d by dy

The benefit of separating research and investment banking is clear:  it avoids the conflict of interest problem.  But as this article in the New York Times suggest, unintended consequences really should raise questions:

It may be true that analysts now put a lot more sell ratings on stocks than they used to, clearly a result of Mr. Spitzer’s settlement. But sell ratings are only a small part of the story. Analysts were never supposed to be just stock pickers. Ask any big institutional investor about what makes good research analysts and the answer is rarely the buy, sell or hold ratings. It is the information they can provide, the details they model and understanding the nuance of the executives. Those aspects of research don’t always end up in reports, but that’s what separates the good analysts from the not-so-good.

The second problem — which is an even bigger one — is that it is hard to find good research on small companies. All the focus has moved to large companies where the big money is sloshing around. And that makes being a small public company a very difficult task, since nobody’s paying any attention to them.

On ratings agencies’ current underrating: “Our role is to get down the hill after the battle and shoot the wounded.”

Q: Don’t you wish everyone couldd be home owners?  A: “Yes, I also wish I could eat a lot and not gain weight.”

Criticizing withdrawing rental assistance after 5 years:  similar to Marie Antoinette — let people who cannot afford rent to become homeowners.

On CDS:  the analogy is writing life insurance on vampiers.  Then vampiers started to die.

On attractiveness of high-risk investments:  “If something’s growing like a weed, it’s probably a weed.”

On Fannie/Freddie: quoting Warren Buffet, “When the tide goes out, you see who’s been swimming naked.”