To: ild who wrote (49362 ) 1/11/2006 11:55:24 AM From: ild Read Replies (1) | Respond to From Fleck's reader:As an analyst (buy-side) I think there is more to it than simply analysts no longer doing their job. There is significant career risks in doing the right thing currently. For example, we are a valuation shop (we value businesses the old-fashion way by discounting free cash flows). Because of the significant run in the small cap market (where I fish), there are few businesses selling at discounts to what they are worth. So, do I 1) recommend overvalued businesses, or 2) recommend selling overvalued businesses, avoid new purchases and sit on cash. #2 is the correct answer, but here's the problem. First, clients may complain about the cash. "Why am I paying you a fee to be in cash?" Second, consultants hate cash and may give you a mandate to be fully invested. Third, assuming the mania continues, cash will hurt performance and you will be at risk of losing accounts, and then your job. Until valuations change, we are sticking to holding above average cash levels, but trust me, it is not easy from a performance derby or client perspective. Although all of this may not apply to the sell-side, I just wanted to give your readers a heads up, that pressure on the buy-side is just as great to "play the game".
