Minyanville Mailbag: Inside Information
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You mention in your 1:47 PM post that "...someone knows something about a specific stock's economics ..., and it got me to wondering: does anyone buy stocks today because they 'know something about a specific stock's economics'? Take FNM - no economic history for the past 4 years - by definition they CAN'T know anything specific. Or, MMM, because I like their yellow note pads? Some people are sold stocks and they are given reasons to buy, but do thoughtful people really buy stocks "...because they know something about a specific stock's economics..." anymore? (Trading on inside information doesn't count, of course.)
Seems to me that construct started dying in 1987.
I am trying to drive towards "the name doesn't matter" mentality; it's the spread, vol, gamma, chart pattern, support, resistance, fat tail opportunity, etc.
That post was actually referring to "trading on inside information." I was comparing having "inside information" about the market, or a possible systemic event, to that of a stock, "knowing something about a specific stock's economics."
I was saying that even though someone might know something about a systemic event, it may not have the reaction one would expect. While if someone knows (not estimates) something about a stock's economics that others don't know, or "inside information," that has a much better chance of having the expected result.
No one "knows" something about a stock's economics unless they have better information. This is why stocks react before the news. Many, almost all, market participants have "systems" to try to determine a stock's economics. Most fall woefully short of meaning and relevance.
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