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jim i hear u, but who will have more patents, who will make more money on wcdma and 3g in general
yes but the growth in stock price will increase way more in idcc than qcom and idcc supposedly has a lockdown of wcdma patents, way more than qcom, now tell me this is what your previous board and this board have been touting this for years,
are u changing your tune, if this is your position how come you have not stated this previously or shouted down the majority on your board who claimed this
i don't know, i just don't know
loch i hear ya, but why worry about what they think, they are invested in a stock that has little growth potential in comparison to idcc, the ones that realize this have invested in idcc, the ones that have not are jealous
firerocket he is in jail unless he agrees to make posts that are non-threatening and clean, he will not cut a deal according to what he posted on raging bull so he will not be coming back here
loch the point is that insider sales are going to effect a smaller company in regards to share price a lot more than a larger one
lochnroll a little bit different on a company whose worth is way more than idcc, when idcc reaches the heights of a qualcomm then u can comnpare the 2 otherwise it like comparing an apple to an orange
revlis thanks, but why the drop almost 40 cents is it just profit taking
ANYONE KNOW WHY AFTERHOURS THE PRICE WENT DOWN TO 13.95 WITH 100,000 SHARES
revlis understood, i hope it turns out to be a big deal
you boardmembers have a history of getting excited over small things and blowing them up the size of the hindenburg, the bottom line is that the stock will move when we get a real news release and then we will not need you to tell us how great it is because we will see the stock up to 50 dollars a share, the fact that we need to hear from you how great the news is tells me it is no big deal
i think you are reading too much into it
azdesert are u kidding us 80 dollars a share, explain to us the great news that would have propelled us that high if this was a few years ago, this is delusional thinking
seems u try to read too much into everything
i am sure some of the people here will claim i am bashing but i laugh yet again, my measly little post has nothing to do with stock price just like your hyping has nothing to do with it, i want the stock to go up, i just believe in the short term it is going down and i believe that the company has never delivered news that has been worth any excitement, that is why the stock is at 13 and not 100 as some has suggested it is worth, add that to the insider selling which killed our momentum at 19 and you have some questionable tactics by management
you have a class action lawsuit against sprint due to excessive options grants, imo idcc would be facing a similar lawsuit if anyone actually cared about the company
how come the biggest patent lawsuit history does not even get mentioned in the mainstream press except for some small papers, u would think the nytimes or some other major paper would give a little mention
according to this board, idcc was supposed to announce a new license agreement at the conference, funny how most of the longs were crying about the insider trading and now they get overexicited about a blah conference call and a presentation at the investment forum, when the ericy situation is resolved that is when you can get excited, because the bottom line is that idcc has yet to deliver a press release that has wowed us in anyway and to deny that is just being blind
firerocket i find it amusing that you are not mature enough to accept differing views on the stock, no my friend i don't care one way or the other, i covered myself with options if the stock goes over 13 and 15, if it goes down i will buy with my own money, either way i make out, i am just giving my opinion and i am not going anywhere
i don't accuse you of being a cheerleader, i give you the real deal and i don't care what you or anyone else thinks, i am not the one who was crying about the insiders selling in december and january, were you one of the many longs who were, did you have an agenda if you were, hmmmm
i think this will be a negative week, again we moved up with the market, and the market made a false pump and dump move based on the UN, wall street knows we are going to war, and so they want to suck some money out of the dopes, again this week the market goes negative
my dime good point i enjoy reading, but its tough my generation was raised by media, i could never handle doctor's offices, waiting on line, or boredom, that is why so many young peope have cellphones, but your right technology is a blessing and a curse at the same time
the market just had a fake rally based on blix's comments, i laugh at how these traders manipulate the market, they know we are going to war, yet whenever they get a little positive report even though they know it will not impact the actual war, they start a false rally get some more suckers bought in, then they dump, the real rally will not occur until it we occupy Baghdad and control it
jim it would have to be a monthly fee, i don't think you could charge per minute, your minutes would get eaten up too fast
jimlur i am excited about that prospect, if you could watch all 4 major broadcast channels on cellphones in the u.s., i think there would be a major demand for this, if you are riding a train, waiting for a doctors appt, waiting for a class, it would make the time go by much quicker
yes if people thought like that then ericy would be on their knees begging idcc to settle,
but there is a big problem with that theory, these are professional businessmen, and they don't think like some scared hick, that is why they are the ceo and you are just the lowly investor
i will say it one more time
ERICY IS NOT GOING TO BE BANKRUPTED BY THIS SUIT, ANYONE WHO THINKS OTHERWISE NEEDS TO TAKE A BUSINESS REFRESHER COURSE, THERE IS NO CHANCE THAT THIS CASE THREATENS BANKRUPTCY
False Alarm? REGARDING TERROR ALERT
Terror Alert Partly Based on Fabricated Information
By Brian Ross, Len Tepper and Jill Rackmill
Feb. 13 — A key piece of the information leading to recent terror alerts was fabricated, according to two senior law enforcement officials in Washington and New York.
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The officials said that a claim made by a captured al Qaeda member that Washington, New York or Florida would be hit by a "dirty bomb" sometime this week had proven to be a product of his imagination.
The informant described a detailed plan that an al Qaeda cell operating in either Virginia or Detroit had developed a way to slip past airport scanners with dirty bombs encased in shoes, suitcases, or laptops, sources told ABCNEWS. The informant reportedly cited specific targets of government buildings and Christian or clerical centers.
"This piece of that puzzle turns out to be fabricated and therefore the reason for a lot of the alarm, particularly in Washington this week, has been dissipated after they found out that this information was not true," said Vince Cannistraro, former CIA counter-terrorism chief and ABCNEWS consultant.
It was only after the threat level was elevated to orange — meaning high — last week, that the informant was subjected to a polygraph test by the FBI, officials told ABCNEWS.
"This person did not pass," said Cannistraro.
According to officials, the FBI and the CIA are pointing fingers at each other. An FBI spokesperson told ABCNEWS today he was "not familiar with the scenario," but did not think it was accurate.
Despite the fabricated report, there are no plans to change the threat level. Officials said other intelligence has been validated and that the high level of precautions is fully warranted.
New Yorkers Taking Police Presence in Stride
In New York, police are out in force in the subways, at train stations and airports and at the bridge and tunnel crossings into the city with radiation detectors and gas masks. In a press conference this afternoon, Mayor Michael Bloomberg said 16,000 law enforcement officials trained to combat terrorism were deployed in the city. Air patrols have also returned to New York.
"We are constantly changing what we're doing so no one can predict what instruments we'll be using and where we'll be going," Bloomberg said. The mayor stressed that while people should be vigilant, they should also be aware that New York City has been on code level orange for 17 months — since the Sept. 11, 2001 attacks that destroyed the World Trade Center.
New Yorkers, and people around the country, should not be frozen by fear and must carry on with their daily lives, the mayor said. New York Gov. George Pataki said it is important for people to be alert to anything suspicious around them, but that they should not spread rumors that could create panic.
‘Threat Is Still There’
"By no means do people believe the threat has evaporated," said Cannistraro. "The threat is still there, the question really is the timing and when this is going to happen."
It's not the first time a captured al Qaeda operative has made up a huge story and scared a lot of people.
The FBI concluded the information that led to a nationwide hunt for five men suspected of infiltrating the United States on Christmas Eve was fabricated by an informant, and the agency called off the alert sparked by the information.
Officials said this one got so far because it coincided with other intelligence, that officials still believe points to a coming attack, timed to hostilities with Iraq.
loop that is funny, i actually liked the war consultant line, let me go though i got rumsfeld on the line they need some help with the tactical planning in the first few days of the war, good luck
lets say we get settlement of 500 million or more and 3g contract, how high does the stock go in the first 4 weeks in your opinion
jimlur, u are right, no doubt about it, i have a core amount of shares that i am ready to wait 10 years if i have to, i think the inherent value of the stock goes over 1000 a share, but in the short run i want to see if i can make a nice amount on the resolution, if i don't i am done with the options, i just want to take a chance, but u are right it will cost me long term shares and i have accepted this, the core shares that i took off the table the other day however are covered by options if idcc makes a short term run over 15
good luck
jimlur for the long run that is good, does not mean that good news is coming, just that an experienced fund manager believes good news will come, he has no inside information, and in the period he bought the stock went from 19 to 12, this market will struggle over the next 2 to 4 week period and could bump down if some bad news hits in the world sphere, i think this is the perfect time to average down and i have done that, i don't see what moves this stock up over the next month
a lot of you guys tend to hang on every word in these conference calls, i think you are over analyzing, they are not revealing anything in subtle ways, you could interpret different words in all different ways, the person answering the question does not have time to word it in such a way to reveal intentions, nor would they want to, u have to get some perspective here, imo the stock is going down over the next couple of weeks, if you want to average down, now is a good time
teecee, my exit price for my core shares if between 500 and 1000, my out of the money options i am looking for 50 and above, the in the money ones are just protection for what i took off the table today, in about 2 weeks i will buy more core shares and try to time it right before first week of war, i still think we have 2 weeks until war starts and market will be down every day most likely until war starts and i think it will take time to see how decisive war is going, not to mention this high terrorist risk, so i will get back in, i just think idcc will be under 10 before i rebuy what i sold today
typical response by some of the posters here when someone expresses a negative view, again this one is for the cheap seats, I HAVE NOT GONE ANYWHERE, now grow up, all i am providing is a strategy, other longs here have averaged down with success, why can't I
nessco explain to us the great news, did nok set a rate, did we get ericy resolution, did we sign anybody else, yes 4th quarter of this year was higher than last year, baby steps, until we get real news this stock is going nowhere, don't forget people that stock rose on harris but more importantly rose in lockstep with the rise in the nasdaq, look at most stocks in the nas had a similar rise
fly this is a little different, this time we are taking out a government, this time we have to fight in the cities, this time we have had a 9/11 and a threat level of high, and a tape of bin laden saying he is allied with iraq, a lot more turmoil in the world now than in 91, by the way you still have at least 2 weeks before war starts, if you have one major terrorist attack in u.s. or europe this market will tank, let's pray that does not happen, but with the world situation the way it is i would not be on margin right now
dws, please explain what u mean and are trying to imply, remember people general market strategy, i only kick myself for not getting out earlier, the world situation will send stocks down over the next couple of weeks
teecee what is amf, i just took some shares off the table did not sell my whole position, i think it is the smart play, if it bumps up i have the amount i sold covered with options
nohotin according to colin powell it is fact check drudgereport.com for confirmation
To all, I took some shares off the table today, covered myself with some march options if it runs over 15
IMO i think the stock goes at the very least under 10 over the next couple of weeks, i am thinking this more because of the general market and lack of news from idcc, i think NOK is waiting on ericy resolution and if settlement happens i see it happening in late march, april, or may,
war is on the horizon and the market will go down until we see the first couple of weeks going well for us, also jitters on this terrorism alert, new bin laden tape where he pronounces his alliance with iraq will be coming out shortly,
today was a nice little bump but i think by end of week we give back gains, and turmoil in the world will send this under 10
How Corrupt Is Wall Street?
New revelations have investors baying for blood, and the scandal is widening
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Cover Image: Wall Street: How Corrupt Is It?
Table: A Heap of Trouble for Wall Street
Table: Where Does the Buck Stop?
How Analysts' Pay Packets Got So Fat
Chart: Big Deals, Big Bucks
Commentary: A Sorry Legacy the Street Can't Shake
Rainmaker in a Firestorm
Table: On the Spot
You Might Get Some of It Back
Table: Where to Go for Arbitration Help
Online Extra: Q&A with Eliot Spitzer
Online Extra: Q&A with Felix Rohatyn
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When Debases Kanjilal, a Queens (N.Y.) pediatrician, picked up his phone in early 2001 to call lawyer Jacob H. Zamansky, he had no idea he would whip up a full-fledged hurricane on Wall Street. Kanjilal claimed he lost $500,000 investing in Infospace Inc. (INSP ), an Internet stock he says his Merrill Lynch & Co. (MER ) broker urged him not to sell when it was trading at $60 a share. By the time he sold, it was down to $11. Zamansky filed a novel arbitration claim against Merrill in March, 2001, in which he argued that its star Net analyst, Henry Blodget, had misled investors by fraudulently promoting the stocks of companies with which the firm had investment banking relationships. That lawsuit led directly to an investigation by New York State Attorney General Eliot Spitzer, who stunned Merrill and its Wall Street brethren three weeks ago when he made public some shocking e-mail exchanges between Merrill analysts and bankers.
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That was just the start. Now, Spitzer is investigating Salomon Smith Barney, Morgan Stanley Dean Witter (MWD ), and at least three others. The Securities & Exchange Commission has launched a probe into practices at 10 firms, while the Justice Dept. is pondering an inquiry of its own. And plaintiffs' lawyers are advertising for clients and filing new suits daily.
The widening scandal has plunged Wall Street into crisis. The resulting furor is more thunderous than the one unleashed by Michael R. Milken's junk-bond schemes in the 1980s, the Prudential Securities limited-partnership debacle in the early '90s, or price-fixing on the Nasdaq later in the decade. In part, that's because many more individuals lost money in the recent market collapse than on earlier scandals.
But uproar over the relationships between analysts and their investment banking colleagues has also grown because it comes on the heels of several other scandals that raise big questions about how Wall Street operates. Already, probes are under way into Wall Street's shady initial public offering allocation practices, as well as its crucial role in setting up and selling the partnerships that led to Enron Corp.'s collapse. Worse, execs at many firms may have made a bundle investing in the partnerships, even as those same firms advised clients to hold Enron stock virtually until it went bankrupt. It all makes Wall Street seem rigged for the benefit of insiders as never before.
The damage goes way beyond the tattered reputations of the firms and their beleaguered analysts. The entire economy depends on the financial system to raise and allocate capital. And that financial system, in turn, is built on the integrity of its information. Should investors lose confidence in that information, it could deepen and prolong the bear market, as wary investors hesitate to put money into stocks. And it could easily put a damper on the economy if companies are less willing--or less able--to raise capital on Wall Street. "One of the precious things we have is the integrity of the financial markets. If that changes it could have dramatic repercussions on the dollar, on domestic inflation, on the economy," says Felix G. Rohatyn, former managing director of Lazard Freres & Co.
Wall Street has always struggled with conflicts of interest. Indeed, an investment bank is a business built on them. The same institution serves two masters: the companies for which it sells stock, issues bonds, or executes mergers; and the investors whom it advises. While companies want high prices for their newly issued stocks and low interest rates on their bonds, investors want low prices and high rates. In between, the bank gets fees from both and trades stocks and bonds on its own behalf as well, potentially putting its own interests at odds with those of all its customers.
But in recent years, those inherent conflicts have grown worse, as the sums to be made by overlooking them have grown enormous. That's because since the repeal of Depression-era banking laws, megabanks such as Citigroup (C ) and J.P. Morgan Chase (JPM ) are allowed to do everything from trading stocks to lending money and managing pension funds.
Chinese walls--jargon for the strict separation of the different lines of business conducted under the same roof--were supposed to keep the bankers honest and free from corruption. But a series of scandals since the early 1980s has eaten away at those foundations. The final blow, however, was the tide of money that flooded over Wall Street during the great tech bubble. Between the last quarter of 1998 and the first quarter of 2000, the tech-heavy Nasdaq market index soared from 1,500 to more than 5,000. Many investors made out like bandits. So did the investment banks. During the same period, according to Thomson Financial/First Call, Wall Street earned $10 billion in fees by raising nearly $245 billion for 1,300 companies, many of them profitless tech outfits that later blew up. The bubble burst in the spring of 2000, wiping out more than $4 trillion in investor wealth. "The fact is that a bubble market allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them," wrote famed investor Warren E. Buffett in his annual report to Berkshire Hathaway (BRK.A ) shareholders last year.
Staking their claim in the gold rush, Wall Street firms ramped up in the late '90s, hiring hordes of analysts, many of them inexperienced. New investment bankers were hired as well. A feeding frenzy set in as rivals fought to grab a big share of the market to bring companies public. At the same time, a new cult of equities came to life, as individuals invested in stocks as never before. True, many investors ignored common sense. Still, as analysts applauded stocks, trumpeting their picks on CNBC and other media, investors bought. "Investors took everything at face value, which was understandable. There wasn't a lot of information, and it was of varying quality," says Michael E. Kenneally, co-chairman and chief investment officer at Bank of America Capital Management Inc.
Only now are the ugly details of the conflicts at play being laid bare. In some of the e-mail turned up by Spitzer, analysts disparage stocks as "crap" and "junk" that they were pushing at the time. The e-mails are so incendiary that they threaten to thrust Wall Street into the sort of public-relations nightmare that Philip Morris (MO ), Ford (F ), Firestone, and Arthur Andersen have endured in recent years. All the ingredients are present: publicity-hungry attorneys general, packs of plaintiffs' lawyers, and potential congressional hearings. "The last thing the industry wants is...the drip-drip-drip of new stories every week," says Howard Schiffman, a former SEC Enforcement Div. lawyer now practicing privately in Washington.
More explosive documents may be on the way. Both Spitzer and the SEC are seeking from more than a dozen firms papers and e-mail related to analysts' recommendations and their potential conflicts of interest. While nobody knows what evidence will emerge, other firms will have their own smoking guns. And analyst pay is likely to emerge as a hot-button issue. Zamansky, for instance, claims that he has seen contracts from investment banks promising analysts 3% to 7% of all the investment banking revenues that they help to generate.
That would be clear proof that analysts were being paid to help the firms' banking clients, often at the expense of investors who expected objective advice.
The financial implications of this mess are enormous. Based on the evidence that has already emerged, Merrill is facing potential fraud claims by every retail investor who purchased any stock that Blodget & Co. may have insincerely recommended. If analysts covering other industries at the firm harbored similar doubts about the companies they hawked, the number of claimants will expand exponentially. Should other financial firms have similarly embarrassing documents in their files, Wall Street could easily be facing billions in potential liability. In a report released on Apr. 24, as the fiasco was unfolding, Prudential Financial analyst David Trone estimated the issue could cost Merrill alone $2 billion.
Heads could roll, too. If prosecutors conclude that firms are guilty of systemic fraud--rather than harboring a small group of rogues--research directors and other high-ranking execs could be vulnerable. That's why the way analysts were paid is such an explosive issue. In egregious cases, criminal prosecutions are possible. Although regulators have never thrown an analyst in jail for fraudulently recommending a stock, experts say that could happen if public outrage flames high enough. Spitzer, whose tough New York securities statutes give him unusually broad power to file criminal suits, says he won't stop short of structural reform. "I'm continuing to negotiate [with Merrill]," he told BusinessWeek on May 1. "They've been fruitful discussions, but negotiations can break down over a range of things. At this moment, we have significant issues that have not been resolved."
Over the long run, a risk bigger than legal penalties could be new restrictions that Spitzer or others place on the way investment banks do business. On May 8, the SEC is scheduled to approve new rules forcing analysts to limit and disclose contacts with investment banker colleagues. But there's good reason to question whether these steps will be enough to satisfy the industry's critics--some of whom seek a separation between investment banking and analysis. At the moment, such radical change is a long shot. But if the Democrat-controlled Senate latches on to the analyst issue, it could trigger embarrassing hearings or proposals for more stringent rules. "Other shoes will drop," says one securities-industry lobbyist. "If [Salomon's Jack] Grubman or [Morgan Stanley's] Mary Meeker turns up [in similar evidence], the sky is the limit" for this issue. "It has big legs."
It was never much of a secret that analysts who work at investment banks often work against investors. Sell ratings now make up less than 2% of analysts' recommendations, up from around 1% during the bull market, according to First Call. Analysts are under pressure from the companies they cover, as well as from big institutional clients who may own the stock, to give positive ratings. Michael Mayo, senior bank analyst at Prudential Financial, recently told the Senate Banking Committee that he had been exhorted to stay bullish throughout his career, from both his former employers and the companies he covers. Otherwise, he said, he doesn't get the same access that others do, which gives him a harder time making nuanced stock calls. "It's like playing basketball with one hand tied behind your back," says Mayo. Analysts also need to shine in surveys such as Institutional Investor's annual rankings, in which money managers vote for their favorite stockpickers, so they spend too much time lobbying clients rather than crunching numbers. "Analysts get focused on saying what they think the client wants to hear to win the vote," says Henry J. Herrmann, chief investment officer at Waddell & Reed Inc., a money manager.
The biggest factor now contaminating the system is compensation. To an ever-increasing degree, analysts' pay is tied to how much investment banking business they bring in. According to a Merrill memo released by Spitzer, Blodget detailed how he and his team had been involved in 52 investment banking transactions from December, 1999, to November, 2000, earning $115 million for the firm. Shortly thereafter, Blodget's pay package shot up from $3 million to $12 million. Charles L. Hill, First Call's director of research, says that when he was a retail analyst 20 years ago, if he helped investment bankers with a new client, he would get a small reward at year's end: "But it was the frosting on the cake. Now, it is the cake."
It would be an exaggeration to say analysts alone are to blame for Wall Street's woes. There's a much deeper problem involving everyone from credulous investors to deal-happy investment bankers and execs looking to fatten their wallets. "It's finally dawning on people that this incentive system we've given managers based on the value of stock options has encouraged management to puff up their companies a lot," says Robert J. Shiller, an economics professor at Yale University and author of the 2000 best-seller Irrational Exuberance.
Even so, experts say a lot of the corruption oozing from Wall Street has to do with an erosion in investment banking ethics and practices. It goes clear back to 1975, when fixed trading commissions were ended. Until then, investment banks had been able to make big bucks off pricey trading commissions. Slashed commissions meant the firms were forced to derive more revenues from investment banking business. "There's a real sense of sadness over what has happened in investment banking. It's not about what's right for a client, it's all about jamming a deal down a client's throat," says an ex-analyst who recently joined a hedge fund.
Consider Enron, which has paid $323 million to Wall Street in underwriting fees since 1986, according to Thomson. Goldman, Sachs & Co. (GS ) pocketed $69 million of that, while Salomon made off with $61 million, and Credit Suisse First Boston took $64 million. Indeed, two of CSFB's investment bankers, after helping to design Enron's off-the-books partnerships, sat on one of the partnerships' boards. According to a complaint filed in Houston Federal Court on Apr. 8, investment bankers generated megaprofits from secretly investing in Enron's hidden partnerships. Meanwhile, many analysts continued recommending the stock to the bitter end: 11 out of 16 analysts who follow Enron had buys or strong buys less than a month before the company's bankruptcy filing.
Enron may be an extreme example. Still, in the past, tradition and ethics played a large role in keeping investment bankers loyal to their corporate clients. Indeed, Wall Street itself used to have much more of an interest in guarding its reputation. Says Jay Ritter, a finance professor at the University of Florida: "These days, bankers are far more focused on short-term profits than on their long-term reputations."
That's likely to get worse as investment banking business continues to dry up. The amount being raised in initial public offerings is way off its 2000 highs. Now there are far fewer mergers and follow-on offerings taking place. Because of this, it's unlikely that Wall Street, after all its hiring during the tech bubble, can sustain its profitability. Goldman Sachs estimates that five of the top investment banks on Wall Street will have to get by on $2 billion less than the $16 billion in net revenues they racked up in 1999. If investment banks roll back to 1999 staffing levels, Putnam Lovell Securities estimates that banks will have to shrink their payrolls by 5%--putting over 13,000 out of work.
But no matter how much Wall Street shrinks, its credibility must grow again. Firms have already taken some steps, such as eliminating direct reporting by analysts to investment bankers. But the Street and the SEC still must hammer out a solid, enforceable code of conduct. And if strong reforms in how analysts are compensated aren't pursued, focusing on increased disclosure will do little to end the abuses. Beyond that, regulators may need to go after the firms' top brass--the folks who set the procedural as well as ethical tone. And the Street should take great pains to monitor itself in an effort to restore investors' confidence. "If Wall Street knows what is good for it and what is good for this country, it will very definitely clean up its act," says Rohatyn. Adds George H. Boyd III, head of equities at New York's Weiss, Peck & Greer: "This is an industry of trust; it's one of its key assets. If [Wall Street] loses it, it is going to have to invest in getting [that trust] back and putting in the controls to rebuild it. Without that trust, there's nothing."
Merrill Lynch apparently knows this. At its annual shareholder meeting on Apr. 26, Chairman and CEO David H. Komansky took an unprecedented stand on the analyst debacle, saying: "We have failed to live up to the high standards that are our tradition, and I want to take this opportunity to publicly apologize to our clients, our shareholders, and our employees." Other apologies may follow, as firms desperately try to assuage potentially litigious investors and unyielding regulators. But for Wall Street, just saying sorry at this stage may prove to be too little, too late.
By Marcia Vickers and Mike France, with Emily Thornton, David Henry, and Heather Timmons in New York and Mike McNamee in Washington
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Corrupt world of analysts
By Martha Smilgis
Special to The Examiner
Finally, the financial services subcommittee of the U.S. House of Representatives is investigating the corrupt world of Wall Street analysts. Apparently, the truckloads of angry letters and e-mails from irate investors who lost half their retirement savings finally goosed our public servants off their duffs. Unfortunately, it's a year late and a few trillion short -- but, hey, at least it's a step in the right direction.
Any conservatives who protest the federal government's interference in the business of free enterprise had better clam up. The Bush administration's thrust to privatize Social Security necessitates a regulatory body -- with bite -- to rake level the financial playing field before masses of innocent investors are further robbed of their investment dollars.
To its credit, the business print media have been quietly skewering analysts for the past six months. The most notorious candidates have been named and ridiculed for their preposterous price targets on stocks that circuitously profited their employers, the Wall Street investment bankers. Perhaps the op-ed headline in the Financial Times said it best: "Shoot All the Analysts."
There's no question this is a deceptive method for investors to learn about companies. The loudest analysts are often rainmakers drumming up business between the investment banks (their employers) and the companies they are assigned to cover. It's straightforward payola, with ineffective analysts pocketing $200,000 per year while the superstar producers can earn $10 million or more by rocketing up stocks in hot sectors.
Savvy investors who survived last year's slaughter learned to handle analysts: Ignore them. It is difficult because almost daily the gremlins spout gobbledygook about revised estimates of six phases of earnings projections. These fluctuating numbers, coupled with upgrades and downgrades, create a whirlwind that leaves investors dizzy and the stock often back where it started.
Of course, comparing year-over-year earnings and providing hard facts on the assets and advantages of a particular company are useful -- as is updated information about real estate holdings, patents, debt load and the competitive environment in which a company operates.
But this isn't happening. After hearing a long list of complaints, Congress will chastise the naughty rascals and insist they disclose their financial relationship with the stock they are hyping. (Since less than 1 percent of analysts recommend SELLING a stock, "hype" is the accurate term for their work.)
Congress will condemn analysts' corrupting "bonuses" and suggest independence. This won't work because no one will pay analysts except those with vested interests. (Mutual funds usually have their own in-house research departments.) No doubt Congress also will bear down on NYSE officials and the National Association of Security Dealers (NASD) to police their own. This also won't work because both groups profit from the status quo.
For Congress to bring about real change, it must go beyond the analysts who are front-line operatives for the upper echelons of the NYSE. The exchange is bucking the global trend to go public (and electronic) because it is a club of specialist firms that subtly jigger the market to favor its members. Going public means being subject to outside regulation, which would ultimately wither the advantages of being a member of the club.
Last week's software glitch -- the NYSE exchange closed down for 85 minutes -- revealed more than technical difficulties. The mishap forced light into the dark recesses of the arcane trading mechanism, and during that brief time, from later reports, investors gleaned just how disadvantaged they are.
Richard Grasso, chairman of the NYSE, vociferously explained how he closed the market to be fair to retail investors because posts 1-8 functioned improperly when a new software program failed. What is disturbing is that institutional investors (banks, brokerages, mutual funds, insurance companies, pension funds) were still able to trade. The malfunctioning software system applied only to retail investors.
Why do retail investors trade on separate software? Because we are second-class citizens when it comes to the NYSE. Despite our increasing numbers, we are out of the loop.
The inequity is caused by the specialists who are in the enviable position of seeing all buy and sell orders above and below the existing price of the stocks they handle. These wizards regularly tweak the market by moving large blocks of money in and out of the stock. In times of stress they create wild swings in stock prices (through short selling) in an attempt to wring every retail investor dry.
When Congress finishes scolding the analysts, it should direct its spotlight to the specialists on the NYSE and examine how floor trading handicaps individual investors.
This column runs exclusively in The Examiner on Thursdays and Sundays. E-mail Martha Smilgis at msmilgis@aol.com
jimlur, that statement is very right and totally accurate and i continue to read story after story of how these analysts touted stocks simply to appease and profit from the investment banking portion of their business dealings, they touted stocks that they said were garbage in internal memos, 60 minutes this past sunday gave another example, any smart investor knows that analysts price targets and predictions mean next to nothing, it is a game where the small investor is never considered for you to respond to me like that is laughable at best, u know i am right, i don't know what the agenda is in that statement by you, but again everybody here knows how corrupt the industry is, i am actually shocked by your post
witch, nobody respects any analysts anymore, they mean nothing, so the 2 or 3 we have mean even less, this year has proved how corrupt they are, all that matters now is the news releases