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Wall Street Is Whispering on Gossip Street, USA

Strange as it may seem, investment pros are now spreading rumors on chat boards.

Who would have expected Wall Streeters to stoop so low?

Investment pros have always been gossip hounds. But lately they have been rummaging the online chat boards for corporate morsels -- and spreading them around. Essentially, some of the high-paid gurus who castigate individuals for lazily trafficking chat boards are doing no better.

Last month, for example, as

Network Solutions'


stock was going through the roof, one worried money manager says he called an analyst to discover what was happening. "I don't know what's going on," the analyst said. "I've read the chat boards and I didn't see anything." The response "sent me tumbling off my chair," the manager says.

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Then take the



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. As it was fizzling out Tuesday, a money manager called

contending that Lycos would soon be on the block again. The suitors? "I'm thinking CMGI or a traditional media company," replied the manager, who was long Lycos. How does he know? "Well," the manager admitted, "the online guy seemed to get a rumor right last time -- so I'm trading on it."

Or take Friday, May 7. Wall Street was buzzing with rumors about



, which traded heavily all day. "I'm hearing that the


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CFO is going to Compaq," said one Wall Street money manager who requested anonymity. Strange. That same rumor appeared on the

Silicon Investor

chat boards a day earlier.

That ilk of a Compaq rumor made it all the way to the options pit, as word

circulated that a Dell COO might be heading over to Compaq; Dell declined comment.

Another Wall Street analyst, coy on naming names, said he had it on good authority that


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was getting serious about buying Dell. But

, a pay-to-gossip chat site, had this nugget of information two days earlier: There is "a vague rumor out that IBM

will acquire Dell very soon."'s claim to fame? "106 Rumors Reported in 1998 Became Reality." The theory, it seems, is to get so many rumors in print that a few are bound to become true. How did Dell feel about this rumor? "Again, we can't comment on rumors or speculation," said an exasperated spokesman.

Of course, Wall Street analysts have been known to spread a rumor or two without the aid of the online community. But use of chat boards as a research tool -- a seemingly growing trend -- raises real questions about the credibility of the Street. "Why are money managers listening to that trash?" a West Coast analyst asks.

Perhaps it's the view that there's actually more legitimate stuff on the boards these days. "Lately there has been a lot more leakage from company people onto the boards," says Randy Befumo, an analyst at the money management firm

Legg Mason Fund Adviser

and a former writer for

The Motley Fool

who says he's not a chat-room hound himself. "Companies are having a lot of trouble keeping them off chat boards and disclosing information."

After all the speculation late last week about Compaq, the company did make an announcement Monday about plans to simplify its distribution model. Company officials, however, weren't exactly primed to announce anything much more substantial than that. When confronted with the deluge of rumors last Friday about impending executive arrivals, Compaq's communications director, Alan Hodel, said: "I don't know about you, but I'm going fishing this weekend."

Too bad Streeters are spending more of their time fishing for rumors. Wall Street's squatting on this part of Main Street doesn't bode well for anyone.