Martha Stewart & Insider Trading

[Capitalist]

Pundit and psychologist Michael J Hurd opines:

Martha Stewart is guilty-- But of what??

"Martha Stewart is guilty of lying. She obstructed justice. That’s why she should be going to jail."

People tell me that this is what they think about Martha Stewart’s recent conviction. Yet when I ask them, "Would you have sold your stock if you knew it was about to crash? Or would you selflessly ignore the information and take the loss?" In just about every single case, they reply, "I’d sell it, of course."

The moral status of a hypocrite indicates that his argument likely means little.

Martha Stewart lied, if in fact she did, because she had every reason to believe she would be convicted of insider trading if she didn’t. Yet the large numbers of people who assume insider trading should be a crime admit, usually without shame, that they would sell their stocks if inside information led them to believe their stocks were about to tumble in value.

It’s said that this sort of "insider trading" activity gives the Martha Stewarts of the world an unfair advantage over "the little guys." What this argument ignores is that the Martha Stewarts of the world, who hold the most stocks, invest the most and take the biggest risks. In the case of Martha Stewart, the company would not even exist without her years of effort and the huge market value of her personality. What seems more unfair to me is that people who achieve a lot are denied the same rights that would be afforded to anyone else who doesn’t achieve as much, and doesn’t take nearly the risk.

Chappell Hartridge, a juror who spoke publicly about his decision to convict Martha Stewart, commented after the verdict was public, "Maybe it’s a victory for the little guy who loses money in the markets because of these types of [insider] transactions …"

Earth to Hartridge: You just succeeded in killing Martha Stewart’s company. You helped destroy the jobs of the people she employs and all her stock value in the process. Lots of little and medium-sized guys are being hurt by this. Get real. We know that it wasn’t the defense of the "little guy" you were after. It was the destruction of a woman of high accomplishment you wanted. Why don’t you stop telling lies?

***************************

As was commented on another list :Insider trading should not be outlawed -no force is initiated. There is no such thing as the right to prevent someone selling something you own (or will buy) for a high price.The exchange of stocks, fraud aside, is not the government's responsibility. People should be free to trade stocks according to whatever terms those establishing the market choose. If you don't like the terms you can go somewhere else.
Amen

[hiawatha]

I would sell shares to avoid a loss, but this is not hypocritical beeause I am not privy to any inside information. The information on which I sold would be information that was generally available to the markets. The situation with insider trading, however, is similar to the position in insurance where the purchaser of insurance is required to disclose to the insurer all relevant information bearing on the risk. A director of a company may be deemed to have a fiduciary obligation, when selling shares in that company, to make known to the buyer any information he has which is not yet available to the markets.
And, lets face it, would you buy shares from a director who told you that, unbeknownst to the markets, his company was, for example, on the brink of insolvency.
hiawatha

[bongo66]

Your talking seeite here Cap. If ALL holders were aware of the same info as MS then it would be fair to sell and it would then be a case of you snooze you lose.

MS attitude to business and her investors is corrupt and she should be punished. Too many company heads are getting away and it is in fact the little guy who keeps getting punished.


She will get away with it i think.

B

[take5]

Good Post Cap, but I have to disagree because rules are rules.

People participate in the US sharemarket because the SEC enforces
rules that basically say that regardless of your shareholding, everyone should be able to make decisions on company information that is made to the investing public in general. No one should be privy to being able to execute buy/sell decisions based on information not available to the public, and hence have an unfair advantage. We all know in practice that is difficult to police, but nevertheless, these are the ideals. Anyone who is proven in a court of law to break these rules, then pays the penalty.

Now, regardless of whether it is fair for a majority shareholder who has built up a company from scratch and put in all the hard sweat, blood and tears to build up a company, once they decide to float on the sharemarket, they have to accept the rules, including their corporate governance responsibilities.

If all market participants are informed that insiders are permitted to trade at any time, then fair enough, let the insiders trade on private information and let minority shareholders make those "buyer beware" decisions. But that is not the case in the US, market participants do not expect to be unduly disadvantaged by not being privy to financial accounts before publish date (for example).

Under current rules enforced by the SEC, insider trading IS UNFAIR.

[Gryffyn]

Cap said "People should be free to trade stocks according to whatever terms those establishing the market choose. If you don't like the terms you can go somewhere else."

But Cap, the market has set rules and insider trading breaks those so you invalidate your original statement.

Free markets and a capitalist society depend on transparency and rule of law. Capitalism does not mean or require unfettered markets but ones that attract and promote capital investment and the free flow of money - insider trading skews this and is therefore inefficient in the long term.

[The Doctor]

Cap Bob Jones for one would agree with you.."don't sell,never sell(at lest not before I have and the price has collapsed!)'...of course the real 'crime ' is getting 'caught'!

[Capitalist]

Y'all have made good points, and what I have tried to point out here is the Martha Stewart scandal is a case study of the Tall Poppy Syndrome. For those who suffer from Tall Poppy Syndrome, other people's achievements are an affront, an intolerable reminder of their own shortcomings. These are the people who desperately search for dirt to sling at celebrities, to show that they aren't so good after all—and who rush to join any witch hunt and repeat any allegation.

By the way, small investors would have nothing to invest in if there weren't large investors bank-rolling IPOs and equity research. The stock exchanges in NZ came about because the well-heeled had put aside enough money to make a stock exchange worthwhile. It's the well off speculators that provide liquidity that allow your Mom-&-Pop investors to get in and out of shares without having to cross a far higher bid-ask spread.

[Gryffyn]

Cap, Tall Poppism is alive and well everywhere - no arguement. But Tall poppies have to remember that they are just poppies too. Your post makes good points about the big players enabling littler players to get involved - great - but they don't do it for that reason and little players wouldn't come to the party if tall poppies got away with murder as the article suggests they should be able to.

That article makes the mistake in assuming that the 10 mill a big player invests is more important than the 100k I might invest and they should be allowed advantages because of that. Crap - they need the small players too otherwise they wouldn't be using a public float and that 100k of mine may be a bugger chunk of my wealth than their 10 million.

That juror didn't help kill the MS company - she did by cheating and undermining the system that we all need to be able to invest and trade equally.

[Gryffyn]

PS - pointing out hypocrisy doesn't invalidate an arguement - it shows that an individual is weaker than the moral they expound.

[Lawso]

Those smooth-talking apologists for MS have overlooked the crucial point - she unloaded that stock knowing that some poor sod(s) would lose a bundle on it.

Capitalist you would moan like hell if you were one of the small shareholders that got done. Or do you get inside imformation for all your trades.

[Sid]

quote:Originally posted by Capitalist

Y'all have made good points, and what I have tried to point out here is the Martha Stewart scandal is a case study of the Tall Poppy Syndrome.


This is nothing about Tall Poppy Syndrome. This is about a person breaking the law, and then telling the most pathetic lies to try and cover her tracks. Tall Poppy Syndrome protects the Tall Poppy in more times than it brings the Tall Poppy down.

[Capitalist]

Here's a nice story from Lew Rockwell's site. Socialist moonbats and anti-Americans love this guy, but *surprise* he is an an-cap.
http://www.lewrockwell.com/anderson/anderson87.html

[winner69]

Irony is that in a few weeks time Imclone shares could be back to the price she was 'advised' to hock them off (She sold at ~$58.55 and now $47.85)

Should have been a buy and hold investor eh - so much for insider trading

I bet she wasn't the only 'imsider' who sold out (or shorted) when she did .... and prob the same people have cashed in on the latest rise as well
But I

[marcer]

Even if it is Tall Poppy Syndrome, that is besides the point. Rules is rules.
Especially Cap, as a self proclaimed capitalist (i.e market should rule etc) if you refer to any 1st year economics text it will tell you that a free and fair market relies on demand and supply, and equal/freedom of information to everyone. Not just those in high places.
Regards Marcer

[Gryffyn]

Cap - Tall Poppism should just be ignored for the sour grapes and envy that it is. That it exists is not an excuse for insider trading though.

Politics of envy no better than the politics of greed.

[winner69]

Cap - not a regular reader of Gary North ...are you?

Should have put the link to that other piece on that lourockwell site
http://www.lewrockwell.com/orig/black3.html

LAst para -
U.S. Attorney David Kelley said Friday that all Americans were victims of Stewart and Bacanovic's crimes because lies to investigators weaken the nation's law enforcement system.

I will not argue with the proposition that the law enforcement system is weakened by lies. But when the chief law enforcement officer of the country is neither prosecuted nor removed from office for a material lie about one non-crime, it seems quite out of proportion prosecute a private person for an immaterial lie about a different non-crime.

No comment from Belg yet either

[Capitalist]

Don't mention that Calvinist freak to me my love :D'The Daily Reckoning' rings a bell ;). I've been around these groups for years, since my early flirtation with anarchism. All the same people crop up in the lib/ancap/anarchist world. You might be familiar with www.cato.org and mises.org of course.

As for some of the other comments on this thread - oh dear, you've completely missed the point. Insider trading laws are unjust. The law Stewart is being tried under is illegitimate.

[Gryffyn]

Cap, if we've missed the point, perhaps you can explain again why insider trading laws are unjust?

[take5]

Cap, leaving the Martha Stewart case aside, let's consider what a hypothetical sharemarket would be like if insider trading was permitted.

Those of us privy to seeing the end of month financials for a listed company could buy and sell holdings before quarterly/half yearly reports are made public. Finance dept workers, board members, majority shareholders would be able to buy/sell chunks of stock based on information not privy to the rest of the market.

The problem lies when a company is attempting to raise capital in the market by floating. They would be seeking funds from a market of investors who are immediately disadvantaged. There would be less players prepared to enter the market because of the extra risk premium, hence the sharemarket institution would not be as profitable as it could be if it ran a fair and equitable market for all players. I liken a market permitting insider trading to be like the Wild West, full of cowboys.

Rules for responsible corporate governance, transparency and arms length transactions are necessary to entice as many market players as possible.

Maybe you are trying to make the point that the Martha Stewart case is unjust because she is being singled out and "made an example of". MS may have been "dealt with", or had unfair treatment, but that's NOT the fault of the laws regarding "insider trading". It would be the fault of the legislative enforcers (SEC) applying the laws inconsistently, and that's a subjective judgement.

Personally, I think all insider traders, architects of creative accounting and their like should be dealt with. Once you accept a position of responsibility, be it on the board of directors or executive management team, you have a responsibility to your shareholders, who may have staked their livelihoods on your performance. This is NOT PC correctness, this is all about ethics and responsibility.

[OldRider]

Cap: What should be a crime? Should there be any?Is not freedom for one restriction for another,so in practical reality, freedom can only apply to one's thoughts and values and the verbal or written expressing of them, when it comes to actions rules are needed,so that what society sees as most desirable is the world we mostly live in.
For myself I have found that to live and let live,accepting and enjoying people for what they are, knowing that the world is not what I see,but that I am what I see, brings contentment
beyond any other view.I don't recall who said that humanity gets frustrated and annoyed trying to shift others from the slums,it's only a change of heart that shifts the slums from humanity,and in this I will agree rules don't do it.

[Gryffyn]

Indeed Cap, if one took your hypothesis to its extreme conclusion we would end up with the marxist maxim that 'All property is theft' and I'm not sure that's what you want.

Nice idea for a debate though.

THE KING says Insider Trading is not a crime unless you get caught, the one`s that are nabed in most cases are all ready naughty people and somehow the system goes out of its way to get them. Back at AUS R Rivkin had been around for many years showing wealth that was hard to fathom how you could he could make money legal to pay for his showing off`s, well in the long run he was nabed on a minor matter starts doing part time[sometimes] but this will not change his attitude unless caught with a big fish,which I think will just be a matter of time.

Big Alan C. only caught by tax trick but still ended in the can, So if you do a bit of insiding keep your mouth SHUT.:D

Watching from Insider Free Paraparaumu THE KING

[Capitalist]

Re the latest --NY <s>Times</s> Slimes Turow writes, "Virtually everybody who takes Ms. Stewart's side conveniently ignores the fact that there was some poor schmo (or schmoes) out there who bought her shares of ImClone."

Two days ago IMCL closed at $74.34. It's hit $80.35 recently (April 27). So those "poor schmoes out there who bought her shares of ImClone" for $60 in December 2001 could have made 33% in 28 months -- not a bad rate of return.

Stupid asshats.

[Sid]

Oh wow Capitalist, those lucky punters who bought off Martha, gosh shouldn't they be grateful to her. A 33% return thanks to Martha being so kind to sell on inside information. I'd imagine some of them will be so happy with Martha that they might visit her in jail.

[Awryly]

quote:Capitalist
Advanced Member

New Zealand
1675 Posts
Posted - 17/07/2004 : 3:16:46 PM
--------------------------------------------------------------------
I was sitting here and thought I could annoy more people than I do now...


The woman is ambitious, as well as paranoid.

[Awryly]

Oh, so you like to discuss and annoy?

[Go the intel-lectuals.]

[Awryly]

May we less well-endowed specimens look up in awe and call you chipmonks?

[Awryly]

quote:You ****ed up the thread re Jim Peron's essay as well.

Inconscionable, I'm sure. Who the hell is Jim Peron?

[Capitalist]

**** you you fool. I'm not conversing with witless drones like you. I'm deleting that post and puting it up elsewhere where I'll get some intelligent feedback.

[Major von Tempsky]

Actually I thought Martha was pretty good looking for a woman in her 60's, although I expect her hair is dyed. Good figure too.
It was only a peanuts amount of money involved so I thought it was all a bit vindictive.
But I see she's basically only got a 3 month sentence (read 1.5 months in practice if it's like NZ) in what will probably be the best gaol around like Lord Archer. Write a few mag articles, tutor the other prisoners, do a bit of crochetting and cooking and gardening.
And I read her company's stock (as distinct from the coy she invested in re the insider trading charge - totally different and independent coy) has risen very substantially since the sentence was announced.
So she's very far from ruined, may even bounce back better than ever with all the publicity.

[Gryffyn]

Do you think she'll get "home" detention? ;)

[ananda77]

Capitalist:

kindness to you.

Hayek (1976), Friedman and Friedman (1980), Upton (1987) comment, that the ‘freely choosing individual’ forms the basis of a neo-liberal entity (the concept of society is rejected, only individuals exist…ed.) and the exercise of freedom in relation to private property is of utmost importance. The function of the state is to ensure that as little as possible is done to restrict this freedom

Milton Friedman (1962) defines “freedom" (foremost valued as economic freedom…ed.), as the absence of constraints…”

Nozick (1976) argues, “that a theory of justice should be based on entitlement…; the entitlement theory of justice emphasizes property rights, the right to hold on to what one owns…(and the opposite of course…ed.).

For neo-liberals, the market forms the central institution and the outcomes of individual market-transactions are unintentional, thus no individual can be held responsible for the outcomes of market transactions.

I assume that Capitalist’s arguments for her defense of Marsha Stewart can best be understood on the basis of above dominant values inherent in neo-liberal theories of economic, social, and political organization.

It could be argued, that Insider-Trading would not be an issue in a neo-liberal entity…but who knows? Sure is that neo-liberals do not reject state intervention entirely.

In their view, the state has the responsibility that laws/rules exist and are evenly applied to ensure the smooth functioning of the market.

In my mind, it is likely that Capitalist assumes that the dominant values innate in our current society are too restrictive in terms of individuals like herself or Marsha Stewart to freely express and pursue their self-interest. A sense of powerlessness may result.

Furthermore, there is no doubt in my mind that dominant values in our society are based on male perspectives of reality making it more difficult for female executives to succeed and, what is equally important, to receive a value-neutral (non-sexist for example) acknowledgement of their efforts. In terms of salaries, women are still in lower salary brackets than their male competitors.

Thinking to be a victim of gross imperfections permeating our society could probably motivate Marsha Stewart’s inside-trading activities and explain Capitalist’s support for her actions.

However, inside-trading is unlawful under current law and the actions are not those of the rational mind.

[belgarion]

F**k me ananda77 ... what a lot of physco-babble ... the only bit that was true to the mark was ...

In my mind, it is likely that Capitalist assumes that the dominant values innate in our current society are too restrictive in terms of individuals like herself or Marsha Stewart to freely express and pursue their self-interest.

... and we already know that. Cap's views are that of the average fascist.

I.e. rules are made for the grubby lowlifes, and, as she's definitely not grubby or lowlife, and sufficiently delusional to believe she is intellecturally vastly superior to anyone who doesn't agree with her, she is, therefore above any such rules.

Basically just a fascist. Hells bells ananda77, lighten up girl and call a spade a spade. ;)

[Major von Tempsky]

Major von Tempsky has authorised me to issue a correction to one of the facts in his above posting on his behalf.
Today's Press, a la page B3, "Porridge for Stewart" reveals that Stewart has been sentenced to 5 months (not 3) at Danbury Federal Correctional Institution followed by 5 months of home detention.
He would also like to point out that the voman in question is Martha Stewart not Marsha Stewart.
And finally gentleman I would just like to observe, Language Gentleman, language. There are ladies present.
The Major sends his regards and will return shortly.

[ananda77]

Belgarion:

Basically just a fascist. Hells bells ananda77, lighten up girl and call a spade a spade.

Personally, I would not want to call Capitalist a fascist.

Fascists reject liberal ideas such as freedom and individual rights (outlined in Human Rights legislation), and in the past have pushed for the destruction of liberal democratic institutions.

Capitalist for now is a neo-liberal (new right-liberal) and her Credo demonstrates this fact:

Insider trading should not be outlawed -no force is initiated.
There is no such thing as the right to prevent someone selling something you own (or will buy) for a high price. The exchange of stocks, fraud aside, is not the government's responsibility. People should be free to trade stocks according to whatever terms those establishing the market choose. If you don't like the terms you can somewhere else.
Amen

Her Credo corresponds totally with the values inherent in neo-liberal thinking outlined in my post.

The reason why I am so pedantic in outlining neo-liberal values and theories is that in the hands of people like Capitalist, who shamelessly display a SUPEREGO of gigantic proportions, such a theory may well lead to another chapter in history which would make Nazi-Germany look like a pious kindergarten.

I am not into conspiracy theories...but Belgarion, you have already located her close to facism and while I personally think it is too early to make a judgement like that, I would like to point out:

Beware of the beginnings.

[Awryly]

So you're saying that Capitalist is sinister as well as ambitious and paranoid? Serious stuff.

I think she should have the opportunity, ambition and paranoia to answer such a charge.

Unfortunately, she seems to have taken her balls and is presently spitting her dummy elsewhere.

[Major von Tempsky]

After being chased around the Internet by Donner who appears to have some sort of fixation with her, I'm not surprised. Some would say it would be good grounds for a sexual harassment case.
There's few enough well educated, thoughtful, articulate women active in investment and economic and political discussions, I think they should be encouraged not harassed and picked on.
Shame on you, and you know who you are.
Who cares whether she's left wing right wing or centrist?
That's her privilege, that's her right in a democracy and a "free" discussion database.

[Capitalist]

Thanks Tempsky. At least others who may dislike me have a brain.

Awryly is an ignorant oaf, and his obsessive behaviour in regard to me with multiple inane 5 word posts in reply to practically whatever I say (as I mentioned on Helen thread), has not gone unnoticed.

I do not want to "discuss" with him, and that is my right.

As I said Awryly, back up the truck, carry on and I will be coming after you.

[Awryly]

MTV

Nice piece of spin. I know other women who are
quote:well educated, thoughtful, articulate and for whom I have nothing but admiration. They are also not arrogant, confrontational, dismissive, unbalanced or abusive.

But, I suppose, as Capitalist will no doubt say with great articulation: BBBBAAAAAAAAAAAAAWWWAAAAAAAH.

[ananda77]

Welcome back, Capitalist and kindness to you

[Shamrock]

Martha is currently being interviewed by Larry King on CNN if anyone is interested.

[ananda77]

Over 50 years ago, the great scholar Karl Polanyi published his fierce critique of 19th. century industrial, market-based society in ‘The Great Transformation’ (1944) in which he stated amazingly prophetic and modern:

<center>"To allow the market mechanism to be sole director of the fate of human beings and their natural environment...would result in the demolition of society" [p.73].</center>

However, Karl Polanyi was convinced:

<center>"Within the nations we are witnessing a development under which the economic system ceases to lay down the law to society and the primacy of society over that system is secured" [p.251].</center>

Development 1944/45 onwards:

-IMF and World-Bank established in Bretton Woods 1944 mandated to help prevent future conflicts by lending for reconstruction and development and by smoothing out temporary balance of payments problems. They had no control over individual government's economic decisions nor did their mandate include a license to intervene in national policy.

-Re-establishing the Welfare State

-Marshall Plan to revive world-trade and re-establish Europe as a major trading partner with America

-Decolonization and the rise of social/liberal-democratic societies

Unfortunately, Karl Polanyi’s vision vanished under the onslaught of Neo-Liberalism emerging from an ultra-minoritarian ghetto to become the dominant economic doctrine in the world today.

For neo-liberals, the market is so wise and so good that like God, the Invisible Hand can bring good out of apparent evil…in fact, the market is so good, that market mechanisms should be allowed to direct the fate of all human beings and the economy should be allowed to dictate its rules to society.

-There is No Alternative- Margaret Thatcher once stated:

<center>"It is our job to glory in inequality and see that talents and abilities are given vent and expression for the benefit of us all."</center>

No worries about those who might be left behind in the competitive struggle. People are unequal by nature, but this is good because the contributions of the well-born, the best-educated, the toughest, will eventually benefit everyone. Nothing in particular is owed to the weak, the poorly educated, what happens to them is their own fault, never the fault of society. If the competitive system is "given vent" as Margaret Thatcher says, society will be the better for it.


Prof. Dr. Jörg Huffschmid, arrives at a different conclusion to the effects of neo-liberal rule over more than two decades. As he pointed out at the Europe World Social Forum in Porto Alegre, 22-28 January 2003:

<center>The results of neo-liberalism are inequality,
insecurity, de-democratization and growing
aggressiveness.</center>

Susan George at the Conference on Economic Sovereignty in a Globalizing World Bangkok, 24-26 March 1999 concluded:

<center>…“the great new central question of politics (today –ed.)
is, in my view, "Who has a right to live and who does not". Radical
exclusion is now the order of the day, I mean this deadly seriously.”</center>

Who has benefitted from neo-liberalism??

[thereslifeafter87]

Ananda, I would have said Keynes had much more influence on the post-war situation than Polanyi.... Polanyi was a socialist. What we saw after the was was heavily regulated capitalism.

Most developed countries around the world have benefited hugely from neo-liberalism.

However, neo-liberal ideals should not be applied to developing economies who lack the financial, judicial, and political infrastructure to support such policies. Thus, the IMF should not be pursuing the policies it is.

Joseph Stiglitz (former head of world bank) has written an excellent book on this subject, though the title escapes me. Of course, it should be balanced out by reading Mike Moore's "A world without walls"