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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: mauser96 who wrote (27101)	6/29/2000 11:02:53 PM
From: Rick	Respond to of 54805

A very interesting message by TRJ was just pointed out on the "Q - buying range" thread by q_long: ultimate.org - Fred

To: mauser96 who wrote (27101)	7/1/2000 10:34:21 AM
From: StockHawk	Read Replies (2) \| Respond to of 54805

re: Lucius wrote: Investment banking and institutional clients come first, you and I come last. I try to read their reports in two parts - fact and opinion. I discount part of the first and ignore the second. That's beautiful advice, Lucius. It is yet another situation where "follow the money" brings out the truest picture. How do Investment Banks make money? First, by underwriting securitiy issues. So what is their motivation there? To sell as many securities as possible from as many clients as possible. And what better way to intice clients that to show them the glowing analysts reports your firm issues concernig its clients? How else do they make money? Through commissions on retail sales. Take the case of two brokers and two clients, each with $1 mil to invest. The first broker puts his clients into a handful of G&K's and holds firm. The portfolio rises to $5 mil after 5 years without any adjustments. The second broker follows the wind. He buys utilities, paper stocks, oil companies, tech, whatever is "in" week by week. After five years his client's portfolio is worth $1.2 mil. And the brokers? In most cases the first would have made a handful of commissions on the initial purchases and nothing more. The second, rich on commissions, just bought a second yacht. The biggest problem with analysts isn't that they are not smart people, or that they are uninformed. It is that they are motivated, subtley or overtly, by outside factors. The biggest danger with their reports is that some people will be encouraged to believe what they want to believe. So I buy a stock, the brokerage house that underwrote the issue and wants to underwrite more, issues a very bullish report. I read the report and think, wow, I just made a great investment, it's all right here in black and white, this company is gonna shine and make me a bundle. I knew I was right. Yeah. StockHawk