Friday, February 13, 2009

The Chanos Sideshow

Creepy corners of the Internet that promote anti-short-selling conspiracy theories are giddy today over news that the SEC may be taking a look at Jim Chanos, who exposed Enron, for the heinous crime of talking about an analyst report before it was issued. The horror!

To the anti-shorting fruitcakes, you see, talking about an analyst report before it is issued is fine, if you are going to buy the stock. To them, you see, there is no stock, no matter how foul, that should ever decline. That's why so many naked shorting troubadors wind up behind bars or spend their lives dodging SEC subpoenas. But doing so much as crossing the street against the light is a hanging offense, the theory goes, if short-selling be the intent.

The problem with this latest escapade is that it's arguable at best whether what Chanos did is even the teeniest bit illegal, as Felix Salmon explains. He calls the whole thing a "sideshow," which is an understatement.

That won't prevent short-hating Neanderthals from using this as an excuse to attack shorts, particularly with Overstock.com's nutter CEO Patrick Byrne on a campaign contribution spree. Dan Colarusso says at Clusterstock that Utah Senator Orrin Hatch, who ably represents the Stock Fraud Capital of the World, has "laid siege to short-selling in the past." So stay tuned.

© 2009 Gary Weiss. All rights reserved.

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