Martha Stewart Guilty Of All Counts [Archive]

davefoc

5th March 2004, 02:50 PM

Clancie said:Yes, she was guilty, but she only made $40,000 in the sale (or avoided losing $51,000...however you look at it).

Seriously, a pretty small crime to spend time in prison for.

Clancie, with due respect I think you have missed the entire point of the trial.

Martha, was not tried for insider trading. That was something that she probably was guilty of and if she had told the truth to investigators concerning that her penalties would have been insignificant if she would have been found guilty at all. Insider trading is difficult to prove and for the client who gets their inside information from a broker I suspect that criminal prosecutions are virtually non-existent.

For reasons, that I can not imagine, Martha chose to lie and lie again in the face of overwhelming evidence that she was lying. After each lie Martha was in a hole that was a little deeper than the hole before. She seemed to think an infinite amount of money to spend on lawyers would get her out of that hole. In fact it appears that she was wrong.

At this point, Martha could fire her lawyers, admit the truth and request mercy. She would save thousands on lawyer bills and might receive some mercy for her common sense. Instead, whatever is driving to act in this bizarrely self destructive way will probably continue to drive her and she will continue to spend massive amounts of money on lawyers to try to prove that 2 + 2 = 5.

Just, to add a little credibiltiy to what I am saying. I like the Martha Stewart public personna. I admire her for building the company that she has. And I think we all will suffer a little as the result of the harm done to her company. None the less, I think that when somebody acts in the way Martha did, the state has very little choice but to attempt to punish for that behavior.

schplurg

5th March 2004, 03:43 PM

Well said, Davefoc. This little blunder could have cost her perhaps $50,000 if she hadn't tried to lie and forge her way out of trouble. Instead it has been estimated that she is worth from $500,000,000 to $700,000,000 less than she was before. A costly mistake fo sho...

shanek

5th March 2004, 04:10 PM

Why are so many people celebrating the conviction of someone on trumped-up charges who didn't cause the slightest bit of harm to anyone else? I know a lot of you were just rooting for it because you don't like her, but next time it could be someone you do like, or even you yourself.

Grammatron

5th March 2004, 04:12 PM

reprise

5th March 2004, 04:38 PM

Originally posted by shanek
Why are so many people celebrating the conviction of someone on trumped-up charges who didn't cause the slightest bit of harm to anyone else? I know a lot of you were just rooting for it because you don't like her, but next time it could be someone you do like, or even you yourself.

Insider trading DOES harm other people - that's why it's illegal. It also undermines confidence in the stock market, something I'm sure most Americans don't want given the current state of your economy. Martha Stewart also obstructed justice - are you seriously suggesting that obstructing justice is an offence which should go unpunished?

One of our high profile stockbrokers is currently serving weekend detention for insider trading, and his apologists kicked and screamed about him being given a custodial sentence because he made bugger all money on the deal. Financial penalties are of little consequence to many white collar criminals, which means that the only effective deterrent against people committing those offences is to make the penalties for those crimes ones which WILL be of consequence to the offenders.

shanek

5th March 2004, 04:46 PM

Originally posted by reprise
Insider trading DOES harm other people - that's why it's illegal.

In several threads, I have challenged people to show ONE SINGLE PERSON who is harmed by insider trading. No one can do it.

Maybe you can? Go on—ONE person who was harmed by Martha Stewart's actions. ONE.

It also undermines confidence in the stock market, something I'm sure most Americans don't want given the current state of your economy.

Again, I have challenged several people in several threads to support that. They can't do it. Insider trading HARMS NO ONE.

Martha Stewart also obstructed justice - are you seriously suggesting that obstructing justice is an offence which should go unpunished?

She lied to the authorities about something they shouldn't have had any authority to ask her about in the first place. Yes, that "offense" should go unpunished. It's kind of like when someone is arrested for resisting arrest, without arresting them for whatever it was they were supposedly resisting arrest for.

Would you say the Dutch family that hid out the Franks were "obstructing justice" when they lied to the authorities, saying they didn't know of any Jewish families hiding anywhere? I say they were "obstructing tyranny," something I applaud. Martha Stewart was obstructing tyranny as well; the only difference is that the tyranny in this case wasn't as severe and she did it on her own behalf as well as to protect others. But it is still tyranny to investigate someone for nothing more than performing a completely voluntary sale of stock.

reprise

5th March 2004, 05:02 PM

Martha Stewart voluntarily sold her stock on the basis of information which was given to her illegally, and I've yet to see any credible claims that she didn't know it was illegal to have information which was not available to ALL stockholders - as a consequence, other stockholders suffered a loss (were harmed) and she did not. If the volume of shares sold on the basis of insider information is large enough, it can seriously jeopardise the financial stability of a company (our ASX routinely suspends trading on stocks when abnormally large sell orders are being given for no apparent reason, as this is often one of the first indications of insider trading). No rational person is going to want to invest their money in a company where some of the stockholders have more information about the true state of the company and/or its intentions than others - why would anyone voluntary put themselves at a disadvantage to other shareholders?

Bentspoon

5th March 2004, 05:33 PM

This is not a surprise:

"Actually, my wife told me the other day that a lot of women hate Martha Stewart. She might have had a better chance with an all male jury."

Let's see. She's aging beautifully, has a lovely figure, impeccably decorates her home, garden and dinner table and is making all kinds of money despite her age.

Of course women hate her. This is WOMEN 101.

Remember the commercial where the European babe would say "Don't hate me cause I'm beautiful"

She wasn't talking to men.

Bentspoon

Luke T.

5th March 2004, 06:04 PM

Luke T.

5th March 2004, 06:05 PM

Originally posted by Sundog

OJ is not a woman. Hello?

OJ did not get off because he is rich and powerful. OJ got off because of entirely other reasons, and we all know it.

I don't know it. All I know is that if O.J. was just your run of the mill black guy who hacked and slashed two white people to death, he'd be on California's death row for sure.

He only got off because he is rich and powerful.

Luke T.

5th March 2004, 06:11 PM

Other victims of insider trading: Enron employees. They were not allowed to sell their Enron stock when the executives knew it was going to tank and they were selling theirs. They sold close to a billion dollars of stock. Meanwhile, the employees could only sit and watch as the stock dropped from around 90 dollars a share to just pennies.

Globert

5th March 2004, 07:06 PM

hhhmmmmm.....

Lied about a private matter.wasn' enthusiastic in helping her Inquisitors.

seems familiar. Can't shake my finger at it......

Globert

5th March 2004, 07:10 PM

I gotta apologize for that last bit.

I was possesed.

Globe

Chad Noles

5th March 2004, 07:12 PM

ROFLMAO,I've just experienced the biggest fallout of the Martha Stewart affair.20/20 has just postponed their story on cousins who marry each other due to Martha's conviction.:mad: Darn your sorry hide,Martha!

Mr Manifesto

5th March 2004, 08:25 PM

Originally posted by corplinx

Martha f'ed up by doing this at a time that the general public was fed up with stock related scandals. Look at the Enron execs, they have gotten dragged over the coals (with the exception of Ken Lay which of course will fual conspiracy theories for years to come). Of course, Martha is more in the news since she is a house-hold name.

If she did this now, my guess is it wouldn't be so bad. Her big bad was doing this at the wrong time.

That, and getting her assistant to try and lie her an alibi.

Roadtoad

5th March 2004, 08:37 PM

I can't say I'm feeling sorry for Martha. Most of her decorating reminded me of the environments in the computer game, DOOM. (Except on DOOM, the environments were a little more cheerful.)

Frankly, I have to agree with Mark Williams of KFBK, who admitted he'd have voted for convicting her because she's an arrogant, annoying b****.

peptoabysmal

5th March 2004, 09:35 PM

Originally posted by shanek

In several threads, I have challenged people to show ONE SINGLE PERSON who is harmed by insider trading. No one can do it.

Maybe you can? Go on—ONE person who was harmed by Martha Stewart's actions. ONE.

Again, I have challenged several people in several threads to support that. They can't do it. Insider trading HARMS NO ONE.

I don't think the argument against insider trading has much to do with harming an individual, but rather that it hurts the market by weakening investor confidence. Isn't it fairly well established that trader confidence has quite an impact on the market?

I can't help but wonder how many US Senators are guilty of insider trading... if anyone has access to vital information it would be them.

She lied to the authorities about something they shouldn't have had any authority to ask her about in the first place. Yes, that "offense" should go unpunished. It's kind of like when someone is arrested for resisting arrest, without arresting them for whatever it was they were supposedly resisting arrest for.

Would you say the Dutch family that hid out the Franks were "obstructing justice" when they lied to the authorities, saying they didn't know of any Jewish families hiding anywhere? I say they were "obstructing tyranny," something I applaud. Martha Stewart was obstructing tyranny as well; the only difference is that the tyranny in this case wasn't as severe and she did it on her own behalf as well as to protect others. But it is still tyranny to investigate someone for nothing more than performing a completely voluntary sale of stock.
I kind of agree and feel like Martha is being picked on. Why? Perhaps her celebrity status, I don't know. I heard (on the news) that what sunk Martha with the jury was that she lied about phone conversations and that the prosecution was able to prove those conversations took place and that the phone conversations contained incriminating evidence against Martha.

Ignorance of the law is not an acceptable excuse, nor is deliberately ignoring a law that you don't agree with, unless you happen to be hiding out from the Nazis. I don't think the Nazis would have agreed with us on that point, however. :D

reprise

5th March 2004, 10:01 PM

Didn't Martha Stewart used to be a stockbroker herself - meaning that she'd have a more than passing familiarity with the laws related to insider trading? She's also not the only person who is being prosecuted in relation to this incident, so I'm not sure why people feel she's being "picked on".

The reports I've read indicate that she asked her assistant to lie for her in order to try to avoid prosecution, so it's not as if she's an innocent party who made a genuine mistake - she knowingly did something illegal and tried to cover it up; I really can't see why the authorities "shouldn't have had any authority" to ask her about her illegal activities in the first place.

CFLarsen

5th March 2004, 10:29 PM

Martha Stewart worked as a stock broker until 1973. She then left Wall Street, bought a farm and began her business.

She knew what she was doing.

CFLarsen

5th March 2004, 10:32 PM

Originally posted by shanek
Maybe you can? Go on—ONE person who was harmed by Martha Stewart's actions. ONE.

The people who bought her shares, not knowing what she knew?

Originally posted by shanek
But it is still tyranny to investigate someone for nothing more than performing a completely voluntary sale of stock.

"Tyranny"? Tsk, tsk....Point is, she knew something that the buyers of her stocks did not. And that is illegal. Now, you can wave your hands in the air and complain about the fairness of such a law, but you cannot deny the existence of it.

peptoabysmal

5th March 2004, 11:02 PM

Originally posted by reprise
Didn't Martha Stewart used to be a stockbroker herself - meaning that she'd have a more than passing familiarity with the laws related to insider trading? She's also not the only person who is being prosecuted in relation to this incident, so I'm not sure why people feel she's being "picked on".

The reports I've read indicate that she asked her assistant to lie for her in order to try to avoid prosecution, so it's not as if she's an innocent party who made a genuine mistake - she knowingly did something illegal and tried to cover it up; I really can't see why the authorities "shouldn't have had any authority" to ask her about her illegal activities in the first place.

I suppose you're right. Though it's not like she went in with info to make a killing, she was bailing on a stock that was going to tank. Same in the eyes of the law I guess. But 7 years? Why not just a fine? I just think if it were someone else, it would have not been dealt with as severely.

epepke

5th March 2004, 11:08 PM

Originally posted by shanek
In several threads, I have challenged people to show ONE SINGLE PERSON who is harmed by insider trading. No one can do it.

Martha Stewart wasn't even accused of insider trading.

The worst thing she was accused of was lying about why she sold the stocks.

But, now that you bring it up, it reminds me of something I like to say to people. We do not have a capitalist system in the US. We do not have anything remotely resembling a capitalist system.

In a capitalist system, "capital" is stuff that you buy or loan in order to make stuff that you sell or lend.

In the US system, "capital" is green pieces of paper, unless it's yellow pieces of paper with the word "Stock" on them.

We pretend it's capitalist by pretending that this "stock" is shares in a company. Hooray democracy! All of a sudden, a lot of people can participate in running a company.

However, we also have laws such that, anybody doing this has to be nearly totally ignorant of the company. Because to buy or sell shares of stock if you aren't completely clueless is "insider trading," and that's Bad.

Besides, if a stock goes down by, say, 25%, does this mean that 25% of the buildings and equipment held by the company (the real "capital") vanish in a puff of smoke? Maybe they eventually sell or get rid of them, but that's not the same thing as saying that stocks are capital.

Which means that, however they may lie about it, everyone pretty much knows that the stock market is just some stupid psychological game. But they can't do that. because then it wouldn't be any fun any more. And that's about it.

reprise

5th March 2004, 11:11 PM

Is a fine the kind of penalty which is likely is to act as a deterrent to insider trading given that it's an offence which is often committed by people who are already wealthy - you'd have to make the fine an incredibly huge one for it to be of any consequence to a very wealthy offender; I couldn't imagine how large a fine it would take to even be an inconvenience to Martha Stewart, let alone a significant punishment.

reprise

5th March 2004, 11:19 PM

All this speculation about what penalty Martha Stewart will receive is precisely that, and none of us can comment on the fairness or otherwise of the penalty until she's sentenced in June.

The charges carry up to 20 years in prison for both Stewart and Bacanovic. The judge could potentially sentence the pair to time in a halfway house or home confinement, but legal experts have said the term would probably be reduced to roughly a year in prison under federal guidelines. Each charge carries a maximum sentence of five years and a $250,000 fine.

Martha Stewart Guilty of All Counts (http://www.casperstartribune.net/articles/2004/03/06/ap/Business/d814m2ug0.txt)

T'ai Chi

5th March 2004, 11:48 PM

Originally posted by shanek

In several threads, I have challenged people to show ONE SINGLE PERSON who is harmed by insider trading. No one can do it.

Martha herself.

Zep

6th March 2004, 02:29 AM

Originally posted by rdaneel
She'll get community service, redecorating roadsides. By what means? Standing in front of a billboard in a sexy little pinafore? :)

6th March 2004, 03:50 AM

Originally posted by CFLarsen

The people who bought her shares, not knowing what she knew?

"Tyranny"? Tsk, tsk....Point is, she knew something that the buyers of her stocks did not. And that is illegal. Now, you can wave your hands in the air and complain about the fairness of such a law, but you cannot deny the existence of it.

It's not the knowing (that often can't be helped) it is the acting on it.

6th March 2004, 03:59 AM

Originally posted by epepke

However, we also have laws such that, anybody doing this has to be nearly totally ignorant of the company. Because to buy or sell shares of stock if you aren't completely clueless is "insider trading," and that's Bad.

First off, insiders trade all of the time. Just because you are an insider does not mean you are handcuffed. You have to file with the SEC depending on the circumstances.

Secondly, "completely clueless"? Go to Yahoo finance and look up the public filings for any given company, then do the same for their competitors, then read up on the segment that they compete in then read up on relevant technologies, the financial state of their clients. The problem is that you appear to think that if someone does not give you the scoop on some rare tidbit of information you are clueless. If you are lazy you will remain clueless.

shanek

6th March 2004, 05:39 AM

Originally posted by reprise
Martha Stewart voluntarily sold her stock on the basis of information which was given to her illegally, and I've yet to see any credible claims that she didn't know it was illegal

It doesn't matter if there's any evidence that she DIDN'T. They have to produce evidence that she DID. And apparently, there wasn't enough evidence to make those particular charges stick.

I'm really bothered by this "guilty until proven innocent" attitude people seem to be having more and more...

as a consequence, other stockholders suffered a loss (were harmed)

How would they not have suffered that same loss anyway?

No rational person is going to want to invest their money in a company where some of the stockholders have more information about the true state of the company and/or its intentions than others - why would anyone voluntary put themselves at a disadvantage to other shareholders?

Exactly why, if the government would just keep out of it, the private companies would voluntarily enact policies to prevent this kind of thing from taking place, just like in the (completely unregulated by the government) commodities market.

shanek

6th March 2004, 05:40 AM

Originally posted by Luke T.
The people who bought the stock she sold when she knew it was going to tank. They lost money.

As I have pointed out repeatedly, and as everyone else has ignored, they were going to buy the stock anyway...the exact same stock at the exact same price. So how did Martha Stewart's actions cause them to suffer? She didn't cause the price of the stock to tank, and these people were going to suffer the loss no matter what she did.

shanek

6th March 2004, 05:42 AM

Originally posted by Luke T.
Other victims of insider trading: Enron employees. They were not allowed to sell their Enron stock when the executives knew it was going to tank and they were selling theirs.

This is NOT "insider trading." This is outright fraud and force. How can you POSSIBLY equate that action to simply selling a stock when you have an indication that something is wrong?

shanek

6th March 2004, 05:49 AM

Originally posted by peptoabysmal
I don't think the argument against insider trading has much to do with harming an individual, but rather that it hurts the market by weakening investor confidence. Isn't it fairly well established that trader confidence has quite an impact on the market?

Yes, but it is most certainly NOT the case that you need government intervention to solve the problem. Look at the commodities market, for example. Its regulation is completely private, voluntary, and independent of the government, yet they have many tools in place to protect the market. For example, if the price of a commodity varies by a certain amount above or below its starting price, trading for the day for that commodity is shut down (one reason why the Trading Places scheme wouldn't work). The reason is exactly what you say: such actions cause harm to the market, so the commodities traders VOLUNTARILY submit to the rules of the (again COMPLETELY PRIVATE) National Futures Association.

Ignorance of the law is not an acceptable excuse, nor is deliberately ignoring a law that you don't agree with, unless you happen to be hiding out from the Nazis.

Or hiding from an oppressive government who is trying to prosecute you for nothing more than taking part in a completely voluntary exchange that doesn't harm one single person.

6th March 2004, 05:51 AM

Originally posted by shanek

It doesn't matter if there's any evidence that she DIDN'T. They have to produce evidence that she DID. And apparently, there wasn't enough evidence to make those particular charges stick.

I'm really bothered by this "guilty until proven innocent" attitude people seem to be having more and more...

Ignorance of the law is no excuse. Since she was a stockbroaker and since she was CEO of a public company no reasonable person could possibly think that she did not know that acting on insider information as a no-no. The fact that she lied about it suggests that she was painfully aware.

How would they not have suffered that same loss anyway?

The principle is that she acted in anticipation of the information being available to all and thus drove the price of the stock down. 5 shares, 5000000 shares, no matter, her action was inimical to the welfare of the other stockholders

Exactly why, if the government would just keep out of it, the private companies would voluntarily enact policies to prevent this kind of thing from taking place, just like in the (completely unregulated by the government) commodities market.

That is nonsense. Why would they do it in the absence of controls when they sometimes do not when it is illegal? You seem to think that people would act better without laws then they do when there are laws. What makes you think that? There is nothing to prevent someone from doing the right thing laws or no laws.

shanek

6th March 2004, 05:55 AM

Originally posted by CFLarsen
The people who bought her shares, not knowing what she knew?

Geez, how many times are you people going to make me rebut this lame-ass answer??? :rolleyes:

"Tyranny"? Tsk, tsk....

Yes, tyranny. The government is punishing people who are doing nothing more than taking part in a voluntary exchange that harms no one. Our founders called George III a tyrant for doing basically the same thing.

Point is, she knew something that the buyers of her stocks did not.

Oh, come on—that describes about 90% of the stock trades!

Now, you can wave your hands in the air and complain about the fairness of such a law, but you cannot deny the existence of it.

When did I deny that this tyrannical law existed? :rolleyes:

6th March 2004, 06:00 AM

Originally posted by reprise
No rational person is going to want to invest their money in a company where some of the stockholders have more information about the true state of the company and/or its intentions than others - why would anyone voluntary put themselves at a disadvantage to other shareholders?

Happens all of the time. The management and Directors know a lot more than the average stockholder.

shanek

6th March 2004, 06:00 AM

Originally posted by epepke
Which means that, however they may lie about it, everyone pretty much knows that the stock market is just some stupid psychological game. But they can't do that. because then it wouldn't be any fun any more. And that's about it.

Actually, stocks are an excellent way of providing investment money to a company should the company prove its value to enough people. People buy stocks because they figure that the value is going to go up, and they figure that because the company is going to be more important. So they want to buy the stock. Some of that stock is being bought from the company itself, and goes into the company's fund as money that is invested. That money can then be used to expand the business or invest in whatever the company needs to grow.

CFLarsen

6th March 2004, 06:02 AM

Originally posted by Ed
It's not the knowing (that often can't be helped) it is the acting on it.

True.

Originally posted by shanek
Geez, how many times are you people going to make me rebut this lame-ass answer??? :rolleyes:

Careful, shanek. You're starting to sound like IIan...

Originally posted by shanek
Yes, tyranny. The government is punishing people who are doing nothing more than taking part in a voluntary exchange that harms no one. Our founders called George III a tyrant for doing basically the same thing.

So, you think that people, who do not have the information that MS had, should just accept their losses, while MS can laugh all the way to the bank?

Originally posted by shanek
When did I deny that this tyrannical law existed? :rolleyes:

So, what's your beef? She's guilty according to law, right?

shanek

6th March 2004, 06:02 AM

Originally posted by T'ai Chi
Martha herself.

Harming yourself is a crime?

(Wait, what am I saying? We've got a government who'll put you in jail and sieze all of your assets or even kill you for nothing more than putting a substance in your own body that they don't like...So of course the mommy government is going to consider harming yourself a crime! What was I thinking???)

shanek

6th March 2004, 06:10 AM

Originally posted by Ed
The principle is that she acted in anticipation of the information being available to all and thus drove the price of the stock down. 5 shares, 5000000 shares, no matter, her action was inimical to the welfare of the other stockholders

There are two possibilities: She sold enough stock to adversely affect the price, or she sold so few shares she didn't affect the price.

If she didn't sell enough shares to adversely affect the price, then her actions made no difference whatsoever and cause no one any harm.

If she did, you are arguing that she devalued the stock for others. But think about it: if she doesn't sell, the massive price plummet comes as a complete surprise and the other stockholders lose their shirts. By selling it and causing the price to start dropping, this gives the other traders an indication that something is wrong and they CAN sell at a slightly lower price and therefore aoid the massive losses that are to come.

One way, the other stockholders aren't affected at all. The other, they're actually HELPED by this advance indication that something is not right.

This is another point I've made in all the other insider trading threads, and it to has gone completely ignored.

That is nonsense. Why would they do it in the absence of controls when they sometimes do not when it is illegal?

Again, I point you to the commodities market as an excellent examples.

You seem to think that people would act better without laws then they do when there are laws. What makes you think that?

History. I've posted the evidence in other threads, for example, that the elimination of speed limits in Montana actually made people drive more safely and courteously. Freedom means responsibility. If you take away people's freedom, you also remove them from being responsible for their actions.

There is nothing to prevent someone from doing the right thing laws or no laws.

You sound just like the Christians who claim that people need to live in fear of Hell to act morally...

shanek

6th March 2004, 06:14 AM

Originally posted by CFLarsen
Careful, shanek. You're starting to sound like IIan...

YOU'RE the one who's ignoring an answer I've posted about three or four times in this thread...

So, you think that people, who do not have the information that MS had, should just accept their losses, while MS can laugh all the way to the bank?

No, I'm not, and if you weren't completely incapable of reading my posts honestly you'd see that.

So, what's your beef? She's guilty according to law, right?

Yeah, well, so were the Franks. So was John Hancock. So were the people who freed slaves on the Underground Railroad. I could go on...

pupdog

6th March 2004, 06:20 AM

Does Martha Stewart own a large share of ABC? Last night, ABC aired an interview of Stewart by Babba Walters, and one might think Mother Theresa was being convicted.

shanek

6th March 2004, 07:13 AM

This isn't directed specifically at you, pupdog, but at a lot of people in this thread:

What does it matter what kind of person she is? What does it matter if she's Mother Teresa or Arsenic Annie? What matters is this ONE act that she committed, whether or not it harmed anyone, whether or not government has any business restricting it in a free society. To look beyond that is just an ad hominem.

shanek

6th March 2004, 10:51 AM

As always, Harry Browne is so able to put all of these tyrants and their apologists in their place with the plain and simple truth:

http://www.harrybrowne.org/articles/MarthaStewart2.htm

The Martha Stewart guilty verdict is more than troubling. It is an outrage.

The very case itself typifies today's government — an entity that is free to intrude in any area of your life, free to make up the rules as it goes along, free to allow prosecutors to make names for themselves in high-profile cases without facing any personal consequences, no matter what harm they do.

Before you try to tell me Martha Stewart is guilty of something, I must first ask, "Guilty of what?"

Whom has she harmed? What is she supposed to have done that warrants sending her to prison?

The prosecutor claims that she sold her ImClone stock on an "inside" tip when her broker told her that the head of ImClone was selling his stock.

So what????

What if she did have inside information?

Is that any more unfair than some other investor having a bigger computer than you do? Having enough money to subscribe to more investment tip sheets than you do? Being smarter than you are?

Since when it is a crime in America to use your wits, your knowledge, your talents, and — yes — your contacts to make money?

There is no victim — no one who was hurt by the actions of someone buying or selling on inside information. Maybe it seems obvious to you that an insider can't profit without someone else being hurt, but that simply isn't the case.

[J]uror Chappell Hartridge remarked proudly on television that the Stewart guilty verdict sends a message that the investment markets will be safer for the little investor. He said "Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions."

He hasn't the faintest idea how the investment markets work (and neither, apparently, did anyone else in the courtroom), but he holds the life of Martha Stewart in his hands.

The prosecution also charged Martha Stewart with lying to government investigators.

Again, so what?

Just imagine for a moment how you would feel if you discovered that the United States Government had suddenly decided to use millions of dollars of its resources to prosecute you for something.

Most likely, you'd be scared to death. Imagine: you're likely to be put in prison for several years, lose your life savings, be separated from your family, lose your career. Your whole life would crumble.

In this situation, barely able to keep your emotions in check, if you saw a chance to beat the rap by telling a lie or doctoring some evidence, you'd have a huge incentive to do so — even if you were innocent.

Doing anything you can to get the investigators off your back is a perfectly natural act. But now it's a crime. And the prosecutor in the Martha Stewart case smugly tells the world that the guilty verdict "sends a message" that lying to government employees will get you prison time.

(I wish these guys would put their messages in bottles and drop them in the ocean. I'm tired of hearing them.)

Another charge was that of "conspiracy."

Conspiracy to do what?

Conspiracy to do what the other charges were.

To defend herself, Martha Stewart claimed the stock was sold because of a previously entered stop-loss order — an order to sell the stock whenever it fell to $60.

The general response to that claim was a horselaugh.

The jury decided that she wasn't telling the truth — that she had lied when she told the government investigators about the stop-loss.

I have no idea whether Martha Stewart's claim is true. Neither do you, neither do the jurors, neither does the judge, and neither do the prosecutors. Which means, without any hard evidence that she lied, the jurors can't possibly say they know she's guilty "beyond a reasonable doubt."

Anyone can suspect that he knows what happened. But a lot of innocent people have gone to prison on such suspicions.

The whole case came down to the testimony of Douglas Faneuil, a broker's assistant who claims that his boss told him to call Martha Stewart and tell her the head of ImClone was selling, and she should sell, too.

Apparently lost in all this is the fact that Douglas Faneuil originally said there was a stop-loss order and neither Martha Stewart or Faneuil's boss Peter Bacanovic did anything wrong.

What caused him to change his story?

The government charged him with being a participant in this venal conspiracy.

http://news.findlaw.com/hdocs/docs/imclone/usfaneuil100202inf.pdf

Not surprisingly, Faneuil decided to change his story. And again not surprisingly, the charges against Faneuil were dropped.

So almost the entire case against Martha Stewart rested on the testimony of a man who changed his story in order to free himself from the wrath of the United States Government.

It's interesting that none of the news reports I read after the guilty verdict mentioned that star witness Faneuil had traded his testimony for his freedom.

Today's real victims are the corporate CEOs, many of whom have been playing by the very rules set down by the government. But those rules aren't rules of law; they're rules of men, and they can be changed at a moment's notice.

While TV commentators "tsk, tsk" about the heinous acts supposedly committed by corporate executives, while George W. Bush reminds us periodically that CEOs have been "cooking the books," the truth is that neither George Bush, the TV commentators, you, nor I have the faintest idea how the books were kept or how they should have been kept. All we know is what self-serving government employees have told us.

Is there anything to be learned by all this?

Yes. What you know about these cases is only what the government claims. Just as with Iraq, everything we think we know originates with some government employee — leaking the "truth" to people in the press, who dutifully report these planted claims as facts.

This is why the Founding Fathers were determined that the federal government would nothing to do with such matters as business dealings. They knew that government officials — armed with threats of fines and imprisonment — would inevitably abuse such powers.

Thomas Jefferson wanted America to be an agrarian society, but he didn't use the power of his office to aid farmers at the expense of commercial interests.

Today, however, the guns of the government are available to force you and me to conduct our lives in the way such paragons of virtue as George Bush or John Kerry want us to.

It seems that nothing is a matter of persuasion anymore. Everything is a criminal matter.

Whatever isn't compulsory is prohibited.

The idea

6th March 2004, 11:43 AM

Originally posted by shanek
There are two possibilities: She sold enough stock to adversely affect the price, or she sold so few shares she didn't affect the price.

If she didn't sell enough shares to adversely affect the price, then her actions made no difference whatsoever and cause no one any harm.

Let's suppose I develop a way to counterfeit US currency so well that even experts never recognize that it is counterfeit. Every month I make and spend one hundred fake twenty-dollar bills, each one having a different serial number. I live in cheap motels and never spend more than a couple of weeks in any one state.

Would my spending of a mere $2000 per month, spread through 26 or more states, actually cause prices to rise? If not, does it follow that my actions would make no difference and cause no one any harm even though I would be fraudulently obtaining $2000 worth of goods and services every month?

Originally posted by shanek
[...] if she doesn't sell, the massive price plummet comes as a complete surprise and the other stockholders lose their shirts. By selling it and causing the price to start dropping, this gives the other traders an indication that something is wrong and they CAN sell at a slightly lower price and therefore avoid the massive losses that are to come.
[...]
they're actually HELPED by this advance indication that something is not right.

Isn't it normal for prices to fluctuate? How can a signal that is lost in background noise be considered a warning? Were buyers told why she was selling? If there is no particular reason to believe that previous estimates of value were wrong, then isn't a price drop an incentive for people to buy rather than sell?

The idea

6th March 2004, 11:56 AM

Clarification: I referred to "26 or more states" because I was thinking on an annual basis.

I intended to ask: would spending $24,000 per year of counterfeit money, that is never recognized as counterfeit, through 26 or more states, actually cause prices to rise?

shanek

6th March 2004, 12:07 PM

Originally posted by The idea
Let's suppose I develop a way to counterfeit US currency so well that even experts never recognize that it is counterfeit. Every month I make and spend one hundred fake twenty-dollar bills, each one having a different serial number. I live in cheap motels and never spend more than a couple of weeks in any one state.

That's just the most ridiculous comparison in this thread yet! Counterfeiting means that you are creating BOGUS money that was not in the system before, and that would lead to inflation. That is NOT what we're talking about. We're talking about stocks that already existed, that have always existed.

A better example would be someone who had thousands of dollars that had been hidden in a mattress for years who suddenly decided to dig it all out and spend it. Is that person doing wrong?

Isn't it normal for prices to fluctuate?

Yes, and every time it does, people speculate as to the reason why.

How can a signal that is lost in background noise be considered a warning?

How would it be lost in any kind of background noise? Stock prices don't just change for no reason. Brokers and traders and stockholders and potential buyers don't just say, "Hey, look, the price dropped, but I guess that's just background noise." Ridiculous!

Were buyers told why she was selling?

Are you saying she should have tracked down every potential buyer and informed them of her reasons for selling? How is such a thing even possible?

The idea

6th March 2004, 12:29 PM

Originally posted by shanek
That's just the most ridiculous comparison in this thread yet!

I didn't intend to make a comparison. I intended to ask a question in order to draw attention to a certain concept.

Originally posted by shanek
Counterfeiting [...] would lead to inflation.
Theoretically, yes. However, I gave a fairly specific example. Someone spends no more than 2 weeks in any one state and travels throughout the contiguous states. Two thousand dollars are spent per month. Are you really asserting as a definite conclusion that measurable inflation would result? How much?

Originally posted by shanek
How would it be lost in any kind of background noise? Stock prices don't just change for no reason. Brokers and traders and stockholders and potential buyers don't just say, "Hey, look, the price dropped, but I guess that's just background noise."

The price changes throughout the day. First of all, we haven't established that her sale of shares caused a price change. If it did cause a price change then the cause was the sale. What motivated the sale is another question. Do potential buyers look at how the volume of shares traded breaks down into individual transactions and then speculate as to why specific shares are sold? "Is that seller going to use to money to take a trip to Europe? Maybe the seller is planning to use the money to buy a new car? Maybe the seller is going to buy bonds?" If one has nothing but numbers, then on what basis would one stop generating guesses or start eliminating guesses?

Originally posted by shanek
Are you saying she should have tracked down every potential buyer and informed them of her reasons for selling?
No, I'm not saying that. Potential buyers are legally entitled to assume that the seller is not selling because she possesses inside information.

shanek

6th March 2004, 12:43 PM

Originally posted by The idea
Theoretically, yes. However, I gave a fairly specific example. Someone spends no more than 2 weeks in any one state and travels throughout the contiguous states. Two thousand dollars are spent per month. Are you really asserting as a definite conclusion that measurable inflation would result? How much?

Probably not much if any; that's a drop in the bucket to the amount of artificial money the government pours into the system.

The price changes throughout the day.

And these people watch the price throughout the day.

Do potential buyers look at how the volume of shares traded breaks down into individual transactions and then speculate as to why specific shares are sold?

Only if the seller is someone significant.

"Is that seller going to use to money to take a trip to Europe? Maybe the seller is planning to use the money to buy a new car? Maybe the seller is going to buy bonds?" If one has nothing but numbers, then on what basis would one stop generating guesses or start eliminating guesses?

Good question. Another good question: Why, by the same token, is it not bad for the government to assume nefarity on the person's behalf and ruin their career as a result?

Potential buyers are legally entitled to assume that the seller is not selling because she possesses inside information.

Why?

The idea

6th March 2004, 12:49 PM

Maybe we can confine this dialogue to the two real issues.

(1) If I perform illegal transactions in a large system, then is it necessarily the case that a victim can be identified?

We can develop a science fiction scenario. Suppose I find a way to shut down my digestive system and feed fresh blood directly into my bloodstream. I own a device that produces robotic mosquitoes that leave no itchy venom behind. I target many thousands of people each day, taking only a tiny amount of blood from each one. No one can detect the loss.

(2) If there is no particular reason to believe that previous estimates of value were wrong, then isn't a price drop an incentive for people to buy rather than sell?

You gave a spin to a hypothetical price drop as an opportunity for people to sell before the price crashes. However, would a small price drop necessarily be interpreted as a sell signal? There is reason to believe the opposite.

T'ai Chi

6th March 2004, 12:51 PM

Originally posted by shanek

Harming yourself is a crime?

shanek, I never said it was a crime. You simply put forth:

Originally posted by shanek

In several threads, I have challenged people to show ONE SINGLE PERSON who is harmed by insider trading. No one can do it.

And therefore I supplied one person who it harmed.

reprise

6th March 2004, 12:57 PM

While insider trading definitely has an impact on "mum and dad" shareholders, it's potential to undermine the stock market relates more to large investors. I wouldn't want my superannuation fund, insurance fund, or my mutual funds manager investing in a company which was disclosing information which would affect the price of the stock to some shareholders and not others - the potential for enormous losses (along the lines of Enron) which could wipe out my savings is too great. If those large players withdraw from the stock market because they lack confidence in the impartiality of the system, that affects the market as a whole (which then affects a lot of other aspects of the economy).

The idea

6th March 2004, 01:05 PM

Originally posted by shanek
Probably not much if any; [...]
Now that I think of it, there was no need to assume that I counterfeited $2,000 per month.

Imagine that I counterfeit a single one-dollar bill and that it is impossible even for experts to detect that it is counterfeit. Now, you have to admit that no price is going to rise because I spent that dollar. On the other hand, I will be receiving a dollar's worth of goods or services.

It is wrong to say that if there is no effect on prices, then there are no consequences. I get a dollar's worth of goods or services that I am not entitled to. Exactly where that buck stops is not easy to say. I wouldn't be ruining anybody's life, but I would be stealing a dollar. If there is no free lunch and no free dollar, then there has to be a corresponding loss of one dollar somewhere.

shanek

6th March 2004, 01:21 PM

Originally posted by The idea
(1) If I perform illegal transactions in a large system, then is it necessarily the case that a victim can be identified?

I say, if you can't identify a victim, you don't have a crime. You don't necessarily have to come up with a name or anything, just show that there is at least one person out there somewhere who was directly harmed by the action.

Suppose I find a way to shut down my digestive system and feed fresh blood directly into my bloodstream. I own a device that produces robotic mosquitoes that leave no itchy venom behind. I target many thousands of people each day, taking only a tiny amount of blood from each one. No one can detect the loss.

I would say that you are harming them, as you are depriving them of their own blood without their consent; however, the level of harm, being spread out so much that there are no adverse effects on any one person, is so small that it's probably not worth anyone's while to try and prosecute you. Someone stealing a 5¢ gumball from a convenience store is arguably causing more harm than you.

If there is no particular reason to believe that previous estimates of value were wrong, then isn't a price drop an incentive for people to buy rather than sell?

Not if the indication is that the price will continue dropping.

You gave a spin to a hypothetical price drop as an opportunity for people to sell before the price crashes.

It's hardly a "spin." It's how it actually happens.

shanek

6th March 2004, 01:23 PM

Originally posted by T'ai Chi
And therefore I supplied one person who it harmed.

She wasn't harmed by the trading, though; she was harmed by the actions of a tyrannical government who seeks to define the parameters under which people can buy and sell stuff. But as P. J. O'Rourke said, when you put politicians in charge of buying and selling, the first things bought and sold are politicans.

shanek

6th March 2004, 01:26 PM

Originally posted by reprise
While insider trading definitely has an impact on "mum and dad" shareholders,

How? I've asked this question before, and it upsets me that people are just repeating the assertion without showing why.

I wouldn't want my superannuation fund, insurance fund, or my mutual funds manager investing in a company which was disclosing information which would affect the price of the stock to some shareholders and not others

And therefore you ultimately wouldn't buy that company's stocks, thereby encouraging the company to set a policy prohibiting that. Just like the commodities market did when traders decided they didn't want to trade commodities when the price could vary wildly throughout the day.

shanek

6th March 2004, 01:30 PM

Originally posted by The idea
Imagine that I counterfeit a single one-dollar bill and that it is impossible even for experts to detect that it is counterfeit. Now, you have to admit that no price is going to rise because I spent that dollar. On the other hand, I will be receiving a dollar's worth of goods or services.

Right, and since you didn't earn that dollar, it would most certainly be theft. Stealing $1 (or even $2,000) from a passerby doesn't inflate the economy; it's still wrong.

It is wrong to say that if there is no effect on prices, then there are no consequences.

That wasn't the claim. The claim, made by the OTHER side, was that insider trading somehow tricks people into buying stocks they wouldn't have bought otherwise; the point about the stock sale having a deflating effect was brought up as a rebuttal to that. So it's not a positive claim.

If there is no free lunch and no free dollar, then there has to be a corresponding loss of one dollar somewhere.

Actually, there is one more dollar without a corresponding increase in one dollar's worth of goods and services in the economy. Hence, while there isn't actually a loss of a dollar anywhere, the nominal value of the economy's goods and services would increase and so other people's money wouldn't be worth quite as much.

The idea

6th March 2004, 01:43 PM

Originally posted by shanek
Actually, there is one more dollar without a corresponding increase in one dollar's worth of goods and services in the economy. Hence [...] other people's money wouldn't be worth quite as much.
How so? Are you saying that there would actually be a price rise as a result of the spending of a single counterfeit dollar in the US economy? Are you sure that the theoretical analysis gives a realistic explanation when we are talking about a single (undetectably counterfeit) dollar?

The idea

6th March 2004, 01:55 PM

Originally posted by shanek
That wasn't the claim. The claim, made by the OTHER side, was that insider trading somehow tricks people into buying stocks they wouldn't have bought otherwise; the point about the stock sale having a deflating effect was brought up as a rebuttal to that. So it's not a positive claim.

What is the significance of classifying a statement as "not a positive claim"? In the process of arguing with other people, do you assert things that you don't really believe? Perhaps you wanted to establish that some hypothesis would have some consequences, but you did not want to suggest that the hypothesis is true? If so, what is the hypothesis?

6th March 2004, 02:07 PM

Originally posted by shanek
What does it matter what kind of person she is? What does it matter if she's Mother Teresa or Arsenic Annie? What matters is this ONE act that she committed, whether or not it harmed anyone, whether or not government has any business restricting it in a free society. To look beyond that is just an ad hominem.
It just feels plain old good to gloat. Like when the noted witch, Leona Helmsley, found herself in the slammer. Stripes just look good on some people.

reprise

6th March 2004, 02:11 PM

How? I've asked this question before, and it upsets me that people are just repeating the assertion without showing why.

Two recent examples in my own country probably illustrate the problem - one a telco and the other an insurance company. Both of these companies were in severe financial difficulty, but that information was withheld from the majority of shareholders (and the ASX itself). In both instances, they were companies which had high profile investors, and whether or not I believe that it's a good idea to invest in a particular company because a high profile investor (who can often afford to sustain a large loss) does, the reality is that a lot of "mum and dad" investors DO take the attitude that "it must be a good company if (name your high profile investor) invests in it". So when the shares in these apparently OK companies start to drop a little as the result of those with inside knowledge bailing out, "mum and dad" investors will often choose to expand their parcel of shares in the company - something they would NOT have done had they had access to the same information as those who are divesting themselves of their stockholding.

When to hold onto a stock which is falling in price, when to cut your losses, and when to buy more, are all judgements which should be made based on information about the state of the company. It is certainly not the fault of the companies concerned that people have unrealistic expectations about the stock market or that people will borrow money to invest in "hot" stocks, or that they don't structure their portfolios in a manner which limits their financial exposure. However, when companies and stockbrokers are selectively releasing critical information to some stockholders and not others, a situation arises where all stockholders are placed at an unfair disadvantage relative to others (and this applies equally to information which might drive share prices up).

FWIW, I wouldn't have sold that stock if I was Martha Stewart because there was a good chance that either the original treatment would eventually be approved or that the company would develop another treatment which would cause the stock price to bounce back - she was well able to sit and wait it out and absorb the loss if the whole company totally tanked; but as I said, judgements like that are ones which should be made on the basis of ALL critical information related to the state of the company.

reprise

6th March 2004, 02:43 PM

We believe that the practice of selective disclosure leads to a loss of investor confidence in the integrity of our capital markets. Investors who see a security's price change dramatically and only later are given access to the information responsible for that move rightly question whether they are on a level playing field with market insiders.

Issuer selective disclosure bears a close resemblance in this regard to ordinary "tipping" and insider trading. In both cases, a privileged few gain an informational edge -- and the ability to use that edge to profit -- from their superior access to corporate insiders, rather than from their skill, acumen, or diligence. Likewise, selective disclosure has an adverse impact on market integrity that is similar to the adverse impact from illegal insider trading: investors lose confidence in the fairness of the markets when they know that other participants may exploit "unerodable informational advantages" derived not from hard work or insights, but from their access to corporate insiders.

The SEC on Selective Disclosure and Insider Trading (http://www.sec.gov/rules/final/33-7881.htm)

Roadtoad

6th March 2004, 02:54 PM

Let me jump in with this:

People have been burnt, and burnt badly from insider trading. We've seen what happened with any number of companies, with people losing their retirements and forced to return to work in their twilight years. I see the results on a day to day basis, with Grandma working behind the counter at a McDonald's not because she's lonely, but because if she doesn't, she goes hungry.

Martha Stewart may not have benefitted that much from her trades, but it was part of a larger manipulation. Sam Wachsal is now doing SEVEN YEARS for his part in this game, and damn well deserves to, and this is particularly painful because Imclone's original product which had been rejected initially by the FDA has now been okayed for testing. THESE PEOPLE ARE IDIOTS!!! Worse, THEY'RE GREEDY IDIOTS!

shanek

6th March 2004, 03:09 PM

Originally posted by The idea

How so? Are you saying that there would actually be a price rise as a result of the spending of a single counterfeit dollar in the US economy? Are you sure that the theoretical analysis gives a realistic explanation when we are talking about a single (undetectably counterfeit) dollar?

I'm speaking of the increase in the money supply in general. No, obviously a single dollar will not have any measurable effect because the increase would be so miniscule it wouldn't even come near our lowest currency division of a penny.

shanek

6th March 2004, 03:11 PM

Originally posted by The idea
What is the significance of classifying a statement as "not a positive claim"?

You said, "It is wrong to say that if there is no effect on prices, then there are no consequences." But that would only be the case if we pointed out the fact that prices didn't drop as some sort of defense, a positive claim. It wasn't. It was a claim used to rebut the other side; hence, we're not saying her actions had no consequences, just that the consequences surrounding dropping prices aren't any of them. That doesn't rule out consequences due to other aspects of her action. Hence, our claim is not how you stylized it to be.

shanek

6th March 2004, 03:17 PM

Originally posted by reprise
In both instances, they were companies which had high profile investors, and whether or not I believe that it's a good idea to invest in a particular company because a high profile investor (who can often afford to sustain a large loss) does, the reality is that a lot of "mum and dad" investors DO take the attitude that "it must be a good company if (name your high profile investor) invests in it".

So they make a financial decision based on a bogus criteria.

So when the shares in these apparently OK companies start to drop a little as the result of those with inside knowledge bailing out, "mum and dad" investors will often choose to expand their parcel of shares in the company

So they also make a decision contrary to what those with a knowledge of the market would make.

In other words, they make bad decisions and end up losing as a result. How is this not the way it's supposed to work out?

Besides, there are a plethora of other bad decisions one can make when trading in the stock market; why is it only this one that must be defended against?

When to hold onto a stock which is falling in price, when to cut your losses, and when to buy more, are all judgements which should be made based on information about the state of the company.

Sounds like bad investment advice to me.

shanek

6th March 2004, 03:20 PM

Originally posted by Roadtoad
People have been burnt, and burnt badly from insider trading. We've seen what happened with any number of companies, with people losing their retirements and forced to return to work in their twilight years.

No sound retirement scheme should be even marginally affected by how the entire stock market does, let alone the value of one stock. Again, these are people reaping the consequences of bad investment practices.

Roadtoad

6th March 2004, 03:22 PM

Originally posted by shanek

No sound retirement scheme should be even marginally affected by how the entire stock market does, let alone the value of one stock. Again, these are people reaping the consequences of bad investment practices.

So you're saying Wachsal's dishonesty has no role in these people losing what they've invested? Remind me not to purchase a used car from you.

6th March 2004, 03:38 PM

Originally posted by shanek

I'm speaking of the increase in the money supply in general. No, obviously a single dollar will not have any measurable effect because the increase would be so miniscule it wouldn't even come near our lowest currency division of a penny.

So then, counterfitting, for one's own personal use, would be ok? If I want to dump $10k a month no one would be hurt, I would be a happy camper all would be well with the world.

Now, don't conjure up 100mm households counterfitting, just like you can't say Martha really effected the price of the stock. We are just talking about me, hypothetically. So laws against counterfitting are a manifistation of a tyranical government?

shanek

6th March 2004, 03:47 PM

Originally posted by Roadtoad
So you're saying Wachsal's dishonesty has no role in these people losing what they've invested?

I haven't said one word about Wachsal. I was talking about Martha Stewart. Wachsal engaged in outright fraud, betraying confidential inside information to outsiders, which is not only wrong, it's illegal without having to resort to any insider trading laws at all.

(Incidentally, he did give this information to at least two others, including his daughter, who dumped their stocks valuing hundreds of thousands of dollars, much more than Stewart. Yet, I can't find any news source that says that they've even been indicted.)

shanek

6th March 2004, 03:49 PM

Originally posted by Ed
So then, counterfitting, for one's own personal use, would be ok?

When did I say it would be okay? I said that a single excess dollar couldn't have any measurable effect on inflation. I did acknowledge that it was wrong because someone obtained one dollar's worth of goods or services that he didn't earn.

Doesn't anyone read anymore?

If I want to dump $10k a month no one would be hurt, I would be a happy camper all would be well with the world.

No, that probably would have a very measurable effect on the economy.

Roadtoad

6th March 2004, 04:02 PM

:hb:

Clancie

6th March 2004, 04:56 PM

Posted by davefoc
Clancie, with due respect I think you have missed the entire point of the trial.

Martha, was not tried for insider trading.
Yes, I know that. That's why I said, " How many people getting tips like that actually go to trial and prison for what Stewart did....lying about it?" I know she was on trial for basically lying to government investigators (Although re: insider trading, it looks like the SEC is charging her for it in a civil suit, now that the criminal trial is over).
...if she had told the truth to investigators concerning that her penalties would have been insignificant if she would have been found guilty at all.
Well, we disagree. I think she should have done the oppposite of telling the truth (imo, they would have prosecuted her on some charge anyway)....And I wonder if it would be easier to prosecutor her or her broker for insider trading if she -had- told the truth?

She used to be a stockbroker so I imagine she had a pretty good idea of the problems telling the truth could cause her (not to mention the good possibility she would be asked to testify against her own broker and -definitely- be instrumental in getting him sent to prison).

Actually, I think she should have taken the Fifth and refused to give them any information. It was naive or arrogant of her to think she could get away with lying like that.

At this point, Martha could fire her lawyers, admit the truth and request mercy. She would save thousands on lawyer bills and might receive some mercy for her common sense. Instead, whatever is driving to act in this bizarrely self destructive way will probably continue to drive her and she will continue to spend massive amounts of money on lawyers to try to prove that 2 + 2 = 5.
Well, she's not the only one involved. Frankly, in her situation I would have taken the Fifth and not incriminated myself -or- my friend. (Admittedly not the most ethical solution, but...)

The only reason I mentioned the money is that it just seems like such a -small- amount of profit to make, and it wasn't like dumping her stock had a huge impact on investors (like it did when the CEO and CFO of Compaq dumped millions of dollars of theirs on a Friday a few years ago...before the bad quarterly report was issued Monday. Oh, and they quit over the weekend...never did get arrested, either one of them).

It just bothers me when the CEOs of Compaq...Enron.... WorldCom (to name a few) are still walking free while someone who lied about a small stock trade is going to prison.

I think that when somebody acts in the way Martha did, the state has very little choice but to attempt to punish for that behavior.
I wouldn't disagree with you at all, if the punishments were meted out equally to big and small cheaters and liars alike--if I saw an equal effort made to go after big-time corporate crooks, not such a focus on fining and sending to prison someone who made this kind of relatively small benefit on a stock tip from a friend.

davefoc

6th March 2004, 08:14 PM

Shanek,
I realize there are arguments to be made for the legalization of insider trading. However, even if I accepted those arguments I would still disagree with you on several different points.

1. If we are to maintain anything like a society based on the rule of law, laws must be enforced even if shanek and davefoc don't agree with the law. A principle technique for investigating and enforcing laws is to talk to people. If there is no punishment for lying to people investigating the crime the enforcement of virtually all crimes becomes impossible.

2. Even if, as you suggest, companies make rules independent of government that they will not permit insider trading with their own stock, these private rules would need to be enforced in some way. So some kind of investigation with penalties for those who lie to investigators would be required.

3. Comparing the insider trading that MS engaged in to people hiding Jews from the Nazis is one of the silliest comparisons that you could have made. MS was not engaged in some sort of noble courageous civil disobedience activity. She was trying to sell somebody something that she knew through insider information to be worth less than the buyer was paying for it. She was trying to scam $40,000 bucks or so and her motivation and morals were just about the same as the guy who rips off a new Lexus.

4. Your notion that nobody was harmed is just wrong. As the result of MS selling her stock on that day 3900 shares more Imclone stock were sold on that day than would have otherwise been. The person that ended up with those shares lost money and MS made money.

5. When MS lied to protect the stock broker and the CEO she was making the prosecution of those folks more difficult and thus taking part in a conspiracy to enable those people to continue to act in fraudulent and illegal ways and thus commit crimes that affected a much wider range of people than were affected by MS's small stock sale.

davefoc

6th March 2004, 08:36 PM

Clancie said:Well, she's not the only one involved. Frankly, in her situation I would have taken the Fifth and not incriminated myself -or- my friend. (Admittedly not the most ethical solution, but...)

Perhaps you might have, but all along MS was taking the path that would produce the least immediate pain for herself. She may have lied to make the public case that she had not engaged in insider trading. She may have lied because she wanted to help her friends that had helped her with the insider trading. She might have lied just because she enjoyed the challenge of misleading the authorities. I don't know. But her lies made the investigation more difficult than if she just hadn't said anything and her lies might have made the eventual prosecution impossible and that's the reason the goverment prosecuted her.

clancie said:I wouldn't disagree with you at all, if the punishments were meted out equally to big and small cheaters and liars alike--if I saw an equal effort made to go after big-time corporate crooks, not such a focus on fining and sending to prison someone who made this kind of relatively small benefit on a stock tip from a friend.

Well, maybe we agree more than I realized. I think though the comment about trying to equal out the punisment of big and little ignores the basic idea that the enforcement of laws is never equal. Somebody gets a ticket for 80 and another guy gets away with doing 110. So the guy doing 80 shouldn't get a ticket?

I also think that you underestimate how bad the punishment of some of the guys that you think aren't being punished enough will be. So far, Ken Lay is the only highly ranked corporate officer out of Tyco, Worldcomm and Enron not to be indicted that I know of. And I'd trade the jail time for some of those indicted guys in a heart beat for the jail time that MS is going to get.

T'ai Chi

6th March 2004, 09:00 PM

Originally posted by shanek

She wasn't harmed by the trading, though; she was harmed by the actions of a tyrannical government who seeks to define the parameters under which people can buy and sell stuff.

I guess that is always an 'out'. I did provide evidence of one person who got harmed though.

I wonder if you live in the same country as this "tyrannical government"?

MoeFaux

7th March 2004, 01:13 AM

I'm just peeking in here to say that I love Martha Stewart. I think she's a great role model, and I admire her. She came from nothing, worked her a*s off, and earned a huge empire. I'd like to be like her.
I'm not clear what she did wrong. But I think she's getting a bad rap. I think people don't like her so she's getting screwed.
But, I love her. Man, she's smart.

CFLarsen

7th March 2004, 01:27 AM

MoeFaux,

I wonder what your home looks like... ;)

7th March 2004, 06:17 AM

Originally posted by shanek

When did I say it would be okay? I said that a single excess dollar couldn't have any measurable effect on inflation. I did acknowledge that it was wrong because someone obtained one dollar's worth of goods or services that he didn't earn.

Doesn't anyone read anymore?

No, that probably would have a very measurable effect on the economy.

You said if no one is hurt, there is no crime. Can't people engage in intellectual elaboration anymore. Pisses me off.

shanek

7th March 2004, 07:11 AM

Originally posted by davefoc
1. If we are to maintain anything like a society based on the rule of law, laws must be enforced even if shanek and davefoc don't agree with the law. A principle technique for investigating and enforcing laws is to talk to people. If there is no punishment for lying to people investigating the crime the enforcement of virtually all crimes becomes impossible.

If we are to maintain anything like a society based on the rule of law, the Supreme Law of the Land (i.e., the Constitution) must be enforced even if politicians don't agree with the law. NOTHING in the Constitution gives the Federal government the power to regulate stock trading. It is most certainly within the rule of law to refuse to comply with, or even actively obstruct, those seeking to enforce illegal laws that violate our Constitutional rights. Just as the members of the underground railroad were right to obstruct the US Marshals enforcing the Fugitive Slave laws, just as local law enforcement officials and librarians today are right to refuse to comply with the Patriot Act, so was Martha Stewart right to actively obstruct those who were attempting to pry into her own personal relations in order to convict her of an illegal law.

2. Even if, as you suggest, companies make rules independent of government that they will not permit insider trading with their own stock, these private rules would need to be enforced in some way. So some kind of investigation with penalties for those who lie to investigators would be required.

That's not the case with the National Futures Association.

3. Comparing the insider trading that MS engaged in to people hiding Jews from the Nazis is one of the silliest comparisons that you could have made. MS was not engaged in some sort of noble courageous civil disobedience activity. She was trying to sell somebody something that she knew through insider information to be worth less than the buyer was paying for it. She was trying to scam $40,000 bucks or so and her motivation and morals were just about the same as the guy who rips off a new Lexus.

She wasn't scamming anyone. She was trying to make a legitimate sale of stocks that she legitimately owned. And people usually sell stock when they think it will ultimately end up being less than the selling price, so if this is fraud, then you'll need to shut down the entire market.

4. Your notion that nobody was harmed is just wrong. As the result of MS selling her stock on that day 3900 shares more Imclone stock were sold on that day than would have otherwise been. The person that ended up with those shares lost money and MS made money.

This isn't a zero-sum game. I've addressed this fallacy in just about every insider trading thread as well.

5. When MS lied to protect the stock broker and the CEO she was making the prosecution of those folks more difficult and thus taking part in a conspiracy to enable those people to continue to act in fraudulent and illegal ways and thus commit crimes that affected a much wider range of people than were affected by MS's small stock sale.

Did you read the Browne article I linked to, which covered the ridiculousness of "conspiracy" laws?

shanek

7th March 2004, 07:15 AM

Originally posted by davefoc
Perhaps you might have, but all along MS was taking the path that would produce the least immediate pain for herself.

Her perogative, since she wasn't doing anything that should be considered at all illegal in a free society.

But her lies made the investigation more difficult than if she just hadn't said anything and her lies might have made the eventual prosecution impossible and that's the reason the goverment prosecuted her.

If the government were just going against Wachsal, then I would agree. But they were going against her, too, and that makes all the difference. I can certainly understand going against someone who lied to throw off investigation into a legitimate fraud case. But I can also understand the legitimacy of someone who lies to the authorities to prevent them from carrying out the enforcement of a wicked law.

shanek

7th March 2004, 07:16 AM

Originally posted by T'ai Chi
I wonder if you live in the same country as this "tyrannical government"?

Yes, I do, and I have experienced some of the tyranny first-hand.

Clancie

7th March 2004, 07:20 AM

Posted by davefoc

Well, maybe we agree more than I realized.
Yes, and even more now. We don't agree 100% (it still irks me greatly that so many corporate execs haven't been prosecuted for doing so much worse than Stewart did...and even more--like the Compaq guys--did criminal wrong, but will never even be charged.). But davefoc, your post was a catalyst for changing my mind.
Posted by davefoc

But her lies made the investigation more difficult than if she just hadn't said anything and her lies might have made the eventual prosecution impossible and that's the reason the goverment prosecuted her.
I agree.

I think though the comment about trying to equal out the punisment of big and little ignores the basic idea that the enforcement of laws is never equal.Somebody gets a ticket for 80 and another guy gets away with doing 110. So the guy doing 80 shouldn't get a ticket?

Well, I'm still concerned about the unequal application of the law--as a pattern--but I can accept the above--that Stewart is guilty of her crime and therefore, in and of itself deserving of punishment.

Actually, what makes me more critical of Stewart than anything is that she knew from the first phone call that what she was doing was wrong. It probably sounds extremely self-serving on my part, but I'm quite sure that if I had her background as a stockbroker and my stockbroker (and friend) called me with an insider tip to sell, I'm pretty sure I would say something like, "I'm sorry you told me, because you know we can't do anything about it. Now I have to wait till the news is public, the price starts to drop, and we'll dump everything we can then."

Also, thinking about it, I can't believe her stupidity. If you lie, you should think about the chances of getting caught--which are greatly increased the more other people know that you're lying. Her broker knew. Fanueil knew. Stewart's assistant knew. That's already "3 too many" people, imo. It was just stupid.

And, I can't believe her greed, either. She wasn't risking losing the full $40,000 she'd invested in imClone, only part of it. How much money is that anyway, for a woman of her wealth--especially after taking it as a capital loss on her tax return? With such a relatively small amount of money at stake for her, with her -total- understanding that she was doing something illegal by selling on an insider tip--I think she could have -afforded- to be honest.

Doing what she did was knowingly dishonest, hard to comprehend as other than stinginess or greed for such a small sum, and stupid given the chance of being caught.

My new opinion is: "Guilty! Throw her in the slammer!"

shanek

7th March 2004, 07:33 AM

Originally posted by Clancie
Well, I'm still concerned about the unequal application of the law--as a pattern--but I can accept the above--that Stewart is guilty of her crime and therefore, in and of itself deserving of punishment.

I think this is where I differ from pretty much anyone else here. I think that even if someone is guilty of violating a wicked law, they still aren't deserving of punishment. Did Peter McWilliams deserve the punishment he got (death) simply because he needed marijuana to survive and the ingestion of marijuana is against Federal laws?

Actually, what makes me more critical of Stewart than anything is that she knew from the first phone call that what she was doing was wrong.

No, she knew it was illegal. That's not the same thing.

It probably sounds extremely self-serving on my part, but I'm quite sure that if I had her background as a stockbroker and my stockbroker (and friend) called me with an insider tip to sell, I'm pretty sure I would say something like, "I'm sorry you told me, because you know we can't do anything about it. Now I have to wait till the news is public, the price starts to drop, and we'll dump everything we can then."

So, you're with the people who say that insiders should be FORCED to keep their stock (even as others are free to sell if they want)?

Clancie

7th March 2004, 07:35 AM

Shanek,

I have a hypothetical question for you. Let's say that you and I each invest $30,000 in imClone on the same day. Next day...good news! A new drug's been developed and is expected to get FDA approval. The stock price soars! Your stock (and mine) is worth $40,000!

But a week later....I get a phone call from my broker who's just seen the order from the CEO of imClone to sell all his stock. The FDA -isn't- going to approve the drug after all, but it won't be publicly announced till Monday. For now, the stock is still in demand. I say, "Sell" and get my $40,000 out now.

But no one calls you with a tip. And the stock begins a rapid drop on Monday as soon as the government announces the news. You don't know whether its better to sell at half price or hold it. You sell and (unlike me who sold on my insider tip) you lose half your investment. Or, you hold it and hope....unfortunately, the wrong choice, too.

But...doesn't bother me. I got out in time. Is that scenario fine with you? :confused:

You know, Shanek, liberals think "How would -everyone- be affected by such-and-such...Is it fair? Is it just?....not for everyone, but--setting your priorities--overall. That the world is not just "all about me".

The problem with libertarianism is you have to look at "How does this work out if -everyone- does it?" And if insider trading was made legal it would make the stock market work much like a pyramid for "regular people" investing in it, like you and me. We'd give the company money...people in the know would cash in during bad times and never lose a dime...and the people at the bottom, all the small investors, would always be left holding the (financially empty) corporate bag. Is that really what you think would work best for you, for me, and for society as a whole?

Clancie

7th March 2004, 07:43 AM

Just saw your post

Posted by Shanek

So, you're with the people who say that insiders should be FORCED to keep their stock (even as others are free to sell if they want)?
Well, they have to wait till news is made public just like anyone else. That's only fair. (Same reason corp execs have to give advance notification when they plan to sell huges amounts of stock. When you're a big fish swimming in the big pond you get the bigger benefits and you take the bigger risks).

I think this is where I differ from pretty much anyone else here. I think that even if someone is guilty of violating a wicked law, they still aren't deserving of punishment.
I guess you do. Stewart was convicted of lying, but the underlying message is about insider trading. I don't find it a "wicked law" at all, for the reasons I've said. (Not at all comparable with marijuana laws and use, btw, which, here in California is legal for medicinal purposes).
No, she knew it was illegal. That's not the same thing.

You're right. She knew it was illegal. I guess we disagree because I also think there's a morality involved here, since her (selfish) decision will negatively impact others (think: if its okay for Stewart, then its okay for everyone "in the know"....that's the problem with libertarian philosophy, you can't just look at one person...you have to think "How does it work out if -many- people do the exact same thing?"

So I -do- think she knew it was illegal (which is enough reason to stop) but also unfair and wrong in a bigger sense.

Fade

7th March 2004, 07:47 AM

Shane,

I agree with you on everything. You have a fantastic mind, and a keen sense of fairness. I wish others in our country had your sort of sensibilities.

My feelings on this:

http://www.harlequinred.com/~johira/marthastewart.jpg

Edit-

"How does it work out if -many- people do the exact same thing?"

I disagree with you. Libertarian philosophy is fair because it DOESN'T ask this question. What you do is not my concern, and what I do is not your concern. Having ones rights impeded because of what *may* happen seems a lot like tyrannical thought control.

(P.S. The sky is still up there)

shanek

7th March 2004, 08:04 AM

Originally posted by Clancie
I have a hypothetical question for you. Let's say that you and I each invest $30,000 in imClone on the same day. Next day...good news! A new drug's been developed and is expected to get FDA approval. The stock price soars! Your stock (and mine) is worth $40,000!

But a week later....I get a phone call from my broker who's just seen the order from the CEO of imClone to sell all his stock. The FDA -isn't- going to approve the drug after all, but it won't be publicly announced till Monday. For now, the stock is still in demand. I say, "Sell" and get my $40,000 out now.

But no one calls you with a tip. And the stock begins a rapid drop on Monday as soon as the government announces the news. You don't know whether its better to sell at half price or hold it. You sell and (unlike me who sold on my insider tip) you lose half your investment. Or, you hold it and hope....unfortunately, the wrong choice, too.

But...doesn't bother me. I got out in time. Is that scenario fine with you? :confused:

Yep. It sucks, but that's the way the market works. As long as your broker didn't get the information through fraudulent means, then it's just all part of the game.

You know, Shanek, liberals think "How would -everyone- be affected by such-and-such...Is it fair?

And that's the problem with liberals: life isn't fair, and the only way to make it fair is to take away free will.

My sister did a great thing with her kids. They kept on, like kids do, about how something-or-other isn't fair. So, she made a deal with them: they would have "fair day." The entire day, EVERYTHING would be fair. And she enforced it diligently. By the time the day was over, they were so miserable that they told her they didn't want anything to be fair again! And every time after that, when they complain about something not being fair, she just reminds them of that day and asks them if they REALLY want everything to be fair. They don't.

I think more parents should do that with their kids.

That the world is not just "all about me".

There's that "poisoning the well" fallacy again. I never SAID it was "all about me." I said it was all about freedom. But that's just the kind of BS people cook up to try and discredit libertarianism.

And if insider trading was made legal it would make the stock market work much like a pyramid for "regular people" investing in it, like you and me. We'd give the company money...people in the know would cash in during bad times and never lose a dime...and the people at the bottom, all the small investors, would always be left holding the (financially empty) corporate bag. Is that really what you think would work best for you, for me, and for society as a whole?

If you'd read my posts in this thread, you would know why I disagree with that and how I think it would really work out in a free market.

MoeFaux

7th March 2004, 08:06 AM

Originally posted by CFLarsen
MoeFaux,

I wonder what your home looks like... ;)

Actually, I don't use a lot of Martha Stewart products. I did get some of her glass bowls for cooking at one point, because they were a hell of a lot cheaper than you'd get at any other kitchen place. She's not my style for design, though. I'm not into flowery stuff, it's too girly. But I love her for her drive, for her "bi*chiness (which is realy just a desire to work hard and make money, nothing wrong with that).

The whole logic of, "It's not fair" just seems like something straight out of communism to me. Is it just me? It just seems like pure whining.

shanek

7th March 2004, 08:10 AM

Originally posted by Clancie
Well, they have to wait till news is made public just like anyone else.

No, NOT like everybody else. Everybody else gets to sell. People do sell, you know, for reasons other than the stock is about to tank. Maybe someone has some unexpected medical bills, or wants to take a vacation in Europe, so they sell their stock to get the funds for it. But if that person happens to be an insider with the inside information, then they don't get to sell, and they don't get to take their vacation, or pay for their needed medical procedure. How is THAT fair?

I guess you do. Stewart was convicted of lying, but the underlying message is about insider trading. I don't find it a "wicked law" at all, for the reasons I've said.

I've given countless examples of harm caused by the insider trading laws. There's one in the above paragraph. It causes great harm and protects no one, and does so by interfering with a free and voluntary exchange. Hence, it is a wicked law.

(Not at all comparable with marijuana laws and use, btw, which, here in California is legal for medicinal purposes).

Tell that to Peter McWilliams. (Oh, wait, you can't—he's dead!)

I guess we disagree because I also think there's a morality involved here, since her (selfish) decision will negatively impact others

One person. ONE. One person negatively impacted by her actions. ONE. That's all I ask for. If you can't even come up with one, then what's the justification for that claim?

(think: if its okay for Stewart, then its okay for everyone "in the know"....that's the problem with libertarian philosophy, you can't just look at one person...you have to think "How does it work out if -many- people do the exact same thing?"

That's the problem with liberalism: they'd sacrifice the trees to save the forest, forgetting that the forest is made up of trees. As Rush said (or sang, rather): "Now there's no more oak oppression / For they passed a noble law / And the trees are all kept equal / By hatched, axe, and saw"

shanek

7th March 2004, 08:12 AM

Originally posted by Fade
I agree with you on everything. You have a fantastic mind, and a keen sense of fairness. I wish others in our country had your sort of sensibilities.

Thank you for the kind words.

Libertarian philosophy is fair because it DOESN'T ask this question. What you do is not my concern, and what I do is not your concern.

Precisely. As long as you don't interfere with the rights of others, you should be left alone. Martha Stewart did not in any way interfere with the rights of others, so therefore she should be left alone.

Having ones rights impeded because of what *may* happen seems a lot like tyrannical thought control.

I would agree 100%. Actions are what should be important, not the reasons for them. As long as one legitimately owns stock, it shouldn't matter what his reasons for selling it are or how many he chooses to sell at one time.

Bottle or the Gun

7th March 2004, 09:17 AM

Originally posted by Fade
Shane,

I agree with you on everything. You have a fantastic mind, and a keen sense of fairness. I wish others in our country had your sort of sensibilities.

My feelings on this:

http://www.harlequinred.com/~johira/marthastewart.jpg

FREE MARTHA
JAIL ENRON

I lived in California when Enron was manipulating 'power-shortages' and prices went sky high to 'cover their losses' then they post record record earnings. I went out of town for a month and left nothing but my fridge plugged in and still had a $270 electric bill when I returned. The following year I received a $20 one time discount on my electricity. I hope someone tosses their salad every night.

The idea

7th March 2004, 09:40 AM

Clancie

7th March 2004, 09:54 AM

Posted by Bottle or the Gun

I lived in California when Enron was manipulating 'power-shortages' and prices went sky high to 'cover their losses' then they post record record earnings. I went out of town for a month and left nothing but my fridge plugged in and still had a $270 electric bill when I returned. The following year I received a $20 one time discount on my electricity.
Yes, and let's not forget Dick Cheney's comment when people complained about the risks of power outages on elderly ill people who were dependent on machines at home (even, in some cases, just things like A/C) for their lives.

Cheney said, "They can do what my siblings and I did for my mother who lives in California. We bought her a generator."

:rolleyes:

varwoche

7th March 2004, 10:31 AM

Originally posted by shanek
How would they not have suffered that same loss anyway?
Because selling causes stock price to go down.

varwoche

shanek

7th March 2004, 12:03 PM

Originally posted by The idea
Are you saying that Martha was on the verge of selling so that she could afford to pay an unexpected medical bill? Was she on the verge of selling so that she could raise some cash for a vacation in Europe? Then she became privy to some inside information and felt that it would be unfair to be punished for having exquisitely sensitive ears?

No; I'm saying you have no business punishing people for a completely valid and voluntary transaction because you never can really know what was in their mind. Regardless of whether ir's done because of insider information, medical needs, or the desire to take a vacation, the action is the same with the same results. Therefore, it is exactly as justified to go after insider traders than it is for people who cash out for other reasons.

shanek

7th March 2004, 12:04 PM

Originally posted by varwoche
Because selling causes stock price to go down.

Already covered this, TWICE. Why don't people READ??? :mad:

davefoc

7th March 2004, 01:11 PM

Shanek,

You persist in comparisons with MS and noble acts of civil disobedience. In fact the laws that MS violated are rules that you think are reasonable if people agree to them voluntarily. Presumably if people agree to rules voluntarily and then violate those rules punishment is required for the people who have broken their trust otherwise almost all forms of cooperative ventures are impossible. Well, from my vantage point MS agreed to the rules against insider trading in all sorts of voluntary ways including her acceptance of employment as a stock broker, her transactions in the stock market and her use of the stock market to raise money for her company.

So why with all the voluntary acceptance of the rules against insider trading should MS according to you be able to say something like, "well gee, I think rules against insider trading are a bad idea and I have the right to ignore them when it suits my purpose"?

Clancie

7th March 2004, 01:19 PM

Posted by Shanek

No; I'm saying you have no business punishing people for a completely valid and voluntary transaction because you never can really know what was in their mind. Regardless of whether ir's done because of insider information, medical needs, or the desire to take a vacation, the action is the same with the same results. Therefore, it is exactly as justified to go after insider traders than it is for people who cash out for other reasons.
Shanek,

Try it this way. People have the right to sell their stock--unless they're acting on insider information. Therefore, if I wanted to give you an insider tip about your stock, "sell it now!", you'd be better off if I didn't tell you. Once you get my "tip", you're not legally allowed to act on it.

Is this fair? In your opinion "No". In my opinion, "Yes".

Why? Because (in the immortal words of Spock in "Star Trek II",) "The needs of the many outweigh the needs of the one...." Like it or not, we're social animals, we each give up some personal freedoms and rights when we make a "social contract" to live together in a particular society.

I know Libertarians chaff at the restrictions they feel are imposed on them by this social contract that involves sacrificing their own needs for the mutual, overall, benefit of society as a whole.

But where has a society ever flourished based on libertarian principles? Do you know of one? I'm honestly curious, because, frankly, I'm drawing a blank trying to think of how such a society would even -begin- to adequately function.

Roadtoad

7th March 2004, 01:30 PM

Originally posted by MoeFaux
...But I love her for her drive, for her "bi*chiness (which is realy just a desire to work hard and make money, nothing wrong with that).

I admire her drive and ambition as well, Moe. That's something that should be emulated.

But as Clancie pointed out, there's something just plain sh***y about working out a special deal where you get advance information about a stock about to tank, and everyone else is left holding a roll of Charmin. I'm sorry, I think that sort of thing sucks. You have a right to accurate and fair notice of what's about to happen with YOUR money.

That's only part of what this is about, but it's a significant component.

Fade, however, is also correct. There's MUCH bigger fish that need to be nailed.

Clancie

7th March 2004, 01:47 PM

You know another thing that's crummy, Roadtoad (though your word for it is better...)

When Martha told -her- own stockholders that she was innocent of any wrongdoing, that kept the stock price of her company high. But she betrayed their trust--she didn't just lie to the government, she lied to her own stockholders (I understand why, but still, these people trusted her and supported her endeavors with their own hard-earned money, and she deceived them. She knew that she -was- guilty).

Now the people who believed in her enough to invest in her company are going to lose a lot of money because of her lie, and she surely would have realized that was a possibility/likelihood when she said it.

She has admirable drive and talent, like Moe Faux said, (and I didn't realize she's as old as she is--63 this year), but I can't admire someone who is so selfish and self-centered, and apparently, quite ruthlessly so.

shanek

7th March 2004, 03:31 PM

Originally posted by Clancie
Try it this way. People have the right to sell their stock--unless they're acting on insider information.

No, it's "People have the right to sell their stock unless they have insider information." You can't get a psychic to get inside someone's head and tell them the real reason, so regardless of what they were acting on, just having it amounts to the same thing.

Why? Because (in the immortal words of Spock in "Star Trek II",) "The needs of the many outweigh the needs of the one...."

Ah, yes, the essence of socialism. However, our country was founded on the principles of individual freedom and liberty. So you CANNOT sacrifice the rights of the one, even if the many do benefit from it.

Like it or not, we're social animals, we each give up some personal freedoms and rights when we make a "social contract" to live together in a particular society.

Why do people always come up with this garbage to try and justify GOVERNMENT FORCE?

But where has a society ever flourished based on libertarian principles? Do you know of one?

I've posted several examples on this board.

7th March 2004, 05:53 PM

Originally posted by shanek

No, NOT like everybody else. Everybody else gets to sell. People do sell, you know, for reasons other than the stock is about to tank. Maybe someone has some unexpected medical bills, or wants to take a vacation in Europe, so they sell their stock to get the funds for it. But if that person happens to be an insider with the inside information, then they don't get to sell, and they don't get to take their vacation, or pay for their needed medical procedure. How is THAT fair?

Not true. Insiders can sell, they have to abide by certain rules. Insiders, by definition, have "inside information". You might be referring to situations where insiders have restricted stock. That is a bylaw thing or agreements that are drawn up between companies during an acquisition and have nothing to do with the feds. This is different again from vesting.

One person. ONE. One person negatively impacted by her actions. ONE. That's all I ask for. If you can't even come up with one, then what's the justification for that claim?

I play a little bit in the market. About 12 years ago, a moderate sized company that I was very familiar with was given an offer for accquisition by a much larger company. The announcement was after market close on a friday. Their stock began being run up that morning. Clear insider trading, no investigation. Monday, naturally, that stock was higher than it would have been otherwise. I suffered. Suffering can be opportunity cost as well as a loss. I have also been aware of deals where stock was run up so insiders could bail at the peak. Happens all of the time. Also, I mean those with insider information, not insiders per se.

That's the problem with liberalism: they'd sacrifice the trees to save the forest, forgetting that the forest is made up of trees. As Rush said (or sang, rather): "Now there's no more oak oppression / For they passed a noble law / And the trees are all kept equal / By hatched, axe, and saw"

Not just liberals. By some that have seen abuses first hand

michaellee

7th March 2004, 06:39 PM

Most posters here talk about this "level-playing field", as if the investment markets should and will operate in a way that results in a right for you to earn a profit. This is crazy. As long as you have the unimpeded right NOT to invest unless you are willing to take the risk, then the free market will work just fine. If you truly demand the right that the market operates to suit you, then what is the result? Government enforcement, plain and simple.

Take this scenario assuming neither trader is privy to any insider information:

Investor A buys stock for $10 and later sells it to Investor B for $15, who later sells it for $20.

Did not Investors A and B both profit in this free market transaction?

Now assume that Investor B used inside information when he bought the stock for $15, knowing it would go up within a week or so.

Investor B's tip was correct and he sold the stock for $20. Does this mean Investor B then profited at Investor A's expense? The Martha Stewart prosecutors would think so, as so would most in this thread. This thinking is based on the assumption that when Investor B bought the stock, Investor A sold it for $15 ONLY because Investor B wanted to buy it. This assumption is incorrect, because Investor A knew nothing of Investor B's inside information. Investor A sold for his own reasons, and if Investor B had not bought it from Investor A for $15, Investor A would have sold it for $15 to someone else. So the result of Investor B's inside information is that his bid elevated the price Investor A sold the stock for.

Now assume that Investor B received inside information, wants to buy and being the government fearing soul that he is, knows he must make this information public before buying, as the law requires.

Investor B knows that by revealing the insider information, the price of the stock will rise before he has the opportunity to buy, so he does NOT BUY. Now because Investor B won't buy without revealing the insider information, he now does not have to reveal the insider information, resulting in Investor A selling the stock to someone else for $15. Investor B's actions cost Investor A nothing.

Back to second scenario, and now bring in Investor C, who buys the stock for $20 from Investor B, who acted on inside information when buying the stock at $15. Is Investor C hurt by the activities of Investor B? No. Investor B was not responsible for making the stock rise from $15 to $20, he only PROFITED from the rise in price. The stock price would have gone from $15 to $20 in any case, and Investor C voluntarily purchased the stock at $20, the same price it would be regardless of Investor B's inside information.

In reality, inside information in the markets is like inside information at the race track. In both cases, neither is guaranteed to be correct inside information. You never hear about the tips that went bad, instead you hear the government and now, most of the public, expressing anger and seeking prosecution of the evil corporate profit makers for making obscene profits at the expense of the poor regular guy. In my personal dealings, inside information turns out bad more times than good, as most risk takers agree.

The market is inundated with legal inside information in the form of privately produced newsletters and such. Most of these follow the investment habits of the evil corporate profit makers, tracking their stock buys and sales that earn them the big money. Why not then do the little guys rake in the dough by simply subscribing to these newsletters? You can answer that yourself.

The entire inside information trading law issue results in higher broker and trader costs and wider bid and ask prices, higher insurance, and overall a less efficient market because of the net result of a suppression of information.

The bottom line is that investing in the markets and the impact it has on personal finances is the individuals responsibility, and government intervention and laws will never protect the unwise investor against incompetence.

MoeFaux

7th March 2004, 06:44 PM

Originally posted by Clancie

She has admirable drive and talent, like Moe Faux said, (and I didn't realize she's as old as she is--63 this year), but I can't admire someone who is so selfish and self-centered, and apparently, quite ruthlessly so.

I love her selfishness. Love it. Not a damn altruistic thing about that woman.

7th March 2004, 06:54 PM

Originally posted by michaellee
The bottom line is that investing in the markets and the impact it has on personal finances is the individuals responsibility, and government intervention and laws will never protect the unwise investor against incompetence.

I am an investor contacted by a bank for a share in round 2 financing. I look at the books and the technology and come to the conclusion that while it is sexy, it has no insulation and will, if not fail, certainly not meet it's financial targets.

I get a few buds and we pluck down a bit of change to basically take the sucker public. We all know it's a looser but we figure we will bail when we see around 10000 to a dollar return over the first few days after the IPO. It goes and we pull out and make a fortune, at least a modest one. The"public" funded us and will keep the company going for a while. Ultimately those that paid us out will get screwed. This was preordained at the time of the first call. A purely mechanical process where you are on one side or the other of the knowledge point.

Fair?

MoeFaux

7th March 2004, 06:58 PM

What the hell is all this crap about "Fair"? What are we, in the second grade?

Bjorn

7th March 2004, 07:10 PM

Originally posted by michaellee
Most posters here talk about this "level-playing field", as if the investment markets should and will operate in a way that results in a right for you to earn a profit. This is crazy. As long as you have the unimpeded right NOT to invest unless you are willing to take the risk, then the free market will work just fine. If you truly demand the right that the market operates to suit you, then what is the result? Government enforcement, plain and simple.

Take this scenario assuming neither trader is privy to any insider information:

Investor A buys stock for $10 and later sells it to Investor B for $15, who later sells it for $20.

Did not Investors A and B both profit in this free market transaction?

Now assume that Investor B used inside information when he bought the stock for $15, knowing it would go up within a week or so.

Investor B's tip was correct and he sold the stock for $20. Does this mean Investor B then profited at Investor A's expense? The Martha Stewart prosecutors would think so, as so would most in this thread. This thinking is based on the assumption that when Investor B bought the stock, Investor A sold it for $15 ONLY because Investor B wanted to buy it. This assumption is incorrect, because Investor A knew nothing of Investor B's inside information. Investor A sold for his own reasons, and if Investor B had not bought it from Investor A for $15, Investor A would have sold it for $15 to someone else. Well, we don't know that. What if the market price was $14, and only the fact that B was offering $15 made A sell? What if there were no other investors offering $15?

One day later, when the shares are going at $20, shouldn't A fell cheated? Let's imagine B is the company's CEO, and he knew some exciting stuff that would hit the headlines the next day. Didn't he outright cheat A?

Isn't A's reason to have shares in this company that he hopes they will make it big one day? Should he be cheated by people with inside information when it finally happens?

Your example is assuming that there are an unlimited supply of shares from sellers at a certain price, and buyers ready to buy at the same price. Such is not reality.

So the result of Investor B's inside information is that his bid elevated the price Investor A sold the stock for.Maybe not, maybe it in fact made A sell, which he wouldn't have done otherwise.

Personally, I hope the guys inside the companies where I have shares work to make profits as high as possible for all shareholders, not just themselves.

Clancie

7th March 2004, 07:17 PM

According to Newsweek she turned down a deal last year that would probably have meant just a probation sentence.

Prosecutors had offered Stewart a chance last April to plead guilty to just one of the four charges against her — making a false statement — in exchange for a probation sentence, Newsweek reported Sunday, quoting several unidentified sources close to the case.

But a defense source told the magazine that prosecutors could not guarantee that Stewart would avoid jail time completely and Stewart refused the offer, Newsweek reported.

Roadtoad

7th March 2004, 07:25 PM

Originally posted by MoeFaux
What the hell is all this crap about "Fair"? What are we, in the second grade?

Fair? No. How about "Just." You play by the same rules as everyone else.

I'm sorry that Martha Stewart felt she was entitled to different rules from the rest of us. But that's not the case. I've had more than a few opportunities to get ahead the same way she did with her Imclone deal, and turned them down flat, because you always get caught. You may not pay the same penalty, but you ultimately lose in the end.

michaellee

7th March 2004, 07:29 PM

Maybe not, maybe it in fact made A sell, which he wouldn't have done otherwise
So you agree with me. With or without insider information involved, anything can happen, so prepare to RISK your money.

Kevin_Lowe

7th March 2004, 08:08 PM

A quick question for Shanek or any other free-market wonk who wants to take a shot at it:

Isn't it an article of faith for you guys that free markets are good, and that a genuine free market only exists when all consumers are perfectly informed about what they are buying?

So why is it okay for people to manipulate the free market by controlling relevant information in the case of stock trading, but not in the case of other products? Is it okay to deceive people to sell a defective used car, and if not what's the difference between a stock with a hidden defect and a car with a hidden defect?

davefoc

7th March 2004, 08:10 PM

michaellee,
There may be arguments to legalize insider trading. I have heard people that I respect make them.

But I don't buy the no loser argument. When you decide to buy a stock for $10 that is worth $15 based on your inside information, you have made $5. The market is not some infinite pool of buyers and sellers (to paraphrase bjorn). Someplace out in that market is a person that sold those shares that would not if you hadn't bought them. He lost that $5 or he lost some fraction of it and the rest is divided amongst others who might not have acted except for the chain of events you set in place when you purchased that share.

Unlike what Shanek said, in the short term, except for transaction fees, stock market transactions are exactly a zero sum game. If you made $5 some other person or group of people had to lose $5.

Except for Shanek's argument that you shuold have the right to engage in civil disobedience if Shanek doesn't agree with the law or at least believes the law is unconstitutional, I think a lot of the arguments about the wisdom of insider trading are irrelevant to the thread. This thread is about the fact that MS broke a law and then lied about it to protect herself and her fellow conspirators.

Not only did MS break a law, but she had tacitly agreed to abide by that law by numerous voluntary actions. And she profitted tremendously by that tacit agreement with the law with the success of her IPO. Do you think that if MS had publically announced that she did not agree wtih rules against insider trading and that she was not going to abide by them her IPO would have been a success?

peptoabysmal

7th March 2004, 08:30 PM

Originally posted by shanek

Yes, but it is most certainly NOT the case that you need government intervention to solve the problem. Look at the commodities market, for example. Its regulation is completely private, voluntary, and independent of the government, yet they have many tools in place to protect the market. For example, if the price of a commodity varies by a certain amount above or below its starting price, trading for the day for that commodity is shut down (one reason why the Trading Places scheme wouldn't work). The reason is exactly what you say: such actions cause harm to the market, so the commodities traders VOLUNTARILY submit to the rules of the (again COMPLETELY PRIVATE) National Futures Association.

Or hiding from an oppressive government who is trying to prosecute you for nothing more than taking part in a completely voluntary exchange that doesn't harm one single person.

Sorry I wasn't able to respond for a while. Been super busy building a new corral / horse shelter thingy.

I don't know if the commodities market is exactly a shining example of the power of a free market, or am I mistaken in thinking OPEC has managed to lock crude in at $37+ a barrel? Might be a good example of a monopoly right there.

epepke

8th March 2004, 12:04 AM

Originally posted by shanek
Actually, stocks are an excellent way of providing investment money to a company should the company prove its value to enough people. People buy stocks because they figure that the value is going to go up, and they figure that because the company is going to be more important. So they want to buy the stock.

As I said. It's a psychological game. "Stupid" was an editorial comment.

epepke

8th March 2004, 12:07 AM

Originally posted by Ed
Secondly, "completely clueless"? Go to Yahoo finance and look up the public filings for any given company, then do the same for their competitors, then read up on the segment that they compete in then read up on relevant technologies, the financial state of their clients.

Oh, yeah. I've seen the bunches of numbers. I've seen how they get created.

You wanna know how to find out the state of a company? Talk to someone who is actually doing the work. Ask them about the company. Count the number of times they say "we" versus the number of times they say "they."

Loon

8th March 2004, 01:32 AM

I think it's worth pointing out that Martha Stewart's defense team never protested the valdity or justness of the laws that she was accused (and now convicted) of breaking.

As to the legality of insider trading:

Pepto Abysmal, Clancie and Kevin Lowe have all hit on the reason, as has one other poster whom I can't remember.

It's not that Martha Stewart damaged any specific people in doing this. It's that the type of activity has to be prevented as much as possible.

If insider trading were legal (or rather, unregulated), the information playing field would not be level (this was Kevin Lowe's point). So now I can act on information that not everyone has to buy or sell a stock.

Note that this is not the same as reading the Wall Street Journal and tracking stock prices. That info is widely available. The only issue is the investor's ability to interpret it.

The kind of thing that generally causes insider tradng issues is not that chart reading or whatever. It's substantive information that has a direct impact on the viability and profitability of the company. Stuff like "the FDA says our product doesn't work" or "George Soros was casually asking me how much the company was worth..." This info isn't available to everyone. If I sell the stock knowing this, it is just like selling a car without telling the new owner that it has some hidden defect like magically turning gasoline to sugar every 3000 miles (I'm not too knowledgeable about cars, so I needed an extreme example). No way to check on a reasonable road test and certainly not something you might suspect just from asking about it.

Knowing that all this stuff is illegal, look what Enron and Wordlcom and others managed to do. Things would be worse without the regulation.

Perhaps deregulation would eventually result in a placid and peaceful market, but the ride there would be anything but. Do you trust the guys running all of these corporations?

So that's why this is illegal- as Pepto Abysmal and Clancie said, it's all about the overall effect, not the individual case.

To address the issue of the exec who wants to sell his shares but can't:
The exec who needs to sell his shares is out of luck. You're right about that. But this is weighed against the greater good of preventing the chaos of an unregulated stock market.

Regarding commodities:
Commodities are not a perfect analog for stocks. As CEO of LoonCorp, I have total knowledge and control of what goes on at my company (or should- we only have two employees. And the other one is a stuffed cat). So I have knowledge that others don't. Not so the hog futures market.

One reason is that commodities represent HUGE amounts of stuff. Another is that they're not tied to an organization, but to a product or material produced by many.

Hog futures are not hinged on FDA approval of my drug. Nor is gold.

8th March 2004, 05:06 AM

Originally posted by Loon
To address the issue of the exec who wants to sell his shares but can't:
The exec who needs to sell his shares is out of luck. You're right about that.

Not true. I don't understand why people keep saying this.

WildCat

8th March 2004, 05:28 AM

Originally posted by shanek
Yes, but it is most certainly NOT the case that you need government intervention to solve the problem. Look at the commodities market, for example. Its regulation is completely private, voluntary, and independent of the government, yet they have many tools in place to protect the market. For example, if the price of a commodity varies by a certain amount above or below its starting price, trading for the day for that commodity is shut down (one reason why the Trading Places scheme wouldn't work). The reason is exactly what you say: such actions cause harm to the market, so the commodities traders VOLUNTARILY submit to the rules of the (again COMPLETELY PRIVATE) National Futures Association.
Shanek, I've explained to you before that commodities are a completely different animal than the stock market. Commodities are fungible goods! The implication being that there can be no insider information for a commodity! A barrell of crude is a barrel of crude, a bushel of corn is a bushel of corn. Prices are determined by such things as weather, which is available to everyone. There is no insider information to be had in a commodities market! Can you not see the difference?

8th March 2004, 06:11 AM

Originally posted by WildCat

Shanek, I've explained to you before that commodities are a completely different animal than the stock market. Commodities are fungible goods! The implication being that there can be no insider information for a commodity! A barrell of crude is a barrel of crude, a bushel of corn is a bushel of corn. Prices are determined by such things as weather, which is available to everyone. There is no insider information to be had in a commodities market! Can you not see the difference?

Welllllllll...... Knowing that the A-rabs are going to reduce supplies might be a useful tidbit. Knowing that McD is going to cease making fries might impact small white potatoes. I have no idea whether using such information is illegal.

To suggest that the commodities markets are not regulated appears to be specious

http://www.cftc.gov/cftc/cftclawreg.htm

whitefork

8th March 2004, 06:26 AM

I'd suggest, in the interest of having an informed opinion, that one read the mission statement and regulations of the New York Stock Exchange itself (www.nyse.com) to see whether Ms. Stewart violated the rules of the exchange itself.

To add value to the capital-raising and asset- management process by providing the highest- quality and most cost-effective self-regulated marketplace for the trading of financial instruments, promote confidence in and understanding of that process, and serve as a forum for discussion of relevant national and international policy issues.

The Exchange is committed to strong and effective regulation to protect investors, the health of the financial system, and the integrity of the capital-formation process.
The exchange's policy is to encourage everyone to participate (and if you have any kind of retirement account you are most likely a participant even if you've never spoken to a broker). The exchange itself sets rules on what is allowed and what is not. It claims to be fair to all investors, never mind whether "fairness" is a bogus concept in the abstract or not.

WildCat

8th March 2004, 12:45 PM

Originally posted by Ed

Welllllllll...... Knowing that the A-rabs are going to reduce supplies might be a useful tidbit. Knowing that McD is going to cease making fries might impact small white potatoes. I have no idea whether using such information is illegal.

To suggest that the commodities markets are not regulated appears to be specious

http://www.cftc.gov/cftc/cftclawreg.htm
It is known in advance when OPEC (and it's not just Arab countries) is meeting, it is also known what their target price for a barrel of oil is. It is also worth noting that the formation of a cartel such as OPEC (which would be illegal if it happened in the US) is the one way to control a commodities market. Yet, it is extremely difficult to hold a cartel together as there is a strong incentive to cheat and always suspicion that the other guy is cheating. And then there are the non-cartel producers adding their production into the mix. Consequently, cartels rarely achieve their stated purposes, even OPEC.

Also, it is in OPEC's interests to have as stable of prices for oil as possible. Too low and they lose $$, too high and (say it ain't so!) people might actually buy more fuel-efficient cars.

McD suddenly stopping fries would only happen if there was an overall drop in demand for them, something that would already be reflected in potato futures and markets.

There are no insiders in a commodities market, really a market in fungible goods is as pure as a market can get. Multiple producers of identical products, prices determined by basic supply and demand. Neither of which can be controlled by the producers (w/ the exception of illegal cartels as noted above).

The regulations you refer to don't involve insider trading, rather as to licensing requirements, fraud protections, etc.

shanek

8th March 2004, 01:03 PM

Originally posted by Ed
Not true. Insiders can sell, they have to abide by certain rules. Insiders, by definition, have "inside information". You might be referring to situations where insiders have restricted stock. That is a bylaw thing or agreements that are drawn up between companies during an acquisition and have nothing to do with the feds.

Well, since I've already made several posts in favor of this arrangement, I didn't think I needed to specify it again as an exception.

I play a little bit in the market. About 12 years ago, a moderate sized company that I was very familiar with was given an offer for accquisition by a much larger company. The announcement was after market close on a friday. Their stock began being run up that morning. Clear insider trading, no investigation. Monday, naturally, that stock was higher than it would have been otherwise. I suffered. Suffering can be opportunity cost as well as a loss.

Well, I don't know how you can justify a "loss of opportunity" as a crime. You have a meeting with a big client for a big sale on Friday; I contact him on Thursday and give him my pitch and he makes the sale with me instead. Have you lost an opportunity? Certainly. Is it illegal? No way.

shanek

8th March 2004, 01:06 PM

Originally posted by MoeFaux
What the hell is all this crap about "Fair"? What are we, in the second grade?

See my post above about my sister's kids and "fair day." I think there's a lot of immaturity going on on this thread from people whose parents should have done exactly this to them.

shanek

8th March 2004, 01:10 PM

Originally posted by Roadtoad
Fair? No. How about "Just." You play by the same rules as everyone else.

Okay, so, it's not wrong to restrict gay marriages because they'll be playing by the same rules as everyone else. It's not wrong to have a poll tax because everyone is playing by the same rules. Slavery is fine, because everyone is playing by the same rules. Right?

I'm sorry that Martha Stewart felt she was entitled to different rules from the rest of us.

She wasn't. Anyone else could have sold the exact same amount of stock at the exact same time and no one would have said boo about it. But because of who she is and the information she had, all of a sudden it's wrong. They're ALREADY making different rules for her!

But that's not the case. I've had more than a few opportunities to get ahead the same way she did with her Imclone deal, and turned them down flat, because you always get caught. You may not pay the same penalty, but you ultimately lose in the end.

Gee, I wonder how many people in the 1800s said, "I've had more than a few opportunities to help slaves escape, and turned them down flat, because you always get caught. You may not pay the same penalty, but you ultimately lose in the end"?

shanek

8th March 2004, 01:12 PM

Originally posted by Kevin_Lowe
Isn't it an article of faith for you guys that free markets are good, and that a genuine free market only exists when all consumers are perfectly informed about what they are buying?

When did I ever make such a claim?

shanek

8th March 2004, 01:17 PM

Originally posted by peptoabysmal
I don't know if the commodities market is exactly a shining example of the power of a free market, or am I mistaken in thinking OPEC has managed to lock crude in at $37+ a barrel? Might be a good example of a monopoly right there.

http://www.wtrg.com/prices.htm

Doesn't look like crude oil prices are locked in to anything to me. In fact, the only time it's been above the level you mentioned was during the energy crunch of the 1970s. Since that was BEFORE the NFA began operations in 1982, I fail to see what kind of rebuttal this is.

shanek

8th March 2004, 01:24 PM

Originally posted by Loon
I think it's worth pointing out that Martha Stewart's defense team never protested the valdity or justness of the laws that she was accused (and now convicted) of breaking.

Because judges are actively refusing to allow defense teams to use jury nullification as a defense, even though it is their perfect right to do so.

If insider trading were legal (or rather, unregulated), the information playing field would not be level (this was Kevin Lowe's point). So now I can act on information that not everyone has to buy or sell a stock.

It's not level anyway, and never will be. So this is just fantasy.

Knowing that all this stuff is illegal, look what Enron and Wordlcom and others managed to do. Things would be worse without the regulation.

As I have repeatedly said, the Enron and WorldCon clowns are thieves of the highest order, and what they did broke so many laws that insider trading really has little to do with it.

To address the issue of the exec who wants to sell his shares but can't:
The exec who needs to sell his shares is out of luck. You're right about that. But this is weighed against the greater good of preventing the chaos of an unregulated stock market.

So, the exec doesn't get to have the medical procedure he needs because of the "greater good." And no one here has ANY problem with that????

Regarding commodities:
Commodities are not a perfect analog for stocks. As CEO of LoonCorp, I have total knowledge and control of blah blah blah

That doesn't go anywhere near my point for bringing up the commodities market. It was done to show how industry self-regulation has prevented actions which harm the market. Since the claim on the other side was that we NEED government to protect people from harming the market, this is a most effective rebuttal of that. Yet, every time I bring it up, people start to switch the goal posts saying how insider trading wouldn't work in the commodities market blah blah blah, when nothing in my claim ever came anywhere near saying that it would nor depends on it doing so. And yet, they ALWAYS resort to this instead of responding to the point I actually made. Wonder why?

shanek

8th March 2004, 01:25 PM

Originally posted by WildCat
Shanek, I've explained to you before that commodities are a completely different animal than the stock market.

See the last paragraph in my above post. It is a perfect rebuttal to the claims being made here; yet, here you are using the exact same distraction that Loon did.

shanek

8th March 2004, 01:27 PM

Originally posted by Kullervo
I'd suggest, in the interest of having an informed opinion, that one read the mission statement and regulations of the New York Stock Exchange itself (www.nyse.com) to see whether Ms. Stewart violated the rules of the exchange itself.

If it were a simple matter of the NYSE setting rules that people voluntarily agree to whenever they trade, it would be a different matter. We're talking about SEC regulations, not NYSE rules of exchange.

WildCat

8th March 2004, 01:36 PM

Originally posted by shanek

See the last paragraph in my above post. It is a perfect rebuttal to the claims being made here; yet, here you are using the exact same distraction that Loon did.
We're talking about insider trading specifically. I thought your point was that we didn't need laws against insider trading in the stock market because the companies could regulate themselves, as they do in the commodities market where there are no regs regarding insider trading. As Loon and I pointed out, there is a fundamental diference between commodities and stocks which makes insider trading an impossibility. Now you're trying to move the goalposts by claiming this thread is not about insider trading, but w/ gov't regs in general (and I probably agree w/ you that in general there are too many gov't regs for businesses). But this thread is about insider trading specifically, so your comparison to the commodities market is invalid.

Skeptic

8th March 2004, 01:39 PM

She was persecuted for the same reason Hillary Clinton is: because she's a strong, successful woman. Nothing more.

...well, that, and using illegal insider's trading to save herself hundreds of thousands of dollars. But, after all, "strong, succesful women" are allowed to do things like that.

Don't get me wrong: I hardly think she's the personification of corporate corruption. She was worth at the time hundreds of millions of dollars, and she still decided to use insider's trading, which she knew was illegal, to save $200,000. Logically, that's like you or me committing armed robbery, out of the blue, because we're $20 short in the supermarket checkout line.

This seems more like the financial equivalent of a "crime of passion" ("dammit, sell it all NOW!!!!"), as her phone calls testify, than some sort of rational calculation of how to screw the system. But the idea that this is some sort of evil conspiracy against "strong, succesful women" is silly.

If I were in charge, I wouldn't give here jail time for this. And I don't think too many people think she deserves jail. But then again, I'm not in charge.

Skeptic

8th March 2004, 04:36 PM

Because judges are actively refusing to allow defense teams to use jury nullification as a defense, even though it is their perfect right to do so.

That has to do with the fact that juries decide the FACTS of the case, not the law. The judge instructs the jury what facts must be found for a guilty (or non guilty) verdict. The jury then decides if the facts apply.

To say that the jury has a right for jury nullification is to say that the jury has the right to ignore the facts, or that the jury's job is not to be a judge of the facts in the first place. This is absurd: it's a direct contradiction with the very idea of what a jury is for.

In addition, there are also pragmatic reasons against it: if you give the jury a right to delare someone not guilty because they don't like the law, the result of that would be anarchy, for obvious reasons.

This doesn't mean that jurors do not actually practice jury nullification. In the south, up to the 1950s, white juries refused to convict whites who lynched blacks. For years, it was impossible to convict mafia hitmen or dons of any crime, regardless of the evidence, because the jurors aquitted them out of fear. Many other examples exist of juries simply refusing to convict for some reason or another that has nothing to do with the evidence.

The "right" for jury nullification "exists" only in the sense that there are no penalties that could be applied to a jury that practices it (and a good thing, too--you can imagine the result of a system where jurors can be punished for reaching the "wrong" verdict!). But that's something else entirely than having a legal right to acquit despite the evidence.

a_unique_person

8th March 2004, 04:40 PM

Appeal, anyone?

shanek

8th March 2004, 06:23 PM

Originally posted by WildCat
We're talking about insider trading specifically.

The claim was made that we need the government to protect us from things which harm the market. I gave an example to show that that is NOT true. And I only needed ONE example to rebut the claim. It DOESN'T MATTER how far removed from insider trading it is; it harms the market, so the industry regulated it ON THEIR OWN.

Now you're trying to move the goalposts by claiming this thread is not about insider trading,

I have never made that claim, and I'd love to see you try and quote me doing so.

shanek

8th March 2004, 06:28 PM

Originally posted by Skeptic
That has to do with the fact that juries decide the FACTS of the case, not the law.

That wasn't the case up until the late 19th century. Before then, almost as long as trial by jury has existed, jury nullification has been seen as a vital part of trial by jury. The government has to make its COMPLETE CASE to the people, and that includes supporting the law itself as well as the particulars of the crime. John Adams himself argued jury nullification when he defended John Hancock.

This right has NEVER been taken from a jury. And even many judges who instruct juries otherwise acknowledge that they do, in fact, have this right.

To say that the jury has a right for jury nullification is to say that the jury has the right to ignore the facts,

That's just complete bull$#!7 and I shouldn't even have to explain why. They judge the facts, whether or not they fit the crime, but they also judge the crime itself and whether or not it is just. Even when juries in the mid 19th century found the facts to be in favor of those prosecuting people who helped slaves escape to Canada (in violation of Federal law), they acquitted them anyway because they believed that the law was wicked and unjust.

This is absurd: it's a direct contradiction with the very idea of what a jury is for.

No, it's not. Up until about 100 years ago, it was a much-regarded part of trial by jury.

In addition, there are also pragmatic reasons against it: if you give the jury a right to delare someone not guilty because they don't like the law, the result of that would be anarchy, for obvious reasons.

No, the result of that would be freedom from unjust laws. It worked great in this country for over 100 years. They only started acting against it once juries started refusing to convict workers who tried to form unions.

Learn some history for a change.

The Central Scrutinizer

8th March 2004, 07:48 PM

Originally posted by Sundog
She was persecuted for the same reason Hillary Clinton is: because she's a strong, successful woman. Nothing more.

And she broke the law. You forgot that part.

Clancie

8th March 2004, 08:05 PM

Posted by Skeptic

...well, that, and using illegal insider's trading to save herself hundreds of thousands of dollars.
How so, Skeptic? She only made about $45,000 on the sale (and should have realized how it would play out later re: her own company).

She lied to investigators. She refused to plea bargain. She was guilty of wrongdoing, she knew better, and she'll have to go to prison for a while.

I feel sorry for her...a bit. But with all her wealth, she was brought down by selfishness...greed or stinginess (take your pick)...and arrogance (she's not stupid and she's -very- familiar with the rules of the stock market).

Its a small crime, but its a crime and she, of all people, should have known better.

As for "insider trading"f, Skeptic...we'll see. The SEC is filing a civil suit against her for it so, for now,...who knows?

Clancie

8th March 2004, 08:09 PM

re: Sundog's comment. I agree that Hillary Clinton is attacked by conservatives because she is a strong woman with political clout, and because she is (to them) a "liberal".

I think the prosecutors were sincere, but that a lot of other people -do- seem glad to see Martha Stewart brought down and I don't know if that's because she's a strong successful woman or if a lot of it is just plain envy because she does so much and has her name on everything. Personally, I think gloating and joking about someone going to prison for such a trivial crime is, well, for want of a better word, kind of mean.

shanek

8th March 2004, 08:36 PM

Originally posted by The Central Scrutinizer
And she broke the law. You forgot that part.

The bogus insider trading charges were dropped. You forgot that part.

RichardR

8th March 2004, 08:40 PM

Originally posted by davefoc
But I don't buy the no loser argument. When you decide to buy a stock for $10 that is worth $15 based on your inside information, you have made $5. The market is not some infinite pool of buyers and sellers (to paraphrase bjorn). Someplace out in that market is a person that sold those shares that would not if you hadn't bought them. He lost that $5 or he lost some fraction of it and the rest is divided amongst others who might not have acted except for the chain of events you set in place when you purchased that share.

Unlike what Shanek said, in the short term, except for transaction fees, stock market transactions are exactly a zero sum game. If you made $5 some other person or group of people had to lose $5.I agree.

Stewart sold her shares before they fell, and received more for them than she would have done if she had sold them the next day. Stewart was therefore better off due to selling her shares based on the inside information. This means that the other shareholders (in aggregate), lost the same amount that Stewart was better off by.

Shane: if no one suffered from Stewart's action, where did the money come from that Stewart was better off by?

The Central Scrutinizer

8th March 2004, 08:41 PM

Originally posted by shanek

The bogus insider trading charges were dropped. You forgot that part.

She was found guilty of conspiracy. You forgot that part.

She was found guilty of obstruction of justice. You forgot that part.

She was found guilty of making a false statement. You forgot that part.

She was found guilty of making a (second) false statement. You forgot that part (again).

peptoabysmal

8th March 2004, 09:41 PM

Originally posted by shanek

http://www.wtrg.com/prices.htm

Doesn't look like crude oil prices are locked in to anything to me. In fact, the only time it's been above the level you mentioned was during the energy crunch of the 1970s. Since that was BEFORE the NFA began operations in 1982, I fail to see what kind of rebuttal this is.

OK as of this writing 3/8/04 the price fell $.69 to settle in light crude at $36.57. Er, light crude is the American oil futures isn't it? Not a rebuttal, just a "A monopoly (ahem) cartel can have a quite an impact on a supposedly free market, can it not?"

I'm no expert, just asking questions. I couldn't keep my eyelids propped open with toothpicks in a macroeconomics class if my life depended on it, truth be told.

peptoabysmal

8th March 2004, 09:50 PM

Here's a little more on the current OPEC strategy:

OPEC president: More crude cuts possible (http://msnbc.msn.com/id/4419603/)

To me, it appears to be manipulation of a market. (Your mileage may vary)

Fade

8th March 2004, 09:57 PM

Originally posted by The Central Scrutinizer

She was found guilty of conspiracy. You forgot that part.

She was found guilty of obstruction of justice. You forgot that part.

She was found guilty of making a false statement. You forgot that part.

She was found guilty of making a (second) false statement. You forgot that part (again).

So she's guilty of obstructing the investigation of something she was cleared of.

Gotcha.

As a completely unrelated aside, did you support Clinton's impeachment?

Why or why not?

Loon

8th March 2004, 10:36 PM

Originally posted by shanek

So, the exec doesn't get to have the medical procedure he needs because of the "greater good." And no one here has ANY problem with that????[\quote]

Well, aside from the fact that this is hypothetical, if the stability of world financial markets are at stake, yeah, it's worth it. (I wonder how a similar arguement would play on a socialized medicine thread...) We go to war all the time and soldiers die for things that are not particularly in their interests.

Also, it's not that he can never sell the stock, just that there are resitrictions. Ed pointed out that this whole thing is a fallacy, though there was less evidence than I would have liked.

[quote]
That doesn't go anywhere near my point for bringing up the commodities market. It was done to show how industry self-regulation has prevented actions which harm the market.

But as WildCat and I have pointed out, the commodities market is different than the stock market, so you're comparing apples and oranges. You've shown that there exists a market that can operate effectively without much oversight. You have not shown that all markets can do so.

Since the claim on the other side was that we NEED government to protect people from harming the market, this is a most effective rebuttal of that.

Again, only assuming that the commodities market and stock market are analagous.

Yet, every time I bring it up, people start to switch the goal posts saying how insider trading wouldn't work in the commodities market blah blah blah, when nothing in my claim ever came anywhere near saying that it would nor depends on it doing so. And yet, they ALWAYS resort to this instead of responding to the point I actually made. Wonder why?

I think the reason people say that insider trading is impossible in the commodities market is that they (we?) understand your position to be as follows:

The commodities market works w/o regulation.
Therefore, the stock market will also work w/o regulation.

It looks to me like you're drawing a parallel between the two markets. We then point out that the markets are not comprable.

It's very possible that I'm misunderstanding you. If I am please correct me.

shanek

9th March 2004, 04:43 AM

Somehow, I missed this post:

Originally posted by davefoc
But I don't buy the no loser argument. When you decide to buy a stock for $10 that is worth $15 based on your inside information, you have made $5. The market is not some infinite pool of buyers and sellers (to paraphrase bjorn). Someplace out in that market is a person that sold those shares that would not if you hadn't bought them.

NOT true. That person WOULD have sold those shares. It seems I have to explain this every single time we have one of these threads, so here we go again:

The market is set up of people who want to sell shares and people who want to buy, not a fixed number of shares, but a certain dollar amount's worth. Ultimately, the price of the available shares ends up being the combined dollar amount that everyone who wants to buy the stock is putting up. The people who are buying are going to spend that money on shares no matter what, and the people who are selling are going to sell them their shares no matter what. Of course, this is made quite complex by the chaotic machinations of the market, and the fact that it's impossible to tell at any given time how many shares are offered for sale and how many dollars are out there chasing them, but the laws of supply and demand help zero in on the values.

So someone who wants to buy $15 worth of stock is going to spend $15 on the stock no matter what. Conversely, the sellers are going to sell their shares no matter what. Therefore, it is completely false to state, "Someplace out in that market is a person that sold those shares that would not if you hadn't bought them."

Unlike what Shanek said, in the short term, except for transaction fees, stock market transactions are exactly a zero sum game.

No, they aren't, because the value of stocks is flexible and subject to the laws of supply and demand. If you have a share of stock, and its value goes up by $5, it is NOT the case that you have somehow mysteriously taken $5 from some other person or people somewhere.

If you made $5 some other person or group of people had to lose $5.

Absolute crap, for reasons I just elucidated.

shanek

9th March 2004, 04:45 AM

Originally posted by The Central Scrutinizer
She was found guilty of conspiracy. You forgot that part.

She was found guilty of obstruction of justice. You forgot that part.

She was found guilty of making a false statement. You forgot that part.

She was found guilty of making a (second) false statement. You forgot that part (again).

What she was guilty of conspiring to do, what she was guilty of obstructing, what she was guilty of making false statements about, is the very same bogus charge that was dismissed. You forgot that part.

shanek

9th March 2004, 04:48 AM

Originally posted by peptoabysmal
Here's a little more on the current OPEC strategy:

OPEC president: More crude cuts possible (http://msnbc.msn.com/id/4419603/)

To me, it appears to be manipulation of a market. (Your mileage may vary)

By a government, yes (well, governments, actually). Your point?

Oh, and BTW, from the article:

This is also the time of year for turnaround, when refiners temporarily shut down to conduct maintenance before ramping up production of special blends of cleaner-burning gasoline required for the busy summer driving season. As a result, supplies tend to contract.

“The general theory is that once refiners come out of turnaround that there will be plenty of gasoline out there,” Bentz said. He said that has been complicated this year by the fact that New York and Connecticut are introducing a new additive to their gasoline supply and refiners must meet new low-sulfur guidelines.

Sounds to me like you're forgetting the staggering costs of regulatory compliance.

shanek

9th March 2004, 04:56 AM

Originally posted by Loon
Well, aside from the fact that this is hypothetical, if the stability of world financial markets are at stake, yeah, it's worth it.

Well, gee, okay, I just don't know how to react to someone who will deny someone a needed medical procedure to help out the financial market...

We go to war all the time and soldiers die for things that are not particularly in their interests.

Thing is, those soldiers usually sign up voluntarily (and when they don't, that's an atrocity) and know what they're getting into. You're talking about involuntarily sacrificing an innocent person.

But as WildCat and I have pointed out, the commodities market is different than the stock market, so you're comparing apples and oranges.

And as I pointed out, and as you seem to want to ignore, those differences are irrelevant to my point.

You've shown that there exists a market that can operate effectively without much oversight. You have not shown that all markets can do so.

Wait, I have to show that ALL markets can do so? How reasonable is that? I only needed ONE to rebut the claim. And I gave you one.

Again, only assuming that the commodities market and stock market are analagous.

They don't HAVE to be analogous for the rebuttal to be effective. In order to respond to my rebuttal, you have to show, not that the markets are different, but that they are different in such a way as to make industry self-regulation impossible. And you haven't even tried that.

I think the reason people say that insider trading is impossible in the commodities market is that they (we?) understand your position to be as follows:

The commodities market works w/o regulation.
Therefore, the stock market will also work w/o regulation.

Then they aren't reading what I'm writing. I'm saying, "The commodities market can self-regulate to protect the market, therefore the claim that markets need government regulation to protect the market is hereby falsified."

subgenius

9th March 2004, 05:06 AM

Sending a 62 year old with no previous record, and who has lost millions (and millions) as a result of the prosecution, to prison for this is not within my definition of justice.
How many people has the government put out of a job because of this case. How many had Martha created employment for?

Walter Wayne

9th March 2004, 06:20 AM

Originally posted by shanek

What she was guilty of conspiring to do, what she was guilty of obstructing, what she was guilty of making false statements about, is the very same bogus charge that was dismissed. You forgot that part. So in the case that you are not echnically guilty of another offense, you are allowed to obstruct justice or make false statements? As I recall, obstruction is obstruction, whether guilty of the offense being investigated or not. The only circumstance I can see that makes it otherwise is if the investigation was unlawful.

Walt

Evolver

9th March 2004, 06:25 AM

So Martha's going to jail.

Think they'll prosecute W (Harkin Oil) next?

shanek

9th March 2004, 06:29 AM

Originally posted by Walter Wayne
So in the case that you are not echnically guilty of another offense, you are allowed to obstruct justice or make false statements? As I recall, obstruction is obstruction, whether guilty of the offense being investigated or not. The only circumstance I can see that makes it otherwise is if the investigation was unlawful.

Well, gee, then I guess we should all just submit to the authorities whenever any of them trumps up a charge against us. Nooo, that's NEVER led to any tyrannical atrocities in the past...

The government DOES NOT have absolute authority over us. WE have authority over THE GOVERNMENT, or at least we're supposed to.

RichardR

9th March 2004, 07:15 AM

Shane, perhaps you missed this too:

Stewart sold her shares before they fell, and received more for them than she would have done if she had sold them the next day. Stewart was therefore better off due to selling her shares based on the inside information.

So if no one suffered from Stewart's action, where did the money come from that Stewart was better off by?

9th March 2004, 07:36 AM

Originally posted by shanek

Because judges are actively refusing to allow defense teams to use jury nullification as a defense, even though it is their perfect right to do so.

I thank you for bringing this point up. Would you mind starting a thread on this precise topic?

davefoc

9th March 2004, 09:06 AM

subgenius said:Sending a 62 year old with no previous record, and who has lost millions (and millions) as a result of the prosecution, to prison for this is not within my definition of justice.

Subgenious, can we interpret this to mean that you think the federal sentencing guidelines should be changed so as to include sentence reductions based on the size of the company that one has developed?

subgenious asked:How many people has the government put out of a job because of this case. How many had Martha created employment for?

I doubt that there will be very many in net. MS omnimedia is principally a marketing/media company that employs relatively few people. If people aren't buying and watching MS stuff they will be buy and watch somebody else's stuff. That is not to say that there won't be disruptions and that it wouldn't be better for some people if MS didn't go to jail. But other people will gain at the same time as their products get more exposure.

subgenius

9th March 2004, 09:08 AM

The harm from the prosecution to the public far exceeds the harm from her actions.
The harm to her from it has been enormous. Far in excess of the crime. Any further punishment is excessive. If there is justice she should be doing some service that would result in some benefit to society to offset the damage the government has done.

shanek

9th March 2004, 09:30 AM

Originally posted by RichardR
Stewart sold her shares before they fell, and received more for them than she would have done if she had sold them the next day. Stewart was therefore better off due to selling her shares based on the inside information.

So if no one suffered from Stewart's action, where did the money come from that Stewart was better off by?

Asked and answered.

shanek

9th March 2004, 09:32 AM

Originally posted by Ed
I thank you for bringing this point up. Would you mind starting a thread on this precise topic?

We discussed it at length in this thread:

http://www.randi.org/vbulletin/showthread.php?s=&threadid=25102

RichardR

9th March 2004, 09:43 AM

Originally posted by shanek
Asked and answered. No you didn't. Can you answer this question or not:

Stewart sold her shares before they fell, and received more for them than she would have done if she had sold them the next day. Stewart was therefore better off due to selling her shares based on the inside information.

Stewart had more money in her bank account because she sold the shares a day early, compared with what she would have had if she sold them a day later. That money must have come from somewhere. Someone else must have less money in his bank account than they would have had if Stewart had sold her shares late. (If not, money has been created from thin air – a good trick.)

So where did the money come from that Stewart was better off by?

TillEulenspiegel

9th March 2004, 10:46 AM

The primary reason ( aside from legal ) that insider trading is unacceptable can be summed up in one word ..fairness.
That may sound naive but it is actually practical.

The demographics of the stock market in the US is that 60% of Americans are vested in the market. The market and it's behavior , now more then ever is a product of physiology rather then disciplined analysis by people educated in economics.

So the dynamic of forces controlling the market are more based on perception and feelings. If the people who make up the market now ( and the reason the Dow has reached such heights is a function of the dollars pumped into the market ) see a fundamental unfairness or that their are involved in a rigged game, the confidence of those investors is gone.

The perception in insider trading scandals exist I believe as a demonstration of a crooked game where the victims are the little guy. The Enrons,Worldcoms and Inclones are viewed not so much as a disparity of the level invested dollars ( first class VS regular air-flight ) but as a scam where in a poker game the house and the high roller are in cahoots and you wind up cheated. This is a prime case where the overused axiom becomes relevant "Perception is reality".

edit to add:
Main topic, The projected monetary savings of Martha's selling of the stock was ~ $50,000. She was worth $1 billion at the time, the value is now less then half that and going south as we speak(?) . Why would a person take such such risks? <sigh>

shanek

9th March 2004, 12:41 PM

Originally posted by RichardR
Stewart had more money in her bank account because she sold the shares a day early, compared with what she would have had if she sold them a day later. That money must have come from somewhere. Someone else must have less money in his bank account than they would have had if Stewart had sold her shares late. (If not, money has been created from thin air – a good trick.)

So where did the money come from that Stewart was better off by?

The money is an expression of her stock the value that it was that day. The fact that the value would have been lower the next day does NOT mean that someone else is out that money.

Okay, let's look at it this way: Stewart sells her stock to a bunch of people and then the stock price falls the next day. But no one is out any more money than they were because of the trade; they might have stocks that aren't as valuable, but stocks ain't money.

Now, let's say Stewart waits a day to sell. Now she can't get as much for her stock, so she's lost out on the money she could have gotten by selling early. Does this mean those buyers all of a sudden decided to just wair a day before buying? If that were the way it worked, then your point would have merit, but it just isn't.

Those people STILL BOUGHT STOCKS THE PREVIOUS DAY. I don't know why this is such a tough concept for people to grasp. They are looking to spend EXACTLY that amount of money on shares of stock. The only difference is, with fewer overall shares put up for sale but the same amount of money chasing after them, this means that they are actually paying more per share than they would have otherwise. They STILL lose out when the stock tanks.

If the "extra money" could be said to have gone anywhere, that is, the money Stewart would have gained by selling early minus the amount she got by selling a day later, then it's spread out over the previous day's sellers, who sold their stocks at a slightly higher share. Which means we're right back at what I've been saying all along: the sellers are unequal, and insiders are put at a disadvantage to the favor of non-insiders selling their stock, not because of their actions, but simply because of who they are.

shanek

9th March 2004, 12:43 PM

Originally posted by TillEulenspiegel
The primary reason ( aside from legal ) that insider trading is unacceptable can be summed up in one word ..fairness.

See my numerous posts earlier in the thread on the subject of fairness. Basically, the only way to make things fair is to oppress freedom.

Tmy

9th March 2004, 12:52 PM

The problem whinsider trading is that it weakens the whole stock market. SOrt of like point shaving in sports. Who wants to participate in somthing thats percieved as being fixed???

Let her go to jail. She deserves it. There are many people in your local jail because they wrote bad checks for amounts less than Marthas handbags. No one cares when they get time. Why such an "injustice" if Martha ends up in the poke. Ist about punishment not danger to society.

RichardR

9th March 2004, 01:13 PM

Originally posted by shanek
The money is an expression of her stock the value that it was that day. The fact that the value would have been lower the next day does NOT mean that someone else is out that money. Here's the problem, Shane. You have a theoretical model of the stock market that says no one loses any money due to insider trading. But the thing about a theoretical model is that it's only good if it can be tested favorably against the real world. This one fails the test. Look:

Scenario 1 – Stewart sells her shares on 12/27/01 for approx $200K.

Scenario 2 - Stewart waits a day and sells on 12/28/01 for approx $150K

In scenario 1 she ends up with $50K more in her bank account than in Scenario 2. That's actual money – dollars - not just the "value" of some stock, it's cash in the bank. Unless money has been created by the transaction (it hasn't), someone else must have $50K less in his bank account. (When I say "someone", I mean any number of "someones" in aggregate.) Whoever has the $50K less has lost $50K due to Stewart's acting on insider information. Why do you deny this?

Originally posted by shanek
If the "extra money" could be said to have gone anywhere, that is, the money Stewart would have gained by selling early minus the amount she got by selling a day later, then it's spread out over the previous day's sellers, who sold their stocks at a slightly higher share. So because Stewart sold early, the previous days sellers, in aggregate, were $50K worse off. It seems you do now agree that these sellers lost at the expense of the insider (Stewart), who gained due to her inside info. You finally answered your own question, which was "who loses due to insider trading?" It's the other sellers who didn't have that inside information.

Originally posted by shanek
Which means we're right back at what I've been saying all along: the sellers are unequal, and insiders are put at a disadvantage to the favor of non-insiders selling their stock, not because of their actions, but simply because of who they are. Except if they are allowed to act upon their inside information, in which case they gain (as I demonstrated above).

Clancie

9th March 2004, 01:21 PM

Shanek,

Here's another hypothetical question for you. Let's say I sell you a lottery ticket (one "share" in the lottery at $1). The winning number is already chosen and I know it and what I sold you isn't it.

Somewhat analogously, if I sell you stock and I know that in a week it will be worthless but I don't care because I'm bailing out tomorrow--using your invested money and confidence in the stock (to keep the price, temporarily, high) to be sure I don't lose money--in fact, unlike you, I make it.

Buy low, sell high. That's what I did, because I had insider information to know when to sell before it would go low again. You didn't. Through no fault of your own, your ignorance finances my profit and your bankruptcy. Is that really how you see the "fair marketplace" operating?

TillEulenspiegel

9th March 2004, 02:33 PM

Originally posted by shanek

See my numerous posts earlier in the thread on the subject of fairness. Basically, the only way to make things fair is to oppress freedom.

Your reasoning is simplistic and in error. The two paragraphs following the quote you site, explain WHY fairness or at least the impression of a process that is percieved as fair is fundimental to the way the market functions today. If people believe that the game is crooked they will not engage in it.

Roadtoad

9th March 2004, 02:51 PM

1.) Stewart cheated. She broke long standing rules from the NYSE and the SEC, and she knew what those rules were when she broke them. For whatever reason, she chose to compound that failure by committing perjury. As such, she deserves jail time.

2.) I don't dislike Hillary Clinton because she's a stong woman, and powerful. Actually, I would have hoped that eventually Nancy Landon Kassebaum (R-KS) would have made a run for President, because, frankly, I'd have voted for her. She, too, is a strong woman, and has held power, but unlike Ms. Clinton, she doesn't lie, she doesn't try to bogart stuff from Federal property, and she's tended to be consistent in what she supports. I could name a number of others, as well, but I think you get my drift.

3.) I supported the Impeachment, mainly because I see perjury as falling under the "High crimes and misdemeanors" clause. I don't give a rat's @$$ what Bill Clinton lied about. He knew better. He was an attorney, and had been Arkansas' Attorney General.

4.) Not that you asked, but I would truly have loved to see Oliver North do time for his role in Iran-Contra. He had it coming. He knew better, too. And, no, I never have supported ANYTHING he's done, including his run for the Senate, and made a few enemies when I told them I'd be damned if I was going to send one dime of the pittance I earned at the time to support that SOB's political ambitions.

What I think is going to happen:

A.) Martha will get probation. As Subgenius said, it's her first offense. It's non-violent. And, someone is going to point this out, "No one got hurt." (I disagree; people did get hurt, and that's why there was a prosecution. Sorry, Shane.)

B.) The furor over Hillary Clinton will die down. She'll maybe make a run for higher office, but she'll lose. If anything, what is likely to happen is she'll wind up as either Secretary of State or Attorney General. She'll actually turn out to be much better than Janet Reno or John Ashcroft. (Not that those two set the bar particularly high.)

C.) Bill Clinton will have a new GF, and eventually, we'll get bored of hearing about an adolescent in his 50's who can't keep his pants zipped.

D.) Oliver North will eventually tell the whole truth about what happened during his time in the Reagan White House. The nation will hold hearings to prevent it from ever happening again. It will happen again.

Bjorn

9th March 2004, 03:10 PM

Originally posted by shanek
Now, let's say Stewart waits a day to sell. Now she can't get as much for her stock, so she's lost out on the money she could have gotten by selling early. Does this mean those buyers all of a sudden decided to just wair a day before buying? If that were the way it worked, then your point would have merit, but it just isn't.

Those people STILL BOUGHT STOCKS THE PREVIOUS DAY. I don't know why this is such a tough concept for people to grasp. They are looking to spend EXACTLY that amount of money on shares of stock. The only difference is, with fewer overall shares put up for sale but the same amount of money chasing after them, this means that they are actually paying more per share than they would have otherwise. They STILL lose out when the stock tanks.But the stockmarket very often doesn't work that way (that people decide on what amount to spend on shares in a certain company). If they do, it's called to 'buy best' where I come from, and many investors would never take such a risk (something happens during the day and you discover you've paid far more per share than you think they are worth - maybe there were very few sellers that day and one of them tries to up the price a bit to see if there are any 'buy best'-fools there).

A very common way of buying shares is to specify what price you want - I'll buy 1,000 shares in company X at $5 per share or better. Same with selling - I'll sell my 1,000 shares if I can get $5 per share, if not, I'll keep them.

On any given day there will be potential buyers and sellers that didn't get what they wanted, and therefore didn't do any transaction that day. Supply and demand are not always equal.

In comes Martha, effectively making the number of available shares at a certain price larger. Someone would not have bought shares that day if those shares were not available. :(

shanek

9th March 2004, 04:20 PM

Originally posted by RichardR
Whoever has the $50K less has lost $50K due to Stewart's acting on insider information. Why do you deny this?

If you had actually read the post you were just replying to instead of just reacting to it, you would see that I didn't deny it at all. I merely denied the conclusion that this constitutes harm.

So because Stewart sold early, the previous days sellers, in aggregate, were $50K worse off.

No, the sellers were exactly how they were; it's just that now they had Stewart amongst them.

Geez, are you actually THINKING about this? ANYTIME someone sells stock and the price then drops this happens! It's just the nature of the market!

It seems you do now agree that these sellers lost at the expense of the insider

No, they didn't! Please READ!!! This transaction has NOT ONE SINGLE THING TO DO with the insider information!

You finally answered your own question, which was "who loses due to insider trading?" It's the other sellers who didn't have that inside information.

Bull$#!7. This transaction has NOTHING to do with insider information. The EXACT SAME EFFECT would happen if she didn't have any insider information but decided to sell for some other reason. Your reasoning is bogus, you conclusion specious.

PLEASE, would someone READ my posts for once???

shanek

9th March 2004, 04:25 PM

Originally posted by Clancie
Here's another hypothetical question for you. Let's say I sell you a lottery ticket (one "share" in the lottery at $1). The winning number is already chosen and I know it and what I sold you isn't it.

Geez, and you people accuse ME of bad analogies! The stock market isn't a game of chance. In your example, you KNOW the result, instead of merely suspecting it; and I don't have access to a plethora of other indicators saying what the price of the ticket will be worth, whereas I do in the stock market.

Somewhat analogously, if I sell you stock and I know that in a week it will be worthless but I don't care because I'm bailing out tomorrow--using your invested money and confidence in the stock (to keep the price, temporarily, high) to be sure I don't lose money--in fact, unlike you, I make it.

But I'm buying anyway. I'll lose the money anyway. So how would you have harmed me?

shanek

9th March 2004, 04:32 PM

Originally posted by Roadtoad
1.) Stewart cheated. She broke long standing rules from the NYSE and the SEC, and she knew what those rules were when she broke them. For whatever reason, she chose to compound that failure by committing perjury. As such, she deserves jail time.

Tubman broke the Fugitive Slave Laws, and she knew what those laws were when she broke them. For whatever reason, she chose to compound that failure by committing perjury (when she lied to the authorities to keep the Underground Railroad a secret). As such, she deserves jail time.

See the tyranny that arises from this point of view?

3.) I supported the Impeachment, mainly because I see perjury as falling under the "High crimes and misdemeanors" clause. I don't give a rat's @$$ what Bill Clinton lied about. He knew better. He was an attorney, and had been Arkansas' Attorney General.

Well, Thomas Jefferson disagreed with this, and that was regarding possibly his biggest political foe, Alexander Hamilton.

The Clinton Impeachment was just a bogus display of partisan politics at its worse. It was a trumped-up fiasco and everyone involved in it should be ashamed at the mockery they made of a legitimate Constitutional defense.

(I disagree; people did get hurt, and that's why there was a prosecution. Sorry, Shane.)

Okay, fine; who? Produce a victim.

shanek

9th March 2004, 04:34 PM

Originally posted by Bjorn
A very common way of buying shares is to specify what price you want - I'll buy 1,000 shares in company X at $5 per share or better. Same with selling - I'll sell my 1,000 shares if I can get $5 per share, if not, I'll keep them.

It amounts to the same thing. Stewart's shares hardly dropped the price by enough to affect this, if it had any noticeable effect at all.

And even if they had, you STILL have the problem (that everyone's been ignoring) about what if she sold the same amount of shares without having any insider information, but needed an expensive medical procedure or wanted to take a trip around the world? How are the others any worse off? They AREN'T. So, why is the SAME ACTION illegal with one purpose in mind but not the other?

Bjorn

9th March 2004, 04:46 PM

Originally posted by shanek

It amounts to the same thing. Stewart's shares hardly dropped the price by enough to affect this, if it had any noticeable effect at all.

And even if they had, you STILL have the problem (that everyone's been ignoring) about what if she sold the same amount of shares without having any insider information, but needed an expensive medical procedure or wanted to take a trip around the world? How are the others any worse off? They AREN'T. So, why is the SAME ACTION illegal with one purpose in mind but not the other? In one instance she knows the price will drop the next day. In the other she doesn't/it won't.

In one instance the purpose is to cheat me, in the other it isn't. :(

EvilYeti

9th March 2004, 05:46 PM

A few comments.

1. The dropped securities fraud charge had nothing to do with Ms. Stewarts sale of ImClone stock. This was a new charge based on the theory that she was trying to protect the value of Living Omnemida, her company, by falsely declaring her innocence during the ImClone investigation. While probably true, its was decided that such a declaration was protected speech and could not be prosecuted.

2. The prosecutors likely decided to stop pursing a fraud conviction over the ImClone sale as the other charges (lying to investigators, obstruction of justice, conspiracy) were more severe. If Martha just pled guilty to illegal insider trading she would have probably gotten off with a slap on the wrist.

3. Bitching about how Martha Stewart is being prosecuted is a bit like complaining about Sammy Sosa getting ejected from a game for using a corked bat. They were both voluntarily engaging in an activity that is governed by fixed, non-negotiable rules. Your choices are abide by said rules or don't play. That they chose to deliberately flaunt those rules (and in both cases, lie to try and cover it up when they were caught) is their fault.

davefoc

9th March 2004, 06:38 PM

subgenious said:The harm from the prosecution to the public far exceeds the harm from her actions.
The harm to her from it has been enormous. Far in excess of the crime. Any further punishment is excessive. If there is justice she should be doing some service that would result in some benefit to society to offset the damage the government has done.

I realize that you don't think MS should go to jail.

My question before went to more about what you thought the underlying principle was that made it so that MS shouldn't go to jail.

Is it a total drop in net worth that's relevant. If someone commits a crime and their net worth drops $50,000 dollars do they get more punishment than somebody who commits the same crime and whose net worth drops $50,000,000 under your system?

I thought from what you said previously that it might be number of people working for the organization that you founded that was significant. If criminal A founded an organization with 1000 employess and criminal B founded an organization with only 50 employess does that mean that all other things being equal we would give criminal A less punishment?

How would you modify the federal sentencing guidelines to implement what you believe about the jail time for people that are convicted of lying, obstructing justice and conspiracy?

davefoc

9th March 2004, 07:01 PM

Shanek, you've been a good sport about answering the questions and arguments of a lot of people who disagree with you. Thank you.

Many people have asked in a variety of ways why if somebody gains money through insider trading you feel that nobody lost money as a result of that trading.

I would, with your indulgence ask you one more time about this issue based on this scenario.

Consider a company with two shares of stock, one owned by MS and the other owned by dave. Based on their knowledge of the company both MS and dave value their shares at $10. MS finds out that the shares are actually worth $15.

MS and DK have an agreement to not buy the others shares based on information not known to both. MS violates this agreement and buys Dave's share for $11 from him without telling Dave about increased share value.

Questions:
Did MS act unethically in this situation?

Did MS make $4 that she would otherwise not have if MS had acted according to the agreement between MS and Dave?

Did Dave have $4 less than he would have if MS had not violated their agreement.

If you reject the above scenario as analogous to the actual stock market because there were so few share holders in the company how many shareholders would there need to have been for the analogy to be correct?

If you agree that MS did act unethically in this situation but you feel that she would not have been acting unethically if the government had imposed full disclosure then does it make any difference to you that Dave and MS both voluntarily purchased their stock while the government rule was in effect?

Kevin_Lowe

9th March 2004, 07:17 PM

Originally posted by shanek
When did I ever make such a claim?

Are you asking me when you claimed that free markets are good?

Are you asking me when you claimed that the free market model assumes that all participants are fully informed?

Or are you asking me when you put those two statements together?

Please clarify.

The Central Scrutinizer

9th March 2004, 07:37 PM

Originally posted by Fade

So she's guilty of obstructing the investigation of something she was cleared of.

Gotcha.

Yes. That is the law.

Originally posted by Fade

As a completely unrelated aside, did you support Clinton's impeachment?

Why or why not?

Define "support". Did he lie under oath? Yes. Was it foolish for the Republicans to pursue it? Yes. So did I "support" it? I'm not sure. It depends on the meaning of your question.

The Central Scrutinizer

9th March 2004, 07:38 PM

Loon

9th March 2004, 08:31 PM

I gotta agree with davefoc, shanek. Your spirited and unflagging defense of your position is quite impressive.

Originally posted by shanek
Well, gee, okay, I just don't know how to react to someone who will deny someone a needed medical procedure to help out the financial market...

Thing is, those soldiers usually sign up voluntarily (and when they don't, that's an atrocity) and know what they're getting into. You're talking about involuntarily sacrificing an innocent person.

While I think this is not really the issue at hand, the exec or whatever did know that the money in the stocks might be unavailable.

Would you say that not treating someone for a horrible disease because they can't afford it is sacrificing an innocent person?

FWIW, the scenario would play out more like this:
1. exec gets disease
2. exec sells stock to pay for treatment
3. exec gets treatment
4. exec gets probed for insider trading

Wait, I have to show that ALL markets can do so? How reasonable is that? I only needed ONE to rebut the claim. And I gave you one.

I don't recall anyone saying "All markets need regulation." If that statement was indeed made, the commodities market would indeed refute this statement. However, showing that the commodities market does not need regulation does not support the assertion that "No markets need regulation."

I don't think "All markets need regulation" was the point anyone here was trying to make. If they said it, I think it was more a mistatement of position than the position itself.

Let's try a new assertion- Regardless of the need for regulation in other markets, the securities market needs some form of regulation.

I will support this assertion with the following points, which may be added to in the course of the discussion and which should serve to differentiate the securities market from the commodities market.

* The fiduciary duty of the BOD of a corporation is the financial wellbeing of its stockholders, via stock price and dividends. These things can and have been manipulated for the benefit of executives and to the detriment of average stockholders. There large cases, including Enron. While Enron may or may not be an "insider trading" issue, it does serve to show that boards of directors can put their own interests far ahead of those of the average stockholder. There is no obligation for anyone in the commodities market to maintain value.

* Commodity shares are not under the control of a single entity. Hog futures are impacted by the performance of the aggregate of hog farms, as well as demand for hog products and probably many other things outside the realm of the trader's control. It is difficult (though not impossible) to manipluate the commodities market for personal gain. Stocks are not the same. The activity of the members of the board of directors has a direct impact on stock prices. They also have access to qualitative information that is not available to the average joe.

Then they aren't reading what I'm writing. I'm saying, "The commodities market can self-regulate to protect the market, therefore the claim that markets need government regulation to protect the market is hereby falsified."

Fair enough. Please see the above. Though I think we may have come to the core of the conflict here.

Originally posted by Clancie
Here's another hypothetical question for you. Let's say I sell you a lottery ticket (one "share" in the lottery at $1). The winning number is already chosen and I know it and what I sold you isn't it.

shanek's reply:
The stock market isn't a game of chance. In your example, you KNOW the result, instead of merely suspecting it; and I don't have access to a plethora of other indicators saying what the price of the ticket will be worth, whereas I do in the stock market.

In Clancie's example, she knows the result. So does the person who makes an illegal insider trade. You can only really use the word suspect in this case if you would also argue for the necessity of "suspect" in the following sentences:

"I suspect that the sun will rise tomorrow."
"I suspect that John Kerry will be the Democratic nominee for president."
"I suspect that Sylvia Brown will not take the JREF challenge tomorrow."

The insider *knows*. That's what makes him an insider. It's almost like selling a lottery ticket with today's winning numbers but not saying that the ticket was for yesterday's drawing.

Originally posted by Clancie
Somewhat analogously, if I sell you stock and I know that in a week it will be worthless but I don't care because I'm bailing out tomorrow--using your invested money and confidence in the stock (to keep the price, temporarily, high) to be sure I don't lose money--in fact, unlike you, I make it.

shanek's reply
But I'm buying anyway. I'll lose the money anyway. So how would you have harmed me?

Hmmm. I'm not sure if there's a direct individual harm. But there is a definite harm in a mass of this behavior. Should every public corporation act this way, nobody would buy stock because they'd know that the cards were stacked against them. Total loss of investor confidence. What protects investors now is laws that say the interests of average stockholders need to be protected.

RichardR

9th March 2004, 08:33 PM

Originally posted by shanek
RR: Whoever has the $50K less has lost $50K due to Stewart's acting on insider information. Why do you deny this?
If you had actually read the post you were just replying to instead of just reacting to it, you would see that I didn't deny it at all. I merely denied the conclusion that this constitutes harm. You really don't think that losing $50K represents harm?

Originally posted by shanek
RR: So because Stewart sold early, the previous days sellers, in aggregate, were $50K worse off.
No, the sellers were exactly how they were; it's just that now they had Stewart amongst them. Wait, you're now saying they weren't worse off? Two paragraphs above you're saying "I didn't deny it at all". Which is it? It can't be both.

Originally posted by shanek
Geez, are you actually THINKING about this? ANYTIME someone sells stock and the price then drops this happens! It's just the nature of the market! Yes I am thinking about this. Thanks for asking. You, on the other hand, have clearly not thought it through. Stewart is $50K CASH better off which means someone else is $50K worse off. Why is that so hard for you to understand?

Originally posted by shanek
No, they didn't! Please READ!!! This transaction has NOT ONE SINGLE THING TO DO with the insider information! Did Stewart sell the shares based on insider information or did she not?

Originally posted by shanek
Bull$#!7. This transaction has NOTHING to do with insider information. The EXACT SAME EFFECT would happen if she didn't have any insider information but decided to sell for some other reason. Your reasoning is bogus, you conclusion specious. Yes, but we are talking about selling based on insider info. Aren't we?

Are you really trying to say now that insider trading is not bad because if she sold her shares for reasons other than insider trading the result would be the same? That's a rather desperate reach.

Originally posted by shanek
PLEASE, would someone READ my posts for once??? I think you need to read your own posts since you contradicted yourself at least twice in this one. Either you are very confused or you are just poor at explaining yourself.

peptoabysmal

9th March 2004, 11:13 PM

Originally posted by shanek

Sounds to me like you're forgetting the staggering costs of regulatory compliance.

I still can't figure out why they had to charge so much more to not put the lead in. :p

EvilYeti

9th March 2004, 11:24 PM

Originally posted by shanek

What she was guilty of conspiring to do, what she was guilty of obstructing, what she was guilty of making false statements about, is the very same bogus charge that was dismissed. You forgot that part.

This is false. The securities fraud charge, which was later dropped, involved Martha's company, MSLO, not ImClone. The charge was that Martha was covering up the ImClone deal to protect the value of her companies stock. Here are some details from the decision.

Defendant Martha Stewart has moved for a judgment of acquittal pursuant to Fed.R.Crim.P. 29. The motion is granted with respect to Count Nine only.

....Mindful of the standards outlined above, and viewing the evidence in its totality and in the light most favorable to the Government’s case, I hold that a reasonable juror could not, without resorting to speculation and surmise, find beyond a reasonable doubt that Stewart’s purpose was to influence the
market in MSLO securities.

....While the Government has presented evidence about Stewart’s financial stake in MSLO and her awareness that her own reputation was crucial to the company, the Government has offered no evidence that Stewart evinced a concern for the price of MSLO stock at any time during the relevant period.

....However, the Government “must do more than introduce evidence that is ‘at least as consistent with innocence as with guilt.’” The Government has not offered any evidence that tips the balance in favor of a rational finding of
criminal intent beyond a reasonable doubt.

For the foregoing reasons, defendant Stewart’s motion for a judgment of acquittal on Count Nine of the Indictment is granted.

As far as I know Ms. Stewart was never formally charged with illegal insider trading of ImClone stock. Most likely either due to double jeopardy issues or simply that the prosecutors felt they had a stronger case without it.

shanek

10th March 2004, 09:48 AM

Originally posted by Bjorn
In one instance she knows the price will drop the next day.

No, she doesn't. She suspects, or thinks it's likely, but she doesn't KNOW. And it's absurd to keep pretending that she does.

davefoc

10th March 2004, 10:20 AM

Shanek said:
No, she doesn't. She suspects, or thinks it's likely, but she doesn't KNOW. And it's absurd to keep pretending that she does.

Shanek, is that the basis of your argument? Previously it seemed that your argument was that somebody could make money as a result of insider trading but nobody lost money so insider trading was ok.

Your answer to Clancie about her lottery scenario and your answer here seem to be that insider trading is ok, because trading based on inside information still involves some risk. So how much risk is required to make it acceptable in your mind? If the inside information only provides a 75% chance of a profit then trading based on inside information is ok?

Is it still your position that trading based on inside information when it makes money for the trader doesn't result in a loss to anybody else?

shanek

10th March 2004, 10:47 AM

Originally posted by davefoc
Consider a company with two shares of stock, one owned by MS and the other owned by dave. Based on their knowledge of the company both MS and dave value their shares at $10. MS finds out that the shares are actually worth $15.

What does this mean, "actually worth"? It's worth $15 to whom? By what measure?

MS and DK have an agreement to not buy the others shares based on information not known to both.

I'm assuming this is a contractual agreement, correct?

Answer those questions and I'll answer yours.

shanek

10th March 2004, 10:48 AM

Originally posted by Kevin_Lowe
Are you asking me when you claimed that free markets are good?

Are you asking me when you claimed that the free market model assumes that all participants are fully informed?

Or are you asking me when you put those two statements together?

Well, I was referring to the second, but the third is good as well. Just provide the quote of mine that supports what you claimed I said.

shanek

10th March 2004, 10:49 AM

Originally posted by The Central Scrutinizer
Yes. That is the law.

Well, we know it's the law! The question is, is it a just law? Why do people keep side-stepping that question?

shanek

10th March 2004, 10:51 AM

Originally posted by The Central Scrutinizer
All of which ARE AGAINST THE LAW. You keep forgetting that part.

We are not discussing the law's existance; we are discussing whether or not the law is just. You keep forgetting that part.

shanek

10th March 2004, 11:01 AM

Originally posted by Loon
Would you say that not treating someone for a horrible disease because they can't afford it is sacrificing an innocent person?

I'm saying that robbing someone of their means to afford it is sacrificing an innocent person.

FWIW, the scenario would play out more like this:
1. exec gets disease
2. exec sells stock to pay for treatment
3. exec gets treatment
4. exec gets probed for insider trading

Which, effectively, according to the law, means that the exec shouldn't have sold his stocks and let the disease ravage his body. THAT is an unjust law. He's essentially being punished for getting medical help.

I don't recall anyone saying "All markets need regulation."

They said that the stock market needs regulation, and the ONLY reason given was the harm to the market. Pointing out one other example of self-regulation avoiding harm to the market is very germaine and a very effective rebuttal.

* The fiduciary duty of the BOD of a corporation is the financial wellbeing of its stockholders, via stock price and dividends. These things can and have been manipulated for the benefit of executives and to the detriment of average stockholders. There large cases, including Enron. While Enron may or may not be an "insider trading" issue, it does serve to show that boards of directors can put their own interests far ahead of those of the average stockholder. There is no obligation for anyone in the commodities market to maintain value.

BUT, since it is such an important issue and since people would be unwilling to trade stock in a company that did not self-regulate in this issue, then in the absence of government self-regulation would be practically inevitable, as it was in the commodities market.

* Commodity shares are not under the control of a single entity.

Not relevant to the point of the industry self-regulating to protect the market.

In Clancie's example, she knows the result. So does the person who makes an illegal insider trade.

No, the insider does NOT know that. The insider has information that he SUSPECTS may lower the price, or that is LIKELY to know the price, but that is NOT the same as the absolute certainty in the lottery example. People trade on inside information all the time and are surprised when the stock price goes the other way. But, of course, those cases don't get any attention. As skeptics, I think we're all aware of the issue of "counting the hits and ignoring the misses."

You can only really use the word suspect in this case if you would also argue for the necessity of "suspect" in the following sentences:

"I suspect that the sun will rise tomorrow."
"I suspect that John Kerry will be the Democratic nominee for president."
"I suspect that Sylvia Brown will not take the JREF challenge tomorrow."

The insider *knows*.

No, he doesn't. Not to anywhere near the degree of certainty of these examples. He knows of ONE effect, but stock prices are determined by numerous effects and are not reliably predictable. It may give the insider an advantage, but the insider does NOT know with certainty what's going to happen.

Hmmm. I'm not sure if there's a direct individual harm. But there is a definite harm in a mass of this behavior. Should every public corporation act this way, nobody would buy stock because they'd know that the cards were stacked against them.

So they would have every incentive to self-regulate. And the ones who refused to would lose potential buyers to the ones that did. Market forces are much more effective than government forces.

shanek

10th March 2004, 11:05 AM

Originally posted by RichardR
You really don't think that losing $50K represents harm?

You're taking it out of context now.

Wait, you're now saying they weren't worse off? Two paragraphs above you're saying "I didn't deny it at all". Which is it? It can't be both.

It can if you actually read what I wrote. Which I'm beginning to believe that few people are actually willing to do...

Yes I am thinking about this. Thanks for asking. You, on the other hand, have clearly not thought it through. Stewart is $50K CASH better off which means someone else is $50K worse off. Why is that so hard for you to understand?

I have explained this several times. I'm sick and tired of repeating myself.

Did Stewart sell the shares based on insider information or did she not?

Are you really trying to say now that insider trading is not bad because if she sold her shares for reasons other than insider trading the result would be the same? That's a rather desperate reach.

No, it isn't. It is ACTIONS that cause harm. And in both cases, it is the EXACT SAME ACTION.

I think you need to read your own posts since you contradicted yourself at least twice in this one.

No, YOU need to read them again. There is no contradiction. Furthermore, the resons why there is no contradiction is contained in the posts themselves.

shanek

10th March 2004, 11:06 AM

Originally posted by EvilYeti
This is false. The securities fraud charge, which was later dropped, involved Martha's company, MSLO, not ImClone. The charge was that Martha was covering up the ImClone deal to protect the value of her companies stock. Here are some details from the decision.

As far as I know Ms. Stewart was never formally charged with illegal insider trading of ImClone stock. Most likely either due to double jeopardy issues or simply that the prosecutors felt they had a stronger case without it.

Well, that makes it even worse! Like being arrested for resisting arrest when there was no arrest to begin with...

shanek

10th March 2004, 11:08 AM

Originally posted by davefoc
Shanek, is that the basis of your argument?

That is the basis for my rebuttal of one particular point.

Your answer to Clancie about her lottery scenario and your answer here seem to be that insider trading is ok, because trading based on inside information still involves some risk.

Not at all. The lottery example is outrigth fraud, and I don't think anyone here would deny that. But again, if an instance of insider trading were fraud, then you could just prosecute them for fraud, no insider trading laws needed. THAT is the distinction. We're talking about the prosecution of insider trading where THERE IS NO SUCH FRAUD.

Tmy

10th March 2004, 11:19 AM

No one is forced to play the market. If you dontliek the rules dont play the game.

The purpose of the insider trading laws is to maintain a healthy fraud free market. Those rules allowed Martha to make a millions (billion?) off the market. THey also f'ed her in the end. Her own doing.

Who would invest in the market knowing it was fixed and corrupt??

Bjorn

10th March 2004, 11:41 AM

Originally posted by bjorn
In one instance she knows the price will drop the next day. In the other she doesn't/it won't.

In one instance the purpose is to cheat me, in the other it isn't. :( Originally posted by shanek
No, she doesn't. She suspects, or thinks it's likely, but she doesn't KNOW. And it's absurd to keep pretending that she does. OK - let's assume she just suspects or thinks it's likely (although you have been defending it even if she knew - are you moving from that point of view, or would it still be OK if she knew?).

If she suspects, or thinks it's likely that the price will drop the next day, I still stand by my original statement:

In one instance she suspects or thinks it's likely the price will drop the next day. In the other she doesn't/it won't.

In one instance the purpose is to cheat me, in the other it isn't. :(

Intent is a very important part of many laws - and in scenario two her intent is to cheat.

EvilYeti

10th March 2004, 12:21 PM

Originally posted by shanek

Well, that makes it even worse! Like being arrested for resisting arrest when there was no arrest to begin with...

No, ImClone chose to be listed on the NYSE and Ms. Stewart chose to buy and sell shares in that company. She is bound by legal contract to abide by the rules and laws of the SEC. If you read the LP party platform, you would see that good Libertarians believe in the enforcement of legal contracts such as this.

Are you suggesting Martha did not lie to investigators, obstruct justice or engage in conspiracy? If not, do you think such behavior should be legal?

Do you understand that if you Martha had co-operated with the investigators, and told the truth, she would have only been charged with illegal insider trading?

TillEulenspiegel

10th March 2004, 03:08 PM

shanek,
I really have a problem with Your position and Your methodology. Please believe me when I say that I'm not engaging in an Ad-Hom, but I just don't get it.

This one page of this thread , You have posted 15 times, no-one ( as far as I can tell ) agrees with your assement. That appearers to be the case in the whole thread. You have posted some 11,225 times since 8/2001. I really don't understand your mindset, are the number of posts you have a product of embracing untenable positions , but refusing to let them go regardless of the opinions and information of others? Or is it something else?

I swear I am not trying to belittle you , I am trying to understand your motivation.

shanek

10th March 2004, 04:57 PM

Originally posted by Tmy
The purpose of the insider trading laws is to maintain a healthy fraud free market.

And the purpose of curfews is to maintain a low crime rate. Even if it works (which is doubtful), that still doesn't make it right.

Who would invest in the market knowing it was fixed and corrupt??

False dichotomy. Yet again, you ignore the option of industry self-regulation.

shanek

10th March 2004, 05:01 PM

Originally posted by Bjorn
Intent is a very important part of many laws

Only with regards to the direct commission of a crime, such as assault with intent to kill. This is held to a different standard than, say, assault with intent to rob, but either way you look at it, it's still assault. So this doesn't help you here.

shanek

10th March 2004, 05:03 PM

Originally posted by EvilYeti
No, ImClone chose to be listed on the NYSE and Ms. Stewart chose to buy and sell shares in that company. She is bound by legal contract to abide by the rules and laws of the SEC. If you read the LP party platform, you would see that good Libertarians believe in the enforcement of legal contracts such as this.

Except that the SEC is hardly a voluntary entity. It is a government agency, and this "contract" is enacted by force. Agreements made under duress are invalid.

We wouldn't be having this conversation if the NYSE were an independent entity with its own rules and she broke them, and so the NYSE took her to court for breach of contract. These are criminal charges, a very different animal entirely.

Are you suggesting Martha did not lie to investigators, obstruct justice or engage in conspiracy?

No.

If not, do you think such behavior should be legal?

When the charge they were investigating turns out to be bogus, yes. When that goes, the rest of it falls like a house of cards.

Bjorn

10th March 2004, 05:18 PM

Shanek, you forgot to answer this:

OK - let's assume she just suspects or thinks it's likely (although you have been defending it even if she knew - are you moving from that point of view, or would it still be OK if she knew?).

Clancie

10th March 2004, 05:20 PM

Wow, Shanek. First (having been in debates as an extreme "minority view" myself)....what tenacity you have!

So, one last thing. Instead of arguing against you, I want to ask a (brief) question about libertarianism and the regulated/unregulated stock market.

As a libertarian, would your concept of individual freedom be more consistent with:

(a) a stock market that is "free" in the sense that it is unfettered by government "interference" (i.e. regulation), or

(b)a stock market that is "free" for all investors in that it gives everyone a level playing field (i.e. the "freedom" to succeed or fail on the merits of -your own- decisions only, uninfluenced by special connections with anyone else)?

shanek

10th March 2004, 05:30 PM

Originally posted by Bjorn
Shanek, you forgot to answer this:
OK - let's assume she just suspects or thinks it's likely (although you have been defending it even if she knew - are you moving from that point of view, or would it still be OK if she knew?).

When are people going to realize the difference between making a positive claim and making a rebuttal to someone else's claim?

shanek

10th March 2004, 05:32 PM

Originally posted by Clancie
As a libertarian, would your concept of individual freedom be more consistent with:

(a) a stock market that is "free" in the sense that it is unfettered by government "interference" (i.e. regulation), or

(b)a stock market that is "free" for all investors in that it gives everyone a level playing field (i.e. the "freedom" to succeed or fail on the merits of -your own- decisions only, uninfluenced by special connections with anyone else)?

I would say that (b) is not only an impossibility, but something that the more you strive to achieve the less free it becomes. The playing field is not and can never be level, and you can only attempt to make it so by cutting some people off at the knees. So, the answer would be (a).

TillEulenspiegel

10th March 2004, 06:25 PM

Thundering silence.

EvilYeti

10th March 2004, 06:43 PM

Originally posted by shanek

Except that the SEC is hardly a voluntary entity. It is a government agency, and this "contract" is enacted by force. Agreements made under duress are invalid.

What??? Are you saying someone held a gun to Martha's head when she bought ImClone stock then subsequently sold it based on illegal insider information? It was her free choice to engage in market transactions and also her choice to break the law.
The NYSE is very much in favor of tight regulation and works closely with government to ensure as level a playing field as possible for everyone. There HAS to be government involvement as private entities (like the NYSE) cannot engage in law enforcement.

We wouldn't be having this conversation if the NYSE were an independent entity with its own rules and she broke them, and so the NYSE took her to court for breach of contract. These are criminal charges, a very different animal entirely.

The NYSE is an independent entity, governed by its own rules as well as those imposed by the SEC. Unfortunately for Ms. Stewart, her particular behavior, in addition to being a breach of contract, happens to be illegal therefore the SEC has to be involved. Private entites cannot enforce federal law.

It should be clear to anyone with even a modicum of intelligence that merely imposing fines or censure for financial fraud is not an effective deterrent.

When the charge they were investigating turns out to be bogus, yes. When that goes, the rest of it falls like a house of cards.

The initial charge could not be properly investigated because Ms. Stewart lied to the investigators and engaged in conspiracy to protect her cronies and cover her tracks. Are you suggesting such behavior should NOT be punished?

How can laws be enforced if there is no penalty for interefering with the enforcement of law?

The Central Scrutinizer

10th March 2004, 09:13 PM

Originally posted by shanek

Well, we know it's the law! The question is, is it a just law? Why do people keep side-stepping that question?

Yes.

The Central Scrutinizer

10th March 2004, 09:15 PM

Originally posted by shanek

We are not discussing the law's existance; we are discussing whether or not the law is just. You keep forgetting that part.

You don't seem to be. Whether a law is just or not is not for you to decide. You keep forgetting that part.

Bjorn

10th March 2004, 09:49 PM

Originally posted by shanek
When are people going to realize the difference between making a positive claim and making a rebuttal to someone else's claim? Ok, can you please clarify what you think:

- Would Martha's insider trading have been OK if she knew the share price would go down the next day?

- Would it be OK if she thought it would go down, but didn't know for sure?

Which position are you defending - or is it both?

As far as I can see, she sold because she got information that strongly indicated that it would go down the next day, but that's not really the point when I ask you.

Loon

11th March 2004, 01:16 AM

Originally posted by shanek

They said that the stock market needs regulation, and the ONLY reason given was the harm to the market. Pointing out one other example of self-regulation avoiding harm to the market is very germaine and a very effective rebuttal.

It's only germaine if the markets are comparable. I keep saying they are different. You keep saying they are markets and therefore the same, but you don't address the differences between the markets.

Again, I think we're very near the crux of the issue, i.e., the point where you and I could go round and round making the same argument and not getting anywhere (i.e., a question along the lines of "Is freedom more important than equality?" or "is happiness more important than health?")

Not shanek: The stock market needs to be regulated to protect it.

shanek: Why? The commodities market doesn't need regulatory protection.

Not shanek: Securities and commodities are different.

shanek: They're both markets.

Not shanek: They're different markets. Securities are, by their very nature, subject to problems, explotations and manipulations that the commodities markets are

shanek: They're both markets.

If I have mischaracterized your response, please explain it again (maybe smaller words? :)) But it seems to me that you are generalizing from one market to all markets with no justification beyond the common use of the word "market."

BUT, since it is such an important issue and since people would be unwilling to trade stock in a company that did not self-regulate in this issue, then in the absence of government self-regulation would be practically inevitable, as it was in the commodities market.

There are several problems here. One is that nobody knows that something like insider trading has happened until the perpetrator has made all of his money. If there's no regulation, one or two unscrupulous folk could run and ruin a company and there would be nothing anyone could do, except maybe not invest in that company anymore. For the real big boys, the ones who can sink a company quickly, they only need to do it once.

The relative decentralization of the commodities market is Not relevant to the point of the industry self-regulating to protect the market.

Again, not true. A stock is extremely vulnerable to the conduct of a single actor, while a commodity market is not.

People trade on inside information all the time and are surprised when the stock price goes the other way. But, of course, those cases don't get any attention. As skeptics, I think we're all aware of the issue of "counting the hits and ignoring the misses."

I'm going to have to ask for a little bit of evidence on this. Two cases please.
I forsee a potential response of "but it never gets reported," in which case I call "Horse Poop."

So they would have every incentive to self-regulate. And the ones who refused to would lose potential buyers to the ones that did. Market forces are much more effective than government forces.

One thing to note is that it is not the companies who are being prosecuted for insider trading. It is the traders. The company can put in all the safeguards it wants. Someone will get around them. And when they do, the company has no recourse. No recourse = no deterrent.

shanek

11th March 2004, 04:13 PM

Originally posted by EvilYeti
What??? Are you saying someone held a gun to Martha's head when she bought ImClone stock then subsequently sold it based on illegal insider information?

No; you're having trouble reading plain English again. I'm saying they put a gun to Martha's head when she "agreed" to the SEC rules. All government is force, the force of a gun.

There HAS to be government involvement as private entities (like the NYSE) cannot engage in law enforcement.

I've thrashed this pathetic argument so many times it's pitiful to see people still cling to it. The commodities market doesn't have to do this; they have the NFA. The electronics industry doesn't have to do this; they have UL, CE, SA, IRAM, GS, and many other standards organizations self-regulating the industry. Much of the world has the WMA, which not only works but is an outspoken advocate of self-regulation in the medical industry. On and on and on. And yet, here you are, spouting off the same whole argument from incredulity with nothing at all to back you up.

The NYSE is an independent entity, governed by its own rules as well as those imposed by the SEC. Unfortunately for Ms. Stewart, her particular behavior, in addition to being a breach of contract, happens to be illegal therefore the SEC has to be involved. Private entites cannot enforce federal law.

Uh-huh. It has to be that way because it is that way. And yet, the NFA has no problem enforcing their own regulations sans government...

The initial charge could not be properly investigated because Ms. Stewart lied to the investigators and engaged in conspiracy to protect her cronies and cover her tracks. Are you suggesting such behavior should NOT be punished?

Are you saying you have no problem living in a country where the government can trump up any charge they like against you and then getyou for everything but that very charge? Should John Hancock have been thrown in prison?

It's amazing how you spout off all of these platitudes in favor of the rule of law, yet advocate thrashing the Supreme Law of the Land (i.e., the Constitution).

shanek

11th March 2004, 04:15 PM

Originally posted by The Central Scrutinizer
You don't seem to be. Whether a law is just or not is not for you to decide. You keep forgetting that part.

Bull$#!7. This is a government of, by, and for the people. It is entirely up to every citizen to refuse to comply with any laws that are unjust or violate the Constitution. You keep forgetting that part.

shanek

11th March 2004, 04:16 PM

Originally posted by Bjorn
Ok, can you please clarify what you think:

- Would Martha's insider trading have been OK if she knew the share price would go down the next day?

- Would it be OK if she thought it would go down, but didn't know for sure?

It doesn't matter what she thought or knew, or didn't know. The action is the same. The action is what is the crime, not what is in her head.

You'll be defending "hate crimes" next...

shanek

11th March 2004, 04:21 PM

Originally posted by Loon
It's only germaine if the markets are comparable.

No, it's not. That's a distraction you keep throwing in. What you say would only be true if the claim I'm rebutting depended on the peculiar nature of the stock market, and I have yet to see anyone describe it in that way.

There are several problems here. One is that nobody knows that something like insider trading has happened until the perpetrator has made all of his money. If there's no regulation, one or two unscrupulous folk could run and ruin a company and there would be nothing anyone could do, except maybe not invest in that company anymore.

Oh, and government can somehow magically tell the future? They didn't stop Stewart from selling. And if they only need to do it once...

Again, not true. A stock is extremely vulnerable to the conduct of a single actor,

No, it isn't. It's "vulnerable" only to supply and demand. One large player can affect that, but can't countermand it no matter how hard he tries.

I'm going to have to ask for a little bit of evidence on this. Two cases please.
I forsee a potential response of "but it never gets reported," in which case I call "Horse Poop."

No. I am not responsible for your incredulity, and youhave deliberately poisoned the well to invalidate any answer I come up with. So YOU answer THIS: why would they ever report an insider trade that went afoul of what they originally planned? If the stock Stewart sold hadn't gone down, do you REALLY think we'd be here discussing this right now?

One thing to note is that it is not the companies who are being prosecuted for insider trading. It is the traders. The company can put in all the safeguards it wants. Someone will get around them. And when they do, the company has no recourse. No recourse = no deterrent.

And how is this any different with government?

EvilYeti

11th March 2004, 05:26 PM

Originally posted by shanek

No; you're having trouble reading plain English again. I'm saying they put a gun to Martha's head when she "agreed" to the SEC rules. All government is force, the force of a gun.

Shane, you are so dense that it defies all logic and reason.

Martha was not "forced" to purchase ImClone stock! ImClone was not "forced" to be listed on the NYSE!!! And by the same token, Ms. Stewart was not "forced" to sell her interest in the company while in clear violation of laws SHE AGREED TO by trading on a regulated market.

Do you not understand that some sales are governed by rules and regulations, whether federal or local laws or private contract? And that by taking part in said transactions you are contractualy bound to honor said laws and contracts? And that anyone is perfectly free, if they disagree at all with the terms and conditions of any transaction, NOT to partake in it? How can that be considered "force"?

Or are you suggesting that we should not have the freedom to choose to invest in government regulated markets? I, for one, value that freedom. Does the LP want to take that away from me?

Uh-huh. It has to be that way because it is that way. And yet, the NFA has no problem enforcing their own regulations sans government...

Except you are wrong about commodities trading not being regulated by the federal government. It is tightly regulated, by the CFTC (Commodity Futures Trading Commission). Since you obviously haven't heard of it before, I would suggest reading more about them here on their website.

http://www.cftc.gov/cftc/cftchome.htm

Are you saying you have no problem living in a country where the government can trump up any charge they like against you and then getyou for everything but that very charge? Should John Hancock have been thrown in prison?

I have no problem living in a country where criminals are prosecuted for engaging in fraud and subsequent conspiracy to cover their and their co-consipiritors tracks. You and the rest of the LP crooks on the other hand, applaud the efforts of criminals to defraud decent, hard working Americans. Vote LP today! The party working for white-collar criminals everywhere!

Have you ever considered merging your efforts with the mob? It seems like both organizations have common goals and ethics.

Your persistent comparisions of Ms. Stewart and crew to heroes of years past is noted and duly laughed at. Ah-HAH!!!

It's amazing how you spout off all of these platitudes in favor of the rule of law, yet advocate thrashing the Supreme Law of the Land (i.e., the Constitution).

It's amazing how you spout off all these platitudes regarding prosecution of fraud and the benefits of free markets, yet totally oppose both concepts in practice!