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What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

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131–140 of 182 posts

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#131

Earlier quoted context omitted.

Outside money flows into the market, this allows it to be positive sum. For the DnD analogy, it is as if you had a cleric. Eg: IPO sells at $2, next seller buys at $4, next at $6, etc. Everyond makes money in that scenario. Eventually there can be losses, do all the losses counter balance these profits? No, because on net everything went up. If there were always trades that had losses to balance the gains, only then…

Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health). If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms…

> If you want to convincingly argue that markets are positive sum you have to demonstrate that markets produce more than they consume in terms of something besides money. E.g. when some of the factory workers quit to go be day traders, the factory ends up producing more while consuming the same or less due to the positive effects of the investments enabled by the increased trading activity.

Price discovery would be the function of the markets that allows this. If the markets find out that iron ore production is going to crash because of a flood or something, they create demand for futures of that iron production, raising the price of iron and encouraging stability in the supply of iron via more companies mining it.

These futures then provide stability of supply and price (somewhat) to the factory. Conversely, they provide stability of demand and price to the mine, who can sell their production ahead of time.

I would not be surprised if most factories do employ investors, even if indirectly via a third-party supplier. Knowing that the price of iron was going to go up would be tremendously useful, and they would be able to produce their goods cheaper than everyone else if they stocked up on materials at lower prices.

They're traded in dollars, but the same would be true in a barter system. Liquidity would be incredibly important in any non-monetary system; people would pay a pretty penny to be able to exchange payment in goods they don't want to something they did want.

> Money gets created when people take out loans which creates debt which is then traded in the markets. That's not money flowing into the markets, that's just the markets doing their own internal bookkeeping (much like D&D uses HP for internal bookkeeping about character health).

That is meant to reflect the new value being created by all of the entities in the market. If you don't add currency to account for growth, the currency increases in value equal to demand for it, making the currency itself a very attractive investment.

Those loans have interest rates, so the borrowers need to be doing something with the cash to generate value in excess of the interest rate, which in turn creates value on the market. Loans backed by actual currency are dramatically more expensive to service because of opportunity costs. The borrower's interest rate would be higher than what the loan offerer thought they could get in return for safer investments. Current loan rates for practically everything are far below that.

The factory benefits by having access to extra cash for cheap. They don't have to stockpile cash for a decade to open a new factory, they can borrow money and do it now at an interest rate that still allows them to keep most of the value.

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#132

Earlier quoted context omitted.

I'd argue for a third category where the new thing addresses a problem that the company themselves is making more problematic (e.g. TurboTax) or where "more efficiently" involves cases where costs to the company are exchanged for costs to society (e.g. petroleum companies, cambridge analytica). I think this category represents the majority of economic activity today, which is why I'm skeptical of markets being zero s…

The third thing is just the second thing. TurboTax lobbying to avoid free tax filing is obviously rent-seeking. It might even be more accurate to call this category rent seeking through regulatory capture. Fossil fuels would have been trounced by nuclear except that they lobbied to require nuclear to internalize all of its costs (and then some) but not their own, extracting undue rents by handicapping the competition…

I was going for extreme examples to make the point, but look at any modern advertiser: their products are used to target segments of society such that we can be encouraged to either turn against one another or to make some kind of decision which is bad for us and good for whoever is doing the advertising.

The perspective you're describing doesn't seem to have a way to classify this activity as unhelpful without going so far as making it illegal. Without that ability, I don't see how we can ever expect the market's notion of value to find itself in line with society's values. The best we can hope for is a random walk within the bounds of "illegal".

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#133

> The messages that Lebed posted would predict marked increases in the stocks value [...] In response to Lebed’s messages, trading volume of these stocks would soar I'm so confused reading the comments here. How in the world is anyone defending this?

I'm equally confused, but in the other direction! He was acting without any special knowledge, so the only thing he was taking advantage of was the gullibility of the general public. That's usually legal, no?

> the only thing he was taking advantage of was the gullibility of the general public.

Like every conman, snake oil salesman, scammer, and fraudster. Why treat him any differently? He should be tarred, feathered, and run out of town.

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#134
post #90

Earlier quoted context omitted.

Wouldn't that mean that you can have a friend do the pump, and you do the dump? Sounds like the guy in the original article did both and therefore wouldn't be saved by that Texas ruling.

The Texas ruling doesn’t (as far as the coverage I’ve read) require that level of separation. Rather just selling to “the market” is enough to insulate you from fraud charges.

Do people actually direct sell stock? At least retail investors

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#135
post #81

Earlier quoted context omitted.

> Depending on who you talk to, Lebed was either viewed as a person who knowingly abused the system and broke the law, or someone ... actually performing no wrong-doing. Funny how selectively quoting a bit differently makes that appear far less so.

It all comes down to selective enforcement by the not-actual-real-judges at the SEC. You have to go through their kangaroo court with an ALJ, and arger likely getting a judgement against you, can you actually go to a real court. And this is combined with different rules for different income classes. Kid from middle income family gets smacked down hard. Whereas billionaire employees doing work on wall street either ge…

> Whereas billionaire employees doing work on wall street

What's a billionaire employee?

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#136
post #127

Earlier quoted context omitted.

> only Capitalism is fine-grained democracy where you vote literally every day with your dollar. I'm not sure where you get that from. Every economic model has trading, wherein the participants make trades (goods for goods). Capitalism is not democratic. Communism isn't democratic for a similar reason. The pareto principle (and natural hierarchies) appears and equality goes out the window for the traders.

It certainly is more democratic than any alternatives I'm aware of. If you don't want someone to accumulate more economic influence, do not pay them. The government will not jail you for doing so. If business is controlled by a democratically elected government, and 49% of the country voted against those officials, there is no way for them to start their own alternative business to articulate those preferences in the…

> It certainly is more democratic than any alternatives I'm aware of

It's no different at all, to any other economic system.

> If business is controlled by a democratically elected government, and 49% of the country voted against those officials, there is no way for them to start their own alternative business to articulate those preferences in the market.

If you have 1 dollar and I have one hundred thousand, the same problem exists. This has nothing to do with capitalism or democracy, per se.

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#137

Earlier quoted context omitted.

I'm equally confused, but in the other direction! He was acting without any special knowledge, so the only thing he was taking advantage of was the gullibility of the general public. That's usually legal, no?

> the only thing he was taking advantage of was the gullibility of the general public. Like every conman, snake oil salesman, scammer, and fraudster. Why treat him any differently? He should be tarred, feathered, and run out of town.

> He should be tarred, feathered, and run out of town.

I can't imagine what this could possibly mean. What should actually happen to him for posting messages on message boards?

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#139

Earlier quoted context omitted.

> failing to mention that your posts are with the hope of raising the price because you have a vested interest in that... seems like a material omission, if nothing else. And if you run around telling people that you just bought some of the stock you think is going to the moon, is that supposed to make them less inclined to buy it, or do they now just think you're putting your money where your mouth is? > what matter…

I don't have the energy to dissect all this, but you're completely conflating legality, enforcement, and provability. We have juries for a reason. Most would a priori find it hard to believe that someone who found a winning strategy would repeatedly post it on random message boards with altruistic intent.

> Most would a priori find it hard to believe that someone who found a winning strategy would repeatedly post it on random message boards with altruistic intent.

That doesn't make it right, though, at least in my mind. There's accountability on both sides in these cases. People reading message boards and treating the contents as financial advice are not taking sufficient care, particularly when they click past / agree to the statement on their trading platform that says that their money is at risk. Their money was at risk, and they did it anyway.

My impression is this would come down to the jury's bias in either direction, when it should be pretty clear cut: you buy random stuff hoping to get rich, be it stocks picks from an Instagrammer, or NFTs, or whatever, and it is you choosing how to gamble your money.

If I were in a casino and a guy was holding a sign saying I should put all my money on number 8 on Roulette, it wouldn't matter if he were the casino owner, and stood to gain, or was just a random guy. It's up to me to decide what to do with the advice.

Re: What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)

#140
post #81

Earlier quoted context omitted.

It all comes down to selective enforcement by the not-actual-real-judges at the SEC. You have to go through their kangaroo court with an ALJ, and arger likely getting a judgement against you, can you actually go to a real court. And this is combined with different rules for different income classes. Kid from middle income family gets smacked down hard. Whereas billionaire employees doing work on wall street either ge…

> Whereas billionaire employees doing work on wall street What's a billionaire employee?

Slightly wrong or ambiguous parsing, but, any employee of a billionaire also works, at least as well as any other sloppy natural communication.
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