Mohan,
One rule of thumb is to buy when the Wall Street guys are downgrading and vice-versa. You just have to make an educated guess on where the subsequent upgrade will occur after the stock tanks a bit. Old game. Of course that's not much help if you are holding already and your stock gaps down!
Here is an exerpt from an SI post (I hope he doesn't mind!) that describes the industry from a sort of personal knowledge insight....
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"....I will add that the independent broker set up her own office because of the restrictions imposed upon brokers by the "distinguished, highly regarded" firm for which she worked: 1) Brokers were specifically ordered never to perform their own research on a company, and were denied internet connections on their office computers for fear they would violate that rule. They could only say or use information that the research and sales departments wanted used. 2) Brokers were specifically ordered never to suggest buying any stock, bond, or mutual fund that was not on the firm's recommended list (they could, of course, respond to specific security information inquiries from clients, but could only make their own specific suggestions to generic inquiries from the approved list) as developed by their analysts, market makers, and sales people--she knew for a fact that some of the recommendations were made because the market makers had too big of an inventory, or acquired too much at higher prices, and needed to unload it. Recommendations for bonds other than government securities could only refer to those the bond traders had in inventory. Stocks handled by market makers were always on the recommended-buy list. She readily agreed with my opinion that I never trusted any retail broker's recommendation because they are being paid not to "advise clients" but to push whatever it is that the central firm authorities want to sell today. My friend said that she has a hell of a lot more work for the money as an independent broker, but that she can now sleep soundly at nights because she can apply her own best ethical standards to meet her clients' needs, rather than the brokerage firm's profit desires. And in the long run, she believes that fair profits will best flow from providing client service and satisfaction, and not from morally problematic client manipulation.
So, SEC, who are the "real" hypsters in the financial securities industries? And I haven't even mentioned all the mutual fund managers who go on the financial talk shows to tout stocks they have _already_ purchased for their funds. I have yet to hear from one who does what the Motley Fool does on the internet--tell you in advance what they are going to buy or sell within the next week.
But of course the SEC gets its primary managers and policy makers from these mainstream industry sources, and they expect to return to lucrative positions as partners in the same types of firms when they have enhanced their resumes by doing their government service duty. I agree that we need a government organization to investigate, prosecute, and suppress illegalities and fraud (perhaps, as in most states, a division of the attorney general's office, in cooperation with the secretary of state's corporate record-keeping division). But the present SEC has a vested interest in helping to maintain the kind of legal fraud that is now perpetrated on small investors by the securities industry....."
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Take particular note of that last paragraph and then this from the SEC's News Digest from Oct 8, 1997.
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SECURITIES AND EXCHANGE COMMISSION ANNOUNCES THAT CHARLES SENATORE,
SOUTHEAST REGIONAL DIRECTOR, TO LEAVE THE SEC FOR MERRILL LYNCH
The Commission announced today that Charles V. Senatore,
Regional Director for the agency's Southeast Region, will be
leaving the Commission in early November 1997. Mr. Senatore
will join Merrill Lynch, Pierce, Fenner & Smith in New York on
December 1, 1997 as First Vice President and Assistant General
Counsel, with senior level responsibility for regulatory
matters worldwide.
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It's definitely a big money game and is TOO EASY, but like you said you just gotta play the game!!!
Mark |
