Magazine article Editor & Publisher

Analyze This & That

Magazine article Editor & Publisher

Analyze This & That

Article excerpt

Raters of the lost market could gain a lot by studying journalism

I'll admit I used to be a little bit in awe of stock analysts. They could talk with apparent knowledge about hedges and subordinated debt and intangible asset amortization. Even their shorthand -- all those casual references to "cap ex" and "last quarter's guidance" -- bespoke a sophistication that seems unobtainable to those of us so dim we actually majored in journalism.

But then, a couple of years ago, former Securities and Exchange Commission (SEC) Chairman Arthur Levitt issued his so-called "Reg FD," the rule that prohibited the common practice among public companies of disclosing significant news to favored analysts or investors while keeping it from the press and the investing public. Suddenly, we reporters could get in on all those insider conference calls. What a shock awaited us behind the green door.

Public companies -- especially newspaper companies -- love to whine about Wall Street's relentless demand for short-term results. But if you have an image of tough-talking analysts holding executives' feet to the fire during conference calls -- well, take a listen to them some time. Analysts routinely introduce their questions with some comment like, "Great quarter, guys!" If a company is announcing an acquisition, the first thing the analysts say, one after another, is something like, "Great deal, guys!"

Clearly, analysts are not heeding the commandment in the title of the book by former Chicago Tribune sportswriter Jerome Holtzman -- No Cheering in the Press Box. I can only imagine a White House press conference conducted like an analysts' call: "Nice work on the Homeland Security Act, Mr. President!" "Great diplomacy at that G-7 summit, sir!"

Of course, it wasn't just this unseemly toadying that wiped away whatever awe of analysts remained. As we now know, some big-time analysts behaved badly while riding up the dot-com and telecom stock bubble. Because much of their compensation was tied to winning underwriting or consulting business for their firm, analysts would laud certain stocks on the many cable TV channels devoted to soft-core porn of the financial variety. In e-mail messages to colleagues, they were disparaging these same stocks as dogs.

But it seems to me that analysts, their employers, and the SEC that regulates them both are drawing exactly the wrong lessons from this scandal.

As last week's editorial in E&P noted, the SEC has already imposed strict conflict-of-interest disclosure requirements for analysts who appear on cable or broadcast TV shows -- and now the New York Stock Exchange is asking regulators to extend those rules to newspapers. …

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