Last month I reviewed the book Confessions of a Wall Street Analyst by Dan Reingold . I liked the book -- giving it 7 stars -- and as such I wanted to talk to Dan a bit about it. He was kind enough to allow me a few questions, and today we'll be covering part 1 of our interview. Here goes:
Free Money Finance (FMF): Before we get started talking about Confessions of a Wall Street Analyst, I'd like you to explain what a Wall Street Analyst does for readers out there that my be unfamiliar with the occupation.
Dan Reingold (DR): An analyst studies, analyzes and issues recommendations regarding investments, usually focusing on a specific industry and on either the stocks or bonds of that industry. If working for a Wall Street firm, the so-called "sell-side" like I was, then those recommendations and research reports are distributed to that firm's financial advisors (i.e., brokers) and, via them, to both professional and individual clients of the firm.
FMF: What led you to write Confessions of a Wall Street Analyst?
DR: I felt that the investigations of Wall Street research conflicts of interest and of dishonest research by the NYS Attorney General and the US Securities Exchange Commission stopped short of dealing with the real transgressions of the era--illegal leakage of inside information and the consequent unlevel playing fields for investors, especially individual investors but also many pros. I wanted to tell my story, what I observed, so that investors and regulators had a better sense of what went wrong and what could be done to prevent it from happening again. I was surprised the investigators had overlooked so much and also surprised that no one else had (or has, even today) exposed it.
FMF: Tell us in your own words what the book is about.
It's about how the role of the Wall Street analyst evolved from one of quiet, backroom analysis and independent and honest advice giving to one of exaggerated stardom and enmeshed in numerous conflicts of interest and big dollar temptations. My book is a personal story of what I experienced during the stock market and telecom booms of the 1990s and during the ugly bursting of the bubble in the early 2000s.
FMF: I personally found the book very compelling -- almost like a suspense novel, but it really happened. Was it as exciting to live through as the book makes it seem?
DR: I think the better word is frenetic. Life for me and most of my competitors was extremely hectic as I was usually under intense pressures from numerous groups that sought to influence my opinions of various stocks and company strategies. It also involved non-stop travel, often around the globe, to visit professional investor clients and telecom companies. It was certainly fun to be "needed" by so many constituencies but it was also virtually impossible to satisfy all of those constituencies in a fair and ethical manner.
FMF: Who is the book written for?
DR: For anyone who invested in the 1990s bull market, lost a good deal of money when the bubble burst in 2001, and wonders what goes on in the back rooms of Wall Street.
FMF: Why should people buy Confessions of a Wall Street Analyst?
DR: Readers have been saying that the book has taught them an enormous amount about how Wall Street and corporate America operate and how to better invest in that context. Further, the book is written in the first person, tells a very personal story of a person who over time comes to be aware of corruption and deceit around him, and does not get bogged down in technical jargon. It is written for the layperson who knows little about Wall Street or telecom or investing. It is also written for the Wall Street professional and especially for government regulators and prosecutors with the hope that the former will reform their behavior and the latter will force them to reform by more rigorously enforcing securities laws and regulations.
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I agree with what he says about the book at the end. It is interesting, compelling, and certainly does not get bogged down. For me, it was a refreshing read compared to most of the personal finance books I read/review these days.
Tomorrow, we'll conclude the interview and cover some very interesting thoughts Dan has on investing and the disadvantage most investors have against Wall Street insiders (and what we can do about it.)
I haven't read the book (yet) but I'm curious what outcome can come of it. We may be due for a significant enforcement or revision to the Investment Company Act of 1940, but barring any regulatory changes I wonder if the book will just scare people away from investing. That would seem a loss. If the author is reading along I would be interested in his perspective.
Posted by: Duane Gran | September 11, 2006 at 09:06 AM