Ambac, Part III
Riddle Me this Batman: Over the past 2 months, we have seen at least 3 rallies predicated on the rumor of an Ambac (ABK) rescue -- either through a capital infusion, or a direct purchase of the company.
Let me remind you that just a week ago their triple-A rating was confirmed by the (choose one a. criminally negligent; b. technically incompetent) organizations known as Moody's and S&P.
To you can imagine my surprise when the stock was halted today. WSJ Marketbeat announced "Ambac Bailout Imminent! Maybe! Possibly!"
Then we learn that the deal was dead, and that Ambac needs to raise $1.5 billion dollars. Thus, all of those rumors and CNBC appear to have been patently false.
But here's the question that keeps coming up: Who are the people leaking this information? And, is this legal? Now, we have learned that all of these attempts at manipulating the market were based on rumors that proved to be false.
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Question: If material, non-public, inside information turns out to be none of the above (i.e., just rumors), has a crime been committed?
UPDATE: May 6, 2008 5:22am
CNBC reporter Charlie Gasparino has repeatedly caveated this to death on any of his reporting: He recommended people be “cautious” about trading on the latest rumors, and specifically noted that a deal has been rumored to be “close” before” and none had come to pass.
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Source:
Ambac Bailout Imminent! Maybe! Possibly!
David Gaffen
Marketbeat, March 5, 2008, 12:47 pm
http://blogs.wsj.com/marketbeat/2008/03/05/ambac-bailout-imminent-maybe-possibly/
Wednesday, March 05, 2008 | 03:00 PM | Permalink
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Comments
Well, Charlie Gasparino certainly juices late afternoon ratings for CNBC...
Posted by: Chief Tomahawk | Mar 5, 2008 3:10:00 PM
Has a crime been committed (if it was just rumours)? Probably not, but the story of the boy who cried wolf comes to mind wrt cnbc.
Posted by: Estragon | Mar 5, 2008 3:14:52 PM
Legal? Yes.
(Pump and dump schemes are illegal but honestly, how can those be proved beyond reasonable doubt?)
Moral? No.
Posted by: rj | Mar 5, 2008 3:15:08 PM
This market is totally ridiculous. There's this annoying perpetual tug-of-war that no one can consistently make money on, long or short. It's more frustrating than anything because of all these headfakes in every direction. But what can we do? That's the market. That's why it doesn't make sense to predict it, only react to it. All we can hope is that those false-rumor-bearers feel really bad and shameful inside.
Posted by: Turtle | Mar 5, 2008 3:19:42 PM
Check out the Fly's recent rantings on this issue...
www.ibankcoin.com
Posted by: Woodshedder | Mar 5, 2008 3:19:43 PM
well, taking a different tack, ambac bailout rumors could have prompted sell-offs... so perhaps there was a little market manipulation added to goose the indices in the desired direction.
Posted by: karen | Mar 5, 2008 3:24:07 PM
"This market is totally ridiculous. There's this annoying perpetual tug-of-war that no one can consistently make money on, long or short. It's more frustrating than anything because of all these headfakes in every direction. But what can we do?"
Easy. Get out and wait til the market makes sense.
Posted by: rj | Mar 5, 2008 3:24:14 PM
In my humble opinion.... CNBC = Financial Pornography
This is why is stay on Bloomberg and FOX Business....
Posted by: contratrader | Mar 5, 2008 3:24:26 PM
This aggravating fight between bulls and bears is like the cut on the roof of your mouth that would only heal if you could stop tonguing it. Choose a f**king direction!
Posted by: Bob Newhart | Mar 5, 2008 3:24:54 PM
Gasp!
Is it possible that some players on Wall Street have a highly visible misinformation artist on a MSM outlet?
Posted by: Say It Ain't So | Mar 5, 2008 3:25:05 PM
Let's do our best to sell down the markets and see if it works?
Posted by: Ben | Mar 5, 2008 3:25:06 PM
So BR, have you changed your take on the PPT?
Posted by: Pat G. | Mar 5, 2008 3:41:19 PM
The NSA knows who Gasparino has been talking to.
Posted by: Garuda | Mar 5, 2008 3:48:27 PM
Just off the top of my head (from what I recall from securities law from law school) the answer is yes, it is illegal.
Any person intentionally leaking known false information regarding a security would be guilty of a 10b-5 violation.
Posted by: Pool Shark | Mar 5, 2008 3:49:32 PM
The crime is that anyone would listen to "churnalism" oh, sorry CNBC
Posted by: jst | Mar 5, 2008 3:54:51 PM
btw,
Here's a link to a recently-filed class action lawsuit against Ambac and its officers for making materially false statements in order to inflate the market price of its shares between 2005 and November 2007:
http://www.lawyersandsettlements.com/case/ambac-securities.html
Posted by: Pool Shark | Mar 5, 2008 3:55:38 PM
If releasing false financial/market data is illegal, then our government commits a crime every time it releases anything regarding the economy.
But, that's not news, is it?
Sorry for wasting your time.
Posted by: Marcus Aurelius | Mar 5, 2008 4:06:30 PM
MA, good post reminding everyone how rigged and bogus it's become. The entire system is rotten to the core.
Posted by: SPECTRE of Deflation | Mar 5, 2008 4:09:23 PM
I guess the answer is "yes, it's legal", as long the cops turn their backs to it.
The SEC sucks. They ought to be ashamed.
Posted by: lunativ fringe | Mar 5, 2008 4:10:25 PM
Think about how horrible it'll be for the market if these monoline insurers actually get bailed out.
They won't be able to float rumours about a bailout to pump up the market every now and then.
Come to think of it, the market may actually sell on the news of an actual bailout, if it ever happens.
Posted by: Donaldo Rodrigues | Mar 5, 2008 4:23:59 PM
Here's my take on this issue of rumors & hard bargaining phase:
Bailouts & rumours - substantailly priced in, unless of course the government guarantees all risk taking in equity markets. Look at the muted market reaction with each successive AMBAIL-OUT news/rumour
Fed/Benny - a couple of more 50 BPs cuts and the fed action will be fully priced in. Benny speak - negative already!
Fiscal stimulus - almost priced in!
Bush speak - negative for sure!!
Buffett speak: Will likely stay positive as long as he is alive.
After all these gyrations over last 3 months, we are trading at the low end of the trading range - primarily as the market has finally adjusted to lower earnings and slower economy finally!
Next leg up will be hard to come by (commodities ain't giving up unless we are forced to go to depression/reflection stage...but a couple of more bad economic data points - and we have the next leg down in the markets to follow!
Posted by: N | Mar 5, 2008 4:24:19 PM
It's only a crime if we fail to put the people stupid enough to believe anything on CNBC in a ward with guards, dogs, and bad food so they don't harm anyone outside their immediate families.
Posted by: Howard | Mar 5, 2008 4:27:31 PM
Couldn't agree more. Charlie is just a stupid punk. Thinks he's the
last of the "old school gumshoe reporters." Out there in the streets
"maaaan", standing on the corner just out of view, head hung low,
fedora tilted down, trench coat fully buttoned as he waits for his I-
bank "bag-man" to deliver his next exclusive "scoop." What a friggin'
hack reporter. Wall Street uses this guy and the rest of the dopey
"sunshine crowd" on CNBC to deliver their bull sh*t messages to the
masses.
AMBAC and MBIA are in runoff mode. No new policies are being or will
ever be written. The state regulators will eventually take control of
these entities, as is their mandate, and the companies will be
liquidated and the assets (ha ha ha) split amongst the policyholders.
The Charlie G "scoop" from the other Friday (as well as the ones since then) was a big heaping steamy pile
of you know what. Just another "ploy by the boyz" to stave off the
demise of the monolines for yet another week, while they spend
countless 20-hour days in their respective "war rooms" trying to
figure out how to get out of this mess. Problem is, there is no way
out! The game is over boyz!!
Posted by: Dumpster | Mar 5, 2008 4:35:02 PM
Answer: Of course, but if you call the tune requested do you get chased? Charlie G has been filled the Dorfman hole for some time, and the powers that be love it. He throws bombs at the shorts, Bernacke's timing has been vicious re shorts. At the end of the day it reminds me of the awful musically effort "We all in the same Gang."
Along those lines, I am long Biggie, short Tupac.
Posted by: dave | Mar 5, 2008 4:43:10 PM
the small time investor has no business in this market- too many games being played by the big boys. hold on to your cash until it all hits the fan.
Posted by: mj | Mar 5, 2008 4:43:29 PM
