Dane Hamilton over at Reuter.com's DealZone has an interesting post up of a speech Monday by short-seller Jim Chanos, who argues that the government should crack down on rumor-mongering financial journalists. Now I'm the last person to argue that everything that appears in the financial media is a) true or b) honest. Rumors get passed, and the traffic in bogus information and fallacious theories is intense, maybe more than ever before because of the amplifying power of the blogosphere. But Chanos runs just about the biggest short-selling fund around and is no innocent in these matters. And so the suspicion here is that Chanos is tossing out a diversion to distract regulators from probing too deeply into the short crowd, particularly those like David Einhorn who have been hammering Lehman Brothers Inc. of late. Chanos must know that if Lehman crumbles like Bear Stearns Cos., the feds will come calling very quickly.
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Pointing fingers at rumor-mongering is a universal pastime, and somewhere along the way journalists get tapped. Recall the controversies over Overstock.com Inc. and Biovail Corp. when the companies went aggressively after short-sellers of their shares, including any financial journalists who got too close to the stories. Overstock CEO Patrick Byrne particularly charged a number of journalists with conspiring with short-sellers, and at one point the Securities and Exchange Commission began asking questions, including of ubiquitous cable shouter Jim Cramer. That whole affair ended in embarrassment for nearly everyone, including the SEC, which quickly retreated -- though not for Cramer who, for a few moments, got to warm himself in the First Amendment.
I'll repeat what I wrote last week about the impulse to punish the shorts and extend the discipline to the benighted media: Get off it. The regulators should have better things to do with their time than trolling through IMs and e-mails looking for rumors, which lead tangled and secret lives. The market is designed to extract some truth over a reasonable period of time, no matter what kind of fallacious garbage folks are dumping into it. Most of the time it actually works. (The interesting times are when it doesn't.) The real victims of gossip and rumor are the most credulous players with the shortest horizons. I'm tempted to argue that the best cure for any truly speculative market is an unholy dose of gossip, innuendo and truth. Go ahead, figure it out in, say, an hour. Otherwise, try a mutual fund. - Robert Teitelman
Comments
Amazing that no one cares about the rumors to the upside. It's only a problem when it's to the downside. Funny how that happens...