March 22, 2001

Don't Like the Reco? Change It!

If it was ever in doubt before, here's proof that so-called "independent" investment analysts are just puppets dancing on company strings. The scarcity of sell ratings, even as the economy sinks into recession and as stocks plunge, tells us that companies usually get their way.

After all, companies have leverage. They can stop dishing up lucrative deals to the investment bankers who fail to get analysts to change negative recos. And since the investment banking department generates the cash that pays analysts, analysts find reasons to tout new stocks with the shakiest of financials, and keep "buy" recommendations on other stocks long after they turn into pure-bred turkeys.

But analysts are by no means the hapless victims in this play. The real dupes are investors who believe analyst recommendations are gospel. They're stuck holding onto stocks that are no longer -- or probably never were -- worth buying.

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