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The Pied Pipers of Wall Street: How Analysts Sell You Down the River

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The best proof of Benjamin Mark Cole's premise - that brokerage houses have sold out common investors to curry favor with huge corporate interests - is the ease with which he accumulates examples of analysts hyping stocks that later went bust. Can the combination of self-interest, analyst hype, and subsequent stock price implosion somehow be coincidental? Or is it time to start calling a duck a duck (or, for that matter, a quack a quack)? Cole's indictment of Wall Street's most efficient salesmen comes just in time for investors looking for a culprit in the overnight evaporation of billions of dollars in retirement funds. Of course, analysts can't be blamed for the stock-market downturn, but their behavior during the run up deserves the close scrutiny it receives here. We [...] recommend this book to any investor who suspects that the true talent of the talking heads they see on CNBC might really be turning your money into theirs.

Is Ben Cole the only financial journalist in America who has the guts to tell the truth on how big brokerage firms are selling millions of investors down the river? Cole has done a masterful job in analyzing a major problem on Wall Street; the extinction of analysts on Wall Street who recommend selling stocks regardless of the price-to-earnings ratios of certain publicly traded companies. These experts work at large brokerage firms on Wall Street and play a crucial role in recommending to millions of investors which stocks to buy. Contrary to popular opinion on the television shows, these analysts are not objective because their real job is to bring in big underwriting fees for their firms. Cole outlines that investment banking -- raising money for companies that need cash is where the real money is made on Wall Street. Brokerages make millions on fees from those deals, so analysts will promote stocks that are flagging in the marketplace. Investors are lemmings following the next analysts' "buy" recommendation, as they loose their limited resources while investment banks cash in on those deals. I work in the financial services industry and have advanced degrees, but I find that Ben Cole's book has given me a market analysis I could never get from the "Gurus" on Wall Street. There is an important reason why the prestigious Bloomberg Press published this wonderfully researched and written book, because I am one of 78 million baby-boomers who will keep investing for years and this book will become the reference work of investing for years to come. A must read for investors.

Let the investor beware of sell-side analyst recommendations!

This book is a little late in arriving. Ten years ago few reporters and almost no individual investors understood that brokerage firm analysts got a lot of their income for bringing in investment banking business (IPOs, mergers, debt financings, and fair value opinions). Then Wall Street Journal reporter, John Dorfman, broke the story. In the old days, sell-side analysts were supposed to be ignorant of what was going on with investment bankers (the so-called Chinese wall) so that the analysts could write objective reports without being compromised by inside information. That Chinese wall doesn't really exist any more.

More than ten years ago, few institutional portfolio managers and buy-side analysts paid much attention to what sell-side analysts have to say. They pay even less attention now.

As the book points out, a sell-side analyst "is just a banker who writes reports." Those reports usually just regurgitate the latest line from the company.

Mr. Cole embroiders the consequences of this long-past fundamental shift with a history of how investment banking fees came to dominate the securities business relative to trading commissions, scam artists posing in different roles, underwritings of lousy companies that later failed, the nasty tricks of short sellers, and how institutional investors can make a few bucks from flipping IPOs.

Although all of the material is accurate, the book's other problem is that it views what is going on from the outside in, rather than the inside out. A lot of the mistakes that happen occur because everyone relies on the companies to explain what earnings will be (thanks to Regulation FD), analyst coverage is very thin, and many analysts are extremely inexperienced. These "analysts" will become even more investment banker-like in the future. What temporarily resuscitated the role of the sell-side analyst as stock picker was the arrival of the on-line individual trader during the Roaring 90s. A long bear market will continue to undermine any economic role for sell-side analysts other than as advisers to company executives. Most CEOs still think that sell-side analysts are important (mostly because of the short-term momentum reports can temporarily create) and court them. Mr. Cole failed to pick up on this point. That's the reason why Jack Grubman at Solomon Smith Barney made $25 million in one year. Was he worth it? You decide.

I was pleased to see that the book included several studies that showed the weaknesses of both the estimates and recommendations of sell-side analysts.

Will the financial media continue to flock to sell-side analysts? Darn right they will. Everyone else in the industry has real work to do, and there's lots of air time to fill up.

Where else is advice not very helpful? How much do you rely on used car sales people? Vinyl siding sales people? Fortune tellers?

Look straight at the facts . . . and take the right action. Be sure to read John Bogle's book, Common Sense on Mutual Funds, if you want to beat almost all other stock investors.

If you want to get a birdseye view of how the brokerages say there are looking out for your interest when they are mainly focused on maximizing their profit margins, get this book and read it twice. If you want to go lazily along thinking your stockbroker isn't like "the other guys" disregard it and then you'll have no one to blame. Cole's writing is punchy and concise, his book well-organized and you come away not only as a better stock-owner but a more trenchant Wall Street analyst. As Cole points out, catchy phrases about investing smart only apply to those who understand that self interest runs the world. It's about time somebody wrote a book for the average stock owner. Too much power is controlled by the big boys. Highly recommended.

This is the first book that I've read that clearly explains the conflicts of interests that make most Wall Street analysts untrustworthy. Using studies, anecdotes, and analyses of the stock market, Benjamin Cole clearly shows why most investors shouldn't trust recommendations by the talking-head analysts on CNBC. The book also recommends where to go to get good advice -- Web sites, etc. Lively, quick read. Check it out.

"The Pied Pipers of Wall Street" is a blockbuster of a book. Benjamin Cole has produced a searing indictment of an industry whose inherent conflicts have turned it into a deathtrap for unsuspecting investors. Though a tidy 219 pages, this is a thoroughly researched book and is full of stinging and poignant anecdotes about two-timing stock analysts and debunking short sellers. Cole also offers up a crash history lesson on the stock brokerage and investment banking businesses that gives readers a solid appreciation of how those practices evolved and why they became so conflicted.

Besides his sure-handed command of the subject matter, the author lends additional credibility to his book by steering clear of hyperbole and hyperventilation, instead letting his research and shocking case studies raise the decibel level. The book also offers sources of honest stock research and analysis that investors can trust, then concludes by outlining several regulatory strategies being contemplated by the U.S. Securities and Exchange Commission to remedy the problem.

All in all, "The Pied Pipers of Wall Street" is a great work of public service by a journalist who has held the stock houses up to the public humiliation they richly deserve while throwing a life raft to investors.

An excellent book that demonstrates that Wall Street's much touted analysts are basically PR guys for the folks brokerage firms really care about--investment banking clients. Written before th NY attorney general's investigation, the book nonetheless exposes the same corruption that is now making headlines. Before you buy a stock because some analyst recommends it, you really should read this book.

This book blows the lid off the 'boy's club' brokerage houses of Wall Street. In a fun to read, anecdotal style, Benjamin Mark Cole tells how and why it is in the best interests of investment advisors to lead "regular guy investors" down the garden path. Mr. Cole gives advice anyone can use to easily find unbiased investment advice. This book is a must-read for anyone who presently invests in the stock market or may do so in the future. Which is everyone.

Benjamin Mark Cole is an outstanding prize-winning investigative business reporter and it's a pleasure to read his first book. Although sophisticated investors do know about stock analysts' conflict of interests, most business media quote analysts without mentioning their conflicts, so I think many people still may not know about this problem. Everyday on CNBC you hear, XYZ Company's stock went up because so and so analyst upgraded a stock. The timing of this book is great because many investors were snookered by analysts rosy outlooks, even as stocks came tumbling down in the past year and a half. This book sets the record straight.

In The Pied Pipers Of Wall Street: How Analysts Sell You Down The River, financial journalist Benjamin Cole draws upon his more than twenty years of experience and expertise to give the reader a candid, nitty-gritty, and accurate picture of how the stock market brokers and consultants really work. A cautionary tale of the offhand, everyday, and routine [trickery] that lurks within in too many "buy" recommendations from the analysts, The Pied Pipers Of Wall Street reveals the inherent conflicts of interest that work against the investor. It is also a clarion warning against blindly trusting brokerage analysts as the sole source of "objective" guidance on investing in stocks, bonds, and mutual funds. The critical importance of The Pied Pipers Of Wall Street has been lately underscored by the bursting bubble of the dotcoms and the wild rides provided by the technology stocks. If you have money in the market, or are considering buy and sell advice from market professionals, you need to read what Benjamin Cole has to say!