Posts tagged with Sec

Insider Trading

On Thursday the talking heads made up a lot of reasons why the DOW and S&P 500 were down 5%. The biggest loss since 2008, they said. Then they made up a bunch of reasons "why".

Was it stagnant growth numbers? Bad retail sales numbers? Maybe sun spots?

Then yesterday, S&P downgraded the US debt rating from AAA to AA+.

This is ridiculous for a number of reasons, not the least of which is that if the US is AA+, how can EXXON or Microsoft (US Based C-Corporations) be AAA? You don't think a US default and the resulting chaos in the markets would cause these companies to be a higher risk? Who would default first. Microsoft under an anti-trust ruling or the United States, a nation that defeated Germany (twice), fought the cold war and invented cheese in a can.

It is also ridiculous that the full faith and credit of the United States is being called into question by an organization that was rating the bottom tranche of sub-prime mortgage derivatives "AAA" during 2004, 2005 and 2006. These morons are the same morons that got us into the debt crisis in the first place. They still don't have a clue about how to evaluate risk. The Black Swan is still coming and these guys are downgrading US Treasury bills.

Oh, and they are all still making millions in salary and bonuses. No jail time or civil penalties for them.

Anyway, I would like to propose an alternative theory to Thursday's market sell-off. Insider Trading. It is possible that insiders at S&P who knew of the impending downgrade leaked the information to Wall St. types who are "in the know".

The resulting sell-off was a reaction, not to any real market forces, but to insider rumors floating around about S&P's impending action.

This week the FBI, Justice Department and SEC should raid the S&P offices and get to the bottom of this. Insider trading has long been tolerated. Traders who are plugged into the rumor mill make millions trading on information that is not publicly available. I think that once the SEC and others look into it, the cockroaches at S&P will flee the light. Maybe we can squish a few.