Levine on Wall Street: It's Not Insider Trading If You Buy the Wrong Stock
Google is not buying Nestor, Inc.
But it is buying Nest, and Nestor, Inc.'s ticker symbol is NEST, so Nestor's stock was up 1,900 percent on Tuesday because ... well, apparently because people confused Nest and NEST. By "people" I probably mostly mean algorithms -- computers skimmed headlines, saw "Google buying Nest," and went out and bought NEST -- though I'm sure one or two actual humans fell for this. (Nest is a private company, so it has no ticker and you can't buy any shares.) I asked on Twitter: If you knew about the Nest deal in advance (say you worked at Google), and you bought some Nestor stock before the Nest deal was announced, hoping to profit on exactly this idiocy, is that insider trading? I say no, John Carney and Felix Salmon say yes, and of course I am right (not legal advice!). Really, imagine the SEC arguing in court that news about Nest "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available" about Nestor. Not gonna happen. Anyway this seems unlikely to come up too much in practice, though tell that to investors in Tweeter and Helmerich & Payne. My advice to you is to buy a lot of shares of Appell Petroleum Corp. and Fibrek Inc. and watch the confused cash roll in. (Not investing advice!)
ABN Amro got its core values from a brothel.
Well, a fake brothel. Honestly this story is hard to explain, but you should read it. It's about ABN's chairman "and former Dutch finance minister Gerrit Zalm" dressing up as his "fictional brothel-owning sister" and talking about values and generally being nuts. "The performance 'fits in with the Dutch sense of humor,'" said an ABN spokesman, so I'm moving to the Netherlands.
LightSquared is still great.
The Dish Network treasurer who helped Dish chairman Charlie Ergen buy a lot of LightSquared debt -- and who was thrilled to spend time with Ergen -- apparently told the trader executing the trades that they were for Carlos Slim, not Charlie Ergen. And this seems to have gotten back to LightSquared owner Phil Falcone, who said in May that "If I were a betting man, I would say that SoundPoint is Slim." (Aside: "If I were a betting man" is a funny thing for a hedge fund manager to say.) This is not even in the top five of crazy LightSquared/Dish/Ergen/whatever-related things, but it is pretty solid. Why would Carlos Slim use the Dish Network treasurer to buy debt? How was it not obvious who he was working for?
Nassim Taleb doesn't like standard deviation.
I like Nassim Taleb both because he wrote one of my favorite finance books and because he has a limitless capacity to get hilariously angry at abstract nouns. Here he beats the concept of standard deviation into a terrified submissive pulp. He would replace it with "mean absolute deviation" (just take all the deviations from the mean, ignore their sign, and average them), which he argues "corresponds to 'real life' much better" than the standard deviation (averaging the squares of the deviations and taking the square root). Then something something something "skin-in-the-game."
Might stocks crash?
Here is a debate but I will tell you the answer, which is
- They might.
- They might not.
- Anyone who knows if they will or not won't tell you.
A nice thing about growing up in a derivatives business is that risk-neutral valuation lowers the old blood pressure; as I said about another person with strong feelings about whether stocks are a bubble, a good thing to do sometimes is to breathe deeply and say "stock prices follow a random walk." I guess this is particularly unhelpful investing advice but that's why all my money is in cryptocurrencies.