there would be no trading as the price would be correct and nobody would want to buy or sell, as doing so would be money-losing.
The market works because of different information, opinions, ideas that are available to different participants.
Trading on insider information is like doing a pump and dump, and should be illegal.
> there would be no trading as the price would be correct
the trading would happen when your personal risk is different from another trader. Future events (that have not yet happened) will also make each individual trader do trading based on their predictions.
It's absolutely not true that there's not going to be any trading. After all, unless every trader's internal risk rating and funding are _exactly_ the same, trading must happen, especially if information is very transparent.
> should be illegal.
just because it's declared illegal, doesn't mean it doesn't happen, nor people don't get away with it. It's why i claim that the next best thing is to _make_ it legal, but force the trade to be revealed instantly rather than have a 1 month time gap.
In the event that an insider (or potential insider) starts making large trades, there will be people observing and making similar trades, and thus the insider information (despite being obscured) is transmitted out via this trade signal. The faster this signal gets transmitted, the less insiders will have an opportunity to profit unfairly.
>>nobody would want to buy or sell, as doing so would be money-losing.
Somewhat related, there is a saying that caused me great hesitation for many years: "Remember, whatever trade you make, someone else is making the exact opposite bet; what is the likelihood which of you is wrong?". Now, in large, this hesitation is largely good, but not to excess.
I then realized that on the exact same trade people can have very different legitimate perspectives that do NOT invalidate yours, i.e., many situations where you can both be right, for your goals. E.g., a trader may have a great reason to sell a stock this minute while a long-term investor has an equally great reason to buy and accumulate the stock. Or, stocks can go in/out of specific investing criteria such as for growth, value, momentum, etc., and different portfolio managers will be selling and buying the same stock at the same minute and both be completely correct about the stock meeting their goals.
Noooo. The presumption of fairness in the market makes the market… without trust, you’ll have less capital, which hurts the shareholders.
My understanding was that insider trading is illegal because you are stealing (ideas, plans, news) from the company.
That’s pretty much the same as making it illegal. It’s a system of honest graft that requires for work and enforcement.
The public metadata would be immensely valuable, and nobody would want to comply. You’d be prosecuting people for concealing ownership.
>>You’d be prosecuting people for concealing ownership.
Yes, and concealing ownership over the long term is more difficult (in many cases, impossible, e.g., for executives with stock packages — exactly the set of most likely insider traders) and investigating and prosecuting it is far easier vs insider trading.
Seems like a win.
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> It's, sadly I'd say, a totally insignificant chunk of the population and yet at every opportunity there shall be people like yourself using any excuse to accuse them of wrongthinking.
I don't understand where you're going with this paragraph. Whether they are wrong is unrelated to how many there are. And you don't need very many people to make insider trading happen.
And why are you using the term "wrongthink"? This is a discussion about actions and rules. Nobody's being punished for their thoughts and opinions, just called wrong in an internet comment. If I say people shouldn't like hot dogs I'm not accusing Chicago of wrongthink.
Despite there being so few somehow they are all exceptionally easy to spot…
I'm sorry I hurt your feelings.
> there are hardly any libertarians
There are tons of libertarians in the US. If you're in Luxembourg (judging from your profile?) you may have fewer of them.
There was a big push in the 70s. Most of the ones I've known well grew up in the 70s and read more or less the same literature. The had some influence in econ in the 70s and 80s and their influence is less mainstream now, so you may have fewer younger ones. There are still lots of them in tech, especially in the bay area. Perhaps they still skew older, I don't know much about the demographics these days.
It's partially an American phenomenon because of the cold war and because it became a way for conservatives to --racism and ++drugs. Nowadays you don't need a third party for that.
> May I have some of what you're smoking?
- https://www.cato.org/commentary/its-time-legalize-insider-tr...
- https://mises.org/articles-interest/what-morally-right-insid...
- https://www.investopedia.com/articles/markets-economy/092216...
- https://www.reddit.com/r/changemyview/comments/2v3ikz/cmv_in...
- https://politics.stackexchange.com/a/20426
- https://www.pbs.org/wgbh/frontline/article/should-insider-tr...
Plus many more. Google around for "insider trading" plus some of the standard libertarian economics keywords like "coasian" or "austrian" and you can find some of the literature. I haven't tried smoking any of it, though, and can't advise it.
Also pretty easy to hide in the noise of a trading algorithm. Eg. Make bets that hold a collection of biotech firms on the day that the fda approves their treatment.
You could also up the exposure by choosing to hold N small market segments, that all overlap with the stock that’s being insider traded.
Like which ones do you suspect have done this?
Many funds do not use these sorts of strategies and the ones that do almost always underperform after fees.
So in aggregate there isn’t much evidence of outperformance.
That’s what some guys I knew in New York told me. People talk to each other and the hedge fund guys don’t really compete with each other.
My guess is they also make use of “expert networks” to access confidential information.
Anyone can pay for that. The problem is being able to read and digest it all.
in the form of nudge nudge wink wink
I would take the idea further, that profitable retail traders are profitable, in large part, because corruption exists.
Not that they are engaged in corruption, but that any patterns they find primarily exist only as a result of the corruption of others.
It’s a working hypothesis at least.
I think it's the market makers and algorithmic traders. Not sure if they are corrupt. When things get famous the retail traders come in and the algos drop off and then the market makers start futzing over the arbitrage.
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That is a single article. Are we really supposed to call into question the entire credibility of the past and present of a news organization because of a single questionable article from years ago? Bloomberg is great at breaking financial news faster than any of the other financial news orgs. That one article you linked wasn't even their specialty like this post's article is.
I'd say that Matt Levine has a fair amount of credibility. He's probably my favorite finance columnist.
TFA is from the "opinion" section; I'm very confident that the article is at least somewhat reflective of Matt Levine's opinions.
If you’re clever enough you to do something like this, then you must realize that getting caught is an obvious eventuality.
So… why?
I don't think it's a question of raw intelligence so much as where the smarts are applied. Doing the crime and stepping back to put the crime in context and analyze the paths are two different topics and two different sets of behaviors.
As an analogy, as a developer I think it's pretty easy to write code that's bad in some way that you don't notice at the time. And that's even true if you are able to spot the same code as bad when, say, joining a new job.
Can't dig up the source but I remember hearing that it's often people that have an overly high value on having things immediately. E.g. thinking about the lifestyle they could live now with the money. They're acting irrationally from a long term perspective.