They're all working overtime to put us back in the dark. Get a load of this from Sundays paper, especially my bolded sections:
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charlotte.com
The drawbacks of Full Disclosure
Regulation FD, meant to help investors, may do the opposite
By MICHAEL KAYES
Special To The Observer
Soon we will mark the end to a tumultuous, but memorable year; 2001 was a year in which unforgettable events erupted on the political, economic and global stage. In January, a new president was sworn in after finally winning a disputed election. Little did he know what challenges lay ahead.
On Sept. 11 the world forever changed. It was a moment when time stood still, when CNBC sound bites were silenced by quiet reflection. At that frightening moment it was uplifting to have a president who openly turned to prayer for emotional and spiritual strength rather than spin-doctors who twist the facts to accommodate public opinion polls.
Maybe the tide has turned.
Maybe the tide has turned in the financial markets as well. The Internet age and the explosion of online trading led the Securities and Exchange Commission to adopt Regulation FD (Full Disclosure). Recently, however, there is growing debate regarding the benefits of Regulation FD.
Its original intent was a noble one - to level the playing field for all investors, so that the general public and the professional investment community would have equal access to information.
On the surface, this made sense in the new Internet economy. In the words of the SEC, "With advances in information technology, most notably the Internet, information can be communicated to shareholders directly and in real time, without the intervention of an intermediary. This online revolution has created a greater demand, expectation, and need for direct delivery of market information."
Twenty-four-hour, seven-days-a-week access to real-time information does seem like a good thing on the surface. But if we are gathering information all the time, when do we process the information? When do we think?
I've read notes from Wall Street analysts posted online at 3 a.m. the night before. I wonder how much diligent analysis that individual did while the rest of us were sleeping?
The lifeblood of investment analysis has historically been one-on-one conversations between company management and experienced Wall-Street , or "sell-side" analysts who dig below the surface to discover the critical investment issues. This process is dependent upon a relationship of trust between analysts and management.
On the one hand, analysts trust management to be as candid as the competitive landscape allows.
On the other hand, analysts are expected to develop reasonable opinions based partly on this information, but to a greater extent based on their experience covering the company, knowledge of the industry and competition, and thorough due diligence to put all the pieces of information together to produce well-supported research reports and investment recommendations.
These reports and recommendations are then "sold" to the "buy-side," comprised of individual investors and various financial institutions. This filtering process, admittedly imperfect, was nonetheless reasonably effective in promoting market efficiency. (My edit: EFFICIENT FOR WHO? THE WALL STREET PIMPS?)
All this changed with Regulation FD. Fearful of SEC violation, companies too often provide aseptic news releases with bits of innocuous information. Unfortunately for many investors, it is knowledge, not information alone, that leads to profitable investment decisions. Regulation FD has torn the heart out of a time-tested process that worked. (My edit: Time TESTED? Like time tested front running, and trading on news beofre the public? That kind of time tested?)
Regulation FD was enacted to eliminate this filtering process and allow the investing public the same access to management information. In place of this time-tested process we now have a race to disclose every bit of information as fast as possible. In essence, a race to be first has replaced a disciplined determination to be right.
Real-time access to information and online trading are not good things. They give individual investors an unrealistic perception of their ability to make prudent investment decisions. (My edit: Commissions down a little you little pimp?)
All the real-time information in the world does not substitute for years of experience and a consistently applied investment process. ,B> No prudent investment decision is ever made in panic mode. Yet it is the very intent of the online medium to invoke an immediate response to every bit of information. (My edit: Say what? You mean Asshock Kumar beating INTC every Monday morning to kill a rally isn't meant to invoke a panic response. Me thinks its the intent of the broker pimps to invoke panics.)
But maybe the tide has turned with the bursting of the tech bubble and the bear market of 2001. Maybe thorough analysis and disciplined investment processes will once again drive our investment markets.
That's my holiday wish.
(My edit: My wish is that all the scum sucking broker pimps go to jail.)
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Michael Kayes, a chartered financial analyst, is chief investment officer at Eastover Capital Management, a Charlotte money-management firm with about $300 million under management |
