Apple bears the brunt of Wall Street's new secret weapon: disinformation

Yesterday, Engadget published a now-refuted Apple email claiming that both the iPhone and Leopard were delayed. Today, the game is figuring out who was behind that email and why. Who cares? Well, when 60% of the normal daily volume of Apple stock trades in 23 minutes, we all should care.

Paul Kedrosky actually was the first person I saw to wonder if the email was actually a disinformation tactic in the service of market manipulation. He also notes that hedge fund D.E. Shaw cut its Apple holdings in Q1 by a third. Kevin Kelleher at GigaOM echoed the sentiment and tied it to the Microsoft/Yahoo boom and bust we implied was driven by Rupert Murdoch and his New York Post article last week. And the AAPL finance boards over at The Mac Observer are buzzing with rumors that some hedge funds with short positions in Apple may have not been very happy with the strong upward move of Apple stock over the past week and decided they had to do something about it. And as the New York Times noted last weekend, suspicious trading overall is on the rise, with the SEC fielding only about 160 analysts to police all US insider financial activity, including overseas investors.

This trend of using disinformation for competitive advantage has been building for more than a decade. Microsoft used astroturf campaigns -- fake grass-roots letter writing initiatives -- to sway public opinion in its US anti-trust case. The Vietnam Veterans for Truth successfully used a disinformation campaign about John Kerry's Vietnam War record to derail his campaign for US president. Similar techniques referred to as "fomenting" now are showing up in the financial arena, documented in public interviews by authorities such as TheStreet.com founder Jim Cramer. These activities are hugely illegal, but when there are billions of dollars at stake, many traders just don't care. To quote Jim Cramer in the New York Times:

What’s important when you are in that hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, that it’s important to create a new truth, to develop a fiction.

Apple stock quickly recovered yesterday after the false email was revealed. But no one should be fooled into thinking that disinformation will die nearly as quickly. Disinformation is the new secret weapon in financial markets, and with hedge funds having few filing, disclosure, and regulatory requirements, we may only find out about how this weapon is being used after some serious damage gets done to investors.

Full disclosure: the author has a long position in Apple shares, but has no positions in the other companies mentioned in this article.

Technorati Tags: Analysis, Apple, Disinformation, iPhone, Jim Cramer, John Kerry, Leopard, Paul Kedrosky, Rupert Murdoch, SEC, Stock manipulation