Many market observers accept the idea that markets are basically efficient. This means that knowing and analyzing publicly available information isn't really useful for achieving exceptional performance over the long term. For example, when your next door neighbor works himself into a frenzy over Walmart going into China, you shouldn't run out and immediately reallocate your IRAs to Walmart stock. Why? Because everybody and their brother already knows this. It is reflected in the price of the stock.
But inside information is different. Inside information gives an edge. Imagine you knew that the Food and Drug Administration was on the verge of rejecting a company's application for a cancer drug, and it wasn't publicly available information. This is valuable information. Acting on it could get you Bubba as a roommate (or the equivalent of the female version of Bubba, as the case may be).
Well guess what? The government is investigating all of Wall Street on insider trading charges. I'm hearing the sarcastic parrot from Disney's Aladdin saying over and over, "Why am I not surprised?"
Of course, if you see yourself as a stock picker, you could be buying the stock from the person with the insider information.
IMHO this is just another reason to avoid stock picking and market timing. If you can't avoid it, understand that you are buying and selling to the likes of Goldman Sachs and some of the biggest hedge funds in the country - those named in the probe.
Stick with funds that track the market. The innovative U.S. and global economy will overcome the stupidness of the monied players in the long run...again, IMHO.
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