18 November, 2008

The law needs to change.

The law I am speaking about is 'insider trading'.

This week, it came out that the SEC has filed a civil suit against Dallas Maverick owner Mark Cuban for allegedly using inside information to sell stock that prevented a $750,000+ loss.

What was he supposed to do? Just sit on it and take the hit? I thought that was what capitalism was all about.. using what you know to make decisions to generate revenue. 

Now.. I'm no stock market genius.. but it seems to me that it would have been pretty irresponsible of him to not make a move to head off a loss of more than 3/4 of a million dollars. I understand to someone worth over 10 figures, you can probably find $750,000 between the cushions of his couch.. but that isn't the point.

Presumably, someone who is in a position to lose that much money has employees. What would have happened if he had not made the sale, and he did in fact lose the money, how many people would have lost their job?

I am not a fan of Martha Stewart, but the same thing happened to her, and she went to jail for it. Ironically, if she had not made that transaction, and just sat on the stock, she would have made more money in the long run.. but that's a story for a different time.

We are one of the only industrialized nation that has such restrictions on trading. With such restrictions in place, the stock market is little different from sports gambling.


Rach said...

I agree, but this is just one of many many market practices that need to be revamped. Like having just made speculation more or less illegal, it was damaging the market, especially as it was dropping through the floor. While it needed to be stopped, I can't help but agree that like this... it is peoples right to invest and sell as they wish. It's just unfortunte that some folks are better at collecting information then others. ;)

Its gonna come to a head soon, and then we'll just have to hold tight and see what this democratic lead nation decides to do... "in the name of Fairness" i fear we're in for a ride.

Anonymous said...

If in fact we are still a Democratic nation....