Nothing rankles me more about the investment game than misleading and confusing information from investment banks, their cheerleading research analysts, media that treat their reports as if they were gospel and the naivete of retail investors who still actually invest based on those silly recommendations, post-Henry Blodget.

Let’s be honest. Most research recommendations are a bloody joke.

They are usually made by conflicted analysts whose employers are paid exorbitant investment banking fees by the companies they cover.

If they don’t deceive the investor, many certainly mislead them.

Yet, people still don’t get it. They still pay attention to buy recommendations by analysts who don’t know how to say sell.

Worse, the media plays into the hands of the investment bankers by trumpeting analyst recommendations without a disclaimer.

On ROB-TV, talking heads fill air time by earnestly reeling off analyst recommendations – and they somehow do it with a straight face!

Personally, I will not put any stock in a research analyst’s recommendation until that recommendation is accompanied by full disclosure of that analyst’s track record.

I want to see their batting averages, as we do with baseball players and mutual fund managers.

I want to know if they were part of the crowd that had a strong buy on Nortel Networks at $100.

I want to know if they they issued a sell recommendation on Nortel before or after it hit $2.

I want to know which stocks they hit home runs with. I want to know their strikeout record.

I want to know if they were one of the eight analysts who downgraded Molson after that company recently issued its grim forecast primarily based on problems with their Brazilian operations that weren’t exactly top secret.

I want to know how often they close the barn door after the milk cow is already out to pasture.

If I know the score, then I can I place a personal ‘sell’ recommendation on an analyst like Karim Salamatian of BMO Nesbitt Burns, who downgraded Molson from a buy to a sell after the company’s profit warning and after the subsequent pounding of the stock (others downgrading Molson from a buy to a sell or hold after the fact were Raymond Lai of Raymond James, Irene Nattal of RBC Capital Markets, Michael Van Aelst of CIBC World Markets, Patricia Baker of Merrill Lynch, James Durran of National Bank, Murray Gainer of Scotia Capital and Jason Bilodeau of UBS).

With full disclosure of analyst stats, I can place a ‘buy’ recommendation on an analyst like David Hartley of First Associates, who anticipated trouble at Molson, downgrading the stock to sell in December.

Of course, we shouldn’t expect that to happen until some time in the next millennium. And it certainly won’t happen unless it is enforced by the regulatory agencies.

Unfortunately, in Canada, a third-world country in terms of our securities regulatory system, that would mean getting 13 regulators to agree on something significant when they can’t seem to agree on the logic and urgency for a national regulatory agency or even where to have lunch.

New York attorney general Eliot Spitzer, the man who has shaken the foundations of Wall Street in recent years, has been campaigning for analyst disclosure that would give retail investors a valuable heads-up on how much credibility should be placed on a research report.

But even someone with Spitzer’s considerable clout has his work cut out in getting the brokerages and their cheerleaders (also known as analysts) to lay all their cards on the table regarding a stock when it could cost them an investment banking client.

Public scrutiny of their profession in recent years has forced many analysts to lose their rose-coloured glasses and cry uncle on some stinkers they cover.

Yet, there are some disturbing signs lately that the resurgence of the market is causing some analysts to return to covering stocks with pom-poms. Analysts who had pulled in their reins on techs over concerns of lofty valuations are starting to throw in the towel and follow the herd.

TD Newcrest analyst Mark Lucey recently wrote in a report that “when valuation (in tech stocks) matters, it will matter but, for the time being, it is a secondary consideration in the market.”

Sounds something like the theory of one-time Internet superstar analyst Henry Blodget when he was screaming sell on Wall Street before the bubble burst.

Today, the one-time poster boy for all that was wrong in the research game continues to provide stock market coverage.

This time, Blodget’s covering the Martha Stewart trial for the online magazine Slate.

You can’t miss him. No doubt, he’ll be seated in the cheerleading section.

SAGE WORDS: “Government can not sit idly by when banks are deceptively marketing dishonest advice to investors . . . Investors may sometimes act unwisely, in haste or out of greed. But those impulses do not excuse the industry from its obligation to provide investors with conflict-free advice, and do not relieve the banks of their obligation to allow investors to assess the performance of the analysts on whom they are being asked to rely.”

– Eliot Spitzer, in a speech to an institutional investor banquet on November 12, 2002.



HOT STOCK: RAND A. TECHNOLOGY
RND-TSX $1.42
Up 67 cents (+89.3%) on 1,261,900 shares (for week ending Jan. 30).
While Nortel (NT-TSX) was getting most of the action from traders over its knockout financials, Rand was the winner by a knockout, on news of a distribution agreement to sell software to a division of Boeing. Mississauga-based Rand was a clean double at one stage, trading as high as $1.59.



COLD STOCK: LABOPHARM INC.
DDS-TSX $6.18
Down $1.82 (-22.7%) on 3,146,400 shares (for week ending Jan. 30).
Labopharm, a Laval, Que., biotech outfit, tanked on disappointing results from one of its Phase III clinical trials. Lennox Gibbs of CIBC World Markets downgraded the stock to “sector performer” from “sector outperformer, speculative” (whatever that meant) and also lowered his 12-month target $10 to $8.25.