July 5, 1996

Dear Business Week:

Let's imagine what a reasonably intelligent investor would be thinking as they read "Now the Medium is the Message Board" (July 8, 1996).

Regarding inside information on the internet, "If so, the implication could be serious for the on-line world, which is getting increased scrutiny from regulators as a medium for market manipulation." Market manipulation has been around along time. Almost every stock that is made a tender offer has price increases before the announcement. The SEC has in reality done very little to control this leaking of inside information. For every one that the SEC does anything at all about there are 10 the SEC doesn't even notice.

A couple of years ago I noticed a stock of mine double on negative earnings announcements, I couldn't understand why. Six months later the stock was taken over by Pfizer. Seventy-two hours before Pfizer announced the tender offer the stock was up another 25%. When I wrote the SEC they said they would look into it, but don't ever expect to hear from them and don't write back to the SEC asking them anything about it.

What about the Microsoft/Intuit buyout? A CFO of a major company was talking to his wife about inside information. The wife and others made trades on the information. What happened when the SEC found out. Not one thing happened to the CFO.

What's my point? The SEC needs to control the so-called "professionals," those people that the investment community looks up to, before they spend their time worrying about what goes on on the internet (if the SEC has lots of extra time no problem, but they don't, so concentrate on the most important). In your opinion what's the worst problem: someone spreading false or true information over the internet, or a CFO spreading inside information at the dinner table? I think it is the latter. A CFO of a major corporation should know better and most reasonably intelligent investors know better than to believe anything they read on the internet.

Another quote from the article talked about the release of information regarding a $850,000 write down at Diana Corporation, "That was clearly inside information," says Diana Chairman Richard Y. Fisher." I couldn't count the number of times in the last few months that I have heard Nightly Business Report (PPS) say that, "Diana does not make comments about its stock price." Why not? If Diana knew about the write down why didn't they report it. Why wait until someone could leak it out? (the problem is not how the leak was spread around rather by a newspaper, a daytime or evening business show or over the internet, the problem is where did the leak come from in the first place) That's one of the main problems with the leaking of inside information. Companies don't have to report pertinent market data to its shareholders when they are well aware of it unless they feel like it (I'm not referring to information that could have a negative affect on a company's competative advantage, I'm talking about information that investors need to know about to make good investment decisions such as write downs.). The problem is not with "cyberpostings" as your article infers. It's with the companies themselves withholding pertinent information from the public that could affect shareholder decisions.

Finally, "The Diana saga shows that the internet and on-line services are providing a new way to discuss securities: Anonymous people who may have hidden agendas can post any information they want, accurate or not, in a public forum." Again, the internet is a public forum, any reasonably intelligent investor is not going to react to information on the internet. However, talking about hidden agendas. Here is a comment from a news brief at Dain Bosworth (not much different than lots of other brokerage houses). "However, there is no guarantee of its accuracy or completeness. Recommendations made herein are intended for investors who are aware of, financially able to bear, and suited to the inherent risks involved. Dain Bosworth Incorporated, its employees, and their clients may from time to time have long or short positions in or options to purchase securities mentioned."

Business Week, hidden agendas have been around along time. Where have you been the last 100 years? What's worse? The internet posting anonymous information or a major brokerage house putting out a buy recommendation that they themselves have a short position in. Get real.

P.S. Since Business Week mostly publishes stories written in by CEOs and politicians, I'm going to go ahead and post my story on the internet. There is probably more readers there anyway.

Sincerely,