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.
This is really common and basically table stakes for sophisticated investors 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 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?
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.
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.
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
Shipping traffic has transponders these days, no different to air. Don't even need drones.
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 like 30% of the equation.
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.
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)?
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.
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.
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.
For instance, is the stock and/or expected earnings > 11%, while traffic seems to be only 11% - or vice versa.
That is almost certainly the case.
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).
This is suggested as the parallel construction for the actual insider info.
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.
Better to teach reality than ideology, assuming you want to be a practitioner instead of a theorist.
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 think the lesson, which has served me well, is to not make short-term trades.
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.
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.
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.
[1] https://www.sciencedirect.com/science/article/pii/S016726812...
What a colorful turn of phrase.
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.
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...
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.
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.
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?
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.
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.
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.
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.
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.
The public metadata would be immensely valuable, and nobody would want to comply. 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.
One thing I very often hear talked about however is how libertarians are the root of all evil even though there are hardly any libertarians. 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.
> 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.
"all the people who believe that insider trading is a positive good". May I have some of what you're smoking? I honestly I think it tells much more about yourself than anything else.
> 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.
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.
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...
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...
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."
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.