Monday, December 17, 2007

Wall Street Swarmed With McFlys

For those of you who remember the 80’s classic, ‘Back to the Future’, I’m sure you’ll agree – George McFly is the most spineless character in cinematic history.

Sadly, it seems that McFly has cloned himself a thousand times over, and his spawn have infiltrated Wall Street in the form of research analysts.

In Scott Patterson’s ‘Ahead of the Tape’ column in today’s Wall Street Journal, he pulls the lid off of Wall Street research in his story titled, ‘Analysts Botch Profit Forecasts on Home Turf.’ (click here for full story.)

While the entire article goes on to point out conflict-ridden research coming out of the Street, particularly in the wake of the subprime mess, one quote in particular stuck with us.

Paul Hickey, co-founder of Bespoke Investment Group is quoted in the article, saying, “You often see brokerage companies giving their peer companies the benefit of the doubt, so they don’t get in this shooting match.”

What is it exactly that has stripped Wall Street analysts of their backbone? Fear of being fired? Perhaps. But that exists for all employees, no? Even full out whistleblowers out there in the past 5-10 years have stood up to ‘The Man’ and been rewarded, so the fears of these analysts to issue negative or contrarian reporters seems unfounded. Yet Wall Street analysts seem to cower in their corners, doing as they're told, content to simply keep their heads down, collect their paychecks, and pray they aren’t asked to become a profit center. McFlys.

With only 7% ‘Sell’ ratings on the year, and with all of the Biffs out there pointing the bullying finger in their direction, in-house analysts are going to have a tough go in ’08. Independent analysts have a tremendous opportunity to make inroads with players on the prowl for valuable research.

Appropriately, here’s the dialogue from a scene between Biff (the bully) and McFly (the spineless wuss):

Biff Tannen: And uh, where's my reports?

George McFly: Uh, well, I haven't finished those up yet, but you know I... I figured since they weren't due till...

Biff Tannen: Hello? Hello? Anybody home? Huh? Think, McFly. Think! I gotta have time to get 'em retyped. Do you realize what would happen if I hand in my reports in your handwriting? I'll get fired. You wouldn't want that to happen, would ya? Would ya?
George McFly: Of course not, Biff. I wouldn't want that to happen. Now, look. I'll finish those reports on up tonight and I'll run 'em on over first thing tomorrow. All right?