Re: [CANSLIM] analysts

From: jch <jchjch@earthlink.net >
Subject: Re: [CANSLIM] analysts
Date: Tue, 13 Aug 2002 09:56:18 -0500
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Tom
NYSE specialists have a hand in this too--When you experience 7% stop loss 
execute at LOD 15% loss you begin to look toward Level II trading on NASDAQ 
where you are under electronic control--no humanoids--read the following:

Richard Ney on the Role of the Specialist
"The story is told that after he had been deported to Italy, Lucky Luciano 
granted an interview in which he described a visit to the floor of the New 
York Stock Exchange. When the operations of floor specialists had been 
explained to him, he said, 'A terrible thing happened. I realized I'd 
joined the wrong mob'" (1Ney, 8).

It was with these words that Richard Ney began his first of three books on 
the nature of the New York Stock Exchange. Ney wrote over 20 years ago, a 
time when a 750 Dow was high and today's volumes were beyond imagining. 
Some of his material is dated, and must be read in the light in which it 
was written. But the main premise of his books is still true: that the 
specialist exists not to ensure the free and orderly trade of stock in a 
particular company, but to fatten upon the innocence and ignorance of the 
small investor.

The New York Stock Exchange is not an auction market (2Ney, 86), though 
many investors still hold onto that image. It is a rigged market. Volume is 
an effect of price. Prices are controlled absolutely by the specialists, 
the 'market makers' in individual stocks. It was this discovery that led 
Mr. Ney to eventually give us small investors a priceless gift: enlightenment.

"Studying the transactions in each stock, I became immediately conscious 
that, on too many occasion to be a coincidence, a stock would advance from 
its morning low and then, often during the afternoon, would show an up-tick 
of a half-point or more on a large block of anywhere from 1,500 to 5,000 or 
more shares. This transaction seemed to herald a transformation in what was 
taking place, for immediately thereafter the stock would begin to drop like 
Newton's apple. Before I could find out what caused this, another question 
presented itself: What caused the same thing to happen at the low point in 
that stock's decline? For it was also apparent that a block of stock of the 
same size often appeared on a down-tick of a half-point or more, after 
which the stock quickly rallied. Together these two facts seemed to give a 
stock's pattern continuity. At the end of several days of investigation, I 
discovered that these transactions at the top and bottom of a stock's price 
pattern were for the specialist's own account. ... Clod that I was, I had 
at last recognized that, although the study of human nature may not be 
fashionable among economists, it is never out of season" (2Ney, 9)."
John Heiman




>guess I am too jaded from too many years inside the securities industry, I
>am not even shocked by all this, I presumed all of this was still happening,
>just like it always has, at the major wirehouses
>
>----- Original Message -----
>From: "Duke Miller" <dukemill@tampabay.rr.com>
>To: <canslim@lists.xmission.com>
>Sent: Monday, August 12, 2002 4:44 PM
>Subject: RE: [CANSLIM] analysts
>
>
>This is incredible.
>
>I pulled up the story, and was further shocked by this revelation:
>
>In a discussion with (his  boss) Mr. Kim about his progress on the
>report, Mr. Boss made clear his doubts on the sector. He said Mr. Kim
>began to fret. Mr. Boss, who sat within earshot of Mr. Kim, said his
>superior called the investment bankers and discussed the report, but was
>careful to do so on his cellphone. Mr. Boss said that Mr. Kim had told
>him to be careful to limit conversations with investment banking to
>cellphones because Mr. Spitzer's release of the now infamous Merrill
>Lynch e-mail messages had been so damaging to that firm. Furthermore,
>internal phone lines, which might be taped, were not to be used.
>
>And near the end of the article:
>
>"In an affidavit that Mr. Boss submitted to Salomon and the New York
>attorney general, he said investment bankers at the firm regularly told
>Mr. Kim of pending banking assignments and merger and acquisition
>activities involving companies in his sector. "In violation of the
>rules, Steve issued favorable research reports on the companies involved
>(homebuilders) after he became knowledgeable of the transactions," Mr.
>Boss said in his affidavit.
>
>"Mr. Boss also said in his statement that shortly after the Masco
>Corporation, a maker of building products, sold 22 million shares to the
>public in an underwriting co-managed by Salomon this spring, and after
>Mr. Kim had raised his estimates for the company, Mr. Kim asked Masco
>management to help with the installation of a new kitchen in his
>Westchester home. According to Mr. Boss's affidavit, Masco spent more
>than $10,000 sending materials and two high-level managers from Michigan
>to Mr. Kim's home for several days."
>
>And this is a subsidiary of Citigroup?
>
>With all that's gone on, these guys are either brain-dead, or totally
>brain-washed.
>
>Duke
>
>
>
>-----Original Message-----
>From: owner-canslim@lists.xmission.com
>[mailto:owner-canslim@lists.xmission.com] On Behalf Of Patrick Wahl
>Sent: Monday, August 12, 2002 12:05 PM
>To: canslim@lists.xmission.com
>Subject: [CANSLIM] analysts
>
>
>Well, those Wall Street weasels are still weasels, even after promising
>reform.
>Here is the link, since it requires registration, some people will
>probably not be able
>to get there or wish to register, so I've excerpted a couple of
>passages below -
>
>http://www.nytimes.com/2002/08/11/business/yourmoney/11BROK.html
>
>
>The two executives boasted that Salomon, Citigroup's investment bank
>subsidiary, had been the first to adopt reforms suggested by Eliot
>Spitzer, the
>New York attorney general, who is investigating Wall Street research.
>They
>also proposed additional moves that regulators might take to prevent a
>firm's
>investment bankers from exerting improper influence on its research
>analysts ..... As Mr. Boss tells the tale, in late June, after spending
>weeks on a report
>analyzing three office furniture companies, he was lukewarm about the
>stocks'
>prospects and assigned them a neutral and high-risk rating. He argued
>that
>until the overall business climate improved, demand for these companies'
>
>products would be lackluster. When two Salomon investment bankers and
>Mr.
>Boss's immediate supervisor saw the draft report, they demanded that he
>revise it to be more upbeat. Mr. Boss refused. A few days later, on June
>27, he
>was fired. Mr. Boss, 33, was offered $24,230 in severance from Salomon,
>which he refused.
>
>Beginning on June 3, for example, the firm said that any fact checking
>by the
>investment banking division of draft research reports would be limited
>to the
>first research written about an initial public offering. Moreover, the
>rules said
>that any draft research sent to investment banking for fact checking
>"must
>omit the rating and target price as well as the investment thesis and
>valuation
>analysis sections."
>
>According to Mr. Boss, two Salomon investment bankers, Richard Moriarty
>and Marc Schneider, flouted those rules the week of June 23, demanding
>to
>see Mr. Boss's report, which was in draft form on his laptop computer.
>
>Stephen S. Kim, the analyst covering home-building stocks at Salomon and
>
>Mr. Boss's immediate supervisor, told him to put the report on the
>firm's
>internal network so it could be reviewed by the investment bankers. Mr.
>Boss
>protested, noting the firm's new rules. Nevertheless, Mr. Schneider soon
>went
>to the research department and reviewed the report on Mr. Boss's laptop.
>Two
>of the three office furnishings stocks that Mr. Boss had advised
>investors to be
>cautious of " Interface and Steelcase " had recently issued bonds that
>were
>underwritten by Salomon.
>
>
>
>
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