Joined: 02/Sep/2006
Location: India
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Posts: 9319
Posted: 08/Feb/2008 at 9:56pm
Originally posted by MuKeShHaRlAlKa
hope this clears the role of analysts in a market
Good one.....more from that: Analysts as entertainers
Andy Kessler recounts in his book, Wall Street Meat - My Narrow Escape from the Stock Market Grinder. Kessler was a rank outsider on Wall Street, having come in as a semi-conductor analyst.
Now, what exactly is the role a stock analyst fulfils? At a very basic level, an analyst is supposed to have an opinion on the stock that helps investors make a decision whether to invest in that particular stock. But it is not as simple as that.
“Companies report earnings once a quarter. But stocks trade about 250 days a year. Something has to make them move up or down the other 246 days. Analysts fill that role. They recommend stocks, change recommendations, change earnings estimates, pound the table - whatever it takes for a sales force to go out with a story so someone will trade with the firm and generate commissions,” writes Kessler.
And what does it take to become an analyst on the Wall Street? “Let’s start with the basics. First, there are absolutely no qualifications whatsoever for an analyst job. I’ve always thought that a monkey could do the job, and many do. There are very few analyst training programs, and no obvious way to get a job as an analyst. Most are in the job by accident, as I certainly can attest to.” he writes.
So, how do analysts who really do not know their industry survive? As Kessler writes “Though I was starting to be right on my stocks, I was increasingly convinced it didn’t matter. I looked around the research department, and noticed that very few analysts were right about anything. The job of an analyst has more to do with impressing everyone they come in contact with, and less to do with stocks. At one meeting I had with Fred Kittler, a portfolio manger at JP Morgan, he paused, looked me in the eye and said, “You realise, you are not in the analysis business, you are in the entertainment business.”
Life can only be understood backwards—but it must be lived forwards
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