Buyside provides a valuable service to institutions. Sellside helps their own firms and themselves get bonuses for unloading stock.
Not many buysiders will describe the canned research they get from executing firms as "valuable." The best research is that which is produced by "pure," research only firms and cost tens of thousands of dollars per year.
As for sellside analysts who are paid to "unload" stock, are you saying that what they conduct are large pump and dump operations? If so, are you proposing that this is a brand new practice, or that the regulators (SEC, SROs, state agencies) have turned their head on what is, as you describe it, an obviously illicit practice?
Now I'm making an assumption that growth mutual funds that follow the momentum investing style use buyside analysts to help them with their decisionmaking.
They might, a tiny bit, sure.
I was talking to a small fund manager that had slowing sales data indirectly from a large CEO back in November...over the past year even I have been presented with some inside information that I never gave to anyone or traded on. I had acquisition information on PRMS...information is out there and those with the right contacts...have access to a lot better information...
Not sure what the point is here. Analyst research for the buyside is a packaged good. Conversations such as you mentioned back in November occurred regularly, and were blessed by the regulators, until Reg FD came along. Plus, unless someone says something lavacious like, "I just heard this from Joe Smith at XXX," there's generally nothing in the world that precludes such information from being either (a) rumor, or (b) lucky coincidence. Is it possible it's inside information? Sure.
But my point was, and is: buysiders have long been aware of the true nature of analysts "buy" and "sell" rating, even while retail folks were, in full lemming fashion, giving such ratings their full, undivided attention...and pushing their money behind that attention.
I have to tell you. I really don't feel the least bit of pity for people who bought a $120/sh stock at an analysts recommendation that they heard on Bloomberg or Reuters, and then watched the stock collapse to $2/sh.
Too bad. Did you think that this guy was doing you a favor? Do you always trust a stranger who works for the firm that underwrote the stock, speaking to a mass audience? Did you do the due diligence to even find out who the analyst worked for? What the ratio of buys to sells are in the analyst community?
I call that kind of a loss "tuition." Just as former SEC Chairman Levitt said that if you lose money from taking message board advice you deserve to lose it, I say the same for anyone who bought ABCD.com because Joe Smith at ABC said it's a "strong buy."
Strong buy for who? And why? And, how can you say that unless you know my personal financial situation?
To the media, I say, save me the sob stories. These folks are self-appointed geniuses when they're right, and litigants when they're wrong. That's whatcha get when you love something that doesn't love you back.
He was just a regular retail mutual fund manager. Don't you call these guys institutional guys?
Well, I'm not sure what you mean by a "retail mutual fund [manager]," since most mutual funds are open to retail entities and institutions, but: I generally refer to all true mutual funds, covered by the Act of '40, as institutions or buyside firms/funds.
Not sure what you're getting at with regard to the execution of trades.
When you said "momentum," in your first message, you didn't clarify it with regard to investing or trading. The assertion that standard buyside entities would be "momentum trading" is hilarious beyond words. As for momentum investing, yes, that's a likely side effect of attempting to run a growth-oriented fund, particularly these days. |
