Who thinks there was some insider trading in Bear Sterns?
I think it's pretty clear - multi-billion dollar hedge funds who are clients of Bear's were short the stock since it began its massive decline since the summer.
Coincidence?
Maybe...but I think something smells fishy here.
Thoughts?
Answers
3970 points
EthanR answered one year ago …
You could be right, but it's not necessarily insider trading as much as people who are knowledgeable about a particular industry, reacting to news about the company that is already public information. For example, many people in the real estate industry were aware that prices were peaking in early 2006 and acted accordingly to profit from that. But it wasn't based on some secretive insider information, a la the Martha Stewart case. It was based on very public things, such as Greenspan's comments about Real Estate, the frothy seller's market, the TV shows about flipping homes, etc.
Another thing to think about is that we all have access to charts on every stock and ETF. So when you begin to see a decline in a stock or a sector on increasing volume, you and I have the same opportunity to short it as the so called insiders. Watch for heavy insider selling on an individual stock, that is NOT just an automatic sell, involving three or more insiders as well. You may not know why the stock is coming down, but you can still get in on the emerging trend.
3680 points
MNSL answered one year ago …
I agree with points made by EthanR. I like to add some more.
There are reports about insider trading in Bear Stearns Puts and I heard currently there is an investigation as well. It is recurrent practice in today’s stocks markets through out the world. Some stocks own by major Investors including some hedge funds they can make stocks down and up suddenly without apparent reason. Sometimes it is very difficult to understand about insider trading. If you follow and learn their activities you can make some profits in the market without getting caught.
I think if we want to take above average returns in the long run we must avoid stocks with more institutional investors holdings and hedge funds. We can avoid losses when they suddenly take positions like insider trading.
508 points
John answered one year ago …
Its almost amazing, that in today's age and with todays investigators, and recent downfall of so many companies, and watching so many of their buddies get hauled off to prison, these executives continue to engage in fraudulent activities. Eventually your going to get caught. Now there out off business (sold for $2 is out of business) and thousands of people lost most of their life savings in the company at which they worked for with no inkling as to the companies financial problems. What Bear Exec's believe the federal government is not going to be examining every inch of their business? There going down and they deserve it. I don't think there is a investment firm out there, able to pass a complete federal investigation and you know it's coming.
The fact, more and more corporations heads are being investigated shows even when your fundamental and technical analysis are spot on, corporate malpractice is becoming a prevalent event in investing...And further more this should be another warning sign not to keep your life savings in one place, even the greatest company, because even the greatest company may not be run by the greatest people!
2172 points
ChaosNantuko answered one year ago …
I suspect there was at least some... if you realized a company you had a very substantial ownership in was going to lose 95% of its value in the near future, you would probably try and get out ASAP too, even if it did mean breaking some rules, and potential jail time. As i see it, the only question is the scale of it. Anyways, Ethans right here. We can decide to short when we see it start to fall on increased volume. In fact, we can enter short position significantly faster then the insiders could ever hope to sell their shares.
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