Hacker News Reader

Comment by froindt | Hacker News Reader

Matt Levine does a great job writing, and I highly recommend his newsletter. He talks extensively about the weird things that happen in the finance and hedge fund world, such as Windstream botching a bond and getting called out on it years later by a hedge fund. Or dozens of examples of things where you'd think "that's gotta be insider trading" but is completely legal.

View on HN

He's hilarious. I don't know how he puts out such high quality content so often, nearly every weekday. There's always something weird or interesting to talk about, and he does a great job of breaking down the complexities in a way that's fun to read.

Don't want to detract---I am a subscriber to the newsletter and find it very interesting and entertaining---but one of the cornerstones of his productivity seems to be that he is quite repetitive. He usually singles out events of a particular type (mostly crypto shenanigans, securities fraud complexities, regulatory corner cases, insider trading, disputes about advanced financial instruments and a couple other areas) and then writes about them repeatedly.

Its somewhat telling that there are enough instances of such events (crypto shenanigans, securities fraud complexities, regulatory corner cases, insider trading and disputes about advanced financial instruments) for those to be repeatedly written about in an entertaining fashion.

He also covered the Uber and Lyft IPOs extensively, showing that he can apply his same writing proficiency to brand new topics seemingly overnight ;-)

I think some of the entertainment value comes from the quite obvious repetitiveness. For instance, in the closing section of yesterdays newsletter, he had this sentence:

> Crypto Traders Also Enjoy Investing In Tesla, Claims Redundant Study.

Which manages to state a fact and deliver a joke in just 10 words, because of the unspoken implications.

That was actually just the headline of the article he was linking to.

The repetition is part of what I really value.

His points are valuable, and the repetition helps me remember what he is saying.

I love the different examples and different facets of the same issue (although it is only a few months reading the eletter so far).

It’s sensible that he would cover topics on which he has professional insight, and this is what Bloomberg pays him to write about. Do you think he is more repetitive than other financial columnists?

Yeah, his repetitiveness is a little like the repeat of the theme song / video before a lot of tv shows like x-files that I don’t always skip over... it doesn’t take away much and I don’t know how else the intro could be done any better.

A lot of the things that people think are insider trading are legal only because those doing them have paid for enough lobbyists to make it legal.

Do you have examples?

In my own personal experience, people are most often mistaken about what is insider trading due to a combination of a vague sense of unfairness and a lack of background knowledge about the reasons for insider trading laws and the exact harm those laws are designed to prevent.

Matt Levine has written extensively about this and it's all quite interesting!

There have been some rather weird price moves in some stocks relating to various congressional committees apparently tipping off people before the info was publicly released.

While I can't find it right now I recall studies that showed that the typical return on a Senator's investments was at least 11% greater than would be expected which is a data point to take into consideration.

I do agree it is all very interesting and will read more of his works when I have time.

That's an excellent example! Thank you.

So... Congressmen are paying lobbyists to lobby... congress?

More, congress and their friends like to make side money.

Wasn’t this specifically made illegal back in 2012? https://en.m.wikipedia.org/wiki/STOCK_Act

> Do you have examples?

Stock buybacks used to be illegal, until they weren't. Very relevant in the current market. Not insider trading as such, but a form of manipulation that one might consider related.

https://mavenroundtable.io/theintellectualist/news/stock-buy...

Thanks for the pointer! It seems... symmetrical(?) that if corporations can sell stock, they should be able to buy it back. It's not a whole lot different from a dividend in practice, it's just cash flowing from the corporation to the owners of the corporation. The commentary on that article about not investing back into the company isn't particularly convincing, to me anyway, just because there are lots of times that its better for anyone but the company to have the cash, especially if the company can't think of anything better to do with it than buy back their own stock. And it's not like the money disappears in a puff of smoke, presumably the shareholders reinvest the proceeds.

I'm sure my analysis is naive and missing something, but on first glance, this doesn't strike as a problem anywhere near as bad as insider trading.

Nope, you're absolutely right. The main difference between stock buybacks and dividends are the tax implications – and what they signal to the market.

Dividends tend to be "sticky" since changing them all the time gives investors little certainty over what they should expect to receive (and if there's anything investors like is certainty)

Buybacks signal management (a) has no better source for capital and (b) probably thinks the stock is currently undervalued (i.e. it's a good time to buy back cheap shares).

Companies very often do not have projects to invest with a return higher than their cost of capital, and any reasonable CFO who finds themselves on that position should pay back its equity holders who risked their money by investing in this company with a given expectation on returns

I meant to say "no better use* for capital" but alas, it's too late and a I can't edit the above

Many things were illegal until they weren't, but we don't go around suggesting there's a nefarious reason behind their legality.

The really honest argument is that buybacks are taxed in a special manner, and this difference between taxes on income and taxes on capital gains is what's really driving income inequality in the U.S.

Insider trading tends to be done by individuals or small groups of friends. I doubt that any of them would consider it beneficial to individually pay for lobbyists.

I don't think that's a very accurate description of the situation. There's no specific law against insider trading. Insider trading restrictions arose out of case law rather than legislation. Enforcement of the law changes as judicial interpretations changes, but judges don't get lobbied. The strictest that insider trading law has ever been was 2009-2013.

Prior to 2009 insider trading cases were generally clear cut situations like an accountant telling a trader about an upcoming merger in exchange for a bribe. Then Preet Bharara started pursing insider trading cases very aggressively, punishing people for being downstream of insider information, even when they didn't know the original source, and no one was bribed.

Starting in 2014 judges started pushing back on this broad interpretation of insider trading rules. Recently a 2013 guilty plea for insider trading was vacated because the behavior he admitted to is no longer considered against the law. Again, this isn't because of lobbying, but because judges have decided that the correct view of insider trading is the one that existed prior to 2009, not the broader one that Preet Bahrara pushed for. Even the laxer standard for insider trading that judges have returned to make the US stricter than most countries in enforcing insider trading.

Politicians aren't considered insiders in the traditional view of insider trading. Trading on Congressional information, which you alluded to, was legal until 2012, when it was banned not coincidentally while insider trading law was expanding in other ways.

https://www.reuters.com/article/us-sac-insidertrading-lee/u-...

I’m sure he writes his copy using upgoer5.

Reply on news.ycombinator.com