MARKET SCAMS

[Capt_Nemo]

To this guys knew found opins towards small investors!!!!!!



BITE ME!!!!!!!!!!!!!!!!!!!!!!!!!


March 22, 2004. (FinancialWire) While New York Attorney General Eliot Spitzer may have struck a blow for a more “honest” Wall Street in the now signed, sealed and delivered global research settlement, he has now rather brazenly admitted that he is not at all disturbed that the smaller, individual investor is getting the short end of the stick.
The Wall Street Journal, a unit of Dow Jones (NYSE: DJ), has reported that Spitzer is unbothered by the fact that a byproduct of his global settlement with Citigroup’s (NYSE: C) Salomon Smith Barney unit, Merrill Lynch & Co. (NYSE: MER) and Credit Suisse First Boston, a unit of Credit Suisse Group (NYSE: CSR), and seven other investment banks, has meant less research for individual investors.
"I'd rather have less but honest than more but fraudulent," he told the Journal, not explaining why there couldn’t be more “and” honest, too.
Going even further, he said Wall Street securities firms are "free to tailor research to institutional investors. Not only are they free to do that, but the market will shape what happens."
Spitzer did not comment on the issue of whether research available only to institutional investors but whose upgrades and downgrades are issued to the public at large is selective disclosure, leaving little investors as a lower class trading second-hand to institutions, much as he claimed was happening with market-timing in the mutual funds industries.
When Spitzer succeeded last year in separating investment-banking divisions from stock analysts to eliminate conflicts of interest, “the historic settlement was supposed to herald a new era of securities analysis -- one benefiting little-guy stock pickers. But now more than ever, the most pioneering, market-moving research is going exclusively to big mutual funds and the private investment pools known as hedge funds, not to the small investor for whom regulators waged their campaign,” noted the Journal.
“At the same time, Wall Street research available to individual investors is being produced under sharply curtailed budgets. The regulatory accord, in the interest of ending conflicts of interest, stopped firms from tying research budgets to investment-banking revenue. That left much more of the budgets to be funded by trading commissions, which are under heavy pressure.
“The 10 largest research departments on Wall Street are following nearly 20% fewer stocks than at the height of the boom in 2000, according to Reuters Research. Smith Barney, for example, no longer covers U.S. auto makers or airlines. It says it hopes to resume coverage of autos but hasn't tracked the industry since 2002.
At the end of 2,000, Merrill Lynch had 3,500 analysts. By the end of 2003, it had only 2,469. CSFB had 3,077, and by 2003, only 2,373. Smith Barney had 3,000, and by the end of 2003, it had only 2,300. J.P. Morgan Chase had 2,400 in 2001, and by the end of 2003, only 2,260. Goldman Sachs dropped from 2,315 to 1,950, Morgan Stanley from 2,140 to 1,925, and Lehman Brothers from 1,650 to 1,605.
According to the Journal, “institutional investors also gain the right to phone the Wall Street firms' analysts whenever they like, grilling them or asking them to do special analyses of a stock or an industry sector. By contrast, the best an individual investor could typically hope for would be to get a copy of an analyst's standard report through a stockbroker.”
Wall Street analysts may no longer be involved in winning investment banking business, but they are now whip-sawed by their value to their firms’ “ largest trading clients. Many big mutual funds and hedge funds let a securities firm know exactly how much value, or how little, they put on the stock analysis they're getting from the firm. In a private report to a brokerage firm, a fund will quantify how much its research had to do with winning the fund's trading business -- say, 40%. These report cards, called ‘commission votes,’ then break it down analyst by analyst, singling individuals out for accolades or criticism,” said the Journal.
“For analysts, commission votes loom large now that their pay can't be tied to how much investment-banking business they bring in,” creating what the Journal sais is a “potential new source of pressure on them: to mold research calls to please powerful trading clients.”
The Journal notes that “hundreds of midsize companies have lost analyst coverage entirely, and coverage of large companies has fallen off. Merrill Lynch hasn't followed major U.S. restaurant stocks such as McDonald's Corp. since it laid off its restaurant analyst last May, and hasn't covered big retailers such as Home Depot Inc. since laying off another analyst in September.”
These are monumental changes on the Street, and the loss of coverages for so many companies has prompted the National Investor Relations Institute (http://www.niri.org) and the Association for Investment Management and Research (http://www.aimr.org) to jointly develop guidelines that enable public companies to avail themselves of fee-based research that meet high standards of objectivity.
A byproduct of the guidelines, which mirror many of the even more intensive standards previously promulgated by the FIRST Research Consortium (http://www.firstresearchconsortium.com), is to make more credible research available to the individual investor.
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