Evening, nephew. The following was posted on the sndk thread, and came as no surprise to me after following your market theories over the last few years.
From: Mr. Miller
Friday, Jul 14, 2000 9:26 PM ET
I know that theStreet.com is junk, IMHO, but I thought this story should be posted as it brought out some very incriminating information that SSB will have to answer for. How is it that a major trade was made at or for SSB the day the analyst downgraded the semiconductor sector? Looks to me like someone has profited handsomely in a most convenient way from a timely call by the SSB analyst; a call that noone else on wallstreet agrees with. They try to make excuses that someone bet against the firm, but why was the trade made, a rather large trade, the next day? If that isn't suspicious, I do not know what is. You make your own call. Here's the article in reference...
Salomon Analyst's Negative Report Buried by Semiconductor Bulls
By Joe Bousquin
thestreet.com
Staff Reporter
7/14/00 8:39 PM ET
Today you're Henry Blodget. But tomorrow? Rodney Dangerfield, perhaps.
Jonathan Joseph, a Salomon Smith Barney analyst, knows the feeling. He managed to rally long-dormant semiconductor
bears with a July 5 call to arms that drove the industry's leading index down 9.3%. Amid potshots from rival firms,
Joseph managed for one day to galvanize investors with a contrarian report citing a host of industry-specific and
macroeconomic factors.
But the pendulum swung back on Joseph with stunning speed, as the chip stocks bounced back 4.5% the next
day. Ironically, driving the rally was a big bullish bet on the semiconductor industry -- placed by the trading desk
at none other than Joseph's firm, Salomon Smith Barney.
It's unclear whether that trade -- covering some $56 million worth of the Merrill Lynch Semiconductor
HOLDRs, a security that tracks the semiconductor stocks -- was executed for Salomon or for a client. But
someone, either within the firm or at one of its clients, made a multimillion bet against Joseph's view.
"Someone said this call is bunk," says a West Coast hedge fund trader who watched the trade post. "The irony is where
the trade was executed."
Salomon declined to comment, except to say Salomon is "the leader in trading semiconductor stocks. Market participants
recognize and appreciate this when deciding who should execute their trades."
Big Swing
In his July 5 call, Joseph cut the chip sector to neutral from outperform, pointing to higher inventories, softer prices and a
spike in spending as possible signs of a top. In the note, he cut his ratings on Advanced Micro Devices, National
Semiconductor, Silicon Storage Technology and Texas Instruments. (Of those companies, Solly has performed recent
underwriting for Advanced Micro and Silicon Storage.)
The note flew in the face of months of bullish sentiment on chips and took the air out of semiconductor stocks, which
had surged 66% since the beginning of the year.
The next day, analysts at other firms predictably took exception, mocking Joseph's thesis in their reports like, "End of the
Cycle? We Don't Think So." Firms such as J.P. Morgan and ABN Amro rebutted the analyst's comments.
Less predictably, Glen Yeung, an analyst who covers semiconductor-equipment stocks for Salomon, issued a note
seeking to protect issues he covers from Joseph's attack on the chip stocks.
"While it is undeniable that the fortunes of chipmakers will ultimately impact equipment fundamentals ... we believe the
fundamentals will get better before they get worse," Yeung wrote.
The Other Shoe
Then, on July 6, Solly's trading desk crossed 643,000 shares of the semiconductor HOLDRs, according to
AutEx/BlockData, a division of Thomson Financial. Traders who watched the trade post say it was a buy, or a bet that the
sector would go up.
That trade accounted for nearly half of the 1.4 million shares traded in the HOLDRS that day. In the weeks preceding July
6, daily volume in the HOLDRS averaged around 200,000 shares.
That Solly would be involved in a big chips trade isn't surprising. According to AutEx/BlockData, Salomon is the leading
volume trader of the 16 names listed in the Philadelphia Stock Exchange Semiconductor Index. Since Jan. 1, it has
accounted for 9% of all the trades in those names tracked by AutEx. The next most active firm, Morgan Stanley Dean
Witter (MWD:NYSE - news), has made 8% of the trades in those names.
Knowing Better
Whatever the story behind the big Solly block trade, Joseph isn't surprised. "Traders take positions against the analysts all
the time," Joseph says. "Their loyalty is to the tape and nothing else. And I want to make clear that there is never any
discussion whatsoever between the analyst and the desk before a research call is made."
So far, the July 6 trade has been a good one; the HOLDRS are up 13% since then. That means those 643,000 shares are
now worth about $65 million, or $9 million more than when they crossed Solly's desk.
Not bad pay for a little more than a week's work.
thestreet.com |
