The Securities Industry is About TRUST!
Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”…a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here or call 888.484.8220 ext. 1.
ETHICS is defined in WEBSTERS as "that branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions." For the past couple of years, I have questioned the ethics of many in the securities industry.
Just to rehash:
In spite of learning a lesson from the likes of Enron, many major financial companies participated in the exact crimes Enron was found guilty of.
Most lenders decided that giving out $250,000 mortgages to people who have no money in the bank…met lending standards…and was ethical.
Ratings services decides that junk should be rated AAA. Of course, these ratings services get paid by the same people whose products they rate.
CDO, CMO, CDS, A-B-C, 1-2-3, M-O-U-S-E, E-I-E-I-O…you get the hint!
During the slime bag buyouts…I mean the private equity buyouts, there was nary a day go by where somehow, some way, a rumor leaked of the next company that was going to be bought. I actually think that every stock on the NYSE was rumored to be bought at one time. 99.999999999999% of these rumors were false. They were nothing but thin air announcements in order for the guilty to sell into or to front run. Why did they continue to tout the rumors? Because no one said anything about it. Not one investigation…formal or informal. Again, regulators asleep at the wheel. Even though investors were hurt by this sleaze, nothing was ever done.
Of those buyouts that did occur, how many of those stocks popped before the announcement? Many! Have you heard of any investigations? For example, HILTON stock popped the day before the announcement… blatant illegal insider trading…but nothing was done! This was a gimmee. I could have indicted someone within one day.
Every time the market would get into trouble, amazingly, the market would be buffered by either Paulson or a fedhead announcing everything was fine, subprime was contained or housing was bottoming. Are you trying to tell me these people are just blithering idiots that could not tell housing was imploding, subprime was indeed a monstrous problem and indeed, the economy was moving into trouble territory? I don’t know what is worse. The fact that they are blithering idiots or they just refused to disclose the real facts.
You would have thought that a bear market would end the nonsense…but nah!
How many times have you heard bubble vision float a rumor that Bear Stearns is going to be bought imminently? Many! The last one being last Friday…which saw the stock pop. Was there a deal? Nope! Is anyone investigating these blatant falsehoods? Nope! So…the rumors continue.
I am writing about all this today because I believe the securities industry is based largely on one word: TRUST! And there is a clear lack of trust in the securities industry. Friday’s late action added to this lack of trust.
I don’t know Charles Gasparino. Never met him… don’t know much about him. I am sure he is a great guy. But what he did late Friday afternoon simply lacked forethought and lacked ethics. This action is just part of the crappiness I have been talking about for the past couple of years.
In the past couple of weeks, Mr. Gasparino went on bubble vision to tell the world that his "sources" were telling him there was an imminent bailout of Ambak…by the same banks that were on the hook for billions. Ambac Financial
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PowerRating) popped on this "news" with the market following. Of course, to the best of my memory, he floated the rumor in the last hour of the day. What came of it? Nothing. So, the first time his sources told him a bailout was about to occur… THEY WERE WRONG!
Did being wrong the first time stop him? Nope. At about 3:25 pm Friday…on a day where trading was thinning out because it was a late Friday as well as a huge snowstorm in the northeast had traders leaving early…on a day where the market was arguably rolling over…Mr. Gasparino decided to get right back on his horse…and went on bubble vision to tell the world that once again, his "sources" are telling him that a deal "could" be done either Monday or Tuesday. The market rallied 200 points in minutes with the cheerleaders taking out their pom-poms.
So what is my problem? Simple! Why did Mr. Gasparino not wait until 4:01 pm to come out with this "supposed" info? He is no dummy. He knew he would pop the market. This was a blatant move to pump the markets up in a thin trading, snowstorm laden late Friday market. I rail against this type of "look at me" journalism! Pundits that go on tv should know their surroundings and should know the possible repercussions but both bubble vision and Mr. Gasparino couldn’t care less on Friday. When you have this type of National Enquirer reporting, people get hurt. Why would he yelp this out at 330 pm and not wait until after the close? After all, there were no facts and admittedly he said the deal may not happen. Again, he wanted the glory of moving markets. Why would bubble vision let this rumor-mongering continue to occur? Oh yeah…so Larry Kudlow can announce on his show that this person "beat the street to report the plan" and that this man "moved the markets!"
So…what if a deal doesn’t get done. Will this reporter apologize and realize his error or will he just do this again in the future? He even admitted "I know I have reported this in the past!" This is not like reporting what club Britney Spears and Paris Hilton show up at…or is it? This is reporting that affects people’s lives. Where are the ethics? I guess I can sum it up with a few words from a mutual fund manager that appeared that evening on the same channel. With glee, the mutual fund manager said, "hey Charlie…thanks for helping us out today!" Indeed…
My last question is will the SEC come in and investigate whether Mr. Gasparino or any of his friends bought call options on the market before this "announcement?" No…I am not accusing anyone of anything but with all the shenanigans we have seen in the past couple of years, are we supposed to give anyone the benefit of the doubt? I am in hopes Mr Gasparino reads this…and instead of wanting to kill me…would realize that what one says matters. He would realize every word I am saying has iron. I am in the same position as I do a lot of tv and have a national radio show where at least 10 people listen to me Monday through Friday. I have never and would never tell anyone that "sources told me" anything and I would never tout buyouts based on so-called "information." I know my responsibility to the public!
Markets were falling off a ledge late Friday before the "save" occurred. Last week was simply four days of gaps and reversals…with the final outcome being the market is still in a nauseating trading range near the lows. Normally, I would say that since the market was about to break down out of its triangle, that eventually it must. But with all the noise…and all the government bailouts, anything can occur. Yes…the latest rumor is that the government is going to bail out homeowners…which will certainty destroy any semblance of a free housing market. Should be another fun week! Nothing has changed in the sectors with the best relative strength. FERTILIZERS, AGRICULTURE, OILS, GOLD/SILVER, COMMODITIES, COMMODITIES and more COMMODITIES.