If “Everybody Knows the Economy’s Doing Better,” What is That Information Worth?

by Charles Hugh Smith
Of Two Minds

Maybe the “smart money” knows the real numbers are now so far from the central planners’ rigged statistics that the carefully constructed narrative of “recovery” is doomed to an unwelcome intrusion of reality.

One investment truism holds that information known to everyone has no value. The reason is that there’s no trading edge in information everyone knows. Trading edges result from information asymmetry, when a limited set of traders has information that is unavailable to other traders/ investors.

Insider trading is one form of information asymmetry, and it is illegal because it gives those with knowledge known only to insiders an immense advantage in terms of exploiting market moves that will manifest once the news becomes public.

Insiders who know a company will report an unexpectedly disappointing earnings report, for example, could buy put options that will gain in value should the company’s stock tank once the news becomes public.

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