The Truth About the Playing Field We Call the Market and the Odd City of Boca Raton

For some time there was an effort under way, more like propaganda, to convince all of these newly found would be self made traders around the time there was a major shift in the market that changed everything tight up to the way we trade this very day.

As the Internet revolution destroyed the client /broker relationship of old (and $80 1-way trades carried out by brokers who knew little about the market and were instead given a list of assets to push on their clients like the salesman they were, rather than seasoned market participants) and brought about the new Internet inspired age of discount brokers, there was an effort to convince people the market had been cleaned up, the waters were safe for the small investor, that manipulation of the markets was something of Jesse Livermore's day and the manipulation of the 1980's characterized by Gorden Gecko had been stamped out as well.I believe the SEC brought few insider trading cases because it undermined the faith in the new industry of discount online brokers. For the ultra-rich, the rise of the Hedge Fund was meteoric around the same time. The only cases the SEC went after were high profile cases like Martha Stewart who was likely the very least of the corruption in the market, but she was well known and like the way the IRS went after movie stars, the SEC went after a household name, all to convince the new self-made traders that the playing field was level; likely in reality Martha's crimes were a drop in the bucket compared to what really went on and still does.

We at Wolf on Wall Street know different than most, not because of guesses or hunches, but because we've been able to effectively use this manipulation we see in underlying trade to our advantage by following the footsteps of smart money.

Toward the end of the week (last week) a new insider trading case broke, once again it was in the ripe for inside information sector of bio-technology.

Did this case break in New York or Chicago? No, it broke in a smaller city, one in which I spent most of my life and one packed to the gills with money, Boca Raton; the same Boca Raton of Seinfeld fame.

While I've met with several smaller hedge fund managers and have worked with other financial institutions on possible collaborations, it's hardly a hub like New York, however for an affluent, smaller town, it is one with some interesting history. 

Boca Raton was one of the first "Resorts for the rich" dating back to the 1920's when Jesse Livermore himself was among a group of investors including famed architect, Addison Mizner (which is a name seen everywhere in the city from streets to parks, to restaurants, gated communities, storage facilities -anything the name will fit on) who invested in the infrastructure and an expensive hotel that would only decades later become the ultra-rick city it is now, with every other car being a Hummer, Ferrari, or some other obnoxiously colored status symbol on 4 wheels.

We also were front and center in the 9-11 attacks as the attackers spent time in the area, in fact while I was living 1 city south of Boca during this time of great tragedy, I recall the FBI coming in to every local restaurant and bar on the small island of Deerfield beach in which I had resided, confiscating all of the security camera footage. Then one night I saw the small "Black Panther" 2 story hotel on the news with news of the terrorists having stayed there (thus the reason the FBI was confiscating tapes from every business in the area).  I recognized the hotel as it was only 6 blocks from where I lived. We skateboarded down there to see all kinds of investigative teams as well as a body bag being taken out, the story at the time was one of the high-jackers had lost his nerve and was murdered by the others; that night was the last I heard of the story, but we did see the body bag with our own eyes.

Days later a story broke that the high-jackers had been using SunTrust bank in south Florida, a place where my fiance (now ex-wife) was a teller.Along with the front page article were the pictures of the known high-jackers, one of which my wife had recognized as someone she served at her branch that she remembered (as do I as she came home that night to tell me how rude this customer had been to her) as he had cashed a bad check and the branch manager foolishly, actually went to their place of residence looking to recover the funds, but found it empty. 

Soon after, The National Enquirer which is located not 6 miles from where I lived received the first deadly anthrax attack and our postal substation was shut down as traces were found on the equipment-another story that disappeared for quite a log time and as far as I know is still unresolved. A lot of interesting things have occurred in small Boca Raton.

This week we get news of a financial advisor arrested for tipping off a childhood friend about Gilead Sciences (GILD) and an impending $11 billion dollar pharmaceutical deal. 

This wasn't a huge deal, the inside information was sold in exchange for $35,000 and (get this) a wooden dock to be built to hold his jet skis, which tells me that these sorts of insider transactions are pretty common just judging by the relatively small payout the tipster was looking for while risking his very freedom. Do you get where I'm going with this? The amount of "Payolla" was so minimal vs. the possible repercussions, it sounds like this is business as usual and that they had very little fear of being investigated by what many would call a toothless SEC, although I have noted here on these pages a recent increase in SEC activity since Obama was re-eelected, considering Wall Street gave 4 times more money to the Republican challenger this presidential election over the incumbent, I'd guess the SEC has been unleashed in a sort of payback.

The childhood friend who got the inside information made a modest $163,000 profit as Pharmasset was sold to Gilead Sciences Inc., again indicating that even small deals and insider information like this are quite common and those with the knowledge and those acting on it, are doing so in ways in which the potential gains vs. the potential penalty seem trivial, yet there seems to be a culture of every day corruption like this, an air of business as usual. 

This is why I have no interest whatsoever in insider information, I'm not interested in jail time, but I am very interested in what underlying trade tells us as MACD, RSI or any of the mainstay indicators of Technical Analysis can't look at what is happening below the surface, they can only see what is happening after the move has been made and it's registering in price action, by then a good portion of the gains are long gone.

I find the story interesting because it's right in my backyard, but I also find it interesting because it was NOT a big story or a huge multi-million, 7 or 8 figure deal. It wasn't a "large" scam of inside information, the small size of the money involved sounds very much like this is a culture that ranges from top to the very bottom including small financial advisors rather than the largest of hedge funds and because it was so casually carried out with so little regard for consequences. I think this tells us a bit more about the true nature of the playing field and I'd much rather have the knowledge of what moves smart money is making while others remain totally clueless than chasing trades via indicators that reflect a move that was planned out months before and has already given up a substantial amount of the gains.