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People minute-to minute-speculating (day traders, hedge fund types etc) spend a ton of time trying to figure out what the BSDs are up to.  Which is why you have momentum indicators and the like.  People try to read more into the tape than just the price action.  Knowing who, how fast, size etc may (repeat may) mean something.

So if you are a big boy, people just seeing the broker you use buying heavy can be enough to start a rumor that big fund X is a buyer.  They then jump in and try to front run you.  So as a big player, you spend half your time trying to disguise your moves -- spoofing the others, lying to them etc.  These things I'd consider grey -- necessary evils because it is not a game of old maid and the rest of the market is not prevented from acting based on info they infer from other public info.  

Lying to a journalist to spook a market?  Getting pretty close to black but just how do you prosecute someone for saying "I hear on the 'vine that XYZ corp's new product will crush the IPod"  vs saying "I believe Apple is due for a correction because of stiffening competition from XYX corp".  Try to actually convict.  NFW. A seems dirty to me, but B is a rational reason for taking a position as a speculator.  

What the Enron boys did was clearly illegal (happened a bit in Europe in my day as well).  They specifically reported fake deals or lied about the price or did a deal which was later unwound in secret later in order to move the market marker services such as Platts in order to make a profit on some derivative instrument pricing off of the marker.

However, merely doing a series of deals in order to make the market move doesn't strike me as illegal.  If I wish to sell more than the market will take at say 100, then the market isn't 100.  It's where ever the next bid shows up.  If I only have to sell 100 in order to drop the price on 1000 I am buying elsewhere off of the market quotes have I broken any laws?  Or have I just pissed off the lords of fair play and the management of gutless operations that are only willing to trade off quotes determined by 22 year old journalism majors with 2 months experience reading market tea leaves or half assed futures exchange settles?

by HiD on Thu Mar 22nd, 2007 at 05:38:10 AM EST
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However, merely doing a series of deals in order to make the market move doesn't strike me as illegal.  If I wish to sell more than the market will take at say 100, then the market isn't 100.  It's where ever the next bid shows up.  If I only have to sell 100 in order to drop the price on 1000 I am buying elsewhere off of the market quotes have I broken any laws?
Interesting comments, and I guess my comments simply show my perspective,,,from the viewpoint of running a company,,,or as a guy who invests with a longer term perspective, having run a company.  Perhaps I have a view of fairness that is not quite appropriate in this traders's market.  But I didn't run my company based on day to day stock prices, and I don't invest based upon day to day results.  So maybe I shouldn't be so pissed off with Cramer's comments.

But my gut reaction to that clip is rage, and feeling he is a total a'hole.  (Some of my financial friends have told me that the operating guys, like me, are naive.)

by wchurchill on Thu Mar 22nd, 2007 at 06:23:05 AM EST
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there are rules, and there are cheaters.  No reason not to be pissed off at cheaters.  the trick is catching them.  I got $10 bucks says Cramer knows the statute of limitations to the minute...

But if you are truly an investor, the price of XYZ corp gyrating around the line fundamentals would generate doesn't matter a whit.  This is just one set of aholes ripping off others.  In the meantime they provide liquidity you might need and narrow the trading spread.  

Now if you have money invested in a hedge fund and these dicks are spoofing their report cards to generate larger bonus payments than reality would give, you are being robbed.  But if you are a hedge fund investor, then you should know the people you are dealing with are probably dicks and factor that into your decision to invest money with them.  And this is why to get into a hedge fund you have to prove you are a sophisticated investor.

You can't cheat an honest man very easily.  Reaching for well above market returns is a sure sign of greed.  Risk/Reward.  there are no free lunches.

by HiD on Thu Mar 22nd, 2007 at 06:56:34 AM EST
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I am an investor, so I have not been damaged  by the manipulation.  

Aren't you pissed off  by watching Cramer on the You tube clip.  I am.

Personally it does not undermine my confidence in the markets--but i just don't like the image it gives to others.  It's a market confidence thing , isn't it.?

by wchurchill on Thu Mar 22nd, 2007 at 07:11:34 AM EST
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about it.  I worked on Wall Street in the commods area which makes equity trading look like a tea party.  

Google Vitol, Trafigura, Marc Rich, Clarendon, Vanol and see the kind of crap these people are accused of around the world.  These were my counterparties.

by HiD on Thu Mar 22nd, 2007 at 07:15:06 AM EST
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well I'm a CEO type, and I'm really pissed off at this.  Big time pissed off.
by wchurchill on Thu Mar 22nd, 2007 at 07:52:43 AM EST
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wc, maybe you were not around at the time, but there have been various diaries about stuff like this which you did not comment on...


"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 22nd, 2007 at 07:58:40 AM EST
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Why is it that every kind of player in the financial markets thinks that the other kinds are either assholes or suckers? That makes me think of the milieu of scam artists, where everyone thinks nobody else is trustworthy but they pretend to trust each other so they can scam others and hopefully scam each other at the end.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 22nd, 2007 at 07:23:52 AM EST
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It seems like these people are in a constant state of insecurity and that they are overcompensating.  I know that's cliché, but this is all about bluster and bluffing and lying to get what you want.  Money! Yes! Power! I'm a real man!
by andrethegiant on Thu Mar 22nd, 2007 at 08:11:29 AM EST
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old trader saw:

"never let them see you sweat"

and it's true.  If the others smell weakness they gain the confidence needed to perhaps break you.  No single player is bigger than the markets as the Hunts found out.

by HiD on Thu Mar 22nd, 2007 at 08:35:35 AM EST
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Another saw:

Bulls make money, bears make money, pigs get slaughtered.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Thu Mar 22nd, 2007 at 07:02:42 PM EST
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First does every kind of player actually think all the others are suckers or assholes?  I rather doubt it.  Bit of a strawman to feed into the value judgement that follows.

If you have ever had to be around the real Cramer type speculators you'll find that most of the truly successful ones will gamble on anything, are utterly amoral about how they make money and really don't much care if others get hurt.  That's my experience.  

I admit I've never dealt with people at pure quant shops -- since they don't deal with people and let the models do the talking.  The truly successful ones there just keep their mouths shut and hope no one notices their actions and succeeds in reverse engineering their models.  The best geek on our desk was one of the nicest humans you could ever meet.   Incredibly smart and grounded.  Made partner and therefore got extremely rich.  Well deserved compared to some of his peers.

As for long term investors, they are neither suckers nor aholes.  Just folks put some assets at risk in hopes of a return.

Day traders who think they can beat the system operating  from home?  80%+ suckers.  And these are Cramer's Cramerica.  

by HiD on Thu Mar 22nd, 2007 at 08:33:41 AM EST
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Well put.  I should have been more restrictive in my comments.  I was referring to the residents of Cramerica, the day-trader types who combine sociopathic social skills with knowledge of the markets.  The more scientific types might sometimes be sociopathic, but they do not rely merely on that asset to get them by.
by andrethegiant on Thu Mar 22nd, 2007 at 10:33:20 AM EST
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