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The Brexit Short: How Hedge Funds Used Private Polls to Make Millions
- jeremysalwen 8y agoReading this article I can't help but have the Supermicro fiasco in the back of my mind, making me question how accurate every detail is.
- URSpider94 8y agoIt’s an old story, from 6 months ago, which has been pretty well corroborated by many other news channels since then. It’s good to be skeptical, but this one is spot-on.
- arethuza 8y agoRobert Peston covered it in his book WTF? which is more than a year old.
- deleted 8y ago[deleted]
- SmellyGeekBoy 8y agoIf the Supermicro story is the only example where Bloomberg has been inaccurate then it still has a far, far better track record than any other press outlet on Earth.
- AnimalMuppet 8y agoBetter than Reuters? I'm not sure about that...
- jonknee 8y agoFor financial news? Absolutely. There is a reason why Michael Bloomberg is worth $50b.
- AnimalMuppet 8y agoFor financial news, is Bloomberg better than WSJ?
- jonknee 8y agoIn terms of tradable information, absolutely. Bloomberg is known for being first, not for long narrative stories (of which the WSJ may have an edge?).
- deleted 8y ago[deleted]
- weliketocode 8y agoThis seems pretty fine to me. Laws forbade publishing exit pools until 10pm, so hedge funds conducted their own research independently to have better information. That's kind of how it is supposed to work. Bad laws/regulations preventing accurate information dissemination lead to financial incentives for those with the most accurate/up-to-date data. I know HN isn't the most Hedge Fund friendly forum, but surely there's an appreciation here for these funds' efficiency and ability to seize opportunity.
- leonk 8y agoIsn't the article's main concern the conflict of interest when polling companies release both public and private polls? They have an incentive to release inaccurate results to the public in order to benefit their private clients even further.
- dantillberg 8y agoPolling companies have an incentive already to create inaccurate polls by structuring the questions cleverly. Regulation will never do away with that.
- jonathankoren 8y agoNot every poll is a push poll. Push polls aren’t even polls. They’re just advertising.
- pessimizer 8y agoThere is no definitive difference between a push poll and a poll that is not a push poll. There are shameless push polls, but objective published polls are about as likely as objective public news; I'd need an existence proof for either. Published polls on how people say they will vote have virtually no utility for the vast majority of individuals. A small minority of individuals may need to plan for contingencies based on the likelihood of a particular result, but that utility drops drastically the shorter the planning window gets (i.e. the closer the vote is), which might be somewhat offset by a possibly greater accuracy. But instead of slowing as the date arrives, the polls get faster and faster. However, the utility of a "push" poll goes up closer to the vote, because voters will have less opportunity to review and correct misimpressions that the poll gave them. Hence the time between polls goes to zero as time to the vote approaches zero, and why some governments feel that they have to step in to create a prohibited window before a vote. Also, a traditional definition of a "push" poll is one that is meant to change the minds of the people taking the poll, but more effective in many circumstances, and definitely more common (because it is cheaper) is a poll which uses strange phrasing to get results that can be reported (after being carefully framed in a press release) in a way that implies far greater support or opposition for something that would be indicated by a more direct questioning. The fact that every vote is to some extent a Keynesian beauty contest, even if that's simply because people are convinced by ad populum and question themselves if they see that the crowd disagrees with them, means that even an "objective" poll would push.
- jackschultz 8y agoI always find cases like this really interesting, how predicting outcomes can lead to tons of success in markets. Political events like this are big money winners if you can predict the answer. Same with elections themselves for the affects of the person's plans. Besides polling data, prediction markets always seem like the could be a legitimate way to guess results. I used to work at a place that ran those, but biggest problem is to make sure the members are committed to answering the questions and learning more about the situation. There's been proof that these cases can be successful. Another event that comes up is company's quarterly reports that lead to giant price changes in their stock instantly. There are "specialist" predictions out there, but having better guesses leads to straight money. Knowledge of those numbers would be huge for traders, and us non-traders alike. Finding some legal and respectable way to predict these big outcomes would be incredibly valuable. Then again, if there was a correct way to make predictions, we wouldn't be having these discussions.
- lordnacho 8y agoAs someone who's stared at market news announcements for years, it's not that easy, even with the data. I've never traded on insider info (and neither should you!) but even when I had it, I didn't think it was that obvious which way things would go. Often the market moves the opposite way of what you'd think, given the news. Any these can be reasonable: "Rates went up, and that means firms will have a hard time borrowing, which lowers investment spending" "Rates went up, but the market (risk assets) also went up because it's a sign the economy is healthy" "Earnings were up, but people were hoping for a surprise" The other entertaining one is when a CEO gets fired because of bad performance, and the price shoots up. Oh, the ignominy.
- Sniperfish 8y agoBuy the rumor, sell the news
- soVeryTired 8y agoDon't forget "Rates went up, but the central bank struck a dovish tone so bonds rallied". Blegh.
- vaultcool 8y agoI really don't get how any of this would benefit the non-financial world in any way, this hyper-capitalism is just wrong to me.
- gammateam 8y agoI was short this in a simple buy the rumor sell the news strategy The pound had become overvalued in a rally leading up to the vote, so I shorted it on the vote being done with I was at a company dinner with some now defunct startup and someone said “wow the pound is down 10%” I yelled YES! And the founders asked me if I just quit
- GateCrasher 8y agoIf I remember correctly the odds of brexit where like 48% but the pound was valued for 100% chance of bremain. Don't need to be an hedge fund to see there was a limited risk but big potential gain for this trade.
- gammateam 8y agoor just sell the news. I was only looking for a 1 or 2% move.
- projectramo 8y agoI guess I'll ask the question: in the US, insider trading is (generally) trading on material non-public information. There are other nuances (various courts have found there needs to be a benefit or not and so on). Is the law similar in the UK? Does it even exist for currencies? Presumably not because there is no company to be the insider of?
- pathseeker 8y ago>insider trading is (generally) trading on material non-public information No, this isn't how it's defined in the US. It's completely legal to trade on material non-public information that you collect on your own via research (e.g. satellites looking at retail parking lots). In the US, it's only illegal if you use information to trade that violates a fiduciary duty (e.g. using non-public information from a CEO).
- projectramo 8y agoI have to admit I am confused on this point. I thought there was one theory that owning the stock makes one an insider because you are an owner. I find people worried and thinking about this all over the web: https://www.ibtimes.com/should-hedge-funds-be-concerned-about-insider-trading-alternative-data-2602756 https://www.ibtimes.com/should-hedge-funds-be-concerned-abou...
- jmalicki 8y agoI think you're misunderstanding their theory of why it would be bad? In the example where a hedge fund buys information from Best Buy about how many Panasonic TVs they sell, Best Buy may have a duty to Panasonic, and thus are an insider in that context, so if the hedge fund buys that data from Best Buy, they could potentially be trading on insider information. It's not because they own the stock.
- projectramo 8y agoOn rereading, that sounds right.
- jv22222 8y agoIt’s been explained to me a number of times but I still don’t get it. How does a short actually work? The part I don’t get is, how do you actually get out of the position and make the money?
- 88 8y agoBorrow shares, sell them, buy them back later (at a lower price, if all goes well), then return them.
- jv22222 8y agoHow can you buy them back? What if the person you sold them to doesn’t want to sell?
- Sholmesy 8y agoBuy any instance of that share back, not that exact one. And if no one wants to sell it, the price has gone up...meaning your bet was wrong and you lose money
- deleted 8y ago[deleted]
- TheBeardKing 8y agoWhat's the motivation of sharedholders to lend shares?
- Aloisius 8y agoThe borrower pays interest to the lender.
- rags2riches 8y agoThey are paid, of course.
- mruts 8y agoYou get paid for providing the shares. So if I had one million shares and thought the stock was going to go up, I could make some extra cash by lending it to people and making them pay me for the right.
- 4ndrewl 8y agoThis might have been a 'secret', but even at the time, as the words were coming out of Farage's mouth, it was transparently obvious what was going on. How is this even a story?
- kristianc 8y agoSo if private hedge funds had access to private polling data from YouGov which suggested that the £ was going to crash, who was driving the £ towards a cliff - and why would they not choose to have access to the same data?
- yohann305 8y agoConducting polls can be quite misleading. Remember the last US presidency election polls? They were totally inaccurate* Hedge funds could have lost a lot of money on this one. *: https://www.nytimes.com/2017/05/31/upshot/a-2016-review-why-key-state-polls-were-wrong-about-trump.html https://www.nytimes.com/2017/05/31/upshot/a-2016-review-why-...
- swebs 8y agoExcept for the one poll that was accurate, but everyone was giving it shit because it was giving a result they didn't want to hear. http://graphics.latimes.com/usc-presidential-poll-dashboard/ http://graphics.latimes.com/usc-presidential-poll-dashboard/
- Armisael16 8y agoThat poll had Trump winning the national popular vote by 3.2 points. He lost by 2.1 points. The poll missed by a total of 5.3 points. The average poll missed by 4.8 points. This result wasn't much worse than average, but it definitely was below average. I can see why someone might be confused by this - one might think these polls are predicting who will become president.
- yohann305 8y agoWhy the downvote? Isn't this comment bringing good critic?
- Armisael16 8y agoNo. The polls were fairly accurate; the problem was how people used the polls. This is also a topic that's been beaten to death over the last two years.
- antientropic 8y agoThe polls were not that bad: https://fivethirtyeight.com/features/the-polls-are-all-right/ https://fivethirtyeight.com/features/the-polls-are-all-right.... It's just that the outcome of US presidential elections can be changed by relatively small shifts in a handful of swing states.
- TheBeardKing 8y agoThe problem I see with companies selling private polls, is there's an incentive to release less accurate public polls. Why give away the good info for free, when the more accurate info is worth tons of money? A company wouldn't necessarily need to falsify the polling data, just poll less rigorously to produce a misleading result. Could current oversight prove that they were being intentionally misleading? Producing private results which counter the public results would make for very good business.
- Aloisius 8y agoThey'd only harm their reputation and ability to gain new clients. There really is no need either. Early access to poll results and crosstab data excluded from public results is still extremely valuable.
- xoa 8y ago>The problem I see with companies selling private polls, is there's an incentive to release less accurate public polls Out of genuine curiosity (I'm American and don't know all the workings of UK government), is the public actually paying for these polls (via some agency in charge of that)? If so then yeah, "the public" is a client and if they were getting shorted in favor of private clients against the contract then that'd be a problem. On the other hand though if polling companies are just doing it as a public service or form of advertisement (aka "see how accurate our public polls are on general elections, you can also expect that kind of rigor if you pay for us to poll about your product") then I'm not sure what the public interest angle is in terms of "less accurate public polls", nor do I see an enforcement angle given that those could just be the normal cheaper ones the company does and it's private entities commissioning and paying for more extensive, expensive and accurate collection. As far as I know polling companies themselves are private entities and are just offering a service. And in practice my understanding is that a lot of "public polling" is specifically being paid for by private entities in the form of newspapers and the like that then release it, because it sells news and in turn the ads attached to them. So same thing, if the news organizations found out they were being screwed they'd sue, and if results are bad enough they won't go with that polling company again, it's a competitive area. If the public isn't paying though then I don't see what else can be expected?
- GreeniFi 8y agoThe issue was that certain of the hedge funds were also funding Brexit campaigning. I believe that was legal, but suspect it won’t remain so for long.
- willyt 8y agoI wonder if they continue to make money on the currency markets by getting advance inside information on what politicians will announce next? Quite a few Conservative party politicians either own hedge funds, have worked for them, or have family and friends with connections that would allow the free flow of advance information. Rees Mog is a partner in a hedge fund, it would be interesting to see his what's app chat history...
- chatmasta 8y agoFun fact: In the US, members of congress are legally exempt from insider trading rules!