Bloombergs recent article, Insider Trading isnt what you see in theMovies, contained only one thing that I agree withthe title. Beyond that, itwas just another example of contriving a story to meet predictableconclusions.As depicted in movies such as Wall Street in 1987 and the more recentWolf of Wall Street, a typical perpetrator is reckless and flamboyant. He and I mean Hedoes drugs, runs with hookers, owns expensiveartwork, and crashes expensive cars with no remorse! However,Bloombergs article points to a much more sordid outlook. According tothe research, the median insider invested about $200,000 per tip andreceived $136,000 in profit. For the author to call this rather sordidand petty crime is somewhat odd. Since when have hundreds ofthousands of dollars in profits in a matter of days become petty in oursociety' According to the census ACS survey, the median householdincome for the US was $53,657 in 2014. Only about 20 percent ofAmerican households even break the six-figure mark, according toCensus Bureau data. Hence, I would say that a six-figure profit in a fewhours or days is a lot of money for any one.The bigger point here is that neither of the above-mentioned movies orthe recent show Billions depict a typical insider trader on Wall Street.Even if you do not like the characters portrayed as working on WallStreet, they do a ton of hard work. The stock picking process has manyinputs; to name a few: talking to the company management, investorrelations and various sales channels, evaluating competition, sectorfavorability, market conditions, interest rates environment and recentstock price action. The insider information is an input, a powerfulinput," and is another piece that solidifies the original investment thesis.This asymmetrical advantage with the inside information not onlyallows to improve the Risk-adjusted return on capital (RAROC), but canalso create superlative profits during the earnings or a buy out event.The law enforcement press conferences and the movies depiction of aninsider trader, sipping drinks and schmoozing and getting theinformation to trade is simply sensationalizing the data gathering. Atypical insider trader on Wall Street, and I was one of them, works verylong hours, and is constantly challenging the investment thesis andlooking for inputs to confirm his/her investment idea.During my tenure on Wall Street, I lived on West Coast and started myday at 5:30 AM (Since the market opened at 6:30 AM). I would bescanning company news, doing online research, visiting companies,calling IR or going to investor conferences/bus tours. After marketclose, I would be listening in to the company earnings conference callsand would be working on earnings models. I had to feed the researchdata I gathered into the earnings models and expectations to confirmthe investment thesis. My working day was 10-12 hours, which typicallystarted early mornings and stretched into late evenings. This was hardlya person lyingon the beach, sipping drinks and exchanginginformation to trade!The glamorization of the job with hallmarks of excessive spending asshown in movies and TV is missing the over consuming and cut throatcompetitive nature of this job. Yes this work is financially veryrewarding but the performance pressure is intense. You are as good asthe last trade and one is spinning really hard to stay ahead of the nextanalyst, or a fund manager. A bad call made by an analyst can cost thecompany millions of dollars and some times ones job. When one of myrecommendations would go awry, my congenial boss had no problemyelling at me.However, in spite of intense pressure on Wall Street analysts to be right,it does not justify gathering the inside information. The Kool-Aid that insider trading is victimless is just not true! The world of electronicexchanges makes the losing investor distant and anonymous andhence the winning insider trader mistakenly feels that there is no harmbeing done.The next question that needs to be asked, is the criminalization ofinsider trading justified' Albeit, a moralistic contempt for the vice ofgreed in insider traders provides a motivation, but ones own vice ofenvy for easy money made by insider traders offers anotherexplanation. For better or worse, insider trading has been made a levelof evil disproportionate to its economic impact.For young professionals thinking of pursuing jobs on Wall Street, oneneeds to comprehend the tenacity and ferociousness of working hard tosucceed in this business. The glamorization in the movies does not trulydepict the long hours that go into putting together the mosaic tosucceed. However, the most perilous aspect of working in this industryis falling prey to temptation of easy money and throwing away everything one has worked for!SEE ALSO:ROOMY KHAN: The US government is creating a culture of distrust and fear on Wall StreetJoin the conversation about this storyNOW WATCH: Couples improved their sex lives in a week with this one simple tip
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