Out of pure annoyance

I have to post this article, and I wish CNBC would read it so I could stop hearing about independent research. The article was written by Herb Greenberg, Coulumnist at www.marketwatch.com. I highly recomend reading his stuff. Here is his article from today:


By Herb Greenberg, MarketWatch
Last Update: 3:29 PM ET Mar 29, 2006
SAN DIEGO (MarketWatch) -- This debate over "independent" research has gone from ridiculous to absurd.
Witness what I view as a well-orchestrated public-relations "spin" by Biovail Corp. (BVF :
biovail corp com
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Sponsored by:
BVF24.17, +0.20, +0.8%) and Overstock.com Inc. (OSTK :
overstock com inc del com
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OSTK30.66, -0.07, -0.2%) in their lawsuits against Gradient Analytics, for daring to write negatively about their companies.
The spinmeisters are trying to create the impression that Gradient's research wasn't truly independent because clients were permitted to request research on companies. Subsequent reports -- if they were written -- were then disseminated to all Gradient clients. The bugaboo, according to those attempting to turn this molehill into a mountain, is that Gradient's reports didn't disclose when a report was the result of a request by another client.
That is not a run-of-the-mill legal matter but a First Amendment issue.
Never mind that private research firms without brokerage or trading arms aren't considered investment advisers and therefore aren't regulated by the Securities and Exchange Commission. My take on this, as I've been saying on CNBC in recent days, has been: So what?
I can't vouch one way or the other on the allegations made in the lawsuits against Gradient and others, beyond noting that claims in affidavits about yours truly that are part of Overstock's suit are false and misleading. The real issue here, however, is that Gradient provided private, for-pay research to several dozen clients. The key word is "private."

It's important to note that no clients have filed complaints; the complaints are only coming from companies that were the focus of negative (and, in turn, correct) reports. In an e-mail dispatch, Whitney Tilson founder of the hedge fund T2 Partners, noted that a friend of his -- a Gradient subscriber -- pointed out that "Gradient discloses clearly to its clients that its reports may have been the result of custom reports that were done first for another client."
That is not a run-of-the-mill legal matter but a First Amendment issue.
What if reports from private research firms find their way to journalists, which they sometimes do? Shouldn't they contain disclosures that ideas may have come from a client's tip? Wouldn't I want to know that a report may have been written at the suggestion of a research firm's client?
Oh, please! I don't give a hoot.

This is private research, and, quite frankly, it's no different from a typewritten report by an unknown person in a plain brown envelope or a published report from a major investment bank that you know handled the company's IPO. What I care about is the quality of the information, which I am obliged to then confirm. That is, after all, why I tell the IRS I'm a "reporter." No matter where a lead originates, it generally results in further reporting and, one hopes, winds up being a jumping-off point to a greater story. If I then quote someone, I point out that person's bias. (Funny, but people generally only complain when I point out that a person is bearish. Why is that?)
Don't get me wrong: These private research firms could get themselves in hot water if they intentionally distribute false information or, worse, let one client know that a recommendation has changed before alerting others.
Beyond that, as in life, what happens behind closed doors is between consenting adults.
Sticking with a theme: It's another joyous day. So now, according to stories by Jesse Eisinger in Wednesday's Wall Street Journal and by Roddy Boyd in Tuesday's New York Post, the SEC has subpoenaed Gradient to get e-mail and phone records of contacts with nearly a dozen journalists, including Jesse, Roddy and me. That's instead of trying to get them directly from the journalists and news organizations.
While the SEC appears to be well within its legal rights to use this backdoor approach, though not necessarily acting in the spirit of the privilege afforded journalists, I echo Jesse's point that it will have a chilling impact on market participants sharing their information with the press.
An SEC spokesman told Jesse that regulators "don't believe the policy chills law abiders from communicating with the press."
Jesse said the comment was naïve. I'll be more blunt: The spokesman is simply wrong.
While I'm as busy as I've ever been, with more ideas to chase than I have time to research, I've already had several good sources say they can no longer communicate with me -- certainly not by e-mail -- on stories that may question a company's fundamentals.
Even on the phone, though, one of these hedge-fund analysts made it clear he's really not supposed to have any contact with me.
That's too bad, because it means the promoters will win, and investors will lose.
In the meantime, I believe this McCarthyism of the markets (combined with the euphoria in the stocks of securities exchanges) will turn out to have been a bell ringer of a market top if there ever has been one.


I have to say that I love that last line. I will look to take some profits in a few stocks as the week closes out. I am still eying WEN as a short, I was stopped out today, but may consider getting back in given its relative weakness.