You dont know it yet, but Chris Carey and Sharesleuth broke new ground that will result in a “business journalists employment act”.
Hedge Funds, Private investors, Mutual Funds employ analysts by the boatload. They get paid quite nicely. Those analysts spend their waking and probably a good portion of their dreaming moments trying to figure out ways to get an edge that can improve their returns.
They hire or put on contract, experts, consultants, investigators, anyone who can help them outperform their peers.
If Sharesleuth is successful, you can bet that any of the above with billions of dollars at stake will gladly hire the best and brightest business journalists they can find.Bigger the rolodex, the better. Old is the new young. Crusty is the new Yuppy.They will unleash those journalists to uncover stories that can give them an edge.
The process will be amazingly similar to what is happening with Sharesleuth. The jouralist will have more time and probably resources to go out and dig up the really good stuff than they did when they worked in traditional media. They will get to useall the investigative training and contacts they have acquired and accumulated over the years. Whatever skills they think theyhave, they will be get the enjoyable task of putting them to work.They will be given as many words, paragraphs or pages as it takes to convey the facts of their investigation.
Rather than turning in the story to an editor, it will go to an analyst, fund manager or investor.
That person , based on that information, might possibly make a trading or investing decision that could make or lose millions upon millions of dollars.
After making those trading decisions, that manager, who now owns the story, will make the decision whether to release that story to media outlets, knowing, that based on the contents of the story you wrote for him, it could and probably will, influence the price of the stock of the company(s) involved. The factor of impact on the price will certainly impact how aggressively he asks you to convey the story to your former peers to publish or distribute further.
The media outlets that think the story you wrote might have interest to their readers in turn, will assignthe person who took your placeto investigate it and write a story. Completely independent of course. But your former employer and peersknowhow thorough you are. Yes they will reconfirm your work, but its still an extension of the work you did for hire. Except now the lead for the storycame from a source that all involved knows has an interest in moving the price of the stock of the company involved and the headline is written by some guy in the newsroom that has no idea about any of the above.
What are the disclosure obligations of the media outlet , if any ?
Of course the fund manager/analyst who owns youramazing work, will alsogladly distribute the content to the sell side analysts that cover the stock, with the specific goal of impacting the price of the stock.
This already happens every day. All day, every day. The only difference is that the people creating and publishing the information arent “business journalists”.
If you take this investigative work for hire job, are you still a journalist ? Are you a corporate investigator ? Are you a financial analyst with a background in business journalism ? Or are you a hack that sold out for the money.
Lets add another element to the discussion. If the story you wrote is published on an openwebsite called “Our-research.com”, does that change anything ? Does it matter if its published before or after the person who hired you to do the work trades on that information ?
Should “our-research.com” have to register itself as a particular type of entity ? Should there be a disclosure paragraph at the bottom of every website that in addition to a privacy statement, offers a “Reader Responsibility” Statement ?
Should every website have to “declare itself” ?
personally, I think the idea that we add a Reader Responsibility Statement to the bottom of Sharesleuth.com is a good one that im considering.
From the top of my head:
“Sharesleuth.com publishes business stories about companies that we have researched solely for the purpose of improving our ability to profitably trade or invest on the information we uncover. We publish this information after we have traded in the stock, not prior, not simultaneously. Our obligation is not to the reader, it is to the trading activities of our owners. Readers should not use this as the foundation for thier own investment or trading strategies. Readers should not presume that the information published on this site will or will not impact the perception or valuations of the companies profiled or referenced. Sharesleuth.com is publishing this information simply because we want to. This site is funded completely by the results of our financial activities. Sharesleuth.com retains the right to investigate any person or company, trade or invest on that information, and not publish that information”
What do you think ?
But lets get back to the “full employment act”
Information is power. Those who do the best job of uncovering information have the opportunity to be hired by those who stand to make or lose the most with, or from the lack of access to that information.
It will be interesting to see what happens to the world of business journalism. Will it be like 1999 when every sportswriter had to make the decision to take the inevitable riches that stock options in BroadbandSports.com , Sportsline.com and others would bring ? Or will todays business journalists stick to their beat working for the “security” of the newspaper /big media business.
Or maybe im completely wrong, and no one will want to hire journalists who know how to dig and find information that can make them more money
Regardless, the discussion is interesting
I’ve always believed its easier to pick losers than winners when reviewing stocks. Sharesleuth is based on this premise, and makes sense to me. If anyone else had thought of this, (even those complaining), they would have done the same thing and formed a company just like you did.
Comment by HondaJets.Net -
If Warren Buffet files notice Monday that he’s bought 20% of International Gadget and Flange, it’s probably going to be profitable to buy IGF 5 minutes after it gets out, and hold for a week or a month until the Buffet Bump in the stock price develops.
Comment by Smei -
Hey Mark, you performed a great service in sharesleuth.com.
Merely 2 weeks after your article came out the company is listed on regulation SHO for excessive trade failures. Is that mere coincidence?
Prior to your article it had never appeared and yet 10 trading days afer the article it appears under a storm of selling pressure. Since it takes 5 qualifying days prior to being listed, the selling pressure creating excess fails was less than 5 days (trade + 3 settlement and all). By my calculations, the number of fails required to meet SHO took place within the first 2 trading days of your story being published. Story + 2 days + 3 day settlement + 5 SHO qualifying days = 10 trade days.
So how coincidental is it that a stock that never appeared on SHO is thrust on immediately after a negative publication and thrown on amidst heavy selling and settlement failures?
But I know you don’t care about the mechanics of such a dilema, after all, you are making money and that is all that counts.
Comment by Dave -
Interesting thesis. But does game theory kick in? If I have a billion dollars, why don’t I spend a portion of that tracking your journalist and “front running” your trade? I am not a lawyer but my gut is that following a person around and making a trading decision based on their movements/meetings falls under mosaic theory — hence I am not really front running? Do my actions or those of people who are similarly disposed undercut your profitability?
Cheers.
Comment by Axm -
Many people should be thankful.
Comment by Sejour -
sites such as http://www.footnoted.org would be a great starting point for finding companies with stuff to hide…
Comment by Izz -
One of the best critics of business journalism
Marek Fuchs, TheStreet.com. Marek?s writing about business journalism is both informative to the investor and informative to business journalists. He points out what is wrong in business journalism today, but does so in an entertaining and amusing way. He also doesn?t preach. His ?Business Press Maven? column appears as many as three times a week.
Comment by Darial -
good
Comment by imdbcn -
I think that sometimes it could be unethical to play such game. Am I wrong?
Comment by net man -
I think this is a great idea. There is no ethical challenge to the base of the proposal.
Where it finds shades of grey is upon replication of this method by others. If the idea works, undoubtedly more and more will try this practice and competition to find the next story will increase. Added with pay-for-story breaks, this competition could lead to “pay-for-telling us” by journalists to corporate wistleblowers. Again, this is no problem….as long as it is true.
However, with the financial incentive to break the news, untruthful information will be told by certain employees. Now of course, any lying individuals could be held civilly and possibly criminally liable – as they could today. This will cause more untruthful news and, thus, less perfect markets.
Where it becomes important for your idea, Mark, is when the question of “is this market manipulation” is applied to an incorrect story your (or another’s) company reports. I know your disclaimer will be large and written by a sizable team of attorneys, but statements already made by you and the nature of your reporting suggest that you do want and expect others to trade on your information and that you will present it as factual news. I think it could an even more sizable team of attorneys to protect you after trading and leading others to trade on false information.
What may be more legally protectable would be to seek out the information, then develop the story, and make your trades as planned – but do not report this information through you or your collection of companies. Instead, strike a deal with a CNBC, Bloomberg, or WSJ where you will provide them with the information that can be reported jointly or solely by the news company. They can then perform their own diligence towards the truthfulness of the story and act accordingly.
Opportunity is lost to collecting research/news reporting income from your website or other medium, but I’d expect your largest revenues to result from gains in market trading. However, you receive a layer of civil and criminal protection from inaccuracies in reporting.
Now, none of this is important if journalists are focused on correctly checking facts. But with larger monetary incentives to break new stories, their fact-checking will at times lose to their ambitions.
Comment by Rob L -
Many people should be thankful!
Andrew j. Hillman
Comment by Andrew J Hillman -
Marc,
Business Journalists today are under fire for their connflicts with the dissemination of information based on their contacts who have a personal stake in the direction the report goes. Lawsuits have been filed on this. analysts today are under tighter controls due to the analyst conflicts of interest where (money to me first and accuracy second was the motto).
Outside of you trading in front of the hatchet job you published (front running), what makes you any different. Are you saying the sources Business Journalist Chris Carey used are different than the sources other business journalists use? Are you saying that the checks you put into the story for accuracy are any different than abny other publication? If I am not mistaken you delayed your first article because you had NO fact checker on board.
Fact is, you are no different than any other journalist report other than the fact that you trade ahead of your stories where the oher agencies forbid it. Carey came from that profession and his contacts are those he acquired from that profession. His stripes did not change because he left their company and came to yours.
Will you provide your readers any better guarantees if they trade off the stories you print if your stories prove to be in err? Put your money where your mouth is if you claim you are really different.
Comment by Dave -
“Crusty is the new Yuppy” On my 50th birthday- That is a hilarious comment. Thanks
Comment by ken -
Thats what I do daily with cyclepoint-e .T/A that tracks escoteric fundamentals which leads the market and any analyst.As soon as hedge/mutual/and program trading substancial moves are made ,I get the entry signal with NO WHIPSAWS until the market makers move is over on a swing trading basis. My group doesn’t have to talk to any analyst,wallstreet lice,stock broker or stock sleuth. Keeping an open mind about it,I can see how your NEW* service will help the stock traders that don’t have this capability .MY cyclepoint-e works on commodities,stocks,or bonds, Indexes or individual securites. IF the HEAVIES play it WE PLAY IT with disgression of course
Comment by Ron D -
Sign up for a more free
Comment by Pola -
“If you do not know me, don’t trust me.”? Aren’t you supposed to keep your enemies close and your friends closer?
They convicted Winans of insider trading, even though he wasn’t an insider on any of the stocks he was trading. He just knew what *public* gossip was going to be publicized.
That’s not insider trading, that’s embezzling. His trades made the subscribers’ trades just a tad less profitable, so he was stealing from the WSJ.
On the other hand, if I were to subscribe to the WSJ, my mail doesn’t arrive until 3:30 PM. His trades wouldn’t have affected me any more than those of readers who bought a copy at CVS at 9 AM. Should those readers be convicted of insider trading?
A tout’s stock recommendations are much more credible if he’s putting his mouth where his money is. If Warren Buffet files notice Monday that he’s bought 20% of International Gadget and Flange, it’s probably going to be profitable to buy IGF 5 minutes after it gets out, and hold for a week or a month until the Buffet Bump in the stock price develops.
A disclaimer at the bottom of every page isn’t going to hurt – and it might help. Sharesleuth may be a boon to business journalists – but it won’t be a boon to publishers like Dow Jones, Steve Forbes, or Time Warner – and they have friends in regulatory places. Watch your back, Mark.
Comment by Deke -
A lot of us already dig up & correlate data & do it for “free.” (Or at least for own ends & few google bucks to cover the web hosting.)
If Sharesleuth or Netscape or whomever sees value in “owning” rights to somebody’s output, how is that a bad thing? I would gladly expunge google, un-publish my site & cash the checks.
Cuban is exactly right about the hypocrisy. It’s exactly why we started http://www.viewfromsiliconvalley.com in the first place.
Keep it up!
Comment by vfsv -
A lot of us already dig up & correlate data & do it for “free.” (Or at least for own ends & few google bucks to cover the web hosting.)
If Sharesleuth or Netscape or whomever sees value in “owning” rights to somebody’s output, how is that a bad thing? I would gladly expunge google, un-publish my site & cash the checks.
Cuban is exactly right about the hypocrisy. It’s exactly why we started http://www.viewfromsiliconvalley.com in the first place.
Keep it up!
Comment by vfsv -
Pffft. Business Journalists. All we really need is Jim Cramer to hoot and holler about which stocks to invest in and which stocks to GTFO of.
The stock market is a gamble. So, its anyones fault for being invested in a stock that Mark ends up shorting. Not fair? Oh well!
Comment by Todd Johnston -
These were posted on Sharesleuth.
——————————–
Found the report interesting. Being your first I hope it is a homerun-slam dunk. You appear to have done the DD. Good “sleuth”ing.
I love exposé style reporting and look forward to your future reports. Also I acknowledge the rights of anyone to short any stock in the markets. It is the odd synergy of the 2 I have issue with not the idividual parts – shorting and negative sleuth reporting.
This is just one man’s opinion and I am not making accusation of any wrong doing by Mr. Cuban or Mr. Carey. I welcome comments that can poke holes in my logic. I always enjoy the reponses that DO NOT agree with me more that those that do agree with me.
I see a huge contradiction in providing information on what you personally believe to be a scam (in escence, posting a “do not enter” sign) but then on the other hand potentially making a financial gain (shorting the company stock). Essentially, it seems, indirectly partaking in the named fraudulent operation and knowingly so. This is even magnified by the fact of Mr. Cuban shorting the shares PRIOR to the report that it appears he has direct input.
In the report D’Arnaud-Taylor and his wife are demonized for selling the company shares into the open market, and maybe rightly so. But how are the buyers of Mr. Cuban’s short sell any less a victim than the buyers of D’Arnaud-Taylor sells? If both are aware that the underlining business that the shares represent to be a perversion of truth are they not each participants? (though Mr. Cuban on lower level understandably so). Is not the instrument of the fraud the stock itself?
Does Mr. Cuban bother to call the person about to buy shares and inform them of the information he has in hand PRIOR to making the short sell? Does it bother him who might be on the other end of the transaction?
Here is a analogy. I become aware of a supplier of vitamins and supplements. I order some samples but after doing a little scientific testing find in reality nothing more than placebo. Still I order a big shipment on credit with the supplier. Then sell the product on Ebay. After doing so I contact my buddy at XYZ Daily with the scoop. The supplier is turned into the FDA and shut down. I don’t have to pay back my credit. I reimburse the buyers that bother to go through the effort which turns out to be about half and pocket the difference. And everyone should be thanking me for exposing a fraud.
It seems the reporting is more – “Hey here is the latest scheme. Participate while you can, I am.” opposed to – “Mr. Yuck says don’t drink.”
All just my opinion.
Posted by: elvistcb35_77 [TypeKey Profile Page] | August 10, 2006 09:57 PM
Here is another analogy.
I see a group of thugs burglarizing the local jewelry store. But they make off before I can stop them. Thinking quick I call the police, report the crime and tell them I can pick these guys out in a lineup. The cops tell me to wait at the scene and they will be there in 5 mins. Spotting my chance I quickly select a nice expensive watch for myself. The cops show up, the bad guys are nabbed, I am the local hero, and the old guy who owns the store sends me a nice bottle of wine. Oh, and I have a nice new watch.
JMHO
Posted by: elvistcb35_77 [TypeKey Profile Page] | August 10, 2006 10:16 PM
Comment by elvistcb35_77 -
Alan, I believe you have just hit on what will be airing on HDNet at some point. Makes good content to see 1) how it came about, 2) what was done as a result and/or 3) if the company still exists. Oh yeah, it would be interesting to track stock prices and trading value to see the impact of such a story. As Mark says, makes interesting discussion….
Comment by TyMKPr -
My only comment: Mr. Cuban, you must love life! The pointless critics only fuel your fire. Kudos on a job well done.
Cheers!
Comment by C. -
With our legal system, I would recommend you add the following cautionary line as well:
“Despite the declarations above, readers are cautioned to assume that I am trying talk-down the price of stocks I have already shorted. If you do not know me, don’t trust me.”
Comment by MoneyIsGood -
Great stuff that sharesleuth.
I have no problem with you bitchslapping them after you make money to pay your staff. I think it really gives Pay for Performance a new twist:)
I’d like to see a feature RECAP. where you look at these stories 90 180 days later to see where they are, and in the case of the ethenol deal, where the raoches pop up next.
Sort of like a whack a mole for sleezeballs.
my only critisism is that there are very few links to statements made.
Now it may be that the information the statement is based on is not online, but it’s source should be noted. i.e. paper public record,located at…..
Rock On!
Comment by alan herrell - the head lemur -