The Countertop Chronicles

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Monday, March 08, 2004

On Martha

John at The-Crease is questioning what the hubub over Martha Stewart is all about.

Beside all of that, I can understand laws against trading based on insider information that's designed to manipulate stock prices. But was that what happened here? It doesn't look like such manipulation was the goal, but rather the desire to avoid losing some cash. And why should that be illegal? Don't we all, every day, make decisions based on information no one else has? Whether it's a new route to get to work or a store to reliably get that hard-to-find bottle of wine, it seems to me much of our day is spent using information to get one over on the other guy. Why is it acceptable in daily life but not in the stock market? Again, I'm not talking about using information to manipulate prices...I recognize that as fraud. But I am talking about hearing something through the grapevine and using that information.

My problems with Martha's actions are three fold.

First, and foremost, as a former stockbroker and member of the New York Stock Exchange (yes, even though her publicists and friends in the media covered it up, Martha's first successful career was on Wall Street) she absolutly 100% positivly knew what she was doing was illegal. This is the same as Bill Clinton lying under oath. The underlying action (sex with an intern) didn't bther me nearly as much as the end result - a membr of the bar lying under oath.

Second:, Martha and the ImClone CEO were trying to manipulate the markets. They wanted to take advantage of what they considered serious insider information to extend the time they had to maximize their profits. The manipulation came because the annoucement of bad news was delayed long enough to keep the stocks price inflated and allow them to recoup their investment and the backs of the trading public.

Finally, she did not hear this information along the grapevine. It came directly from someone who had access to it, well before the public would, and who Martha as a former stockbroker and member of the Stock Exchange knew would possess special knowledge.

While I agree that the reasons for our concern with stock fraud seem very nanny state-ish (if people are too stupid to buy into frauds, shouldn't they suffer the consequences of their foolishness?) it is in fact a direction we as society have traveled in. In light of the incredible success of our stock market since these reforms came about in the mid 1930s who am I to disagree with them.


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