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The story...

Trading patterns on various stocks indicates someone used their inside knowledge of 9/11 to make profits.

Our take...

We suggest alternative explanations for this elsewhere, but don't think we're the only people to do so. Here are some excerpts from an Alexander Rose National Review article.

"Recall, as well, the mood of the summer of 2001. By early September, the airline industry was in the doldrums after the meltdown hit business and vacation travel. On September 5, meanwhile, Reuters, the news service widely followed by Wall Streeters, quoted analysts as saying that "a further deterioration" in airline financials was probable. Translation: Bail out now, boys. Matters were not helped by AMR's announcement two days later that its third- and fourth-quarter losses would be larger even than already forecast. Immediately, airline analysts downgraded AMR, as did hotel specialists, and a wave of shorting hit the travel industry (people even took positions in Royal Caribbean Cruise lines and Cruise Lines Carnival Corps).

As a result, investors hurled themselves into the puts market, desperate to lock in profits or make a killing if AMR went bust. The panic was not restricted only to AMR: Speculators rightly predicted that UAL would also go from bad to worse, and took their bear positions accordingly. Thus, the short interest on UAL was up, as I've said, 40 percent over the previous month (and AMR's by 20 percent), but the average for the other major airlines was 11 percent during the same period. While UAL's and AMR's short interest was greater than the airline average — reflecting widespread pessimism as to their chances — keep in mind that the average short ratio of all stocks on the exchange reportedly rose by one percent: pretty much every airline was getting clipped that summer compared to the rest of the market. In other words, American and United were in deep trouble even before September 11, and the market reacted normally (well, perhaps a little overheatedly) to bad news and darkened forecasts.

As for the ESPD rumor, yes, the stock — in common with most Nasdaq tech listings, a highly volatile one in the first place (it's Beta today is a whopping 1.886) — had gone into a tailspin thanks to the short-sellers, but by Monday, September 10, it had bounced to $8.69 — or 74 cents above its September 7 closing price. If Osama was an eSpeed short-seller, he had his wallet pick-pocketed by the longs on that occasion. (Since then, ESPD's lagged behind the major indexes).

The mysterious London trades, it turns out, were the work of a small European airline that was following a tried-and-true hedging strategy against a downturn (wisely, it seems). And as for Munich Re, the stock had been dropping since the beginning of September, and a week before September 11, two brokerages cut their ratings on the firm owing to their concerns about deterioration in the capital markets.

Conclusive? No, and as virtually none of this is sourced it's hard to evaluate what Rose claims. It does show that there are contrary views to the "foreknowledge of 9/11", though, and further research may help confirm these.

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