Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
In the history of bad regulation by government bodies Sarbanes Oxley has got to be the crown jewel. Every since this nightmare set of rules was put into law earnings season has turned into a minefield. You never know when your going to step on the wrong company and get your leg blown off.
The original idea was to level the playing field and make it so that everyone got important company info (like quarterly reports) at the same time (one aspect of this regulation). This way the institutional traders wouldn't have an unfair advantage over the small investor. Now companies won't say a word outside of official announcements for fear of landing in the cell next to Ken Lay. What the law makers didn't understand was that there was a system in place. The company would give the wink and nod to analysts numbers and expectations and the information would disseminate through the system. The stocks would build in these expectations and when the company announced any surprises were somewhat adjusted for. Smart traders, large and small, could anticipate problems and get out in front of them.
Now, no one has any idea whats happening until the company announces it. The problem with this is that any adjustments that may have helped ease the hit are gone and its all happening in one day. Small investors are getting run over by institutional traders on the way out the door. We've seen it happen so many times now that earnings season is turning into a complete mess.Check out the earnings last night from AQNT, and WFMI.
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