SEC to Quell Rumors………..Right!!

• Posted by ToddSullivan
• on July 14th, 2008

Does anyone really think the SEC will be able to stop rumors? Do they really?

The U.S. Securities and Exchange Commission said Sunday that it and other regulators are firing up new examinations to prevent stock-price maniplation by short sellers and others.The agencies’ goal is the “prevention of the intentional spread of false information intended to manipulate securities prices.”

Now, who is to say what is “false” vs what is “wrong”. We are now delving into the realm of a persons intent and when you do that, it is a losers game. On another note, why are we only looking at short sellers?

How about CEO’s and CFO’s of financials who said “things were ok” only to write down billions months later? Are they not just as guilty?

The SEC is up against it in this one because up until now, the shorts have been right and the firms that have come under attack are poorly managed, over leveraged and have questionable business models for down times. Reads Bear Sterns (BSC), Lehman (LEH).

If I “think Lehman has questionable loans and think management is not forthcoming enough so things must be worse”, then am I spreading false rumors or just speculating? Is this going to be a rear view mirror test? We are going to prosecute people after the fact when what they have said proves wrong? Will journalists get into trouble by reporting these rumors?

Will we investigate Congress-people in an election year like this one who throw bombs about the economy and stocks in an attempt to curry votes? In effect they are hurting equities and stock prices by making the current situation seemingly worse than it is. Surely we can prove half of what is said there is “less than truthful”. Is a SEC investigation into Sen. Schumer coming? clearly his letter lead to a run on the bank. any bad news is bad for Republican’s in the election. Was Schumer pushing Indymac over the edge for votes?

If we are going to investigate Bill Ackman and David Einhorn, let’s look at Schumer’s motives also.

Rumors have and will be around forever. If you have a strong business, they may affect the share price temporarily but not impair it. If your business is weak, they may hurt it….

How about the SEC investigate all those newsletters I get in the mail pumping stocks that never go anywhere?

Disclosure (“none” means no position):None

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