Forum Archive Index - June 2000

["Nigel Bree" <nbree@kcbbs.gen.nz>]

James Lee wrote:
> Charts show all types of information. [...] activity caused by the
> insider trading. So any body who uses volumes and price movements as
> indicators is therefore benefiting on insider knowledge if this was not
> acted upon the charts would show nothing significant occuring.

This depends on the insider activity causing the rise in volume; for the
kind of stocks that are typical of the NZSE, then the volume driver may well
be insider knowledge (and for the penny stocks that seem to occupy most of
the Sharechat messages, that is definitely true) but that's not a truism
which you can apply to other stockmarkets such as the US.

[ Leaving aside things like the half-yearly need to exercise about-to-expire
  employee share options, anyway. ]

It's certainly true that the pure-chartist trader can _incorporate_ a kind
of residue of data insider trading by reading the derivative signals it
leaves behind in the public data. But that data is nonetheless public, and
only in an unhealthy market (or an extremely illiquid stock) will insider
trading leave a mark that can be distinguished from non-insider trading. The
chartist doesn't care to make that distinction in any case, just as they
don't care for the fundamentals - just momentum, and perhaps 'news', but
independent of _content_.

[ Can the chartist tell short-sellers from real sellers either? Nope. It's
  all aggregated, and the chartist doesn't care. ]

> My other point was exactly what you pointed out you can not judge someone
> with only considering one perspective, which is exactly what people are
> doing by condeming Hoggard.

Actually, my point was quite different - selective use of evidence, as
Warner Lamb also noted. That's a _very_ different animal than "only one
perspective", which frankly hearkens to much the same kind of territory as
the inexplicably fashionable denial of scientific rationality as "culturally
relative". In other words, it is an effective tool for the sophist but
little else.

Not that I mean to imply that such is your intent in pleading that case.
It's always fine to call upon Occam's Razor (i.e., a cock-up), question
prevailing orthodoxy and assumptions, and such like. But frankly, as a
catch-phrase you will always find it associated with a "perspective" that
has no evidence or logic to support it.

> Mr Hoggard may have committed insider trading, but can anyone be sure he
> did it intent.

Indeed not, but if a mere oversight it was an extraordinary one. And the
severity of the reaction against him can be gauged against the fact that a
number of company directors have so definitively demonstrated their contempt
of the small shareholder in recent times. He is, in essence, being made to
stand as a proxy for the many others because their manifest lack of ethics
has not been tied to such a well-documented breach of the law.

> but should he have his name drawn through the mud by people and journos'
> who really have no idea.

Actually, I think the coverage in e.g. the Herald has been pretty balanced
in respect of his case. They've been fair in noting that his transgression
was relatively minor, but that he had the ill fortune to be caught out where
much bigger fish (e.g. Michael Fay) were able to avoid the charge sticking.

What I think the episode really highlights is that if the retail investor is
to get really involved with the NZSE (as on-line trading has done with the
US markets), then what is needed is more (and more enforceable rules on)
disclosure of all kinds. As with harmonization on accounting standards, the
simple fact  is that as the world moves along the NZSE and its listed
companies will be forced to join in or be left as a backwater. The call to
disclose market depth here is just the tip of the iceberg in that regard.



----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.