The Guardian Makes The Wrong Point About Stock Losses

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How surprised we are that The Guardian manages to get the wrong end of the stick in a story about business. Or markets. Or stocks. Or, well, anything actually. They want to tell us that some people sold their stocks just before the crash and that they’ve therefore avoided some losses.

Shrug, OK:

He saved himself from larger losses by selling a big chunk of his Amazon shares in February, before the worldwide scale of the coronavirus crisis was fully acknowledged and before the stock market collapse.

Regulatory filings show that Bezos sold $3.4bn worth of Amazon shares in the first week of February, just before the stock price peaked.

Well, we know how that works, pieces about Bezos, Amazon, get more clicky clicky from the online readership. They go on:

Other US executives that have been either lucky or smart by selling large chunks of their shareholdings in February include Larry Fink, the chief executive of fund manager BlackRock, who saved potential losses of $9m, and Lance Uggla, CEO of data firm IHS Markit, who sold $47m of shares on 19 February that would have dropped to $19m if he had held on to them.

In total US executives sold about $9.2bn in shares of the companies they run in the five weeks before the start of the stock market rout. Selling before the 30% collapse in the market saved them from paper loses of $1.9bn.

So, what’s the important part here? The S&P is, by one estimation, $5 trillion down from its peak. Meaning that there’re an awful lot of holders of stock – some of whom will be said management – sitting on paper losses. 1.9b is 0.04% of 5t. That is, The Guardian gives us a report on 0.04% of the event and ignores the 99.96% of it.

Well done there, vry well done that man.

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Tim WorstallJabezSpikeBloke in North DorsetDavid Morris Recent comment authors
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Grendel
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Grendel

Do we know what he did with the money? Unless he’s sitting on a pile of tasty cash it’s possible he’s lost the same or more on other products…

Spike
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Spike

Despite the mania about a few individuals hoarding all the wealth, one or a few investors’ shares is indeed a tiny percentage of the total market. The more important question that the Guardian (always) fails to ask is: Is this news? Compared to what? Executives continually sell (and buy) stakes in the companies they manage (stakes we want them to have to align their interests with ours). In this case they got out just before the rout. (Grendel is right, most probably then got into another rout.) We are supposed to use envy to conclude that this is self-dealing like… Read more »

David Morris
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David Morris
Spike
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Spike

There are two differences with this, though: (1) US legislators have explicit “ethics” rules not to front-run; corporate types are free to trade except in defined intervals like just before publishing earnings. (2) The 4 legislators attended a private briefing suggesting the COVID outbreak was worse than the public then believed. Given evidence that the executives benefited similarly from private disclosures, they’d be in the same trouble.

Bloke in North Dorset
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Bloke in North Dorset

If only opinion formers at places like WaPo and NYT had paid attention to those with skin in the game rather than the Chinese, WHO and assorted Trump haters, the USA might have moved earlier and been better prepared.

Spike
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Spike

Recall, at the time, they were busy promoting a Bill of Impeachment against the President for: (1) Acting in his self-interest and (2) resisting Congress.

Jabez
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Jabez

‘The Guardian gives us a report on 0.04% of the event and ignores the 99.96% of it.’
Because the 0.04% of the event is the bit that contains the transactions that could be interpreted as insider trades.
Just like the minority that gets targetted for stop and search is the minority associated with most street crime. The majority can be usefully ignored.