Dale,
I try to remember that Wall Street analysts have several functions. They probably arose from the need of the bosses at investment bankers to keep real tabs on who was running the companies they invested in and if they were acting diligently and honestly. The information the boss pays them for probably doesn't leave the inner chamber in its whole form.
Just as a fisherman may use some of his catch to cut up into chum to attract more fish, the boss may let out excerpts of the analyst's observations to create more market. Remember, the investment banker is affiliated with a commission-collecting broker, too.
As detailed information declines to disembodied fragments, and price charts begin to take a life of their own, the public and analysts create a spirit of the times. The bits of information can now be fed in a sort of "trend is your friend" stream to the public whereby other analysts can make similar pronouncements, not to educate those who don't pay them, but to help establish a current in either direction. There need not be any actual conspiracy whereby the houses speak to one another, they can feel it and play into it, knowing that they can always churn business.
We, just like the bosses, can buy well-run companies when they're cheap, if we know they're staying in business and making money. We can't collect commissions, so we have less of an interest in frenzy, but over a period of time, we can do well. If we were in the position of a brokerage firm, wouldn't we do things just the same way?
BTW, I just looked at some OLD charts. DJ-30 from '65 to '82 and SP-500 from 72-82 went so NOWHERE that it's a fright to behold. I am largely invested in broad indices and that truly gives me pause (I'm 50 and am not in the mood to wait 25 years for a big rise. That's okay for my kids.) However, chips are here to stay, and the manufacturers will always need expensive equipment. Linens are here to stay too, but the sheetmakers don't have to buy the latest copper, 300 mm equipment, they just have to change the print. I believe we will still see excellent business, and ultimately, the greedy must follow with their dollars. I, along with others, look forward to buying more in our favorite group from panicked sellers. I hope those shares come from sources other than the fine folks at this forum.
-Alan |
