The Internet is "disintermediating" the market (taking out the intermediaries, like stock brokers, real estate brokers.even, to some extent, reporters and editors). The Internet makes it possible for an investor to become his or her own market analyst, portfolio manager and trader. So we're seeing an unprecedented popularization and "democratization" of investing, including the self-management of pension plans. More and more market regulators are encouraging companies to file their financials on the Web, and there has been an explosion of investment-oriented discussion groups and websites like www.motleyfool.com and Yahoo! We're not yet a "population of investors", but we're moving that way. Millions of ordinary people are becoming better-informed about business.
The Bad
The same things that make the Internet history's most powerful communication medium - its speed, its global reach, and its virtually unregulated character - also scare the bejabbers out of stock market regulators. An ideal market is one in which information is reliable and available to all investors at the same time. To be efficient, stock markets must provide investors with information that is accurate, and they must ensure that it operates within groundrules that protect investors from chicanery and fraud.
There's a rising incidence of Internet-related market fraud. Everyone has heard of the "Flaming Ford Website", whose horror stories of self-igniting Fords cost the manufacturer millions until the site was traced to a firm of class-action litigation lawyers. Have you heard that, last April, shares of a California high tech firm skyrocketed, then crashed, on the strength of a fraudulent "Bloomberg" article on a fake "Bloomberg" website - costing investors millions? The U.S. National Consumers League has now set up an Internet Fraud Watch to act as a watchdog of cyber crime. And there's a whole Website (ScamBusters) devoted to the same purpose. Check out www.scambusters.com and www.fraud.org/internet/intset.htm The Ugly
The Ugly
Corporations and market regulators alike are starting to conduct surveillance on Internet Newsgroups and online discussion forums, watching for planned disinformation campaigns aimed at undermining competitors, touting bogus stocks, or otherwise poisoning the public well. Northwest Airlines was recently targeted by someone claiming in an air travel newsgroup that Northwest's fleet was unsafe (untrue). Heinz has been harrassed for years by the urban myth that its ketchup contains blood, and Proctor and Gamble by the urban myth that its logo is satanist.
Some abuses of discussion groups are more sneaky than abusive. Involved in a labour dispute? Check relevant Newsgroups and "fight sites" and you may be shocked at how union members, posing as "typical grass-roots employees", are outflanking your well thought-out news media initiatives to tell management's story!
