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I was thinking exactly the same thing. I wonder how much is being made using insider trading and never got caught.

everdev 7y ago
Anyone who consistently outperforms the market is a good candidate. My guess is if you're beating the market you're keeping it to yourself or a few high net worth clients.
- imglorp 7y ago
  Sounds like playing in a casino. They're cool with it until you win too much.
  - everdev 7y ago
    Exactly. And to further the analogy it's challenging to tell the difference between investing and gambling.
- arthurcolle 7y ago
  James Simons?
  - shagbag 7y ago
    Simons doesn't do insider trading. Arguably he paid long term capital gains on a basket that should have been short term capital gains. But his system of short term, automated, stat arb / signal detection based trades are clearly not based on classified corporate data. I suggest you read The Man Who Solved the Market for more info.
    - deleted 7y ago
      [deleted]
    - harry8 7y ago
      Well you don't know that, it's Simon's assertion that he doesn't do insider trading and whether you or I believe him (and I do, fwiw) stating that he doesn't as an incontravertable fact is going too far. "There's zero evidence that Simons and Renaissance do any insider trading." Is a better way to state it.
      - shagbag 7y ago
        Simons is pretty reclusive, I don't think he's actually made an assertion about insider trading. Either way, you're right that I don't know for sure. But all evidence points to a system that runs in a mostly automated manner, which would be the opposite of what you'd expect from an insider trader. Someone who makes "gutsy calls" based on "intuition" like Steve Cohen is what I think most successful insider traders would look like.
        arthurcolle 7y ago
        Insider trading easily lends itself to automation depending on the level of conspiratorial thinking you're willing to accept. Consider the stakes - you have a multibillion dollar sub-portfolio (Medallion has current AUM of $118B according to some random site called InsiderMonkey, idk whether its legit or not). In 2016, the AUM was reported at $76B. His returns literally don't make any sense. You can't be right all the time. Anyways, so literally you wanna use a small fraction of that to fund the construction of a small discreet, strategic team that acquires information to gain edge in public markets. Simons has background in signals intelligence, and despite his later work, wouldn't it be an extremely obvious avenue to just forcibly acquire knowledge that is non-public and then place trades accordingly? Simplest explanation is its definitely illegal. Every couple years, you hire some algebraic geometry PhD and boom, you chalk up all your returns to magic math. Doesn't make any sense.
        codyb 7y ago
        50% returns in three years? Although 2016 - 2020 has been a pretty bullish market. Seems like they do well during downturns too?
    - arthurcolle 7y ago
      I read the book. In my opinion, it's just a puff piece oriented towards a slightly more technical audience. The entire Renaissance org is pretty walled-in, and in my opinion it is pretty obvious that based on returns they must be exploiting an edge that treads the line of legality. Take a look at their basket options tax strategy (documented by Levine, look for "incantations+Levine" on your favorite search engine).
      - iudqnolq 7y ago
        Can't find it. You're the seventh result for "incantations" "Levine" in my personalized Google, though :). I like reading his newsletter a lot, though, so I'd appreciate a pointer.
        arthurcolle 7y ago
        Just tried to google this myself and you are right, looks like Google crawlers are as speedy as ever. Here's what I was talking about - Link to article I was referencing: https://webcache.googleusercontent.com/search?q=cache:4l2vAbvucsoJ:https://www.bloomberg.com/opinion/articles/2014-07-22/senate-literary-critics-don-t-like-fictional-derivatives+&cd=1&hl=en&ct=clnk&gl=us https://webcache.googleusercontent.com/search?q=cache:4l2vAb... Here's a pastebin of the content in case you can't access the above: https://pastebin.com/43hjkBQe https://pastebin.com/43hjkBQe
        iudqnolq 7y ago
        Thank you
        arthurcolle 7y ago
        Anytime, old sport. I'll be here all week.
    - arthurcolle 7y ago
      You literally cannot know this. It's pretty easy to construct a scenario where "oh yes he is omniscient and thereby he can easily draw returns from a bustling market" but it's even easier to construct a scenario where fraudulent activity is occurring and those same returns are being derived from expert-level fraudulent activity. No one is accusing a buy-and-hold investor like WB of committing illicit activities. Seriously, no one. OTOH, I think it is quite reasonable to suspect that the premier quant trader of all time, with those stellar YOY returns is extracting alpha via strategies that are "dumb" and "always work", i.e. his primary edge. These strats probably exist in the grey area of financial structuring and trading activity (if not worse). Seriously. Just look at the yearly returns time series. (Acquiring the yearly financial statements is left as an exercise to the reader). I mean yeah I think he's awesome too. But thinking he's some kind of market savant in a post-Madoff world is really quite silly, in my opinion.
seriesf 7y ago
The president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. We just don’t know who is getting the payoff.
- bananabreakfast 7y ago
  Why is this downvoted? This is an openly true fact. The president literally tweets about the China trade deal to manipulate the market up and down. On top of that, the president and all of congress literally cannot be convicted of any crime while in office and they pretty much all engage in massive and rampant insider trading.
  - samdoidge 7y ago
    Where's the evidence?
    - croon 7y ago
      https://en.wikipedia.org/wiki/Volfefe_index https://en.wikipedia.org/wiki/Volfefe_index Or one out of tons of specific companies: https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/did-donald-trump-tank-boeings-stock-because-he-was-mad-about-a-news-article/ https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/di...
  - datashow 7y ago
    I'm confused. Influencing the market is the same as insider trading?
    - dboreham 7y ago
      The accusation is that someone else is doing the insider trading based on prior knowledge of the tweet content.
      - datashow 7y ago
        The accusation: "The president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. " And "Why is this downvoted? This is an openly true fact." Apparently, they equal influencing the market to insider trading.
malux85 7y ago
Ah, most of it? You know that dark pools of communication exist too right? They even have code words for the names of well known insider traders, e.g. Jacob Rees-Mogg, the UK politician is known as the “profiteering ghoul” because his massive short on the pound, why else was he pushing Brexit so much? The will of the people? Get real Which makes sense, do you think that given the financial amounts involved, and the only thing stopping most people is ethics (and knowledge that it’s illegal but easy to get away with) that it wouldn’t happen??
- fortydegrees 7y ago
  Super interesting. Where is the best place to find out about JRM and the evidence that he does this?
  - malux85 7y ago
    I just told you, the communication dark pools. It’s not open to the public, you need a shibboleth
    - jl6 7y ago
      And you found out about it how?
      - thaumasiotes 7y ago
        The idea that there are groups of people communicating with each other privately doesn't really need a lot of evidence. It's 100% likely to be true. A better question would be "why do you think these specific people are coordinating with each other?".
        coralreef 7y ago
        It's 100% likely to be true. Uhh citation required
MiroF 7y ago
My guess is very common. Even if you just look at stocks before a major announcement, they usually start trading in the right direction a few hours before the announcement.
- icedchai 7y ago
  This cracks me up because of all the times I've seen that NOT happen. The stock drops actually drops big time after the announcement. Sometimes the news is "good" but doesn't meet expectations, so the stock drops. Maybe it was already priced in. Sometimes the news is "bad", but better than expected, so the stock goes up. Maybe that was already priced in, too. Either way "just looking at stocks before a major announcement" isn't going to get you anywhere fast.

Anyone who consistently outperforms the market is a good candidate. My guess is if you're beating the market you're keeping it to yourself or a few high net worth clients.

imglorp 7y ago
Sounds like playing in a casino. They're cool with it until you win too much.
- everdev 7y ago
  Exactly. And to further the analogy it's challenging to tell the difference between investing and gambling.
arthurcolle 7y ago
James Simons?
- shagbag 7y ago
  Simons doesn't do insider trading. Arguably he paid long term capital gains on a basket that should have been short term capital gains. But his system of short term, automated, stat arb / signal detection based trades are clearly not based on classified corporate data. I suggest you read The Man Who Solved the Market for more info.
  - deleted 7y ago
    [deleted]
  - harry8 7y ago
    Well you don't know that, it's Simon's assertion that he doesn't do insider trading and whether you or I believe him (and I do, fwiw) stating that he doesn't as an incontravertable fact is going too far. "There's zero evidence that Simons and Renaissance do any insider trading." Is a better way to state it.
    - shagbag 7y ago
      Simons is pretty reclusive, I don't think he's actually made an assertion about insider trading. Either way, you're right that I don't know for sure. But all evidence points to a system that runs in a mostly automated manner, which would be the opposite of what you'd expect from an insider trader. Someone who makes "gutsy calls" based on "intuition" like Steve Cohen is what I think most successful insider traders would look like.
      - arthurcolle 7y ago
        Insider trading easily lends itself to automation depending on the level of conspiratorial thinking you're willing to accept. Consider the stakes - you have a multibillion dollar sub-portfolio (Medallion has current AUM of $118B according to some random site called InsiderMonkey, idk whether its legit or not). In 2016, the AUM was reported at $76B. His returns literally don't make any sense. You can't be right all the time. Anyways, so literally you wanna use a small fraction of that to fund the construction of a small discreet, strategic team that acquires information to gain edge in public markets. Simons has background in signals intelligence, and despite his later work, wouldn't it be an extremely obvious avenue to just forcibly acquire knowledge that is non-public and then place trades accordingly? Simplest explanation is its definitely illegal. Every couple years, you hire some algebraic geometry PhD and boom, you chalk up all your returns to magic math. Doesn't make any sense.
        codyb 7y ago
        50% returns in three years? Although 2016 - 2020 has been a pretty bullish market. Seems like they do well during downturns too?
  - arthurcolle 7y ago
    I read the book. In my opinion, it's just a puff piece oriented towards a slightly more technical audience. The entire Renaissance org is pretty walled-in, and in my opinion it is pretty obvious that based on returns they must be exploiting an edge that treads the line of legality. Take a look at their basket options tax strategy (documented by Levine, look for "incantations+Levine" on your favorite search engine).
    - iudqnolq 7y ago
      Can't find it. You're the seventh result for "incantations" "Levine" in my personalized Google, though :). I like reading his newsletter a lot, though, so I'd appreciate a pointer.
      - arthurcolle 7y ago
        Just tried to google this myself and you are right, looks like Google crawlers are as speedy as ever. Here's what I was talking about - Link to article I was referencing: https://webcache.googleusercontent.com/search?q=cache:4l2vAbvucsoJ:https://www.bloomberg.com/opinion/articles/2014-07-22/senate-literary-critics-don-t-like-fictional-derivatives+&cd=1&hl=en&ct=clnk&gl=us https://webcache.googleusercontent.com/search?q=cache:4l2vAb... Here's a pastebin of the content in case you can't access the above: https://pastebin.com/43hjkBQe https://pastebin.com/43hjkBQe
        iudqnolq 7y ago
        Thank you
        arthurcolle 7y ago
        Anytime, old sport. I'll be here all week.
  - arthurcolle 7y ago
    You literally cannot know this. It's pretty easy to construct a scenario where "oh yes he is omniscient and thereby he can easily draw returns from a bustling market" but it's even easier to construct a scenario where fraudulent activity is occurring and those same returns are being derived from expert-level fraudulent activity. No one is accusing a buy-and-hold investor like WB of committing illicit activities. Seriously, no one. OTOH, I think it is quite reasonable to suspect that the premier quant trader of all time, with those stellar YOY returns is extracting alpha via strategies that are "dumb" and "always work", i.e. his primary edge. These strats probably exist in the grey area of financial structuring and trading activity (if not worse). Seriously. Just look at the yearly returns time series. (Acquiring the yearly financial statements is left as an exercise to the reader). I mean yeah I think he's awesome too. But thinking he's some kind of market savant in a post-Madoff world is really quite silly, in my opinion.

seriesf 7y ago

The president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. We just don’t know who is getting the payoff.

bananabreakfast 7y ago
Why is this downvoted? This is an openly true fact. The president literally tweets about the China trade deal to manipulate the market up and down. On top of that, the president and all of congress literally cannot be convicted of any crime while in office and they pretty much all engage in massive and rampant insider trading.
- samdoidge 7y ago
  Where's the evidence?
  - croon 7y ago
    https://en.wikipedia.org/wiki/Volfefe_index https://en.wikipedia.org/wiki/Volfefe_index Or one out of tons of specific companies: https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/did-donald-trump-tank-boeings-stock-because-he-was-mad-about-a-news-article/ https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/di...
- datashow 7y ago
  I'm confused. Influencing the market is the same as insider trading?
  - dboreham 7y ago
    The accusation is that someone else is doing the insider trading based on prior knowledge of the tweet content.
    - datashow 7y ago
      The accusation: "The president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. " And "Why is this downvoted? This is an openly true fact." Apparently, they equal influencing the market to insider trading.

malux85 7y ago

Ah, most of it? You know that dark pools of communication exist too right? They even have code words for the names of well known insider traders, e.g. Jacob Rees-Mogg, the UK politician is known as the “profiteering ghoul” because his massive short on the pound, why else was he pushing Brexit so much? The will of the people? Get real Which makes sense, do you think that given the financial amounts involved, and the only thing stopping most people is ethics (and knowledge that it’s illegal but easy to get away with) that it wouldn’t happen??

fortydegrees 7y ago
Super interesting. Where is the best place to find out about JRM and the evidence that he does this?
- malux85 7y ago
  I just told you, the communication dark pools. It’s not open to the public, you need a shibboleth
  - jl6 7y ago
    And you found out about it how?
    - thaumasiotes 7y ago
      The idea that there are groups of people communicating with each other privately doesn't really need a lot of evidence. It's 100% likely to be true. A better question would be "why do you think these specific people are coordinating with each other?".
      - coralreef 7y ago
        It's 100% likely to be true. Uhh citation required

MiroF 7y ago

My guess is very common. Even if you just look at stocks before a major announcement, they usually start trading in the right direction a few hours before the announcement.

icedchai 7y ago
This cracks me up because of all the times I've seen that NOT happen. The stock drops actually drops big time after the announcement. Sometimes the news is "good" but doesn't meet expectations, so the stock drops. Maybe it was already priced in. Sometimes the news is "bad", but better than expected, so the stock goes up. Maybe that was already priced in, too. Either way "just looking at stocks before a major announcement" isn't going to get you anywhere fast.