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Minyanville Mailbag: Inside Information



Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this email with hopes that it adds balance to your process.


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.

Minyan Steve


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.

No positions in stocks mentioned.

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