Assymetrical Information and Herds Part 2

Ackman Valeant Emails

Ackman Emails – Market Watch

I referenced the huge discrepancy in information access regarding CHK’s price action in a previous post.

In yet another reminder of why you should do your due diligence and not follow names, whether its Buffet, Klarman, Einhorn, Ackman, or Barney, emails from Bill Ackman, stating all the Bear angles for Valeant, have been released.

As he was publicly pumping the stock, he was privately, saying things like:

“Valeant has become toxic… We are on the brink of a catastrophe…You have previously made the mistake of waiting while Rome was burning. There is now a conflagration… We are on the brink of a tragedy.”

and

“When Mike said that you were running out of time on the call, he was right in that the company is running out of time to save itself,”

Jumping on the coat tails of others is a bad idea.

The “smart money” is not looking out for you.

 

4 thoughts on “Assymetrical Information and Herds Part 2

  1. And then there are the market makers. Whose job is to manipulate price to keep as much of your money as possible. Still not sure how that’s legal, but I suppose money rules the world.

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    • There’s a “maximum pain” metric I saw somewhere. It highlights at what price a given stock costs market makers the most, thus allowing you to try and get on the right side of it. That doesn’t take into account material changes from volatility, but it is a useful metric. I’ll see if I can track down the source data for it.

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      • I’ve read about those, if you are referring to pinning. Seen it work out in extremes, but hard to count on it as a rule. External factors nullify it half the time.

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      • I think it requires a big move either way to really use pinning or max pain as a tool.

        That way the underlying can get to an extreme faster than the MMs sell their Options. I don’t think it would be too consistent with relatively benign stock movement

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