Magazine article Management Today

A Penny for Them

Magazine article Management Today

A Penny for Them

Article excerpt

Are tipsheets written by knaves solely for the consumption of greater fools, or are they integral to any investment market, part and parcel of the capitalist process?

If you lie awake at night wondering whether the stock market's recent buoyancy - which has taken the FTSE-100 Index from 2,900 to 4,300 in two years - is about to encounter the clifftop, here's a statistic that might give you some comfort. The Penny Share Guide, doyen of the tipsheets, is only selling 30,000 copies a month. In 1987, when the market last took a major fall, Penny Share Guide's circulation reached an amazing 97,000.

Cynics say that tipsheets such as Penny Share Guide, and there are at least 20 others, are written by knaves solely for the consumption of greater fools, the people upon whom you unload this month's overpriced stocks at even higher prices next month. Only when even the greater fools start to wise up do stocks crash. And if the tipsheets' advice is so good, argue the sceptics, then why aren't those who produce them millionaires?

Such cynicism is a little unfair. For a start, there are one or two tipsheet millionaires around. Nigel Wray, now at Burford, made his first fortune as the founder of the Fleet Street Letter, which later merged with Michael Green's Carlton Communications. And tipping in any form is surely integral to any investment market, indeed part and parcel of the whole capitalist process. It's effectively the raison d'etre of that army of analysts employed in the City of London.

Even so, the differences between the tipsheet and those classy circulars put out by the posh brokers are all too obvious. A circular from Morgan Stanley or BZW gives you a lot of information about the company and its shares: the 'buy' or 'sell' recommendation is relatively incidental. But the whole point of the tipsheet is the tip. And of course, there's that other vital distinction, the tipsheets emphasise the spiv.... sorry, less expensive, end of the stock market.

Mainstream investment - the business of pension funds, insurance companies and most wealthy individuals - is as concerned with avoiding loss as with making profits, an attitude that makes sense if you've got worthwhile assets to start with. But if you haven't, it might suit your mien to go for the less reputable stocks. …

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