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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: per strandberg who wrote (55807)	4/13/1999 12:26:00 PM
From: Knighty Tin	Respond to of 132070

Per, See techstocks.com on this subject. Most analysts buy into the "guidance" the co. gives them. The cos. have found it good for their stock price to overestimate earnings early in the quarter, then lower them quietly, and then beat the newly lowered targets. It is a scam, but the analysts go along with it for several reasons. First, to do otherwise would require some actual research. I think they neither have the time nor the skills, nor the talent to perform actual research. Secondly, those who deviate from the guidance do not get invited to the restricted meetings or receive the banking business. Analysts make money with the banking business and by sucking big commissions into stocks they follow. That means they have to be backing up their bankers and playing kissy-face with institutional clients most of the time. There is an organization to which most analysts belong, The Institute of Chartered Financial Analysts and the CFA is their professional designation. They have to pass 3 tests over 3 years. This course of study embodies poor accounting techniques, idiotic investment theories, goofus economics, retardo statistics, and slapstick humor, otherwise known as ethics. Ask most CFAs what "quality of earnings" means and they will tell you, beating the estimate. <g> The laws against priveleged information are odd. You can gather as much insider or otherwise non-public info as you want. You just can't use it. Of course, this is all nudge, nudge, wink, wink. What Ivan Boesky went to prison for is now accepted practice. We had an example recently of a handful of analysts being tipped off that sales at Compaq were not so hot. They got their clients out before the public heard the news, and even then, the public heard the news from clients of those analysts. That stinks and they should all have been arrested, according to the law. But besides a law suit against Compaq, nothing happened. I have worked as an analyst before I got a PM job and I still have many friends in the biz. They are not all sleazy and incomptetent. But so many are that they provide little service to regular investors. As far as measuring performance goes, the most famous is the II All American team. However, this is a beauty contest and has nothing to do with being right. People vote on the analysts who do the best job of wining and dining them, not the ones who are right on the stocks. Analysts do get sued, but the litigators rarely win. If you read a brokerage report, it has more legal flim flam than analysis.