Readers Report
How to Get Ordinary Investors Back into the Market
No wonder buy-and-hold investors aren't likely to come back into the market anytime soon ("Whipsawed by Wall Street," Cover Story, Mar. 10). The majority of pundits and so-called strategists I see and read on a daily basis still advocate that a good portion of an investor's portfolio be invested in equities, a stance they have maintained for much of this bear market. Meanwhile, the mutual-fund industry has done little to help individual investors: It has maintained a low cash position since the market's peak in early 2000, apparently afraid to sell in spite of the market's extreme overvaluation.
The money-management industry missed a golden opportunity to educate the public that buy-and-hold is not forever, and that bear markets can evolve into a multiyear event. They are now faced with an extremely disillusioned investor base that shows no proclivity to become enlightened anytime soon.
Robert Parish
Yardley, Pa.
David Henry and Marcia Vickers explore the underlying battle each individual investor is fighting to find the "next" place to create that nest egg, when all can see the difficult world that we may be living in for many years to come. For 15 years I had been a buy-and-hold investor. But the last year forced me to shift to trading. In the past, one could buy and go to sleep that night. Now, neither individual investing nor mutual funds guarantee peace.
Pranay Mital
Singapore
If the Federal Reserve and the Securities & Exchange Commission want investors to return to Wall Street, it's time to eliminate the hedge funds, index futures, exchange-traded funds, and all the other gimmicks that pro traders use to manipulate the market. They have destroyed the idea of buying shares in a company and becoming a partial owner of that company. They have destroyed the idea of equity.
Carol Nickels
Philadelphia
What is needed is a tax code that not only removes favored tax treatment of institutional money but also penalizes institutions that sell stocks in less than a designated holding period, say six months. Such a rule would force institutions to be much more deliberate in their purchasing and more inclined to "buy and hold." Although Wall Street would lobby against any law that might diminish activity, in the end they will profit by the return of the individual investor and the creation of products that add value, not volatility.
Richard Klitzberg
Boca Raton, Fla.
The Justice Dept. on Corporate Fraud
"What's cooperation" (Capital Wrapup, Mar. 17) is correct in observing that the revision of the Federal Principles of Prosecution of Business Organizations seeks to ensure that our prosecutors consider whether such companies' cooperation with our investigations is authentic. However, with regard to waiver of the attorney-client privilege, the principles are clear that: "The Department does not...consider waiver of a corporation's attorney-client and work product protection an absolute requirement...."
The Department has no fixed position on what specifically constitutes authentic cooperation. The principles direct prosecutors to weigh a variety of factors, including: overly broad assertions of corporate representation of employees or former employees; inappropriate directions to employees or their counsel, such as directions not to cooperate openly and fully with the investigation including, for example, the direction to decline to be interviewed; making presentations or submissions that contain misleading assertions or omissions; incomplete or delayed production of records; and failure to promptly disclose illegal conduct known to the corporation.
Larry D. Thompson
Deputy Attorney General
Washington
Editor's note: The writer is chairman of the President's Corporate Fraud Task Force.
The Monster That Wants to Destroy the Digital Home
"A real Hollywood horror story" (Information Technology, Mar. 10) focuses on the potential threat of new technologies to the profit margins of Hollywood studios. The real monster is Digital Rights Management. After DRM blocking and screening hooks are implanted into music, movie, game, and other types of entertainment files, and after the corresponding decoders are placed in their respective multimedia devices, it's highly unlikely that an MPEG-4 encoded movie, for example, that plays in your living room plasma TV will not be wirelessly transferable to your bedroom TV or to the TV facing the back seat of your sport-utility vehicle. And even if it can be transferred, it probably won't play on these different devices.
Securing a fair rate of return for content creators is essential if we are to have a thriving entertainment business. But we should not adopt methods that will reduce the demand for, and ultimately the profits of, those individuals and firms that add so much to our lives.
Barbara Devaney
Wilton, Conn.
Setting the Record Straight on Next Level Communications
Motorola Inc. didn't "come across" Next Level Communications deliberately or use its "shares to buy an 80% stake in Next Level" ("Next Level: A grim fairy tale," BusinessWeek Investor, Mar. 10). When Motorola acquired General Instrument Corp. in an $11 billion deal in January, 2000, Next Level was already a GI subsidiary. Far from being a "tiny cub of a company," Next Level had already worked its way through more than $350 million in GI investment.
No one denies that Next Level is in financial trouble. At the same time, no one but Motorola seems to be offering a solution for the shareholders, employees, customers, and technology by offering a path forward in these difficult times. Moreover, the Delaware Court of Chancery refused to enjoin Motorola's pending tender offer for all of the outstanding shares of stock of Next Level and rejected all of Next Level's claims. This decision was made on Tuesday evening, Feb. 25.
Don McLellan
Corporate Vice-President
Mergers & Acquisitions
Motorola Inc.
Schaumburg, Ill.
Editor's note: Because of BusinessWeek's production schedule, the story went to press before the court ruled.
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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