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Blood on the Street

May 02, 2006

Blood on the Street  

At the start of each year I write down about 30 books that I want to read before the end of the year. The topics are as diverse as my interestshistory, biographies, baseball and stock market history, are just of few of the categories that make it to my annual reading list.

I recently completed Blood on the Street by Charles Gasparino and highly recommend it. In addition to being well researched with ample notes, Gasparino is a senior writer for Newsweek and a former writer for The Wall Street Journal. After the bubble burst for Internet stocks in 2000, Gasparino brought the story of the huge conflicts of interest analysts faced when recommending stocks to national attention when he was writing for The Wall Street Journal. His book, which I believe was recommended by Munger or Buffett at a recent Berkshire shareholder meeting, gives you a ringside to one of the many ways Wall Street makes money at the expense of investors.

The book focuses on three analysts during the dot.com mania: Jack Grubman of Salomon Smith Barney, Henry Blodget of Merrill Lynch and Mary "Queen of the Internet" Meeker of Morgan Stanley. Gasparino details the pressure stock analysts faced to issue positive stock ratings on companies that did investment-banking business with their firms. Analysts were hesitant to issue sell signals or write reports critical of the company they were "researching" in fear of losing the millions of dollars of investment banking business their firms made. It is estimated that following the tainted research of these biased reports investors lost billions of dollars of wealth.

There are many examples of analysts publicly recommending to "back the truck up and buy" a stock on their buy list while writing disparaging emails about those very same companies in private. I always had my doubts prior to the dot.com crash how objective analysts really are when millions of dollars were on the line in banking fees. New York state attorney general Eliot Spitzer did a great public service by exposing this fraud and cracking down on Wall Street's dirty secret.

I follow in the footsteps of Sergeant Friday in Dragnet who used to say "just the facts ma'am". By reading company annual reports, SEC filings and business magazines like Fortune and Forbes, an investor can get much of the information and facts they need in order to make an intelligent investment decision. My goal at Hidden Values Alert is to uncover companies that you might never find on your own and present you with the facts. And no, we don't have any investment bankers on staff.

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Charles Mizrahi is editor and publisher of Hidden Values Alert newsletter, which focuses on finding stocks trading significantly lower than their underlying business value. He has over 23 years experience in the financial world as a money manager and investor. Email:
charlesmizrahi@gmail.com, Webpage: www.HiddenValuesAlert.com


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