jabez

Nominal vs. Real Gains

Here is yet another wild card thesis to think about: post-Galleon Wall Street now has to think about the wonderful neo-Stalinist world of 24/7 electronic surveillance. Technology has reached a critical point; sensors are now effectively undetectable and cheap enough to deploy in massive arrays, and data storage capacity is effectively infinite. From the perspective of law enforcement personnel, warrantless surveillance cannot produce evidence usable in court (yet). However, once persons engaged in ongoing illegal activities are identified, then a warrant can always be obtained, and subsequent data is then admissible. Therefore, why not spy on anyone making large sums of money?

This very real situation creates a highly uncomfortable environment wherein everyone engaged in trading must assume that ANY communication is being monitored, and any conversation or relationship may suddenly place one in an untenable legal situation, literally at the drop of a word.

Will hedgefunds and other big players deploy money into a massively overvalued market w/out the benefit of insider information? Will they move in unison to the short side? Heh. And would short-selling then be banned, and (even more) capital abandon the US equity markets entirely?