Dow falls 500 points then S&P downgrades U.S. credit. Insider trading?

[FarLeftFist]

Seems like some were tipped off about a default. No, I have no facts about this, but it seems pretty clear. Just putting it out there.

[L0oniX]

1. The first question I have is which hedge fund managers stand to profit.

[FarLeftFist]

3. True. Someone needs to start unraveling the evil forces behind this crisis.

I want NAMES!

[Kurmudgeon]

7. Start with Eric Cantor (R-Va.), He bet against the US.

http://www.actionnc.org/could_rep_cantor_s_debt_default_brinksmanship_boost_his_personal_investments

"Cantor's hardline anti-tax stance in the debt talks is winning points with Tea Party conservatives, who previously had been disappointed with his unwillingness to embrace deep spending cuts. But others have also pointed out that Cantor's actions may be serving the congressman's own financial interests.

Those charges can be traced back to last June, when the Wall Street Journal reported that Cantor had bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF in December 2009, according to the congressman's 2009 financial disclosure statement:

The fund takes a short position in long-dated government bonds -- in effect betting against U.S. Treasury bonds. A "short" is when the trader hopes to profit from a decline in an asset's value.

As Salon recently reported, Cantor's latest financial disclosure states that the millionaire lawmaker still has up to $15,000 invested in the same fund. Should the U.S. begin defaulting on its debt payments next month, Salon observed, "the value of holdings would skyrocket."

[FarLeftFist]

14. So the GOP had this rigged the whole time?!

That is the MOST ANTI-AMERICAN shit I've heard....EVER! Where is the OUTRAGE?! This exposes them fully.

[Kurmudgeon]

18. Some of them did, others were just useful dupes.

However, no one got a blow job so it probably won't get investigated.

[coalition_unwilling]

20. Not sure this will be any consolation to you, but on Thursday as

stocks were crashing around the globe, investors were rushing to the safe haven of U.S. Treasuries (meaning that prices for same were moving up dramatically as interest rates moved dramatically lower). So anyone like Cantor holding ProShares Trust Ultrashort 20+ Year Treasury ETF (Ticker is 'TBT', I believe) would have gotten creamed on Thursday.

The impact of the S&P's downgrade of credit rating is unclear. Standard theory would predict that interest rates would rise and prices for U.S. Treasuries would fall following such a downgrade. However, I think the market had already fully priced in the likliehood of such a credit rating downgrade long before, so I doubt Cantor's fund will profit much from the credit downgrade.

[Eddie Haskell]

22. A small price to pay knowing ...

things reversed on Friday even before the S&P announcement. These people are now hold a winning ticket. We'll see what happens Monday, but if they traded on knowledge of the downgrade ... they must be prosecuted.

[coalition_unwilling]

24. I retain a lay person's understanding of and interest in these matters, but

I do not believe that an 'insider trading' charge as you imply relies on any illicit gains being made necessarily, merely that the person or entity trading be doing so on information not available to the public at large. If I am correct, it matters little to me whether Cantor and his cohort 'profit' from their trades, merely that it be demonstrated by a 'preponderance of evidence' (the SEC's rule, IIRC) that they had advance knowledge and traded on such.

Monday will be interesting, that's for sure.

[CBGLuthier]

2. Something to ponder. Isn't it ALL insider trading. We never know shit

The "insiders" will always be one step ahead of everyone in a rigged game like the stock market.

[FarLeftFist]

4. Exactly! They designed the game so they will always know the next move.

[RKP5637]

5. It's like gambling now and the house has the game rigged in their favor. n/t

[WheelWalker]

10. It is for us outsiders.

[KharmaTrain]

6. Not Really...

The market had been on the ups for the most part of the last two years...much of it based on earnings in foreign markets. The chances of a "correction" was all but expected...especially in light of all the stupid games going on inside the beltway. The predictions the market was due to drop had been out there for a while and now there's predictions of a big comeback by the end of the year. Insider trading? Hard to say since so many people were hearing these reports and adjusting accordingly. Also, this debt game played out in such slow motion it gave those who play for position to cover all the bases and then some.

BTW...this country didn't default. It didn't help its long term economic situation but it didn't default...

[nadinbrzezinski]

8. If I got a million every time foreign governents pushed this

when downgrades came....

[AnnaLee]

9. Yves Smith at nakedcapitalism

http://www.nakedcapitalism.com/2011/08/will-sp-downgrade-be-another-y2k-scare.html

"Not only was Twitter alight early on Friday with rumors of the downgrade, but some parties purportedly got the memo earlier in the week. From a credible source via e-mail:

Good friend passed on a note from a hedge-funder who thinks the S&P not only fudged its figures for today’s downgrade, but leaked it in-advance earlier this week to a few hedge fund insiders who made a killing off it. That would square with the fake “states face bankruptcy” panic scam earlier this year, which made a few people a lot of fast money.

I assume they did not make a directional bet but went long vol. "

[originalpckelly]

11. It does seem a wee bit too coincidental.

[Warpy]

12. No, it's been known for weeks that a downgrade was in the works

ever since the Republicans announced they were going to make a huge deal about raising the debt ceiling, usually just a quick procedure with an up or down vote.

The drop is more due to the PIIGS mess and the fact that the Euro is no longer stable. As the dollar rises against the Euro, people start to take their profits and get out of overpriced stocks. When they do that, the weenies in the market hit their panic buttons and a stampede happens.

A default is different from a downgrade. A default means we stop paying the bills, including the interest we owe on our debt to foreign investors. A default would be catastrophic.

[FarLeftFist]

15. I thought the mindset was No Default No Downgrade.

They knew the threat was looming but didn't think it would ACTUALLY happen. Seems like the insiders were tipped off a little.

[Warpy]

17. Everybody who didn't get smoke blown up his butt by

financial yappers and politicians knew it was coming, that some downgrade was likely inevitable.

A default would have gotten us "junk" status. The AA+ rating is just a shot across the bow, a warning to get those revenues up or else.

[jimlup]

13. I assume you saw this which was recently posted:

http://www.marketoracle.co.uk/Article29477.html

[FarLeftFist]

16. Holy Shit! Thank You.

[indurancevile]

19. the market fell after the announcement was made is my recollection.

[quiller4]

21. If institutional investors had "inside" knowledge then they

would have been running up stocks and running away from securities but all week they did the opposite.

[divvy]

23. The SEC and FBI should investigate CASH positions of the GOP

I believe you will find huge cash positions and then massive reinvestment in securities when they "change their mind" and decide to stop crashing the economy.

What they have done is worse than insider trading