The media bloodbath is continuing unabated and the media has seemingly tried every business model and monetization pathway except the one that seems the most obvious to me.
In 2015, the NYT published a bombshell piece detailing the working conditions inside of Amazon The minute before the NYT published this piece, the market had a certain valuation for Amazon based on the best current information, the minute after the piece was published, the market started working to absorb the information and this altered people’s valuation of the company. The only people who had prior access to this information were people inside the NYT and what seems like the obvious business opportunity is to trade against this information in order to make a profit on the market move.
This is simply the most salient example I can think of but newspapers publish major, groundbreaking, market moving stories every day. MeToo, for example. Knowing that Weinstein was a sexual predator or Les Moonves hushed up his assault allegations before anyone else in the public market has value and it’s being sold for ad click dollars.
Note that this is explicitly not insider trading. Investigative journalists are combing the same sources that everyone else theoretically has access to. They aren’t inside employees of the company. Hedge fund research analysts are, in theory, performing much the same tasks except they publish their findings as research, not news.
Not saying that every story a paper publishes is tradeable or that every trade is even going to be profitable but that’s part of the art of running a hedge fund. It seems odd to me that, of all the desperate moves the newspaper industry has tried to stave itself from extinction, this is the one that’s always been off limits.
If I ask you how is work is and you go “work sucks” and then I go trade on that information, neither of us have committed insider trading. If I ask 1000 people in the company about how work is and they all tell me that work sucks, that’s still not insider trading. I’m not asking for privileged information.
According to Wikipedia, apparently “Winans once asserted, ‘The only reason to invest in the market is because you think you know something others don’t.’” Uh, no, that’s only why people trade on the short-term. Long-term investors are buying securities in companies that have profits and thus are increasing the value of the company, and quite often those profits are distributed to shareholders directly. That’s why most people buy.
How is this a serious question? Hedge funds don’t get their information from newspapers, which learn about trends long after everybody in the industry knows about them. They hire teams of professionals who spend every hour of their work days absorbing details about industries, firms, and people. They hire Ph.D. mathematicians to write sophisticated programs to examine the fine details of money movement. They do not have one guy poking around one company one week and a different company the next.
This idea makes as much sense as saying that since newspapers are the first to get announcements of scientific breakthroughs they are qualified to build the next Mars mission.
BTW, did the OP even bother to look at what happened to Amazon’s stock price after that so-called bombshell article in the NYT? It went up. And up and up and up.
Because (if I’m understanding you correctly), what you are describing is a violation of a number of SEC and other regulatory laws that fall under textbook “market manipulation” (Securities Exchange Act of 1934 comes to mind. Probably others).
There is also a desire for financial information services like Bloomberg or Thompsons Reuters to demonstrate impartiality. Mike Bloomberg became a billionaire by selling his terminals to investment banks and hedge funds. Not by owning one.
The second one I think even outweighs the first. Assume for a moment news organizations could get a useful trading edge from the information gathering of their reporters while avoiding securities laws violations, stripped of the shield that they were only profiting from subscription/ad fees from providing information to the entire public at once. It would still make them useless as impartial sources of news to the public. They’d have a direct conflict of interest in reporting more positively or negatively about companies whose securities they were long or short. It’s fun to listen to stock picker/shorter type hedge fund guys (there are many hedge funds of course whose expertise has nothing to do with gathering info on individual companies) on CNBC talking up or down the companies they admit they are already long or short, but it’s always to be taken with big lumps of salt.
Maybe OP means newspaper co’s becoming hedge funds and not being newspapers? But that would seem to ignore the huge difference in the typical types of people who work in either of those jobs.
That’s why most people should buy. That’s what the Intelligent Investor, and One Up Wallstreet, and Buffetology, and every other bare-basics investing book* tries to impress on the masses…
But most people think stocks are fancy lottery tickets and have never once read a 10K. Most people have no inkling whatsoever of what kind of business underlies a stock, or even what a P/E ratio is. They hear “apple” and think “magic” or “superlotto” and get wiped out over and over.
*: ok, I’m embarrassed I can’t remember munger’s book and technically Buffetology isn’t actually written by the correct buffet
I agree that’s only people who either trade/time the whole market, or make investments in a subset of the market, like one or a few companies’ stocks For people who make buy and hold investment in the entire market (an index fund) Winans is free to assert that, but there’s no reason to think it’s true. That assertion would imply that the expected return of the whole (stock, it’s implied) market is equal to the risk free rate, but historically it’s been much higher. Although it’s intrinsically unknowable and unprovable what the stock market’s return will be in the future.
All in all that’s a confusing quote either as made or related. The potentially valid thing I could see a cynical person associated with insider trading saying is that to invest in a particular stock alone, or much more than other stocks, you’d better have good, illegal inside information. ‘Something you know that others don’t’ could include better analysis of the company’s financial statements, or better legal-to-trade-on first hand knowledge etc. Lots of people think they have that, very few really do. When people have clearly important illegal-to-trade-on inside info it that is something they know others don’t, but it’s illegal.
Of course there are grey areas, but the idea individuals can come out ahead by carefully studying 10k’s is not too valid for most people. It’s not a matter of people not bothering to do that, it’s the 99.9% chance, for household name co’s at least, that somebody better and faster at that kind of analysis than you has already done it and it’s already reflected in the stock’s price.
