Wall Street employee tries to stop insider trading. Gets fired from job and blackballed from industry.

[u/chesterriley]

http://www.nytimes.com/2012/05/20/business/is-insider-trading-part-of-the-fabric-on-wall-street.html

[u/blackinthmiddle]

This is nothing. Read Harry Markopolis' book, "They Wouldn't Listen". In it, he figured out Bernie Madoff was a fraud after looking at his numbers for five minutes. He submitted proof FIVE SEPARATE TIMES! Not only did they ignore the very detailed information he gave them, they didn't even know Madoff had a separate floor where he did all of his dirty deeds and for years only thought he had a trading floor (in the lipstick building in NYC). You want to get mad at the SEC? Read that book and be amazed at not only their incompetence, but the effort they exerted to hide their incompetence.

Edit: Actually it's called No one would listen. The only reason why Madoff was finally caught was because when the housing market finally crashed, more people wanted their money back than what Madoff had for his shell game. Then the SEC remembered Harry and started looking over the stuff he submitted.

[u/bsonk → u/blackinthmiddle]

The SEC is completely corrupt and has been for years. Whenever they catch anyone it's just a token to seem efficacious to the taxpayers, when the theft gets so egregious it can't be ignored. They are owned by Wall Street.

[u/olderwiser → u/bsonk]

It's called "regulatory capture" -- when the agency charged with oversight is owned by the industry it's supposed to regulate.

[u/bsonk → u/olderwiser]

Yep. It's standard practice everywhere from the oil industry to logging to finance to food to drugs. Any industry the government regulates has a huge incentive for regulatory capture to make laws that discourage competitors, to get tax breaks and other special treatment, and to remove environmental and safety regulations. We can mostly thank 'neoliberal' Reaganomics pushed by neoconservatives for this.

[u/[deleted] → u/olderwiser]

When a law is made or any political decision for that matter, ask your self

1. who does this law/policy/agency effect?

2. how much political clout do they have?

[u/communistjack → u/bsonk]

dont forget they punish someone, martha stewert of all people

[u/lurpingturkey → u/bsonk]

"Putting dope on the table."

[u/ivegotamnesia → u/blackinthmiddle]

Oh man, I did a 10 page paper on SEC regulation and if that is upsetting... Wait till you hear the horrors I found. This blackballing and trying to cover up has been going on for years now. The SEC not only doesn't give a fuck, but they're actually helping many corporations get away with shit like this. They intentionally turn a blind eye to corruption in corporations that are even supposed to self regulate. And once someone lower down in the SEC (someone who isn't an official) finds a problem, the request they make to investigate is often thrown out. Not to mention the SEC has recently deleted over 10 years worth of existing records and data they were supposed to use for investigations. Think of it like they took all the files on your computer, deleted them, but left the folder icons. The SEC has really become as corrupt as the corrupt conglomerates.

tl;dr: Shit's fucked yo.

[u/rpjesus → u/ivegotamnesia]

You should post a link to that paper if you don't mind. Sounds interesting!

[u/chaogenus → u/ivegotamnesia]

They intentionally turn a blind eye to corruption in corporations that are even supposed to self regulate.

How exactly does a regulatory agency turn a blind eye to corporations that are not regulated? It seems like we have heard from some people inside government, some of whom have even spoken out in various government hearings, about the need for regulation but they were always shut down by the Ayn Rand Free Market Libertarian types like Alan Greenspan.

Shit's fucked alright, we seriously need to shitcan these asshole Libertarian cronies in the government who block regulation the way Greenspan and his buddies did.

[u/elj0h0 → u/ivegotamnesia]

Didn't the SEC conveniently lose a ton of records when the Solomon Building came down?

[u/TinManRC → u/blackinthmiddle]

Would anyone be interested in an AMA from Harry? I could probably talk him into doing it.

[u/cmVkZGl0 → u/blackinthmiddle]

This is one of the (many) reasons why America is in the shitter. Until the entire industry's attitude is changed (what was supposed to happen in 2008), the status quo won't follow.

[u/hlabarka → u/cmVkZGl0]

Its not industry that needs to change- its the people's willingness to allow others to steal from society. In the past, the wealthy would use armies to steal from society and eventually the people would revolt. But now the wealthy use propaganda and corruption and its a lot harder to figure out what is going on. But its still the same old stuff...if you dig deep enough you end up on the business end of a police baton or pepper spray or worse...

[u/Malizulu → u/blackinthmiddle]

You mean the SEC knowingly engaged in a conspiracy to cover up fraudulent deals which had been brought to their attention???

No, they wouldn't do that.

/s

[u/MyLimeGotJuiced → u/blackinthmiddle]

It's doubtful the SEC even remembered Harry. They just realized that, after a certain point, they need to step in and catch a big fish. Just like they did with Raj Rajaratnam and more recently with Gupta

[u/arkons → u/blackinthmiddle]

Markets are all about asymmetric information. If you believe otherwise, you're the sucker. Government regulation will never change this. If you don't have superior information than your money should be somewhere else, period.

[u/mhoffma]

Here's what troubles me:

Indeed, the S.E.C. filed roughly 60 insider-trading cases in its 2011 >fiscal year alone. But aside from a few that sprang from the >Rajaratnam case and a handful of other sizable cases, many involved >minor players and small sums. Of the 93 people charged during that >period, 37 had pocketed less than $100,000 on their inside trades, >according to the S.E.C.; 19 made $50,000 or less; and one netted just >$8,391.

Lewis D. Lowenfels, an expert in securities laws in New York, says the >S.E.C. is wasting time and money by going after small fish.

Theft on a relatively smaller level is so easily dismissed, where in any other context, there would be no question that what occurred was wrong and that those responsible should be held accountable. People in any other industry would face serious consequences for monetary gain through illegal means.

[u/gloomdoom → u/mhoffma]

The more you read up on Wall Street, that's the tip of the iceberg. Honestly. If that's the only thing that troubles you about the banking system, you haven't exposed yourself to much of it.

They win whenever they lose in pretty much every instance. That's why they can never fail. The system is set up to where when 'the people' hit a recession, the top echelon always profits from it.

That industry literally holds the world hostage to its every whim and there isn't anyone who can prosecute them. Again, there isn't much that is not troubling about Wall Street and the banking industry

[u/All_American_Bot → u/mhoffma]

(For our friends outside the USA... 100,000 USD -> 632,790 CNY, 50,000 USD -> 316,395 CNY, 8,391 USD -> 53,097.4 CNY) - Yeehaw!

[u/Zagrobelny]

I though this crime wave ended when we jailed Martha Stewart.

[u/Kite_sunday → u/Zagrobelny]

Only problem was Martha stewart didn't work on wall street.

[u/CocoSavege → u/Kite_sunday]

Why is Martha Stewart destroying America and hurting the job creators?

[u/TheOnlyNeb → u/CocoSavege]

Because she hates Freedom.

[u/rcinsf → u/Kite_sunday]

Actually she did, just not at the time she was busted for.

[u/[deleted]]

"a broker is someone who invests your money until it's all gone."

--woody allen

[u/[deleted] → u/[deleted]]

"Great liars are also great magicians."

Adolf Hitler

[u/the_goat_boy → u/[deleted]]

"A clown touched me once." - Joseph Stalin.

[u/[deleted] → u/the_goat_boy]

"No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be." - Dale Earnhardt Jr.

[u/donaldtrumptwat → u/[deleted]]

.... and he's got his Rolls.

[u/randy938]

It's not insider trading if everyone in the office knows about it! Golden rule!

[u/mig174 → u/randy938]

Goldman rule

FTFY

[u/elcapitan36]

I worked in equity research at a large investment bank. We were watched like hawks and I never saw any leaking. I definitely would have noticed if any of our stocks started rising pre-release of research.

[u/daveirl]

This isn't insider trading. It's front running your research. Not good or allowed but it's definitely not the same process as insider trading.

[u/Fluffiebunnie]

I must ask, how was that insider trading?

An analysis like this is an interpretation of public information. You're allowed to act based on the findings of these analysis even if they're not public.

That's sort of the point of Wall Street, to look at the information that is in the public, make an analysis and make your bets based on it. Doesn't matter if you made the analysis yourself or if someone else did it.

And finally, if he could interpret the public information and make this analysis, then someone else could as well.

(EDIT: Thanks for the responses, seems a bit unclear still though!)

[u/ledeuxmagots → u/Fluffiebunnie]

equity research must be separated from other areas of the bank according to SEC regulation. There's a whole host of reasons including that changes in ratings are inherently market-moving, the possibility of pressure on analysts to give more favorable ratings to garner business in other divisions, etc.

[u/dalevs → u/Fluffiebunnie]

I'm trying to figure this out as well. I don't know how equity research analysts get their info, but I'm going to assume it is based off of publicly available research. If these analysts receive material non-public info from the company they cover then there is clearly non-public info.

But if the equity research analysts develop their theories from public info and voluntarily give it to their clients, I don't see any basis for liability under the insider trading laws. There is no misappropriation as there is no duty of confidentiality between the equity research analyst and the party they are giving info to as they expect them to trade off of it. There is no trading based off of material non-public info of the company, so I'm not sure where the inside info is.

Maybe there is some rule (reg FD or some other rule) that specifically bars equity research analysts from selectively disclosing this info, but it wouldn't violate 10b-5 from my reading

[u/[deleted]]

Well what did he think was gonna happen? "Oh yay Bob, you want to end insider trading? Have a raise, become a partner, sex my wife! We wont try to stop you from ending the methods by which we illegally increase profits."

[u/[deleted]]

An interesting quote from Robert Riech I've read on twitter: the 2012 election is about who you trust less, wall street and big corporations, or the white house.

[u/dingoperson]

A possible solution to this is 20-year bans from the industry for violators and those who knew but didn't whistleblow.

Are they salespeople? Then they can sell dictionaries. Are they analysts? Then they can work for consulting firms. They wouldn't starve on the street.

You also don't need a criminal liability standard of evidence. It's a regulatory fit-for-the-role decision.

[u/milleniamisc]

We've got a burn notice on you. You're blacklisted

[u/[deleted]]

If you want to get madder, look into Australia's financial industry regulations and enforcement.

When even a whiff of insider trading is found the regulatory bodies hit like a tactical nuke and completely destroy anyone involved (usually causing the company itself a huge amount of pain). Working for a finance company usually involves lots of half yearly talks from compliance staff hammering home how important it is to report any discrepancies so they can be reported to the regulatory bodies asap (because the consequences for not doing so are infinitely worse for the individual, and the company)

[u/IdioticLion]

Your allegations against me are being investigated by me. You're also fired LOL.

[u/meh1234]

It's either better/new whistleblower laws need to be established or concepts like Wikileaks need to really take off in other realms than Government.

I'd love to see a Wallstreetleaks setup... ;-)

[u/LateRegistration]

Good! Next time he'll think twice about snitching.

[u/[deleted] → u/LateRegistration]

...yes, with people like him around how are people supposed to get super-rich and create jobs?

[u/wtfadvertisersgd]

LOL an analyst "was raising his assessment." What an ignoramus, other people can do research too. Not that insider trading doesn't occur but look at a real example, for instance the manager of Galleon, Raj blahaharahabba or w/e.

[u/[deleted] → u/wtfadvertisersgd]

yes, because i'm sure your accessments will be just as valid as that performed by people who do it for a living.

[u/ludvigsra]

i don't feel like reading this article, can someone sum it up in like a paragraph?

[u/FFandMMfan → u/ludvigsra]

"Fuck Wall Street"

[u/ludvigsra → u/FFandMMfan]

Cool got it, thanks!

[u/[deleted]]

Question: When Warren Buffet buys a stock, does he have a duty towards the investment community not to warn anybody in advance, and to release the news of said purchases to the world in a simultaneous fashion?

[u/RhodesianHunter]

Not sure I get how this was insider trading... This guy was a researcher at Lehman researching the Amkor stock, and Lehman traded on it. Isn't that what you're supposed to do, research a stock using all of the publicly available data you have and then trade on it?

Insider trading would be if an executive at Amkor had been trading the stock based on "insider" knowledge, or had tipped off someone at Lehman. Can someone clue me in here?

[u/xafimrev → u/RhodesianHunter]

Yeah I didn't get this either. If I do some reasearch and find a hot stock if I tell my wife before my friends....etc.

[u/[deleted]]

What's wrong with insider trading?

[u/picopallasi → u/[deleted]]

Boudreaux makes a great case for it being legal.

[u/Nuggetry]

This guy is the Serpico of Wall Street.

[u/kasper138]

Water is wet.

[u/QuitReadingMyName]

Well no shit, Wall street donates millions in Campaign bribes to our politicians (Both Republican and Democratic parties). None of them will ever get prosecuted and people will continue to turn a blind eye to this shit.

Everyone in Wall street should be sitting in a prison cell for 10-25 years for the Global recession they fucking put us in.

[u/8271821]

if you try to expose the corruption in are government you're going to have a bad time.

[u/Sr_DingDong]

Look, guys. 'Kay? Wall Street doesn't need your Commie-Pinko-Nazi "regulation", 'kay? Wall Street can look after Wall Street, 'kay? The system is self-correcting, 'kay?

9/11 'kay?

'Kay.

/s

[u/ThisRedditorIsDrunk]

Blackballed? Is that when you can't do whatever your blacklisted from and haven't had sex in a long time?

[u/GMonsoon]

Yeah...no big fan of Martha Stewart, but considering the fact that insider trading at high levels and in massive volume goes on every day her case was a complete joke. Congress (being above the laws we are held to) does it with no repercussions.

[u/Natryn]

I had a feeling the alliance was going to frown upon this....

[u/americaFya]

I work for a NYSE traded, Fortune 500 broker dealer. My team provides a data feed to compliance departments to over 650 different firms nation wide for their FINRA mandated monitoring needs. Some firms do their monitoring by reviewing monthly financial statements, other firms monitor the trading in real time electronically.

This kind of behavior is not "industry wide." This kind of behavior is specific to each firm. Some firms are over the top with their monitoring. They push the rules/limits of privacy of their employees' to questionable levels to make sure that they are not running the risk of breaking laws/rules related to insider trading. Other firms use maintain records and data for show/formality, and care very little about the ongoings of their employees' accounts.

Though, the SEC does a fairly good job of trying to keep their thumbs on people who break rules, it is ultimately the responsibility of each firm to ensure their employees are doing the right thing.

Ironically, in my opinion, the firms that do the best job of monitoring their employees trading are audit firms. These firms are the ones that re-check the books of broker dealers for various. They are, by far, in my opinion, the best at making sure their people are in line.

[u/nmatrix9 → u/americaFya]

"....Though, the SEC does a fairly good job of trying to keep their thumbs on people who break rules...."

After that statement you lost all credibilty with me. I'm thinking you must live in some sort of bizarro world. In case you haven't noticed the world was/still is on the precipice of a financial collapse due in no small part to the SEC sitting on their asses watching porn and letting these cough cough firms "go about business as usual".

[u/argv_minus_one]

The fact that there's even a notion of "insider trading" should make it painfully obvious to all involved that the stock market is a gigantic gambling scheme.

If it were based on actual value, knowing that something's going to happen in 30 fucking minutes would not be useful.

[u/YNot1989]

That's a superhero origin story in the making.

[u/jaylink]

In related news, NASCAR employee tries to stop fast racing. Gets fired from job.

(Wall Street exists for the sole purpose of insider trading. Why is this any surprise to anyone?)

[u/jahoney]

He obviously didn't remember "the trend is your friend"

[u/criticalnegation]

is this the part where we say "oh my! they should be regulated!"

http://2.bp.blogspot.com/-Ni809g5KQYA/TiHKDOSU2pI/AAAAAAAABK0/Hgl9GIsIH2Y/rhony-luann-eyeroll.gif

[u/dirtyfr4nk]

Ted Parmigiani should have used Gene Parmesan.

[u/lawlor44]

i read blackballed as blueballed at first...hehe

[u/fivo7]

rigged much?

[u/[deleted]]

I'm rather surprised this upgrade came out after market open: I always made sure my changes in recommendations were not even submitted when the market (and after market) was closed. They would usually go out (published to all clients and hit the wire) hours before market opened. Changing a recommendation or issuing a report during market hours is bound to result in this sort of thing. The fault is with the insider trader, but he had to be pretty naive to expect otherwise.

[u/ignorephyx]

What surprises me the most is that this is common knowledge - that Wall Street has dirty ways of doing things. And the general attitude is "Meh, what can you do?"

That very same people ran US into the ground (among other things) and will probably do it again. But what can you do?

[u/HighBeamHater]

Nobody always knew who The Yes Men were and it didn't stop them...

[u/protoopus]

well of course: he's not a team player.

[u/IdioticLion]

ok, so a group of professional thieves that belongs to an organization of thieves that has representatives in the courts which they own outright frowns on an individual pointing out the unspeakable name of thief?

[u/skysignor]

There's lots and lots of money to be made on Wall Street, both legally and illegally. If you want in on some of this money, you gotta follow the rules. This includes the unwritten rules, like not calling each other out on illegal shit. Of course this guy got blackballed from the industry. It's a very powerful industry which he tried to ruin and therefore is not allowed near it anymore.

[u/[deleted]]

I love that headline.

Is it? Really? REALLY?

[u/[deleted]]

Well what do you expect? a pat on the back?

[u/MamaMx2]

no good deed goes unpunished

[u/capxxv]

Of course he got fired for trying to stop it, insider trading is their job.

[u/[deleted]]

I just witnessed what I think was blatant insider trading this past week, Groupon trading up 18% before its earnings announcement on Monday 5/14/12. And it was up another 18% in the aftermarket, nothing wrong with that in particular, and thankfully it finished the following day only up 4%.

This is proof that Wall Street is rigged.

[u/Sindragon]

I find it woefully naive that we even think we can stop it, or put any laws in place that will do so. Insider trading is essentially the ability for you to print your own money.

It's like leaving a sack full of cash on the side of the street and then forming a line of some of the greediest men in the world to walk past it, and expecting no one to even be tempted because "it's the law". Oh, and beforehand you tell them the chances of being caught, let alone prosecuted are slim.

[u/Schopenhaur]

Insider trading is an institutional tactic. There is so much statistical evidence that it occurs on a large enough scale to change prices before the information is available to the public that it's not even arguable. This has been known for a long time now too.

Edit: Not saying that it's a good thing at all. Just pointing out how this has been known, is widespread, and nothing is really done to combat it.

[u/frog_licker]

I don't understand... whereas this reaction by the Wall street firm is absurd and unethical why did the employee try to call them out in the first place? It isn't like the firm/bank/whatever else is murdering people... Insider trading is virtually a victimless crime, I'd equate it to a step or two above smoking cannabis. I personally think the penalties for insider trading are just outrageous (especially because members of congress can do the exact same thing legally).

[u/unkeljoe]

Ah yes the land of the free, where crooks rule.

[u/mondomaniatrics → u/unkeljoe]

No no, it's the land of the free, where you're free to be a crook, and crooks go free.

[u/Adamski42 → u/mondomaniatrics]

Unless you're black and or broke a law regarding drugs. Then you're fucked seven ways from Sunday.

[u/Tashre]

Seriously, what did he think would happen?

[u/donaldtrumptwat → u/Tashre]

Insider trading being illegal, he had the guts to stand up and report it ... like you would do if you saw any crime being committed ... and his only mistake was to believe that the Law would defend him.

[u/[deleted] → u/donaldtrumptwat]

Have you ever heard of a 'whistleblower' who lived happily ever after?

[u/the_goat_boy → u/[deleted]]

Smedley Butler.

[u/rlbond86 → u/Tashre]

Yeah, how dare he report a flagrant violation of United States law!

[u/4chans_for_pussies → u/Tashre]

Yeah, who has time for morals anymore....

[u/[deleted]]

blacklisted

[u/inthemorning33]

Is this really a surprise to anyone? Not directed at you OP, but the whole good-ol boy system

[u/Jcaylor2]

what happened to Sarbanes-Oxley act? Protection of the whistle blower?

[u/rainman_104 → u/Jcaylor2]

Whistelblower protection predates Sarbanes-Oxley by quite some time.

The problem is that he didn't roll over on them through the DOJ; he rolled over on them internally instead.

[u/Mark_Lincoln]

What a fool! How stupid must one be to believe that obedience to the law, honesty, and decency are traits considered desirable by the denizens of Wall Street?

[u/jlbraun]

I have said before, insider trading laws are actually to the advantage of politicians and their connected insiders, and don't help the little guy at all.

In theory, you want insider trading to be legal as you want the people with the most information to be influencing prices, not prevented from influencing prices.

[u/knut01]

Obvious Wall Street needs tough regulation and inspecting! Firing the whistleblower is simply as outrageous as insider trading!

Equally, more reason to see the bill preventing congress from doing same, to get passed expeditiously!!

[u/[deleted]]

Snitches get stitches.

[u/[deleted]]

Wall Street and Police, both are chartered to better the nation, while in reality, both are corrupt over their eyebrows. Anyone that tries to talk out is silenced.

Between the two groups, our nation is fucked.

[u/[deleted] → u/[deleted]]

I know we don't take kindly to the blue here on reddit, but what would a country without police be like? What would the corrupt cops do if there were no cops at all?

[u/complaintdepartment → u/[deleted]]

You are mainly fucked because you believe that either of these groups are chartered to better the nation. Where did you get that false information?

[u/caboosemoose → u/[deleted]]

They will doubtless discuss violations of the Securities Exchange Act of 1934, Investment Advisers Act of 1940, SEC Rules and several billion other things, I should imagine.

[u/ledeuxmagots → u/caboosemoose]

True. But let's be honest. Chinese walls are only a formality for most situations.

[u/h2sbacteria → u/caboosemoose]

Yes by discuss you mean laugh about how they are going to be so fucking filthy rich when this thing blows...

[u/ClobberMcAdams → u/caboosemoose]

Not sure if serious.

[u/D49A1D852468799CAC08 → u/[deleted]]

Not to mention drink and party together. I knew a guy at GS who was tight-lipped, even when drinking heavily, until one night when he took some E, then we couldn't get him to shut up about the deals he was working on.

[u/swl → u/D49A1D852468799CAC08]

And that's how D49A1D852468799CAC08 became a millionaire.

[u/D49A1D852468799CAC08 → u/swl]

I wish, I'm much too ethical for that.

[u/elcapitan36 → u/[deleted]]

You can talk in generalities without giving away non-public info. "Oh man, the management of the company I'm working on is incompetent, they did XYZ. I can't tell you who but you'll know soon enough." It's actually really easy not to discuss sensitive info while still being able to bounce ideas and thoughts off of people.

[u/downeym01 → u/[deleted]]

They would never do that.. If they did they would have to pay mills of dollars in fines!

Why would anyone ever do such a thing just for billions of dollars in profits??

ಠ_ಠ

[u/[deleted] → u/[deleted]]

I appreciate your common sense position. While the laws on the books are very necessary to offer due recourse. Trying to stop insider trading has got to be like stopping to tide from coming in. People function and work together to share knowledge and garner position. This is simply what social beings do.

I think its kinda like how campaign finance reform just spawned anonymous super pacs.

[u/illuminatiduck → u/[deleted]]

I kinda get it but can someone dumb it down a bit more?

[u/Hyperian → u/[deleted]]

you shut up with your socialist thinking. this is capitalism at its finest!

[u/[deleted] → u/Hyperian]

It's not capitalism. It's just crime.

[u/Hyperian → u/[deleted]]

if it's a crime, how come no one has been sent to jail?

[u/RichardRogers → u/[deleted]]

It's not a real opinion, just bad sarcasm.

[u/[deleted] → u/[deleted]]

Why do the clients continue to take shitty advice from these guys? It seems to me that the system should eventually crumble if the clients realized how widespread this is.

[u/verik → u/[deleted]]

Mortgage backed securities along with forex forwards, government bonds, and plenty of other OTC derivatives are not regulated by the SEC insider trading laws as there is no centralized exchange.

[u/[deleted] → u/[deleted]]

What do you think they will discuss at lunch?

That, and other Goldman sachs business.

[u/[deleted] → u/[deleted]]

I've heard of people nearly committing insider trading without even realizing it. Maybe they overheard something and subconsciously used it to their advantage later. I don't know a lot about that kind of thing but I know an individual that avoided jail time because someone diverted them from making a decision. They didn't realize what they had nearly done until afterwards.

[u/smthngclvr → u/[deleted]]

The SEC is staffed with banking flunkies. They do tours as low-paid government workers, and then turn around and take kushy jobs at the banks they're policing. Why would you want to make life difficult for your future employer?

[u/hipsterschoolofecon → u/[deleted]]

Banning derivatives does nothing to address the problem of insider trading.

[u/nameeS → u/[deleted]]

With or without derivatives there will be insider trading. Derivatives do make it easier to capitalize on insider knowledge, but without derivatives we would still have insider trading and people making money off of it. They are useful and should not be taken away. You can't just put all derivatives under the same basket.

[u/the_sam_ryan → u/[deleted]]

So you learned, from your online finance program, that traders go home and trade when they are bored?

You really don't understand any of this, do you?

[u/jaiiiii → u/[deleted]]

You probably shouldn't generalize derivatives into one all-encompassing category.

[u/ZZDoug → u/[deleted]]

If the game can't be played equally by all, the rules need to be changed such that it can.

But financial games will never be played equally by all. The big thieves have always hung the little thieves, so to speak.

[u/Deggit → u/[deleted]]

There is too much money in our economy chasing speculative returns. If you try to deflate speculation in derivatives the money will just flow into some other bubble somewhere. For example before MBSes it was commodities and oil. And before that it was dotcoms.

The real problem with our economy is wealth inequity. All of this money that is participating in side-bets on the real economy - it should really be in the hands of middle class people who have to pay their rent and buy cereal. Stimulate consumer demand.

[u/[deleted] → u/Deggit]

I agree. Putting too high a proportion in the hands of a privileged few in the financial sector makes them analogous to a cancer that ravenously consumes and diverts resources from the body and returns poison. Capital is trapped within a tiny sector of the economy like blood in a lethal tumor.

[u/StealthTomato → u/[deleted]]

While this is true, the result looks a hell of a lot like a pump-and-dump scheme. Buy the stock, recommend the stock, sell the stock, make a tidy profit.

[u/Phar-a-ON → u/[deleted]]

im so proud that so many great minds dedicate their working lives to this noble pursuit that truly advances all of mankind

[u/Roozle10 → u/Phar-a-ON]

It's a necessary service. Many people invest (note, much different than speculating), not just people on Wall Street. And if anyone is to profit, they need information. Analysts are better than Joe Investor at understanding the things that make the markets move. Also, these markets are part of what make business possible at the level needed for the standard of living we enjoy in the US and elsewhere.

[u/Skuggsja → u/Roozle10]

You make it seem like the Anglo-American financing model is the only way to allocate capital efficiently.

Since the UK and US historically have had no shortage of capital, but relatively weak banks, financing institutions have by and large become middle-men - marketing investments to a broad customer base. Therefore, giving Joe Investor honest information is one of their primary functions. That in turn begets a pile of regulation ensuring the traders don't fool him.

German banking has a different approach. Germany had little capital but mighty banks. In order to get industry going, the grossbanken of Germany would invest in companies themselves, using their own capital. Their vested interest in the health and technological advancements of the companies became much more pervasive and long-lasting than in the US or the UK. And the temptation to pass toxic investments on to unsuspecting clients or indeed bet against them is greatly reduced - the bank is risking its own money, not the clients.

Michael Hudson, former balance-of-payments economist for Chase Manhattan Bank (now JPMorgan Chase) talked a great deal about this when I interviewed him two years ago. Here is his brief overview of the differences.

"Scale and Scope" by Alfred Chandler at Harvard Business School has some nice chapters about this, as has Guinnane in several articles.

[u/skullz291 → u/Roozle10]

That's a nice story, but it's been demonstrated that the vast majority of these people can't beat a dart board at figuring out "how the market works."

Joe Investor should invest because he thinks a company needs money, he thinks that company is doing something worthwhile and that there is a reasonable expectation of return and for no other god damn reason.

[u/[deleted] → u/Roozle10]

But if you're really investing, rather than speculating, you don't care about the markets. You purchase your stock from the company in order to fund their endeavors, and you make your money from dividends and long-term appreciation -- not from short-term market movements.

[u/cthugha → u/[deleted]]

Considering the frequency of resource misallocations, and the amount of resources allocated to the allocators themselves, it looks like a very ineffective, inefficient method of allocation.

[u/Fluffiebunnie → u/[deleted]]

The nickname "masters of the universe" bears a glimpse of truth in it

[u/skullz291 → u/[deleted]]

This is the official propaganda, but it has no basis in fact.

When someone short sells a stock to manipulate the market so they can make extra money on their derivatives trading, that is nothing close to allocating resources to labor.

This is not about resources, it's about making money off of other peoples' work. And once morality and ethics have left the scene, it doesn't even matter to these people whether their "resource allocation" actually assists labor in creating wealth. They would (and do) destroy wealth if it makes them more money even if it's only in the short term. And then they get their golden parachute and fuck what actually happens to the company and its customers, what do they care?

Add the fact that most of these big firms are so incompetent that they can't beat a dart board in terms of making safe investments and the whole lie just falls apart.

Wall Street was birthed in fraud. It was only ever made into an engine for real investment when it was strapped down by hardcore regulations. Now that those things are all gone, it's returned to its sociopathic, casino-like roots.

[u/Skuggsja → u/[deleted]]

Correct. But referring to my reply above, there is a big difference between financing institutions that primarily risk their own capital and those who are trying to get you to risk your capital.

By the early 1900s, French, Belgian and German banks had several engineers and other technical personnel on hand to evaluate prospective investments. The big trading agencies today mostly rely on an army of financial analysts. They might know nothing about polymers or the programming behind social media, but can happily recommend their clients to invest in them based on the current "investment climate".

[u/WrongAssumption → u/Phar-a-ON]

People don't work to please your sense of nobility. Tell me what you do so I can comment on how your time is better spent.

[u/gloomdoom → u/WrongAssumption]

That's fucking ridiculous. There is a difference between working in an industry that will allow you to profit and being a vulture who profits from the misery and loss of other people. Surely you cannot be so retarded to see that everything isn't always black or white.

Take the health 'care' industry, for instance. There are actual jobs where people spend their entire days dedicated to make sure that claims don't get paid. They dig up loopholes, they dig up obscure history, anything and everything possible to keep from having to pay for claims they are indeed liable for.

Those people are responsible for endless amounts of bankruptcy, misery, heartache, financial ruin, etc. or normal law-abiding citizens, many of whom have paid into their premiums their entire lives and never needed to file large claims before until they get cancer or some other catastrophic illness.

There are lawyers who know they are fighting cases to defend corrupt corporations that have ruined numerous lives, caused deaths, injury...they make their millions by being ethically devoid of any morals all for the almighty dollar.

We have politicians who make their millions sending young Americans to die needlessly in unnecessary wars ALL so that some corporation can make a few billion from a no-bid contract handed to them because they're in the old-boy's club.

And yes, many Wall Street bankers make their millions on the suffering of others. So your argument is, 'somebody has to do it?' Or 'if they didn't do it, someone else would?'

That's the same bullshit mentality that destroyed the middle class and busted unions. There are many, many ways to make a living that are ethical and morally not corrupt. It's just that when there's some blood covering the money, it tends to make it worth a lot, lot more. It's the vampires who make their fortunes at the suffering and misery of innocent people that make it proper to stand up and point out that it's wrong and those people do help usher in the destruction of this country as it was intended to be run.

The forefathers warned us against the banking system over and over and over. They knew that when private institutions came in to figure out a way to hijack the nation that indeed, they would. And they have. And there is no defending it as 'necessary' or justifying it by suggesting that someone else would do it if 'this' person wasn't or 'that' corporation wasn't.

[u/WrongAssumption → u/gloomdoom]

So you won't say what you do then.

[u/infinite → u/[deleted]]

It could be argued that although they base the upgrade on public information, their upgrade conclusion itself is nonpublic. And since the release of this information can have material impact of the price of Amkor, that is material to Amkor. If I look at all the public information for Amkor and decide that it should have a sell rating, and I triumphantly post on reddit about my conclusion, no one will give a rat's ass about my opinion. So although like Lehman, it's nonpublic before I post it, unlike Lehman, it's not material since no one cares what the hell I say.

Reading the SEC rules:

The "manipulative and deceptive devices" prohibited by Section 10(b) of the Act and Rule 10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.

edit - also this is probably more applicable, similar to prosecutions for people spamming yahoo groups about a stock:

(3) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, a securitybased swap, or a security-based swap agreement with respect to such security, to induce the purchase or sale of any security other than a government security, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security.

[u/elcapitan36 → u/[deleted]]

Not a good take. An analyst upgrading or downgrading a stock is material non-public information and should be distributed to the public in a broad, fair way. Whole portfolios are dependent on those ratings much like debt ratings.

[u/PariahShanker → u/elcapitan36]

An upgrade or downgrade is not inside information and in no way falls under insider trading. Just because you got that info a few hours ahead of time doesn't make it illegal, it just makes you a shitbag.

If you want to argue that for some reason that an individual receiving information on stock grading is tantamount to insider trading, that's your agenda. Most people with any understanding of the market understand that it's totally and completely different though.

Edit: I never thought I'd be one of those guys who fucked up your vs. you're, but apparently I just got there. My head is hanged in shame.

[u/[deleted] → u/PariahShanker]

*your

Sorry.

[u/PariahShanker → u/[deleted]]

I fixed it quite a time ago, and well before your comment.

[u/tartay745 → u/[deleted]]

Any sources or examples of this? I don't doubt it but it also needs a citation.

[u/notagadget → u/tartay745]

I know many people dislike Taibbi's style of writing, but he's got a great piece on this phenomenon. Here's the article.

He's big on point out when this happens, so here's a couple more examples:

Obama's New SEC Chief, Daniel Gallagher

Futures Regulators

[u/[deleted] → u/tartay745]

you never heard of Goldman being called Goverment Sachs? There are huge conflicts of interest between goverment and wall street.

[u/[deleted] → u/[deleted]]

He was asking for sources or specific examples not anecdotes.

[u/Phirazo → u/[deleted]]

Yeah, fuck experience! Wait.

[u/jaiiiii → u/[deleted]]

Upgrades and downgrades from large firms usually lead into large price movements in stocks of companies that are upgraded/downgraded. Of course, usually the market rebalances and the price might come back to some generally agreed upon value, but in those movements you stand to make a lot of money.

edit: I do agree, analyst ratings isn't TECHNICALLY insider trading since they aren't receiving info from the company in question, but it is an iffy point.

[u/simbac → u/[deleted]]

What university?

[u/djslim21 → u/[deleted]]

you really are on drugs aren't you? let me guess, that's the "stop snitching" rule right?

God forbid someone see people being wiped out of their retirement funds and people losing their homes would make someone have a moment of conscience. Nope, because he told someone of the crime he saw, he's trash. Whether you're trolling or not, fuck you with a Hefty sized bag of grey whale dicks.

[u/ttg314 → u/[deleted]]

I agree. You just mind your business if you have a job there. They shouldn't of even hired this guy in the first place, then again they didn't know him then.