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January 22, 2004
Changes in Equity Research
New York Attorney General Eliot Spitzer’s Global Settlement and former SEC Chairman Arthur Levitt’s Regulation Fair Disclosure have changed the way Wall Street research is performed. A panel sponsored by the New York Society of Security Analysts reviewed these changes and who is poised to take advantage of the altered equity research business.
The panel agreed that the Global Settlement’s attempt to finance independent research is aimed at retail investors and will likely fund research on widely held stocks that already receive coverage elsewhere. John M. Eade, president of Argus Research Corporation, expressed the opinion that government action alone won’t create un-biased research and proceeded to promote an association of independent research firms called the Investorside Research Organization.
Andrew Klein, founder and chairman of Soleil Securities Group explored the process in which the financial community uses independent research. A salesman representing the research producer calls asset managers early each morning and tries to give them investment ideas. Each quarter, asset managers and others in their organization get together. They discuss which research has been accurate and valuable and then decide what research they will buy in the future. Klein believes this approach discourages a subscription research business model.
Jack Rivkin, chief investment officer of Neuberger Berman, agreed that there will be a greater emphasis on quality research as large investment banks and financial institutions reduce their research departments. Rivkin also believes that the use of "soft-dollars" hasn't been eliminated by division between research and investment banking meant to remove conflicts of interest. Instead, it has made more difficult to get money for providing ideas that result in trades. Another result of the split between research and investment banking is the reduction of the number of stocks covered by an analyst.
Jonathan Glick believes that analysts don’t need ideas and rather just want facts to support their own ideas. His company, the Gerson Lehrman Group, uses a business model that connects organizations with experts on a broad range of subjects. The use of research to validate existing ideas is also prevalent in the field of competitive intelligence, according to Benjamin Gilad, President of the Academy of Competitive Intelligence.
The other major change in the industry is that sell-side analysts are much less likely to support investor relations executives. This has resulted in less coverage of stocks. This also means there are opportunities to help companies raise money, support a share’s price and convince Wall Street that the company will do well. This is where independent analysis comes into play. Independent research firms can be paid to create logical arguments to sell a stock.
Posted by lawrencehecht at 08:54 PM | Comments (0)
Defining Terms and Organizing Business Information
Google’s upcoming IPO of several billion dollars illustrates the importance of information search and retrieval. Today’s event, Using Taxonomies to Organize Enterprise Information, demonstrated the limitations of automated methods like Google and the continued significance of real people for the management of information. In fact, Gartner claims that there is a 80% chance that the number of professionals handling knowledge mapping will double by 2005.
Taxonomies are hierarchical classification of things that shows relationships among categories that supports the discovery and access to information. Yahoo! is an example of a taxonomy for all types of information. It has limited value because the indexing is done by non-subject matter experts. Data increases in value when it is easy to find and collected in databases that can be merged because they have similarly defined variables. www.taxonomywarehouse.com is a good resource to find free and purchasable taxonomies. The event’s sponsor, Convera, also sells taxonomies as part of its software package.
Posted by lawrencehecht at 08:49 PM | Comments (0)
January 15, 2004
Beyond Light and Air: Zoning as a Tool of Social and Economic Reform
Bloomberg official and an advocate strongly disagreed about the using zoning to create manufacturing jobs in New York City. Speaking at an Association of the Bar of New York City event, Adam Friedman, Executive Director of the New York Industrial Retention Network explained how real estate prices and zoning changes are hurting the city’s base of manufacturing jobs. Sandy Hornick, Deputy Director for Strategic Planning at New York City’s Department of City Planning, claimed that zoning has a limited ability to promote industry development.
Hornick also supported Michael Slattery’s view that macro-trends over the last century were the reasons that manufacturing declined in the City. As the Real Estate Board of New York’s Senior VP for Research, Slattery supported flexible zoning that allowed market forces to build office space and residential housing.
Other panel participants included Eva Harnhardt of the Municipal Art Society and the moderator Stuart Beckerman, Esq. Everyone in attendance agreed that manufacturing jobs were important. In addition to paying better, than retail and restaurant jobs, Friedman also provided a strong reason why manufacturing jobs are important to certain populations in the city: 63% of manufacturing jobs are held by immigrants and 24% of the sector employees do not have a high school diploma.
On a personal note, I believe that New York should concentrate on knowledge industry jobs. However, I don’t have a good solution to the problem of creating high paying jobs for immigrants and people with limited educations; of course, no one else has a solution either.
Posted by lawrencehecht at 08:34 PM | Comments (0)
