August 24, 2015
What we’re reading this week
I’ve done my best to avoid additional articles on insider trading but I have to comment on the Ukrainian hacker case. A group thought to be based in the Ukraine allegedly stole press releases and traded on information like earning reports. I’m sure that it’s illegal to hack into a database and steal press releases and trading with that data constitutes securities fraud but I’m not so sure that it’s insider trading. There are many definitions of insider trading but generally speaking (based on recent cases) there must be disclosure of information in breach of confidentiality by a person privy to that knowledge. That was not the case here. It’s largly mainstream knowledge that insider trading is not techniquely illegal, in that there is not a law against it.
Maybe it’s time for congress or the SEC to make insider trading illegal?
Petco filed for its IPO and said “As pet parents increasingly use social media as a means to personify and share their pets with others, we believe pet¬-focused content in social media will continue to accelerate the humanization trend.” This lead me to wonder about a Facebook exclusively for cats. Then I realized that probably exists already.
White Collar Crime
Someone believes in stiffer penalties for white collar crime.
Exotic Bond Funds
The financial services industry is continually making new, complex investment products in order to charge clients more money. One of the more recent developments is the “go anywhere” bond fund. The main problem with this product is its complexity. When pressed, mutual fund companies asserted that the main reason people buy their funds is because investors “don’t want to be bothered with the nuances of what the managers are doing.” If I went to my kids’ school and asked about what they would be learning this year I would not expect the teacher to say “the only reason people send thier kids to school because parents don’t want to be bothered with what their kids are learning.” I don’t want to read the syllabus or anything but I would like to know that they are learning something.
Millenials Move Out
The general consensus is that the demand for homes is dropping or will drop because young people (millennials, 1980-2000) cannot afford to buy homes. Interestingly, Zillow released a chart that shows the median home price has gone up roughly $40,000 since 1990. The median American income has only risen $2,000. On the surface those numbers look like supporting evidence. However, if you put down 20% that means that your down payment is roughly only $8,000 more. Mortgage rates were 10% in the early 90’s vs 4% today…if you adjust for inflation the median American has a lower monthly mortgage payment than 20 years ago. There are a lot of interesting theories on why millennials aren’t buying homes but this one doesn’t work out.
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