HWP -- Hewlett Packard Message Board

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Technology Stocks : HWP -- Hewlett Packard

HPQ 26.64

+2.7%

Nov 5 3:59 PM EST

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To: w0z who wrote (4580)	4/25/2002 9:56:06 AM
From: Elroy	of 4722

There is nothing wrong with a research department recommending a stock and the same companies' investment management group selling the stock. All that means is that the analyst's views are different from one money manager - the money manager just happens to work under the same corporate umbrella (Smith Barney, MSDW, whatever). The DO NOT work together. They are probably in different buildings and probably in different states. And their incentives are very different. The money manager only cares about outperforming his benchmark. Simple as that. The research analyst's incentives are much more complex - he cares about generating trading volumes in the stock so his brokerage house can get commissions, he cares about making a good reputation among all large institutions so he can get voted into the Institutional Investor rankings, he cares about generating corporate finance business in the stock so corporate finance can generate fees (this is where the big controversy is - nothing to do with the investment management side of the brokerage), and he cares about being correct on his call (Buy/Sell). He does NOT care whether the investment manager outperforms his index, because if the investment manager outperforms his index the research analyst gets nothing. Squat. Zero. Why would the research analyst collude with the investment management side of the business when he aint going to share in the benefit? Nuff said. Having made my point clearly (I think), I'm fairly amazed that the CFO of HWP doesn't seem to know this..... Elroy

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