RE: Martha Stewart and her Merrill Lynch Broker

From: gts (gts_2000@yahoo.com)
Date: Fri Jun 06 2003 - 01:03:12 MDT

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    Olga Bourlin wrote:

    > I did not say it was not intelligent to sell a stock that may be
    > dropping in price. I said it was not a good idea (therefore not
    > smart) to enter a stock position without a stop in place (sometimes
    > this is called a stop loss, or a stop limit

    You don't have to explain the market to me, Olga. :) In case I didn't make
    it clear, I spent 12 years of my life as a general securities broker. For
    many years I was a broker for Merrill Lynch, the same firm involved in this
    scandal. I left the business about ten years ago.

    I disagree with your view that stop orders are necessarily a good idea for
    any stock position. They often cause investors to get stopped out of a good
    stock on a minor decline, only to see it immediately recover. But this is
    not really a discussion about smart trading strategies.
     
    > But that's what I was addressing. If Martha used a stop loss the day
    > or night before the IMCLE drop, then it would look suspicious

    It would look suspicious, yes, but it is not a crime to do things that look
    suspicious, nor it is it intelligent to take a loss on a stock merely to
    avoid suspicious appearances.

    She may only have been lucky. I don't personally believe it was luck, (I
    think she was acting intelligently and rationally by trading on so-called
    inside information), but the burden of proof is on the prosecution to show
    that she wasn't just lucky.

    And actually this all may be moot anyway... according to her attorney at
    http://www.marthatalks.com/legal/index.html the indictment is not even about
    her suspicious stock trade. I haven't read the 41 page indictment but
    according to her attorney the gov't is trying to prosecute her for covering
    up an insider trade that it won't accuse her of making in the first place.
    (?) Strange if true.

    I opened this thread mainly to discuss and debate my admittedly
    controversial position against insider trading laws -- not against
    obstruction of justice laws -- but as it turns out Martha may not be in
    trouble for insider trading after all. It is for that reason that I opened
    another thread called "Insider trading and market efficiency."

    > Again, I was talking mostly about stocks and investment strategies -
    > as that's my forte.

    I'm sure you are very wise investor, Olga, but personally I just wish I had
    nickel for every person I've known in life who thought they knew something
    about investments when in fact they did not.

    Remember that every time you buy or sell a stock, there is someone on the
    other side of the transaction who thinks she's just smart as you are. She
    might even think it's her forte. :)

    -gts



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