Don't Blame A Blog For Your Bad Investments When The Market's Being Manipulated

from the don't-shoot-the-messenger dept

The stock market was abuzz yesterday with the fallout from a post on Engadget -- which turned out to be false -- saying Apple was delaying the iPhone and the next version of the OS X operating system. In the minutes after the report, which was based on an faked email that was sent out to Apple employees, shares in the company tumbled 5% and volume spiked. After Apple denied the report, the stock went on to recover most of the drop, but plenty of investors are seeing red with Engadget, claiming the site's shoddy reporting "cost" them thousands of dollars -- even though judging the credibility of rumors is part and parcel of investing. It's hard to see much fault in what Engadget posted, since the email in question did actually go out to Apple employees. It's convenient for many people to bring out the generality that you can't expect anything better from blogs, but they've quickly forgotten how a "legitimate" news source spread false rumors about Microsoft buying Yahoo a couple of weeks ago. But the bigger issue here is how it's beginning to look like market manipulation is on the rise, and Engadget may have been an unknowing accomplice. In addition to the Yahoo rumors, which led its shares up 20%, rumors about Palm -- rumors which haven't proven true -- have driven its shares up recently too. With M&A speculation at fever pitch, the market's ripe for takeover rumors, while the pressure on media (both new and old) is more intense than ever to break stories. If the SEC or other authorities are going to look into the situation, it's not the media outlets that need to be investigated, but rather the players spreading the disinformation.


Reader Comments (rss)

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    Bubba, May 17th, 2007 @ 1:59pm

    Blog to blame? No. Good journalism? Also no.

    You're right - don't blame the blog for the investment loss. However, one need not invoke that argument to criticize the poor journalism that seems to have completely lacked any fact checking. Bloggers want to be treated as journalists? Act like them.

     

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      Anonymous Coward, May 17th, 2007 @ 2:39pm

      Re: Blog to blame? No. Good journalism? Also no

      "Act like them."

      Not to nitpick, but I think they're acting EXACTLY like journalists (these days, anyway).

       

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    Jamie, May 17th, 2007 @ 2:15pm

    Put blame where blame belongs

    You are completely right in saying that the blog should not be blamed for the investors losses, but that doesn't let them off the hook for posting rumors as facts.

    I don't think they were wrong to post the story, but they should have made sure to qualify it as an unsubstantiated rumor.

    Blogs are partially news, partially opinion, and partially gossip and rumor. Nothing wrong with the mix, as long as it is clearly defined.

    Blame for posting an unsubstantiated rumor as fact goes to Engadget, but blame for poor investing strategy goes to the investors.

     

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      SailorRipley, May 18th, 2007 @ 8:32am

      Re: Put blame where blame belongs

      I agree blogs shouldn't be blamed for the losses.

      I also agree they shouldn't be let off the hook for posting rumors as facts (at least not the bloggers/sites that want the journalistic stature (journalism as it used to be, not what is has mutated into)).

      However, I don't really agree with that this should have been qualified as an unsubstantiated rumor...

      I agree they should have qualified it as unsubstantiated rumor if someone had sent them an email (even if it was from an employee using his apple corp. email account) informing them that there were going to be delays. In that case, they should have said for example "...an apple employee claims...".

      But what's case here: they got a copy of the email, from a trustworthy source, who no doubt was fooled as well, showing the email was sent to thousands of apple employees, appearing to be real. Apart from it passing most normal journalistic tests (trustworthy source, appearance of legitimacy, being sent to plenty of apple employees), apart from getting confirmation from Steve Jobs himself (or one of his minions), what else could anybody have done?

      Not to mention the fact that Apple has the habit of not commenting on anything, so trying to get confirmation at best would have resulted in denial (which is what most people/companies would do if it was true as well, just to prevent it from leaking out until they could do it in a press release and put spin on it to limit the effect on stock).

      So I don't think there's much (if any) blame to be put on anybody for posting it as fact. Which doesn't mean I think Engadget is always in the right or the textbook example of good fact-checking, I just don't think they can be blamed in this particular case

       

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    Anonymous Coward, May 17th, 2007 @ 3:15pm

    "it's not the media outlets that need to be investigated, but rather the players spreading the disinformation"

    The media ARE the players spreading the disinformation. A single source is used to post a story like this?? If that's not disinformation...

     

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    Anonymous Coward, May 17th, 2007 @ 3:24pm

    engadget may not be wrong

    Since when has any technology company met their deadline? I expect delays... When a company says June, I know it is more likely September-December easy. In fact, if it does come out in June, its probably riddled with bugs as they released it without enough testing to meet the deadline.

     

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      SailorRipley, May 18th, 2007 @ 8:42am

      Re: engadget may not be wrong

      I agree that most of the times deadlines are not met, especially by tech companies, however, you have to make a distinction between two things:

      the internal deadline and the public deadline... it is in fact those internal deadlines that often are not met...if you don't meet the public deadline, it's either because somebody was too dumb to put enough margin between the internal deadline and the public one (to allow for normal delays) or there are some really big, unforeseen (and unforeseeable) issues.

      Before moving to the US I worked for a very competitive IT company for many years, and on every project there was always a difference between the date we told a client we would have (= install) the website/software/... and the date we (internally) expected to be ready (=finished, tested and ready for installation). Of course there were projects we didn't meet the latter deadline, but we always met the deadlines given to clients.

       

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    RandomThoughts, May 17th, 2007 @ 6:31pm

    Hell, Jim Cramer talked about exactly this situation last year. He even used Apple as an example. Of course, he said you do it with the bozo's over at the Wall Street Journal, but thats another story.

     

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    Mark, May 17th, 2007 @ 9:40pm

    This just in: Iraq has WMD - US taking action to p

    The mainstream media, in its own vitreous edifice, should hesitate before casting stones.

     

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    Sandman619, May 18th, 2007 @ 3:25am

    Engadget does bear full responsibility for the effects that it launched on the Stock Market. As far as I am aware, they were the only media to run this story, which was based on a single message transmission. They did not even bother to contact Apple's PR dept to verify the facts. They did not check for the alleged press release on Apple's site. They received a message and published that without any further effort. Granted, "They are a blog not a real news entity." Regardless, they have a responsibility to report accurate info and this was easy to verify before rushing to publish. But, Engadget proved that it is merely a hack and that a visit to that website is a waste of a keystroke. Granted, the only real loss was from selling the stock as if fell, remember, two dumasses are merely two dumasses. Cheers!

     

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      SailorRipley, May 18th, 2007 @ 8:54am

      Re:

      Not that I'm an Engadget fanboy (including this one, I now have read 3 articles on their site), but please...

      they bear no responsibility...

      1) they forced nobody to sell, if you want to blame anybody, blame the people who took action based on a message on an internet website which said "...we have it on authority that as of today..."

      2) being the only media to run a story is called having a scoop, provided the story is (or turns out to be) true of course.

      3) Do you honestly think Apple PR is going to confirm (assuming it was true) the rumor so people can read it first on Engadget? Or would they deny it, so they can be the first to air it in a press release where they can put as much spin on it as they want (and in fact, by denying, buy some time to figure out what spin to put on it)...
      I'm sure people/companies have never done that before. Oh wait...

      4) they got the email from a trustworthy source, who obviously in the past has provided them with correct information, the email was clearly sent to plenty of apple employees and looked to be legit...shy of getting Steve Jobs to confirm the story (good luck with that), what else should they have tried? Contacting any of the employees on the email list would have told them what they already knew: that the employee in question got the email. Contact Apple PR? well, I already covered that.

      Don't get me wrong, I'm not that good a Christian that I believe in he who is without sin can caste the first stone...I just believe whoever casts any stone, should make sure their aim is true.

       

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    James, May 18th, 2007 @ 7:15am

    Blame

    You can blame Engadget for shotty reporting skills, but not for your stock market losses.

    If you're so ignorant as to sell on any rumor that pops up then you really shouldn't be investing in the stock market anyway.

    The rest of us actually ENJOY these sort of knee-jerk reactions because it allows us to buy an otherwise, over-priced on speculation stock, on the cheap (not this particular one mind you but others that have had this sort of thing happen).

    Amateurs.

     

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