Information wants to be free and will always become free one way or another. The entire way the current system of insider trading illegality is set up favors only the super-rich and super politically connected that are beyond the reach of the SEC. For example - lets say you are the CEO of Pfizer. Now PFE is working on a blockbuster drug for obesity. Now since half of America is morbidly obese, you expect profits from this drug to exceed 300 billion over 20 years. You look at test results and they are fantastic - BMI goes down to normal in patients with no side effects. Now if insider trading was legal - then the scientists and basically everyone inside the company that is aware of the results can trade on the information and get rich. So can their family and friends that are in the know. But they have to act fast because the rumor will spread like california wildfire and pretty soon the stock is going to runaway. Now this is a very democratic way of making money. But no - the SEC says that no one can act on this information. So you can't buy PFE stock/options because that sends an immediate warning signal at the SEC once the information becomes pulbic. So you also can't tell your grandmother to buy PFE because she never bought stock in her life so its obvious she will show up on the SEC investigation list once the results of the drug become public. But this is just way too valuable information to not profit from so you call you're buddy Steve Cohen at SAC - who makes a living trading off insider info. He is beyond the reach of the SEC cause he's legal team's resources are enoumous compared to the SEC. Plus he's got some sway with the current admin. and both parties due to political donoations. Plus every other hedge fund manager that also trades on inside info. also got his back legally because they don't want to see a bad legal precedent set that could be used against them in the future. As a show of gratitude for you, he hires your college dropout son as a trader at his firm with a 7 figure salary plus bonus. So under this senerio instead of thousands of PFE employees and their freinds and family making money the only mofo that makes money is a f-cking billionaire - and maybe some of his other billionaire buddies that are also outside the reach of the SEC. How bout when Bernancke got a call from Bob Rubin and made the 'greatest monetary flip flop in monetray history' according to Larry Kudlow himself. You think Rubin didn't talk about his conversation considering he is chairman of the largest bank in the world. Or how bout Paulson winking at his buddies at Goldman - which turns out to have the largest earnings in history despite the biggest market rout in 5 years. Occasionlly the SEC may go after someone really high profile only to give the illusion of doing their due diligence. The current system trading of insider trading is only illegal for those without enourmous financial resources to fight the SEC and for those without political connections. Insider trading is the only real edge in the market and is worth trillions every year. And the SEC does a good job making sure this wealth never passes onto those that aren't already billionaires.
Of course insider trading is rampant. That's just one more reason... Why the odds are stacked against retail traders... It's not even a random system less commissions. It's a random system... Less commissions... less market manipulation by brokers and insiders. Anyone who thinks they can beat insiders... By staring at charts... is dreaming.
I trade off TAS and DOM more than charts, but my argument is: I dont try to beat the insiders, I try to reocognize their insidiously aggressive buying and join it. I would imagine a good technician would say the same thing. Charts do show when someone knows something.
I have to agree with you completely. If insider trading were legalized, then the SEC would have no purpose. If the SEC had no purpose, it would be very difficult to justify the cost of such a bloated bureacracy to congress, least of all taxpayers. Without an SEC, the American public would no longer hold in their minds the illusion that capital markets are fair and orderly, which could lead the common Joe to see the equity markets for the scam that they are. This would obviously be totally unacceptable to the powers that be, so therefore the concept of not restricting insider trading activity to those who have enough money and influence to be on the SEC's buddy-list is totally absurd (realize that that is what you're advocating here, as that is the effect of the status-quo).
Insider trading is the only true edge in trading - and its a multi-trillion dollar a year edge. And that's why its illegal, God forbid the trillions made in the markets each year ever trickles down to the average person. No it can't be that way, gotta reserve the big money for guys that already have big money - how else are they going to make up for their losses from taxes, inflation, currency devaluation, etc.
I'm sure everyone watched the ridiculous action today and realized how oddly pertinent this post is. Of course, to suggest insider trading be legalized is insane, but you have to wonder when the S&P is on its knees, bonds rallying to the moon, and an almost inevitable market drop is in the works for all the right reasons, a random "Fed rate cut" rumor gets circulated...of course only after the market has bounced a full percent. Of course this is followed with the inevitable "buy program" media bs, but it seems that the fact that these buy programs were initiated with enormous size and the right time signals some form of insider trading is in the works. I'm sorry, but you don't normally see tens of billions of dollars pumped into the market on a rumor that doesn't have much weight.... Of course, if you've got one of the biggest hedge funds in the world and an inside man at the treasury, it doesn't hurt either
hmmmmmm, if i had info from the inside, would you take it? how often would you use this info? would you share it?