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To: t2 who wrote (877)	9/29/2000 7:57:02 PM
From: c. carlson	Read Replies (1) \| Respond to of 2260

This is the first Q Since the SEC put out the notice to companies that they will no longer tolerate "whispers" to analysts. ...that any disclosure must be public disclosure. I think that some of these guys have nothing to go on now. They are more likely to be blindsided buy surprises on the up and downside. Their margin for error has just gotten worse. Read all company news and listen to the CC's and you will be ahead of these guys. I'm sure of it!

To: t2 who wrote (877)	10/1/2000 1:27:02 PM
From: Mick Mørmøny	Respond to of 2260

Your perspectives about analysts are true. As a follow up, I am posting something in relation to Regulation FD that you may already know. Where do we go from here? Now that Sept. is gone, soon we will be hearing about Black Monday and big market drops happening in Oct. To be aware of these things, I think, will help prepare us for more volatile trading. Mick $$$ -------------------------------------------------------------------------------- Openness Can Be a Two-Way Street By KENNETH N. GILPIN SUNSHINE is healthy. But it can burn. Investors will receive a big dose of sunshine when Regulation FD takes effect on Oct. 23. The directive, from the Securities and Exchange Commission, will end disclosure of corporate information to some people and not others, including guidance on earnings. Some companies are already complying with the new rule. In a number of cases — Intel and Eastman Kodak, for example — what they had to say was not pretty. Nor was the reaction. Chuck Hill, director of research at First Call/Thompson Financial, which tracks analysts' earnings estimates, took time last week to talk about Regulation FD and the profit outlook for the remainder of the year. Here are excerpts from the conversation. Q. It seems many companies are already complying with this rule. Do you agree? A. I think that is correct. I don't have an exact figure, but there are certainly a meaningful number of companies that are doing this. No one can remember, for example, the last time Alcoa preannounced their earnings. Q. What sort of impact do you foresee when everybody is forced to live by the new rule? A. I don't know if you will see the full impact in the first couple of quarters, because I think some corporate lawyers will advise some companies to clam up completely, or close to it. That is not in the best interest of the companies, because they will find that the earnings estimates will be more volatile, in bigger ranges. And I think companies that don't say anything will start losing some coverage if they are not giving guidance. But once the dust settles, it will be pretty much business as usual, except that instead of giving guidance individually to analysts, the guidance will come in the form of a preannouncement or a Webcast. And we are going to see a lot more Webcasting of conference calls and meetings. Q. If the number of companies making preannouncements increases, will the stock market become even more volatile? A. It will create more volatility because the ranges on earnings estimates will be somewhat wider, and surprises will be more frequent on both the upside and the downside. On average, over the last six years, companies have beaten estimates by nearly three percentage points. That may get squeezed down to a smaller number. Q. How will this rule affect analysts? A. This will make their job harder rather than easier, but that is good. There are a lot of good analysts out there, but a number knew they could get away with not doing all the homework they should because they could regurgitate what the company was telling them. There should be a two-way relationship between an analyst and the company he or she is covering. As an independent, outside observer, an analyst is supposed to do some digging. But the analyst should be contributing as much information to the company as they are getting. The relationship should be valuable to both sides. Q. Even with the downside preannouncements, will third-quarter profits be healthy? A. Up until a week ago, we thought preannouncements were running at about a normal pace. But since then we have changed our tune. Now we are saying we will see more warnings than usual. Even if some of those are due to Regulation FD, that is not the whole story: there is a problem out there in that there are more companies with earnings problems than usual. Right now we are expecting earnings growth of 16.4 percent for the third quarter, down from an estimated 18.8 percent in early July. Q. What about the fourth quarter? A. There could be some problems in the fourth quarter. You are seeing these warnings for the third quarter because the American economy is slowing, energy prices are higher and the euro is weak. I think all three of these factors will be in play again in the fourth quarter. The stock market is correct in paying attention to the preannouncements we have seen, not for the impact they had in the third quarter, but rather for the effect they will have on fourth-quarter results. And the fourth quarter will tell us where we are headed in the first quarter. Q. Which are the strong and weak sectors? A. Consumer cyclicals — be it autos, housing or apparel — have problems. Basic materials companies — the papers, metals and chemicals — have also been crushed. Energy companies are going to do well in the third quarter. The estimate for the sector now is an earnings increase of 91 percent, up from 80 percent on Sept. 1. And technology is going to do well, with a projected increase of 35 percent. nytimes.com