The art of the rumor

Rumors can be a nasty business on Wall Street. Increasingly, they're a high stakes business. There's already been one prosecution. The SEC recently announced a settlement with Paul Berliner, a trader formerly associated with the Schottenfeld Group; he was alleged to have spread rumors that the Blackstone Group was on the verge of renegotiating a deal for Alliance Data. The SEC is also looking into the role that rumors played in the Bear Stearns debacle. None of this has deterred the practice, however. It's a favorite pastime on Wall Street, one that has most recently befuddled Lehman Brothers. The New York Times quotes CEO Dick Fuld, as saying, "I will hurt the shorts, and that is my goal." Technology has made rumor-mongering that much more efficient. But people should not think that IMing and texting will render your words untraceable. The day when a case is built on new-age communication forms is not far off (see next item).   

For more:
- here's a New York Times column

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