Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (47125)	1/28/2002 5:23:38 PM
From: stockman_scott	Respond to of 65232

POINT OF VIEW: Enron Mess Boosts Short Sellers' Image 28 Jan 14:24 By Neal Lipschutz A Dow Jones Newswires Column NEW YORK (Dow Jones)--The Enron debacle will hurt the public image of many. But the still-unfolding collapse of Houston energy giant Enron Corp. (ENRNQ) will also help some reputations. Count short sellers among the early beneficiaries. Few groups, with the exception of journalists and Congressmen, of course, are more in need of a burnished image. Because they benefit from a decline in share prices rather than from an increase, short sellers have long been seen by many small investors as an unsavory lot, perhaps downright un-American in their desire for, and, as some company officials would claim, their complicity in the destruction of equity wealth. Still, a more sophisticated view is needed of these investors who sell borrowed shares and hope to profit by later replacing them with shares purchased after the price has dropped. First and foremost, these much mythologized investors (if they are successful) tend to do the hard, numbers-crunching research that in the 1990s became such a rare commodity at the major Wall Street firms. And they are often first to alert the broader market to perceived accounting irregularities, or at least to adventures with numbers going on at publicly traded companies. They are not always right, of course, and many a corporate management has blasted short sellers in the courts of public opinion as well as the judicial system for allegedly trying to ruin a company simply for their own gain. But short sellers are willing to cry foul when few others are and that is their major service to the market. As the Enron mess adds a huge exclamation point to a series of accounting scandals that have shaken faith in the basic math that underlies well-functioning equity markets, the efforts of "shorts" have never been more valuable. Witness the cover story on short-seller Jim Chanos in this week's Barron's. The "teaser" line says Chanos was "way ahead of the pack in uncovering the shenanigans at Enron." (Barron's and this newswire are both published by Dow Jones & Co.). You can tread back well before Enron to find evidence of short sellers' bubble-bursting skills. "Because of their contrarian stance and the liquidity they bring to bear, short sellers have an overwhelmingly positive impact on the market," wrote Gary Weiss in Business Week in 1996. "They are often the market's first line of defense against financial fraud - frequently alerting regulators to scams and accounting irregularities ..." Before we go overboard, no one should order sherriffs' badges for shorts. Their motives are self interested. And there is no easy scorecard for how many times short sellers have been "right" when making accusations about accounting. But their skepticism and their willingness to dig can perform a public service, especially at a time when others suggest the use of new measures of financial success for companies exploring new markets or exploiting new mediums. In the case of Enron, traditional guidance from analysts was generally enthusiastic until it was too late. Many did not heed the words of Securities and Exchange Commission Chairman Harvey L. Pitt, writing in the Dec. 11 Wall Street Journal: "Analysts and their employers should eschew expressing views without an adequate data foundation, or when confused by company presentations." Given the post-Enron atmosphere, look for short sellers' work to get increased attention from institutional investors. "No one on the Street is more widely despised," Business Week said of short sellers back in 1996. After Enron, a grudging respect is likely to be the growing sentiment about shorts. Neal Lipschutz is senior editor, Americas, for Dow Jones Newswires. -By Neal Lipschutz, Dow Jones Newswires, 201 938 5152 neal.lipschutz@dowjones.com (END) DOW JONESNEWS 01-28-02 02:24 PM