Ed Butowsky, managing partner at Chapwood Capital Investment Management LLC, joins the Willis Report on Fox Business to discuss the recent news of potential inside trading involving Warren Buffett’s right hand man David Sokol.
Its understandable that Warren Buffett does not want to talk anymore about the David Sokol affair, which has shaken up this country’s most legendary investment firms – Berkshire Hathaway. However to small investors, this story comes as no surprise as many small investors view Wall Street as a rigged game motivated by information.
Ed explains that there are many reasons why small investors perceive the market to be rigged, and not just because of this news story. One of the more notable reasons is because institutional investment houses really own the market place; however, when a news story like this breaks it makes everyone question the research they do and the companies they buy into. Moreover, when a company like Berkshire Hathaway is involved with a scandal like this it turns everyone’s head.
Prior to this news of potential insider trading, Warren Buffett was recently quoted as saying. “We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation.”
Now that the story has broken about David Sokol, Warren Buffett has clamped down and is trying to dissociate himself from the story as much as possible.
The fact that David Sokol’s activities does not indicate insider trading raises awareness that the rules may need to be changed to be more aggressive against the act of insider trading. These rules should take into account who works for which company, how many shares do they buy and when they buy it. In this situation, the chronology of events that occurred indicate to the lay person that the only reason he bought the shares was to profit from a buy-out. Many thousands of shares purchased at $100, the only motivation there is if you knew of a buyout. While the act of purchasing stock in this case, is not unlawful the timeline of events that ensued definitely show some greed factor.
Regarding cases like this and others under investigation today, the implications are big relative to the small investor. For small investors, the stock market is definitely leaning in favor of large investment institutions; however, investors should always stay informed and do not trade against these institutions. There are various investment vehicles available to leverage like exchange traded funds (ETF) and others.
A word about Ed Butowsky:
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
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