Buyeyeglassesnow: Making Money on Line

A new federal investigation is focusing on the legality of supply line leaks and their consequences on Wall Street. The poster boy for this would have to be Apple, around which an entire manufacturing and distribution channels has grown, and which is now too big to plug every leak — especially now that memetically propagating news magnifies every murmur into a clamor, for better or for worse.

The subjects of the probe are some research firms that make it their business to know what’s going on in, say, Shenzhen or Taiwan, where friends and industry experts dispense information that may or may not be confidential about such things as big new orders, equipment changes, and meetings with other companies. The feds say that at some point, these things must constitute insider trading. I say good luck drawing that particular line.

It’s funny watching various sectors react as their perimeters begin to come in conflict with the internet. Not only because that initial reaction usually simultaneously overreaches and underestimates, but because I relish that moment when an industry or person realizes exactly what a den of vipers they’ve stepped into. I wish I could actually be in the room when they first understand the situation.

The financial industry and its regulators demonstrate a strange mix of progressive and antiquated thinking. Not to get into political or big money issues here, but even the limited democratization of information currently underway could have serious implications, though there are channels of information deep enough and obscure enough that even 4chan might not be able to uncover them for quite some time.

In the meantime, more public forms of “inside” information are becoming public knowledge, and I think the feds are going to have a hell of a time laying down the law on what is confidential, what is privileged, what is within the bounds of journalistic anonymity, and so on. They’re getting hit with the industrial equivalent of privacy concerns.

For example, what role do confidentiality agreements signed in China by factory workers have in our laws? What about temporary agreements when they do contract work for an American company? Is a factory floor employee allowed to connect the dots by himself, with knowledge only of, say, what size the current iPad is and what size the unbranded display he’s assembling is? Is it the corporation’s responsibility to compartmentalize and enforce secrecy, or is it each individual company’s? Whose is the liability when a truck delivers an iPad 2 to the wrong address, and some Hong Kong blogger picks up on it?

The SEC and whoever else is involved here will have to make a huge number of judgment calls, and a large portion of them will be wrong. Not that I blame them, or that I could do much better myself. But I will say this: any government effort to make illegal the free passage of publicly available information will meet with failure. How can you forbid a research company from making use of anonymous information provided to an industry outlet like Digitimes? They publish “insider” information every day, and I check it every day, because that is valuable information for what I do. Is similar information made confidential simply by the fact that it hasn’t been reported yet?

There is a chance that citing such information in decisions to sell, buy, and so on will become illegal. Think about how stupid that is. Yet the regulators are caught between a rock and a hard place, and either the law must change or they must disregard the now-outdated law in light of (relatively) recent developments in technology and information markets.

At the moment, however, it’s still appears to be just a preliminary investigation, so there’s no need to get too worked up about it. Still, be prepared for some strange and labyrinthine regulations concerning what information does and doesn’t constitute a breach of confidentiality. And then watch every single party affected sidestep those regulations. “Better luck next time” is all we’ll be able to say.

Despite being one of the more unpopular policies in America, the death tax is set to be resurrected on January 1st. How high it will ultimately rise remains to be seen. If the tax deal passes, it will return at a 35% rate and a $5 million exemption. While not good, that’s certainly better than the 55% rate and $1 million exemption we’ll see if the deal fails. Still, both rates would mean disaster for family businesses and farms.

The hard left has inexplicably decided that not pushing hard enough for excessive taxation without respiration is where they draw the line in the sand. Nancy Pelosi referred to any deal that would lesson the fleecing of Americans upon death as “a bridge too far.” Others have referred to its inclusion in the tax deal as “gratuitous.” That’s funny, given how apt the word describes the tax itself.

What are we to make of this inexplicable drive for such an unpopular policy? One explanation is that the left simply holds a profoundly distorted view of social fairness. Rather than seek equality before the law, they look to government to enforce equality of outcomes. But other forces might be at work as well.

Another possible explanation comes courtesy of a new issue brief by the American Family Business Foundation, which highlights the cozy relationship between the life insurance industry and big government. Because life insurance benefits are untaxed, even an overpriced plan can result in more money being passed on to heirs than a simple bequeathal. The life insurance industry benefits heavily from this arrangement, with an estimated $12.5 billion in revenue coming due to estate planning. Without a death tax, much of this revenue would be lost, making the $50 million per year spent on lobbying by the industry seem like a bargain.

When the death tax was phased out temporarily, the industry went to work fighting to ensure it would rise again. This is their customers money they are spending in order to promote higher taxes, which will then force those taxpayers to purchase their product if they want to fulfill the basic human desire of providing their children. Their work is now about to pay off. And this is where the left draws their line in the sand?

To add insult to injury, the very same elites who want to rob the graves of the newly departed will get a gratuity, courtesy of US taxpayers, should they die in office. Known as the death gratuity, this benefit consists of a payout equal to one year’s worth of their bloated salary to the family of a member of Congress that dies in office. So while American farmers are struggling to find a way to pay a gratuitous death tax without selling off their property, the families of the likes of Senators Kennedy and Byrd get gratuity checks of $174,000 or more. Where is Bernie Sanders to ask when enough is enough for these political elites?

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Sunday, December 19, 2010

Making Money on Line

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