tag:blogger.com,1999:blog-2807403883562053852.post2408620245148459431..comments2024-03-27T08:40:31.785-06:00Comments on Clayton Cramer.: Another Billionaire Democrat in TroubleClayton Cramerhttp://www.blogger.com/profile/03258083387204776812noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2807403883562053852.post-39117645019767844132011-05-15T23:20:19.810-06:002011-05-15T23:20:19.810-06:00Your argument assumes that the ignorant outsider a...Your argument assumes that the ignorant outsider agent(s) would have bought or sold regardless of the actions of the agent with insider information.<br /><br />This may be true in the case of a broadly traded security and relatively small trade by the insider.<br /><br />But in other cases, the market for the security may be thin, and the action of the insider may induce the outsider to trade.<br /><br />Besides which, the argument really amounts to a restatement of the old excuse that an injury which is spread thin enough ceases to be an injury. If I embezzle a few thousand $ from a billion $ corporation, the effect is negligible, so the crime is victimless.<br /><br />Likewise, this claim about the victimlessness of insider trading is based on the idea that the insider's trades are dispersed across such a large volume of trades that no other party has significant traceable losses. I don't buy it in either case.<br /><br />I'll further suggest that passive misrepresentation is fraud. Anyone who buys or sells securities does so on the basis of the public information about them. One who sells securities, knowing that the public information is wrong, is engaged in passive misrepresentation.<br /><br />Which deserves to be treated as fraud.Rich Rostromhttps://www.blogger.com/profile/13262703348236110420noreply@blogger.comtag:blogger.com,1999:blog-2807403883562053852.post-23650461624363251352011-05-12T07:32:47.544-06:002011-05-12T07:32:47.544-06:00The theory of why insider trading hurts no one is ...<i> The theory of why insider trading hurts no one is this: </i><br /><br />Sure, but this theory seems clearly wrong. Suppose X buys 1000 shares of A because he has inside information. Without inside information X would not have traded A. This increases the demand for shares of A. Markets balance supply and demand by adjusting the price. So the price of A will go up a little and the number of other buyers and sellers will adjust to supply the 1000 shares. Perhaps the increase in share price will induce Y to sell 500 shares he would otherwise have held onto and will discourage Z from buying 500 shares he would otherwise have purchased. Y and Z lose (by missing out on the rise in shares of A) what X gains. <br /><br />The profits an inside trader makes don't appear out of thin air, the economy as a whole is no better off (in contrast to profits from say an invention), they are at the expense of the other market participants. Like a poker game in which one player knows the cards are marked.James B. Shearerhttps://www.blogger.com/profile/13452342984383895221noreply@blogger.comtag:blogger.com,1999:blog-2807403883562053852.post-42768447513118565972011-05-11T20:39:10.773-06:002011-05-11T20:39:10.773-06:00I don't understand why people think insider tr...I don't understand why people think insider trading hurts no one. It is like counterfeiting, the harm is diffuse but it exists. Some person (or combination of people) is losing the money the inside trader makes.James B. Shearerhttps://www.blogger.com/profile/13452342984383895221noreply@blogger.com