• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint

Beware of “Buyer Beware”

The American regulatory agencies, described by Henry Kaufmann as “… less than robust… Understaffed, under-funded, and badly fragmented,” have been, in his words, “slow to recognize some of the more serious abuses” in the financial markets.[70]

Among the biggest abuses—now recognized as a result of the bubble—have been those of the analysts who worked in the investment banks. The banks employ two kinds of analysts: Those who issue recommendations about individual firms, and those who try to get investors to buy the stocks. For an investor to have any confidence in a bank's analysts, he or she must believe that an analyst's report is something more than a disguised sales pitch. So banks have ordinarily insisted that analysis and sales were separated by a so-called Chinese wall which left analysts free to make honest appraisals. But during the bubble, it became clear that the Chinese wall was no protection at all for the independence of the analysts. Trying to sell IPs, analysts gave glowing recommendations to firms which collapsed within months. Trying to support the stocks of firms previously sold to the public, analysts issued buy recommendations as the company's share price plummeted. Trying to justify dozens of mistaken recommendations, analysts insisted that the New Economy was real, and then defended the notion by pointing to analysts at other banks who were making similar erroneous forecasts.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint