“Victimless” Insider Trading?  Really, Mr. Jenkins??

It’s hard to take seriously Wall Street Journal columnist Holman Jenkins’ latest broadside against prosecuting insider trading when it contains whoppers like this one:

“Whoever was a buyer when SAC Capital was selling would have been a buyer anyway, whether SAC’s motive in selling was inside information or the maundering of an astrologer.”

–Holman Jenkins, “The High Cost of Ignorant Stock Prices“; The Wall Street Journal (11/30/2012)

Come again?

Combating “Ignorant” Stock Prices

If you weren’t following the story, back in 2008 SAC Capital’s Steven Cohen ferreted out from a doctor in the know that Elan’s experimental Alzheimer’s drug was in fact a bust.

First, he managed to dump his shares, avoiding a huge loss.

Then, he apparently shorted the stock, scoring a fortune when it plunged after the news became public.

“Outperform the market,” indeed.

Buying Mr. Cohen’s About-to-Plunge Elan Shares

If you knew what Cohen knew about Elan’s drug, would YOU have been buying when he was (very quietly) selling?

Nah, I didn’t think so.

Which is why Jenkins’ argument that insider trading is a harmless activity that actually promotes efficient (vs. “ignorant”) stock pricing is the ultimate canard.

On the contrary, I can’t think of a single practice that does more to undermine public faith in the markets — and therefore, their utility — by reinforcing the (by now) broad perception that insiders will always manage to pick the pockets of average investors.

See also“Victimless” Insider Trading

P.S.:  Also hard to take seriously? 

Any publication that countenances such sophistry and twisted logic on its Op-Ed pages.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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