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----- Original Message -----
From: <A
href="mailto:todd@xxxxxxx"; title=todd@xxxxxxx>Todd Turner
To: <A href="mailto:'gannsghost@xxxxxxxxxxxxxxx'"
title=gannsghost@xxxxxxxxxxxxxxx>'gannsghost@xxxxxxxxxxxxxxx'
Sent: Thursday, March 01, 2001 2:32 PM
Subject: RE: [gannsghost] Copper's bullish outlook
<FONT
size=2>"It is rather fascinating
to see how we've moved from one extreme to another. Recently, analysts have been
leap-frogging over each other with stock downgrades of anything that resembles
technology, including a poor prognosis for the entire sector. It makes you
wonder what the truth is, whether things are as bad as they want you to believe,
or if this is another game to allow well-heeled clients to buy stocks at
ridiculously low prices, or allow brokerages to add stocks to their inventory at
bargain levels. <SPAN
class=448323619-01032001>"
<FONT color=#ff6600 face="Arial, Helvetica, sans-serif"
size=5>
<FONT color=#ff6600 face="Arial, Helvetica, sans-serif"
size=5>The Games Analysts
Play<FONT face="Arial, Helvetica, sans-serif"
size=2><FONT
face="Arial, Helvetica, sans-serif"><FONT
face="Arial, Helvetica, sans-serif" size=3><FONT
face="Arial, Helvetica, sans-serif" size=2><FONT
face="Verdana, Arial, Helvetica, sans-serif">By Michael Sincere, author of the
books: <A
href="http://www.invest-store.com/cgi-bin/pristine-bin/moreinfo.cgi?item=11549";><FONT
face="Verdana, Arial, Helvetica, sans-serif">The Long-Term Day
Trader <FONT face="Arial, Helvetica, sans-serif"
size=3><FONT
face="Verdana, Arial, Helvetica, sans-serif"> and <A
href="http://www.invest-store.com/cgi-bin/pristine-bin/moreinfo.cgi?item=11570";>The
After Hours Trader
M<FONT
face="Arial, Helvetica, sans-serif" size=2>any traders are already aware of the
games some pros play to separate them from their money. As traders, we know that
market makers and specialists will play games such as running the stops,
artificially gapping stocks up or down at the opening, and acting as The Ax on
certain stocks. But these games pale in comparison to the games many Wall Street
analysts play on unsuspecting retail investors and novice traders.
Some of the most notable
offenders have been identified in the press, including Paine Webber analyst
Walter Piecyk for his $1,000 a share price target for Qualcomm in 1999. To his
credit, he did lower his price target to $200 a share in 2000, but it was too
little and too late. The press has also had a field day with Henry Blodgett, the
Merrill Lynch analyst who put outrageously high price targets on Amazon.com
(AMZN) when it was trading at $250 a share.
Then we have well-known
Internet bull Mary Meeker from Morgan Stanley who told people to buy Priceline
(PCLN) when the stock was trading at $165 a share in 1999, repeated her
recommendation at $78, and then again on the way down until Priceline fell to
less than $3 a share. Forget about traditional stock valuations based on
earnings, she said. Morgan Stanley and Meeker both made millions in fees that
year. Another brilliant Meeker call was recommending WebMD (HLTH) when it was
trading at a little over $100 a share. It now trades for less than $10.
To be fair, other analysts
weren't quite so bullish, including Jonathon Cohen of Merrill Lynch, who wrote
in September, 1998: "In the next 12 to 18 months, we expect Amazon to trade for
something less than $50." It is ironic how analysts like Meeker and Blodgett got
all the publicity and were paraded around on television while Cohen's more
accurate price target was buried in a research report that barely saw the light
of day. Actually, it is not so ironic. It is the way Wall Street does business.
Basically, the investment banking divisions of the major brokerage firms raise
money for companies that need cash, so they strongly encourage their analysts to
be bullish on companies the firm represents. The bottom line: Most analysts are
not going to say anything controversial or negative about a current or future
client.
In a scathing report on how
analysts do business, CBS 60 Minutes interviewed Tom Brown, fired from
Donaldson, Lufkin & Jenrette (now CFSB), who revealed some of the secrets
behind analyst recommendations. "I don't know frankly how some of these analysts
live with themselves," he said at the time. He said it was hard to look at
himself in the mirror knowing that he may have caused some people to lose 50
percent of their retirement money. "They really are cheerleaders," Brown said of
analysts. "The investment banking group wants you to be wildly bullish about
everybody."
In a twist to the whole
sorry mess, the father of Jonathan Lebed, the 15-year-old boy who made a half
million dollars pumping and dumping penny stocks, defended his son's actions by
pointing out that his son is just emulating the actions of these high paid
analysts. In an article published in the New York Times magazine section, author
Michael Lewis pointed out that even a 15-year-old boy could figure out how the
system was being run. The biggest analysts on Wall Street were artificially
lowering their estimates for the companies they represented so the companies
could then beat the whisper numbers. In the middle of an excessively bullish
market, stocks were flying on the news a company beat analyst expectations,
which then gave the analyst a reason to issue another upgrade.
It is rather obvious that
individual stocks are being manipulated by savvy pros who are using 24-hour
financial news programs to pump the companies they represent. At least the SEC
charged someone with a crime, but you have to wonder if they are looking in all
the right places. Oliver Velez pointed out there is an eternal conflict of
interest between the retail and institutional divisions of major Wall Street
brokerage firms. "The retail brokerage arms of most Wall Street firms have
historically been money-losing enterprises, but are primarily used as the other
side of the transaction for their institutional clients," he says. "For
instance, how does an institutional mutual fund that is a client of a major Wall
Street brokerage firm get out of 4.4 million shares of an individual stock in a
short period of time? To sell 4.4 million shares close to the desired price in a
short period of time, you need a buyer. To help support the buy side is a
brokerage upgrade, an analyst recommending the stock to retail investors.
Although this action is not illegal, I think if more retail market players were
aware of this activity they might be a little more cautious about brokerage
upgrades and downgrades. Historically, they have a horrible record."
Of course there are
reputable analysts who tell investors the truth about the highly inflated
technology stocks, especially the Internet stocks. But there were dozens more
who basically took advantage of investor greed by making outrageous price calls
based on nothing more than a pie-in-the-sky story and ridiculous valuations. If
you looked at the fundamentals of many of these companies, it was quite clear
they weren't going to be making any money anytime soon, if ever.
Velez says that you can
often use analyst calls to your advantage. If an analyst upgrade comes when it
is obvious to everyone that the stock is on a rip-roaring tear to the upside,
you can use it as a contrarian signal. Indeed, when Blodgett and Meeker were
upgrading Priceline and Amazon, it was the time to sell, not buy. Velez says the
same is true in reverse, which more accurately reflects the current market
environment. "If a stock drops 70 percent," Velez says, "and there is a
downgrade after a huge decline, that can also be a contrarian indicator. It
doesn't always work out that way, but the individual market player will be far
better served by thinking in reverse of brokerage upgrades and downgrades after
a stock has already made a substantial move."
Although it might be a bit
late for those who got talked into buying many of the Internet stocks at the
top, there are many lessons to be learned from the games the analysts are
playing. If you are going to trade or invest in the stock market, it is
essential you understand how upgrades and downgrades influence a stock, and that
you learn the symbiotic relationship analysts have with the companies they are
analyzing."
It is rather
fascinating to see how we've moved from one extreme to another. Recently,
analysts have been leap-frogging over each other with stock downgrades of
anything that resembles technology, including a poor prognosis for the entire
sector. It makes you wonder what the truth is, whether things are as bad as they
want you to believe, or if this is another game to allow well-heeled clients to
buy stocks at ridiculously low prices, or allow brokerages to add stocks to
their inventory at bargain levels.
<FONT face=Tahoma
size=2>-----Original Message-----From: VZ
[mailto:noh_wave@xxxxxxxxx]Sent: March 1, 2001 8:00
AMTo: GG; NWMMSubject: [gannsghost] Copper's bullish
outlookHere's an excerpt from Jeff Cooper's
<A
href="http://www.tradingmarkets.com";>http://www.tradingmarkets.comcolumn,
from today.Selling Puts, right here, and gathering the creditsfrom
the Put sale to offset the cost of going long theCalls is a "time-worn"
strategy.In fact, I mentioned to our staff, that with theanalysts
bashing the techs, then secretly, havingtheir trading desks pile on, to go
long, is an oldtrick.Get
ready.VZ__________________________________________________Do
You Yahoo!?Yahoo! Shopping - Thousands of Stores. Millions of
Products.<A
href="http://shopping.yahoo.com/";>http://shopping.yahoo.com/
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