From: Harvey Newstrom (mail@HarveyNewstrom.com)
Date: Sat Jul 06 2002 - 11:25:50 MDT
On Saturday, July 6, 2002, at 09:41 am, Brian Atkins wrote:
>>> Plus, why would you buy stuff from misleading people -- be they
>>> members
>>> of a corporation or your local mom and pop store? Don't you think
>>> on a
>>> truly free market, the problem would take care of itself?
>>
>> Just like Enron. Why would people buy stock from a company that lies
>
> Some people will always buy the stock if they think it looks cheap
> enough.
> Worldcom is still trading, and some people are still interested in
> buying
> it, albeit at a much reduced price.
You miss the point. If people don't know they are lying, they can't
avoid them. This argument seems to say it is OK to try to defraud
customers or cook the books, because the market will choose not to do
business with such crooks. It doesn't work that way. The market must
be a true free market or it doesn't work right.
> I disagree, and think the problem would take care of itself even without
> organizations like the SEC (who so far did a piss-poor job, something I
> don't expect to change significantly) to force them to do things a
> certain
> way.
You just contradicted yourself. You agree that they didn't do a good
job historically, and you don't expect them to change. Why do you think
the problem will take care of itself? You seem to have just argued my
point.
> What I think would happen is that in an "ecology" of companies, what
> they would soon learn is that to achieve the best stock price for
> themselves
> (and the insiders) they would have to voluntarily submit to plenty of
> openness and fact checking by outsiders. The ones that didn't would
> suffer
> a lower stock price or even be completely unable to go public.
This sounds like a perfect argument for food labeling to me. You agree
that companies need to disclose their accounting statements and submit
to external audits of their internal finances. If we did the exact same
thing to food manufacturers, we would have the food labeling I want.
Food contents would have to be disclosed. External auditors would
confirm the contents, This sounds like what I am asking for. I don't
know why you explain this as if it refutes my statements.
> As for how to discover that the books don't match reality in a young
> market with few debacles under its belt, what you have to do is wait for
> the company to go broke. Eventually it will not be able to pay its
> bills,
> and word will leak out.
That is too late. By the time they go broke, all the investors have
lost their money. We want a system to evaluate companies before fraud
takes place.
-- Harvey Newstrom, CISSP <www.HarveyNewstrom.com> Principal Security Consultant <www.Newstaff.com>
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