Wednesday, March 01, 2006

SEC: Subpoena Happy

Some crazy things are coming from the drop in's share prices lately. Recently, MarketWatch columnist Herb Greenberg was subpoenaed by the Securities and Exchanges Commission (SEC) along with another Dow Jones reporter. Sought in the matter were conversations between the two and stock traders and analysts. This afternoon brought on another round of SEC lunacy as it was divulged that and co-founder Jim Cramer, also the host of the CNBC show Mad Money, were served subpoenas in connection with stock manipulation allegations.

I have only one thing to say regarding this matter, and it has already been echoed by Cramer and others. Seasoned analysts tend to be right when they tell their subscribers or their clients that a stock is a "sell" or a "buy". This implies that their news doesn't cause stock prices to fall, but in fact it just amplifies the effect of the company's negative outlook. If Jim Cramer comes out on his show and responds to a caller asking about a certain stock by saying "SELL SELL SELL" accompanied by a good reason, where is the logic in calling this stock manipulation. The stock was already headed south on its own but investors with more information decided to either avoid or get rid of their shares in the company in question.

The government is rarely a good regulator whether it's private enterprise or the financial markets. It overreacts; it underreacts. Why doesn't the SEC just stick to the big stuff, like insider trading. Too many people are fed up with companies like Tyco and Worldcom whose CEOs have been disgraced but whose employees have been swindled. I don't see the public outcry against Jim Cramer and Herb Greenberg simply doing their job in advising their clients to avoid losses and head for the easy gains. Without them and their fine work, investing would be far less profitable ...

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