Hacker News Reader

Let's consider a recent example. The massive Fed/Treasury coordinated $2T+ bailout from last week. This thing came as a surprise to most us. Prior to this we saw 10 days of "weird" bullish activity. Market was going up on incredibly bad news, some banks such as Goldman advised high-end clients to buy stocks for unknown reason. And then the news came. Later it was revealed that this SPV had wide congressional support. So 1000s of officials from the White House, Fed, Treasury dept and Congress were sitting on this info for 2 weeks. Now add their staff that worked on getting this done, lawyers, accountants, advisors, regulators, oh and BlackRock who executed the deal. There is exactly zero chance this piece of info wasn't leaked to all high end clients in the banks at least a week in advance.

I don't doubt it was leaked. But even with that information, unprecedented Fed support was speculated for some time but crystalized on March 3rd when Fed lowered rates 0.5%. the market still went down since then. Maybe it didn't go down as much as it would have had the Fed not intervened, but that's difficult to profit from. Market recovered a bit and you can point to another Fed policy in hindsight and say this caused the rebound.

First was expected, second was a surprise.

I feel like most quarters won't necessarily give easy opportunities for insider trading, because stock prices over the course of the quarter are greatly moved by macro trends that are hard to forecast. But there are definitely some short-term events that move a stock in fairly predictable ways (an acquisition offer, an imminent recall, earnings coming in way way above or below guidance, etc). With a bit of leverage it's easy to just wait and make plenty of money off of particular events rather than maintaining a continuous insider-trading portfolio. Of course this strategy makes your trades much more suspicious too...

This sounds like a fun game! There was at one point also this game called chartgame.com, the interface when the site was still old is subtly (but importantly) different from now [1]. The most fun thing IMO was that you'd see the company name after you were done with that particular company. It was made to see whether technical analysis worked.

On another note, I was wondering how you got the data. So I opened my Chrome dev tools to see. I'll be checking financialmodelingprep.com out!

[1] https://www.youtube.com/watch?v=lJAw_LXcUgY -- someone playing the old version

Financial Modeling Prep is amazing. Incredible that its free and well documented. My proudest github star [0] is from the creator of Financial Modeling Prep, Antoine Vulcain, who liked my site.

[0] https://github.com/breeko/stox

This post [0] in a related disccusion yesterday refers to research in 2004 [1] that clearly concludes senators did better trades than the index. But maybe times have changed. Or senators.

[0] https://news.ycombinator.com/item?id=22837708 [1] https://projects.iq.harvard.edu/files/gov2126/files/ziobrows...

I've heard about this study but haven't read it carefully. My problem with these studies is that their methods of analysis are overly complicated I'm not knowledgeable enough to know if the results are being managed.

The range is from 1993-1998 while this was published in 2004. I'm not sure why that range was selected.

Also, consider the universe:

> Initially, we begin with 6,052 transactions. Before analysis we apply several screens to the data. Only U.S. common stocks are included in the study. These screens eliminate, among other things, all preferred stock, ADRs, REITs, foreign stocks, and mutual funds. We also eliminate all initial public offerings (IPOs) from the sample.2 In total, 360 observations are eliminated for the reasons given above. Among the surviving transactions, approximately 59% of the stocks are listed on the NYSE, 40% are traded on the NASDAQ, and about 1% are listed on the ASE.

Why eliminate those other things? Would the conclusion have changed if they had been included?

> As indicated previously, Senators report transaction amounts only within broad ranges.

Ranges are as follows:

$1,001 to $15,000

$15,001 to $50,000

$50,001 to $100,000

$100,001 to $250,000

$250,001 to $500,000

$500,001 to $1,000,000

over $1,000,000

And from the paper:

> As before, we again estimate the value of their trades using the midpoint of the range reported by the Senators for all transactions less than $250,000. For all transactions above $250,000, we assume a transaction size equal to $250,000.

Why floor it at 250? Why not keep the midpoint, at least for 250 - 500 and 500 - 1mm?

I also thought it was odd to look at two portfolios, one of buys and one of sells. If the buys outperformed, but sells were a lot larger, then its not a good strategy on the whole. That's before we even get to the performance measure used.

Think could all be above the board and decided upon prior to actually crunching the numbers. But there are too many things here for me to definitively buy the narrative.

I agree that insider trading is less prevalent than people think, simply because lots of people love to believe in conspiracy theories, and put on a tin foil hat.

However, in the Bloomberg article you mentioned, it was cited that the hackers had a 77% success rate. Any serious investor would tell you that's an incredibly high success rate, as it's impossible to be 100% right all the time. If you had that hit rate, you're almost guaranteed to beat the index by a very large margin.

Lastly, it's possible to still have insider info, and not make money on the trade. That doesn't make it legal, though, does it? I think that's still insider trading - it's just making the wrong bet. If I had access to all insider info, I'd be super picky. Ignore 99% of what I hear (ie 16M Americans are unemployed, big whoop! everyone knows), and only trade on the 1% of info that will almost certainly move the markets (ie COVID-19 will shutdown entire cities). Extremely difficult to do if you love trading, but the optimal strategy.

All information is not created equal. Classified briefings on a virus that may shutdown entire sectors of the economy isn’t the same as unemployment numbers. Everyone knew a ton of people were going to be laid off.

From your blog: “Here’s a trade from David Perdue, the great Senator of Georgia. He actually made nearly half the trades of our dataset, and it makes sense since he’s worth $15.8 million”

Why would it makes sense for him to make half the trades because he is worth $15.8 million? Plenty of Senators are worth more than that.

> he’s worth $15.8 million

On a unrelated note, how the hell can a senator sit on so much and be worth so much? Aren't they supposed to have the public in their main interest? Sitting on all those assets looks really suspicious. Seems they care more about themselves than their community/country.

Why can’t you be rich and also care about your community? You don’t start life as a senator, you have a career before it.

Because you get rich by not distributing what you earn, back into the economy/communities, but by hoarding. Someone who is worth $15.8 million is clearly hoarding and not utilizing the funds to improve what's around them.

That argument could be made down to much lower income categories. “You make 80k/year and don’t give a quarter of that away? So selfish/“

$16 million is a not-unreasonable amount to save for a comfortable retirement that includes travel around the world and making sure your children get a good start to life, and says absolutely nothing about how much the person donates to society’s betterment.

This a beautiful display of "1%er" tone deafness and ignorance of reality, like Mitt Romney's advice that people should simply borrow money from their parents if they want to go to college and start a business.

FWIW, I’ll be lucky not to be homeless when I retire.

The general advice is to have at least, what, a million saved for retirement. 15 is a lot, not so much that it’s unreasonable to my mind for a successful person.

> $16 million is a not-unreasonable amount to save for a comfortable retirement that includes travel around the world and making sure your children get a good start to life

I agree with you. But maybe if that's what you're aiming for, you should not be in decision power over the entire country. If you're seeking out that position, it should be because you want to see the entire country as your children. Those are the people we want as leaders.

Not the selfish hoarders that currently hold the power in most countries today.

Your statement is overly broad and untrue. Someone who is worth 15.8 million could very easily be making enough to be worth 200 million but giving a lot to charity. For Perdue's case, he appears to average around 2% of his earnings to charity, which isn't an amazing amount, but it's not negligible either. But the point is that how much someone is worth doesn't "clearly" indicate what they are doing with their money. There are plenty of very rich folks that give / have given a lot back to society.

2% of income at that level where nearly all is discretionary spending, is negligible

It's not like he has his money stuffed into his mattress. Money invested into the stock market is used by companies to grow / hire people / make new products.

Minor quibble. Companies don't get the money invested in the stock market after the IPO - other traders do.

They don't make more products or hire more people when someone buys a stock on the open market.

Why should he do more with those assets? There's nothing that forces him too...

if he donates to charity - or as the POTUS does, gives his salary away (or doesn't) - that's entirely on him.

Being "rich" and "caring" are two separate and unrelated things...

If I care, but do something that makes more than I spend - or invest wisely into something that makes more... I care and make money...

"if you have money you don't care" is a seriously flawed attitude.

I could understand that someone would like to have a buffer in case of emergencies, but it seems like $15.8 million is a bit over the "emergency buffer" line and becomes more like they want more money just to have more money.

You're a public servant, supposedly working for the public, why you need so much? Share it with the ones who have zero instead. The US have a huge problems in many areas, like healthcare, homelessness and other serious problems, if these hoarders would actually display a bit of care towards those people, you can solve it.

But again, sitting on $15.8 million does not look like you're actually trying to solve anything else but your ego.

whether its $100 or $100m - why do you get to decide what's right for someone else to have sitting in a bank account?

Why is your decision that "$1m is enough for anyone" (or whatever your arbitrary amount is) the correct one? Why not 100k? or 10m? (arbitrary numbers I know you haven't stated as such)

"You're a public servant" What does his personal finances have to do with his public service?

as long as he's not making his money from his service (IE: Kick backs, sweet deals for family, etc)?

Nothing.

"The US has huge problems" everyone/every country has huge problems in all these areas - each in different flavors. You could take 100% of money (or value, since a lot of "value" is in intangible stuff like property or stock that isn't "money") from everyone above $1m (or your arbitrary cutt-off) and guess what? We still couldn't afford "heatlhcare for all" and people will still be homeless. Money isn't the problem and it doesn't solve all problems. Just look at places like CA that are spending more and more and having worse and worst problems - the issue isn't money.

At the end of the day... his having 15k, 15m, 15b or 15t means nothing about his attitude, ego or ability to care.

He's the 25th wealthiest member of the Senate. To be fair, out of 240 trades, 206 of them were between 1,000 and 15,000. Turnover in his account between those three month was somewhere between 950k - 5.34mm, with up to 536k - 3mm in purchases. I don't think this is unusual volume for something with a net worth of 15.8mm, but I could be wrong. He seems to like day trading.

If only we could trace insider trades using some sort of big data system. Hmm.

https://www.reuters.com/article/us-column-insidertrading-saf...

  KID TRADERS

  Using data on a half a million accounts from Finland from 
  1995 to 2010, the study came to a surprising conclusion: 
  accounts set up to benefit kids 10 years and under did 
  really well at stock picking, and did especially well just 
  before mergers, earnings releases and events that generate 
  big stock moves.


  The analysis was possible since Finland makes available 
  unusually detailed information about the identities of 
  investors.


  “When guardians trade through under-aged accounts, there 
  is a relatively high probability that they are trading on 
  private information,” the authors, Henk Berkman, at 
  University of Auckland, Paul Koch at the University of 
  Kansas and Joakim Westerholm at the University of Sydney, 
  conclude in a paper slated to be published in the Journal   
  of Finance.


  The gap between the junior set and typical accounts held 
  by adults was striking: in the day following trades made 
  by kids, their accounts outperformed the adult accounts by 
  9 basis points.


  Ahead of major earnings announcements, the kids chose 
  correctly whether to buy or sell 57 percent of the time 
  and beat their elders by 1.1 percent in the following day.


  It gets even better - at least for junior. On trades made 
  the day ahead of a merger announcement, juvenile 
  portfolios outperformed by 12 percent the following day, 
  and made the right decision to buy or sell an uncanny 72 
  percent of the time.


  The rest of the market, by the way, chose correctly 
  whether to buy or sell only 50 percent of the time.


  This is probably not all due to inside knowledge, 
  according to the study. The guardians tended to be richer 
  and may simply have been more successful at investing, the 
  authors argue, due perhaps to higher intelligence or an 
  advantage in obtaining legal, but valuable information.


  Even so, the fact that the juvenile accounts outperformed 
  ahead of mergers while the guardians’ accounts did not 
  implies that the adults were smart enough to know better 
  than to trade on inside knowledge in an easily traceable 
  way.

I have experience working on civil investigations of financial crime. It takes a very long time to prosecute white collar crime of all kinds. Especially insider trading. The most effective technique is to overwhelm the accused with reports containing facts that don’t constitute cold, hard evidence of crime, and then wait for them to buckle under the pressure and admit guilt

> I recently analyzed the trading activity of Senators [0]

How is this relevant? Surely any senator knowingly engaging in insider trading wouldn't do so directly. They would get someone else to profit from the info and give back to them in either untraceable or legit ways.

Insider trading By elected officials isn’t against the law. There’s no reason for them to hide it. There have been several recent examples of senators openly insider training and no repercussions for being caught.

Optics matter, that's enough of a reason to hide it.

I can’t tell because the post source is hugged to death but I’m just speculating that this is utilizing sec form 4 data or similar sources? There can be some interesting signal there that you could incorporate into a trading strategy but that’s mostly semantic and another story, I totally agree with you broadly. It will be a minor miracle if there isn’t fraud that washes out with a market crisis of this scope, but I’ll be amazed if the grand majority of trading isn’t above board.

Really enjoyed your medium series btw!

It would certainly be possible for them to abuse their position in this way, but there may be enough counter motivations. Most are already wealthy, so they are not going to be hungry for money. They are also fearful of negative publicity or information that could help a political opponent. Abusing their position to trade stocks could easily end up in an opponent's attack ad.

People don't get wealthy without being hungry for money. Money hunger isn't satiated by money.

“knowing the future isn't that helpful” — while true, it’s irrelevant as it relates to if the behavior is criminal insider trading activity, even if the trade resulted in no gains, it’s still criminal behavior.

“knowing the future isn't that helpful”

Did you actually read the article? It specifically talks about press releases put out by companies. That’s just a sliver of the type of insider trading knowledge you can trade off of.

There are all types of other insider info. For example if you work at the FDA and know in advance what drugs are about to be approved/rejected.

Also I tried your app and the prompt it gives is... not even close to insider info

“ Regeneron Pharmaceuticals Inc is an integrated biopharmaceutical company. It discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions.”

I fail to see how this is helpful info? Now if on the other hand it said “the company discovered a COVID drug in final approval with FDA”, that would be much easier to trade on.

Look below the chart, you get their financial statements and metrics, including the ones are in the time span you're trying to predict.

that's all info that corresponds to guidance given in advance. It's slightly useful but not substantial info like a regulatory ruling or a pandemic.

Yep exactly.

Knowing the right future information can be insanely profitable. No matter what clickbait headline Matt Levine can come up with.

> Did you actually read the article?

This is a verbatim example of not assuming good faith in the guidelines for this site

So if no one can play the market successfully, it’s socialism propping up the rich and forced austerity for the poor to maintain the “story”, as Trump calls it, romantic nonsense as Thiel writes about it, propping up the imagined belief we need elites pushing us forward.

Elite wealth managers alone, btw. A minority of rich actually have marketable skills.

Has nothing to do with business acumen (math models have shown one time success was luck not skill and continued success is simply bought; hi Bloomberg)

So yeah let’s keep playing this game, guys! Physics I’m sure shows somewhere this was predetermined by the motion of the stars and matter we can’t see.

Why NOT subject the mathematical majority to a system that (conveniently) won’t educate them well enough to even offer a chance at falsifying the underlying presumptions!

Cope.