Wednesday, November 19, 2008

A few words about Mark Cuban

I can't say I've admired Mark Cuban in recent years. His public persona is that of the standard-issue billionaire big-mouth, a real-like Tony Stark without the titanium suit, and the ideas behind Cuban's "Sharesleuth" project seem to me entirely misguided.

Gary Weiss explained the problems with Sharesleuth welll in several items posted on his blog in 2007, when that project (supposedly a new model for finance journalism) was at its peak. I'll just link you to one of those items, thereby taking that task off my own shoulders.

Instead I'll say this: unimpressed though I am with Cuban, I suspect he is in the right in his latest fight. The SEC has chosen him as its newest target for its intermittent anti-insider campaign.

I've never been impressed with the idea that punishing insider trading makes sense. Some deterrent for breaches of fiduciary duty is appropriate of course, but that's rather hard to find here.

So I'm rooting for Cuban. Fight the power, MC!

Joe Nocera’s recent book, Good Guys & Bad Guys, makes a related point. It’s in a reprinting of a story Mr. Nocera wrote for GQ in December 1992, concerning Drexel Burnham and Michael Milken.

For the record, Mr. Nocera occupies a ‘moderate’ position on the spectrum of reactions to Mr. Milken [who was in prison when the story was first written]: Nocera argues that the infamous financier was guilty of some crimes, but not of the worst of those of which he was accused, and that his sentence was excessive.

But that isn't what intrigued me about the article. The passage I have in mind quoed an unnamed associate of Milken's saying: “”When a Drexel salesman heard that the corporate-finance department was buying a stock – for what reason he didn’t know – and then advised a client wanting to sell that same stock that he might be better holding on to it, was that an example of insider trading? Or was it something more innocent?”

Good question. Indeed, it’s a better question than Mr. Nocera (who soon drops the query) may understand. There is nothing extraordinary about such an instance, and since given existing law and prosecutorial practices there is no good answer to that question, then the courts and prosecutors who punish insider trading are in effect telling traders, brokers, bond salesmen, etc. that they have to drive 55 miles per hour or below – and that they can’t use a speedometer, because none are available.

That’s wrong.

Personally, when I use the phrase “free markets,” I don’t mean the word “free” as an adjective. I mean it as a verb. Let’s free markets.

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