It's A Deal

July 18, 2008

True That

Is a rumor a rumor if it's true? The answer, of course, is ... who cares?

Just when you thought things couldn't get any worse--at least in the land of cold, hard facts like a quarter-of-a-trillion-dollars in bank write-downs, a complete breakdown of risk-management capabilities and a credit crisis that still may be closer to its beginning than its end--along comes the maddeningly, utterly embarrassing fiasco that is our regulators focusing on gossip.

Wow, are we in trouble. Who ever would have thought that 'buy the rumor, sell the fact' would have you face to face with the suits at the SEC? It would be laughable if it weren't so scary.

Am I happy Bear Stearns went under? Of course not, because I had friends who worked there and IDD had many a subscriber there.

But did the company make its own bed? You bet your fact-laden you-know-what it did.

You may have read some of the 15,000-word accounts of how the media, short sellers and hearsay did in Bear. Yep, and next up are Goldman, Bank of America and, say, Microsoft. Not buying those rumors? Maybe it has something to do with the fact that those companies are actually running sustainable businesses. And the real kicker is watching the heads of other heretofore respectable banks calling their peers in the C-suite to task for allegedly spreading these rumors--based solely on rumors that they were doing it! Classic stuff.

Listen, Wall Street isn't akin to a clinical trial for a new drug, or a stress test for a tiny part in an airplane, where things get scrutinized, scrutinized again, and then really get looked at. Rumor, innuendo, gossip and BS are as much a part of the Street as are P/E ratios and ROE. Indeed, you can bet that on some Web site right now Ben Bernanke was just assassinated and bin Laden was just caught. And then there's something called "core inflation."

Do with that information what you will. But in the end, here's what we're saddled with: when things don't go your way these days it's everyone's fault but your own. Bear Stearns wasn't over-leveraged, it just didn't have a good CNBC policy in place, right? IndyMac loses nearly a billion dollars this year and trades at about a quarter, but it's Chuck Schumer's fault for saying things are bad. (You know things are haywire when I'm defending him.)

Punish the crooks, lend reasonable support when needed and tweak the rules where appropriate, but stop the insanity.