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Comment by gruez | Hacker News Reader

So if this sort of "insider trading" is bad, what does this mean for other sorts off strategies hedge funds do to get an edge, like flying helicopters to look at how full oil storage tanks are? Should that be banned too? The article basically argues that any sort of edge is bad because it disincentivizes others from participating.

edit: see my subsequent comment. I'm not saying corruption is good. The whole point of the article is that it's bad beyond just corruption, and that's the point I'm pushing back on.

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This insider trading isn't hedge-funds working hard to get an edge. It's political insiders trading ahead of public statements. They are getting gains not by dint of being incredibly smart, nor from working very hard. Instead its from abusing their position in power. And by doing so in this manner, they are taking money away from the actual productive people trading in the futures market.

Besides, as Matt Levine often says. In the US, insider trading is a matter of miss-appropriating information when you have a duty of confidentiality. Its not about trading when you know more than someone else. Its about trading when you know something your not supposed to share.

>It's political insiders trading ahead of public statements. They are getting gains not by dint of being incredibly smart, nor from working very hard. Instead its from abusing their position in power.

The article specifically argues that it's extra bad beyond just corruption. That's the part I'm pushing back on.

>The stench of corruption is overwhelming. Yet aside from the raw corruption, these incidents also raise a larger question. The insiders ripped off the parties who sold futures to them at what turned out to be very unfavorable prices to the sellers. What broader damage does this kind of unchecked insider trading do?

> The article specifically argues that it's extra bad beyond just corruption. That's the part I'm pushing back on.

They are elected officials that are supposed to be working in our best interests, or at least the interest of their supporters.

Are they making decisions in our best interests or what makes their pocket book fatter? Poisons the whole system.

The American people knew who they were electing. They knew it, and they elected him anyway. Whatever damage results from that collective decision is our cross to bear.

Many of them will insist that they didn't know. Another group of "many" will insist that this is all somewhere between "not that bad" and "great".

The problem is that everyone else on earth has to suffer the consequences of those choices.

Again, that's bad, but still under "corruption", which is not what I, or the article is addressing.

A market maker who doesn't know if their counterparty is a Trump insider looking to fleece them must ask for a bigger safety margin to cover the risk they are taking -- and not just from the insiders. Honest participants in the market get taxed in order to provide the insider payout.

This is extremely basic incenive / money-flow tracing and "setting aside corruption" is a premise that has the hairs on the back of my neck standing straight up. It smells like someone looking to force the framing. Everyone before me in this conversation was right to be suspicious of your motives in asking it, and I am suspicious as well.

>A market maker who doesn't know if their counterparty is a Trump insider looking to fleece them must ask for a bigger safety margin to cover the risk they are taking -- and not just from the insiders. Honest participants in the market get taxed in order to provide the insider payout.

That's still corruption. Your argument about other participants being "taxed" applies for other sophisticated counterparties as well, eg. hedge funds with armies of analysts and can fly helicopters around to gather intel. Unless you want to say that's bad too, the only difference between the two is that the hedge fund isn't engaging in corruption.

Ah, so you were just trying to force the "set aside corruption" framing.

Other than that, Mrs. Lincoln, how was the play?

>Ah, so you were just trying to force the "set aside corruption" framing.

Again, if you read the TFA, the entire thesis is that the insider trading is extra bad beyond corruption. The corruption itself only gets a passing mention.

>Again, if you read the TFA, the entire thesis is that the insider trading is extra bad beyond corruption. The corruption itself only gets a passing mention.

I did and that's not at all what TFA argues. It argues that it's the corruption that's the problem, which is exacerbated by the lack of legal enforcement by the current administration -- mostly because many in that administration are either actively involved in said corruption, or happy to cover it up/pooh pooh it.

I suppose you might think that some folks who haven't read TFA might buy your analysis, even though it's pretty much the opposite of what Krugman argues.

You go, girlfriend!

Nope. TFA does not adopt the extremely narrow focus you are trying to force. Nice try.

If you assume the referee is actually playing the game then yes, the difference between a referee making a call to advantage their own bets to make the other team win and an opposing team making a play to make themselves win is one of those entities is engaging in corruption.

The pacing of strategic military decisions being modulated to allow leading the futures market would be the very definition of "blood money".

It’s not just vaguely bad because of corruption. But its corruption that very directly increased the price of oil payed by everyone else.

I'm not sure what world we live in where being able to rent a helicopter implies hard work and not large amounts of preexisting wealth (generally taken by many to indicate at least some abuse of power, somewhere along the way).

Businesses require investment and a helicopter charter is probably less than a year of office space.

“The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.”

Okay so what are you trying to say with this quote? Are you arguing that businesses don't require investment and risk?

That the idea of a level playing field is nonsense.

The wealthy can afford to continually leverage their wealth to accumulate even more wealth. This expresses in many different ways.

The wealthy man can afford the helicopter to get an edge at the global casino.

It's a structure designed to concentrate wealth and power and it won't end well for anyone involved, top or bottom.

It's a world where renting a helicopter is hilariously cheap available to some average person.

Looking at my local tourist helicopter place, a private custom flight is $1k per ~15m. That seems like nothing if it allows you be make millions with the information.

You can’t make millions from shorts unless you’ve already got millions to risk.

Shorts don't cost much to open, just the borrow rate on the shares. As long as it goes straight down you can leverage quite a bit without getting called.

Of course, this is the fastest way to lose your shirt and everything you have ever worked for, if there is any uncertainty.

Yes, I'm sure Robinhood or Schwab will allow me to open a $2M short position when my portfolio is $[sufficiently small that I'm debating the costs of a couple of thousand for a helicopter charter].

It's easy enough to synthesize 100x leverage by synthesis through options. If you have $25k for a margin account you could do it no problem. Of course, your funds would be rapidly vaporized if you were even a little bit wrong on timing or you needed more margin for volatility to keep it from getting called before it dips.

> So if this sort of "insider trading" is bad, what does this mean for other sorts off strategies hedge funds do to get an edge, like flying helicopters to look at how full oil storage tanks are?

This is allowed because you've gotten that extra information through your own methods that in theory anyone else can get access to. The problem here is they're using information that nobody else could possibly have access to, therefore its "insider" trading and it's been illegal for a long time.

Gee, what could go wrong using governmental info to provide personal gain? Surely they wouldn't be tempted to start causing situations to become reality for personal gain! (ala Dick Cheney and Halliburton.)

Politician are servants of the people, for the people. This involves sacrifice and following the law. (I realize this is a naive statement, but shouldn't we be jailing these law breakers?)

If the market wants to incentivize flying a helicopter to bring it information about the real world, that's somewhere between ok and good.

If the market wants to incentivize pumping and dumping the American economy by releasing a stream of fake news from the US President, that's bad.

We should tilt the arbitrary rules away from the bad things and towards the good things.

I think Matt Levine’s take on this is best, in that the problem here is _theft_: https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...

> The real issue is never whether the trading was unfair to the people on the other side; it’s whether the information was misappropriated from its rightful owners

In this case the rightful owners are the American public in whose employ the leakers are. They got this information from their position of trust, and sold that information, to the disadvantage of the people they work for.

If those hedge funds are doing something that stops the market from functioning then of course there should be intervention but it doesn't seem clear to me at all that hedge funds trying to get an edge (especially in a way that's replicable by other funds) has the same effect as rampant insider trading in regards to destroying the market.

> like flying helicopters to look at how full oil storage tanks are

Unless the helicopter is dropping a bomb on a school on the way there (or back) I am not sure that the comparison is fair.

HN will never stop surprising me with it's takes on how it's okay to make money at anyone else's expense regardless of laws, ethics or harm done

It’s really only a few people who believe this, and they’re always replied to by people vehemently disagreeing with them.

Wait, those big oil tanks don’t have lids? Doesn’t that mean rain would mix with the oil??

AFAIK the lids "float" on top of the oil, probably to prevent vapors from building up if the tank is half full.

>Wait, those big oil tanks don’t have lids? Doesn’t that mean rain would mix with the oil??

Modern tanks have floating lids. The lid is as much for keeping the volatiles in as keeping water out. Water gets into all sorts of places in oil refining anyway. It wouldn't really matter anyway since oil and water being famously good at mixing. You can just draw water off the bottom, filter it or boil it off depending on the situation and amount. Obviously they don't want more water (you're wasting money processing everything that you can't sell) but some isn't a big deal.

There are differences between the insider trading and your helicopter example. The theory is the better traders know the reality when making decisions, the better. When oil traders hide information about their reserves, they are working on creating a rift between the reality and the public knowledge. Helicopter is overcoming it. When Trump makes empty announcements that change prices in a purely speculative manner, but before doing this he buys futures, he is just creating instability on the market and he exploiting it. Instability is bad, the whole idea of futures is to deal with the risks stemming from the instability.

Instability is bad, but when the cause of it is market getting new information, it becomes ok: it is bad now, but it is good in the long term. But when the instability becomes a source of profits, when there are incentives and means to create the instability, then long term benefits go away.

This kind of "well eksuallyyyy" argument isn't very useful or good faith when a systemic harm is highlighted. It's just contrarian muddying of the conversation.

>This kind of "well eksuallyyyy" argument

It's not, when the article is specifically arguing that the insider trading is bad beyond just corruption, and barely touches corruption. You don't get to tack on a weak claim on top of a strong claim, and then when the weak claim gets pushback fall back to the strong claim and say everything's fine because you're directionally correct, or claim the person pushing back is wrong because they're directionally incorrect.

You keep saying this, when it is counter to the actual text of the article.

> Yet aside from the raw corruption, these incidents also raise a larger question....What broader damage does this kind of unchecked insider trading do?

That is what the article is about. It's saying that this is corruption, and discussing what the effect of this corruption is. "Beyond just corruption" is wholly your invention. I don't even know what it would mean?

Corruption is the cause. The article discusses the resulting effect.

Considering the very House, Senate, and connected buffoons with the presidency are all in on insider trading and corruption... Why shouldnt others?

Hell, being a congresscritter in charge of oversight of $industry allows you to cheat the public cause you know what's coming. How else do you see a senator making $174k/yr but net worth's of $100M? Its legal, only cause they carved their own exemptions and scam the public.

The numbers are big enough that I kind of suspect it's the various funds that are doing it. They've probably have some legal gray area intel they're leveraging like paying a guy who knows a guy overseas who knows a guy who's a l33t h4x0r (i.e. someone who got erroneously invited to a group chat).

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