Katya Wachtel and Sam Forgione of Reuters wrote this in a recent investment recap piece:
“Billionaire investor George Soros dumped 7.85 million shares of U.S. Airways Group Inc in the second quarter, a regulatory filing on Wednesday showed.
“It was a timely move by the investor’s Soros Fund Management. On Tuesday, the U.S. Justice Department filed a lawsuit to block the proposed merger of US Airways and AMR Corp, the parent company of American Airlines.”
Timely move indeed as U.S. Airways stock dropped more than 15 percent in value in the two days after the Justice Department action was announced.
Friends in High Places
Was Soros tipped off? Who knows, but big government’s hand in virtually every business transaction points to the value of having friends in high places, and the impact this pervasive influence has on even the appearance of integrity within the investment system.
For example, The Wall Street Journal has reported on the almost ludicrous Spy versus Spy game played at the Labor Department revolving around the regularly scheduled release of market moving economic data such as the monthly unemployment report.
In order to accommodate the media, the Labor Department provides credentialed media with the information 30 minutes before it becomes publicly available so they can write their stories, ask questions and get the facts right. (Disclaimer: I was Chief of Staff of Public Relations at the Labor Department under George W. Bush and participated in this process.)
The mutual agreement was that the data would not be released prior to 8:30 a.m. ET on the dot.
Poor News Embargo Enforcement
In the age of computers, cell phones and sophisticated communications, enforcing this 8:30 a.m. release time has become increasingly difficult and costly.
Computer trading programs buy or sell stocks and bonds in nanoseconds based upon this economic data, and if a media outlet that also has a trading component to it happens to get the data out even a second early, their machines are the first movers and the company can make millions of dollars on that one second advantage alone.
A reasonable person could ask why the federal government spends money to compile this data when private sources like ADT and Gallup produce employment reports that these investment machines could subscribe to for data?
In fact, a reasonable person could ask why the Labor Department continues offering an embargoed briefing if the participants can’t be trusted not to cheat? What was once a convenience is now a high-tech security game. Rather than continuing to play it, the Labor Department should consider having the Bureau of Labor Statistics head appear at 8:30 a.m. and provide the data to the media, and answer questions in real time. Everyone, not just those special credentialed reporters, could cover the event, and whoever had the fastest fingers and Internet connection would win.
Sure the media that cover these events would be mad, but so what? Just how much money are taxpayers supposed to spend to make certain investment firms don’t cheat by getting info a second early?
Big Government, Big Investor Links
Whether it be the appearance of possible impropriety induced by a major investor/political contributor properly timing a stock sale to avoid a negative government action, or media/investor companies trying to game the government’s data release system to make millions by being first with the news, the inextricable ties between big government and big investors is troubling at best.
Our nation thrives when people are rewarded based upon creating products that consumers want, taking risks to bring those products to market, and beating others in the marketplace. We stumble when government information trading or manipulation becomes more important to the bottom line than actually creating anything.
When a big business’s accountants, lawyers, lobbyists and connections in the government become more valuable than their scientists, researchers, architects and engineers, something has gone dramatically wrong, and the more corporate America becomes reliant on big government for its profitability/market advantage over competitors, the more difficult it becomes to contain and constrict government’s strangling reach.
If everyone’s on the take, no one is going to protect the fleeced, and that is the sad state of politics in America 2013.
Rick Manning (@rmanning957) is the Vice President of Communications and Public Policy for Americans for Limited Government.