Friday, November 20, 2009

Shoot the Messenger! Or at Least Get the SEC to Investigate Him!

“When all else fails we can whip the horses’ eyes,
And make them sleep
And cry.”

—“The Soft Parade,” The Doors

Okay so we’re not exactly sure what Jim Morrison’s “Soft Parade” lyrics have to do with the central message of today’s virtual column—except that the dead poet’s gloomy words came immediately to mind while reading what we here at NotMakingThisUp believe is the single most important story in today’s Wall Street Journal.

The story is titled “A Tough ‘Sell’ for Jefferies Analyst,” and reporter David Armstrong starts it off thusly:

Jefferies & Co. analyst Brian Kennedy made the best call of his fledgling career when he slapped a ‘sell’ rating on shares of CardioNet Inc. earlier this year.

Then he quit his job

Our sharp-eyed, long-time readers will know precisely where this story is going before it gets there.

But to spell it out for any less-than-sharp-eyed readers out there—i.e. Congresspersons, especially those on Important Financial Sub-Committees—the story of Brian Kennedy and CardioNet is the story of every Wall Street analyst who didn’t go along with the crowd in recommending a company otherwise universally touted by Wall Street’s Finest.

Kennedy was snubbed within his own firm and investigated by its own attorneys, and he was blacklisted by CardioNet management, who decried him as a tool of short-sellers and filed a complaint against him with the SEC.

That he was right in the end—CardioNet blew up for exactly the reason he put a “Sell” on the stock to begin with—didn’t help Brian Kennedy at all.

Thus the story of CardioNet is the story of Citigroup and Fannie Mae and WorldCom and Enron and every other bad investment idea whose cheer-leaders steamrolled whoever tried to raise a factual dissent of “The Story.”

As such, it ought to be required reading in every research department where Wall Street’s Finest practice their craft, not to mention in the hearing committee rooms of Congress, where short-sellers—rather than bad lending, bad borrowing, bad management and bad regulators—are routinely trotted out as “Exhibit A” in the Causes of the Financial Crisis.

Having recently visited the Rock and Roll Hall of Fame and Museum in Cleveland—which has, among its many mind-numbingly detailed displays, a fascinating collection of childhood memorabilia of a surprisingly innocent Jim Morrison, including a grade-school report card and a polite thank-you note written to his mother years before he became a fall-down drunk—Morrison’s dark exhortation at the end of “The Soft Parade” simply seems to fit the mood of the Journal’s article

“When all else fails we can whip the horses’ eyes,” indeed.

But so as not to end on a down beat, we are happy to report that, when asked to name the nicest guy she’d met at the Rock and Roll Museum thus far, the grey-pony-tailed ticket-taker said “Alice Cooper” without missing a beat.

One day, as promised, we will tell the story of How Jed Drake and I Stole Alice Cooper’s Mailbox.

Jeff Matthews
I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


Anonymous said...

See: Marvin Roffman at Janney Montgomery Scott and his sell on Trump Casinos circa 1990. Eventually made the cover of Barrons as one of Alan Ableson's favorite Wall Street stories. The names change, but the story is always the same.

Anonymous said...


When I read about Mr. Kennedy's plight, I began to wonder what the Sarbanes-Oxley law has done to protect sell-side equity analysts from conflicts of interest within their own firms?

Nothing New Here said...

Ketchum's testosterone levels are no higher than Glauber's.

Didn't Bill Lennan and Craig Bibb "leave" WR Hambrecht under similar circumstances?