Re: Re: Re: RE: RE: Profit Rates -- From Michael Yates

[Eugene Coyle]

Doug,  Gee, Solow and Samuelson never thought of it either, when defending the
idea of the production function.  Luckily they had Joan Robinson to call it to
their attention.

But you and I are talking about different profit rates, as Daniel Davies has just
pointed out.

Gene Coyle

Doug Henwood wrote:

> Eugene Coyle wrote:
>
> >How do you adjust for the change in "capital" in telecom companies, before and
> >after the melt-down?  What's the denominator?
>
> Gee, better contact the folks at the Bureau of Economic Analysis. I
> bet they never thought of this!
>
> In fact, I'm sure they've never thought of many of the objections
> brought up on PEN-L over the last several days. They are, after all,
> just a bunch of third-rate public sector bean counters. A handy
> reference list of people who need an education can be found at
> . The person who handles the
> capital stock estimates is Leonard Loebach, at 202-606-9764. If he's
> like most of them, he'll probably answer his own phone and be happy
> to talk to any knowledgeable, friendly caller.
>
> Doug

Re: RE: RE: RE: Re: re: profit rates

[christian11]

The WSJ has pretty much dropped the ball on the MS investigation. The most they've 
done is dribble stuff like below out a little at a time. I actually am surprised at 
this--they are generally more conscientious and interesting about stuff like this.

AG's Probe Against Merrill Muddies Waters For Wall Street

By CHERYL WINOKUR MUNK and LYNN COWAN

   Of DOW JONES NEWSWIRES
NEW YORK -- An action by New York State Attorney General Eliot Spitzer on Monday makes 
the future even muddier for securities firms' research and investment banking 
practices.

A court order, obtained by Spitzer, against Merrill Lynch & Co. (MER) requires the 
country's largest brokerage firm to make immediate reforms such as better disclosure 
about its investment banking relationships and more context for its stock ratings.

Spitzer is also considering bringing criminal charges against the firm, which denies 
the allegations.

Since the analyst objectivity issue gained momentum after the dot-com bubble burst, 
firms have been scrambling to make sure their policies are in compliance with the best 
practices adopted last summer by the industry's main trade group. Merrill itself 
revamped its research policies over the summer, to prohibit stock analysts from owning 
stocks they cover. Merrill also began disclosing, on the front page of all research 
reports, a statement that it has or may have business relationships, including 
investment banking ones, with companies mentioned. The firm is also planning to revamp 
its research this quarter to focus more on GAAP accounting.

The Attorney General, however, claims its order Monday requires Merrill, for the first 
time, to disclose the relationship between its research and investment banking arms.

The press release said Spitzer has issued subpoenas to other securities firms, though 
it did not say which ones. Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. 
(JPM) both said they had not received subpoenas. Lehman Brothers Holdings Inc. (LEH), 
Credit Suisse First Boston, Bear Stearns Cos. (BSC), Morgan Stanley (MWD), the Salomon 
Smith Barney unit of Citigroup Inc. (C) and UBS Warburg wouldn't comment.

The immediate impact of Spitzer's action is unclear, but his order includes an 
application to the State Supreme Court for approval to gather more evidence about 
Merrill's research practices. If he prevails, it could be very embarrassing for 
Merrill and other firms, based on the sampling of information Spitzer has obtained so 
far.

According to his investigation , at the same time that Merrill was contemplating a 
neutral rating on selected stocks, such as Excite@Home Corp. (ATHM), analysts were 
telling one another that the stock was "such a piece of crap," among other things. 
Many of the allegations involved former Merrill internet analyst Henry Blodget.

In a statement Monday afternoon, Merrill said the "allegations reveal a fundamental 
lack of understanding of how securities research works within the overall capital 
raising process. They cite a limited number of employee emails, taken out of context, 
as 'proof' that investment banking had undue influence in determining research 
ratings. In fact, these emails prove nothing of the sort."

The attorney general's investigation has been underway since June 2001 and is yet 
another example of the pressure facing the industry in the wake of the dot-com bust. 
Spitzer said he hoped his action would prompt regulators, including the Securities and 
Exchange Commission, to weigh in with proposed changes for the industry. Ultimately, 
regulators and other may seek to have the firm split its equity research and 
investment banking businesses, similar to Arthur Andersen's plan to break apart its 
auditing and consulting businesses, according to Spitzer. It was unclear whether he 
was referring to just Merrill or the overall industry.

Congress is currently studying the thorny issue of analyst objectivity. In addition, 
The New York Stock Exchange and the National Association of Securities Dealers Inc. 
have proposed new rules for investment banks. The comment period ends next week.

These rules would require additional disclosures of potential conflicts in analysts' 
research notes. They would require investment banks to clearly state whether they own 
of 1% or more of the company they are writing about; whether there are any investment 
banking conflicts of interest at the time a report is issued; and whether any 
compensation has been paid by a subject company to the investment bank within the last 
12 months or is expected within the next three months.

--

Christian

Re: RE: RE: RE: Re: re: profit rates

[ravi]

a la michael pugliese ;-):

-

http://www.usatoday.com/money/finance/2002-04-19-merrill.htm

No quick deal likely in Merrill Lynch case
By Thor Valdmanis, USA TODAY

NEW YORK -- The dark cloud hanging over the securities industry just got
darker.

Hopes of quickly achieving a final settlement between Merrill Lynch and
New York Attorney General Eliot Spitzer over alleged conflicts of
interest among Merrill research analysts have been dashed because of
arguments about culpability and money, people close to the negotiations say.

-

http://www.boston.com/dailynews/107/economy/SEC_considering_whether_to_joi%3A.shtml

SEC considering whether to join probe of conflict of interest
By Michael Gormley, Associated Press, 4/17/2002 13:39

ALBANY, N.Y. (AP) Federal regulators met with New York Attorney General
Eliot Spitzer on Wednesday to determine whether they should join his
investigation into Wall Street analysts accused of giving positive stock
ratings to companies they were criticizing among themselves.

Securities and Exchange Commission officials were also being briefed by
Spitzer's fraud prosecutors on the status of his investigation into
analysts at Merrill Lynch & Co. and some of its rivals, said a source
familiar with the matter who spoke on condition of anonymity.

-

http://www.mips1.net/mukfn.nsf/Current/852569CF00506AC142256A87002E1E93?OpenDocument

Merrill Lynch acts to end conflicts of interest
By: Tim Wood

Posted: 2001/07/11 Wed 10:00 ZE2  | © MoneywebUK 1997-2002
NEW YORK - In what amounts to a tacit admission of guilt, global
investment firm Merrill Lynch is to prohibit its analysts from owning
stocks they cover.

The move might be interpreted cynically as a belated response to public
outrage over analysts' inability or unwillingness to deliver accurate
recommendations. Few conflict of interest allegations have been
substantiated, but it is common cause that the Chinese wall between
firms' investment bankers and analysts was demolished during the
listings boom from 1996 to 2000.

--

--ravi

RE: RE: RE: Re: re: profit rates

[Eric Nilsson]

Jim wrote,
> Didn't Merrill-Lynch financial advisors recently get in trouble
> for selling
> info that was inaccurate -- but helped the investment-banking side of the
> business?

I know the LA Times has covered this at least twice a week or so ago, but I
haven't see much in the WSJ about it.

Eric
.

Re: RE: Re: Re: RE: RE: Profit Rates -- FromMichael Ya tes

[Doug Henwood]

Davies, Daniel wrote:

>To be fair, although there are known serious problems with depreciation, the
>WorldCom and Global Crossing affaires aren't really relevant to the
>statistics Doug quoted.  The assets of WorldCom and Global Crossing are
>worth exactly what they were worth before the meltdown, as stock market
>movements don't mean much to cables in the ground.

And if they're part of the capital stock yet generate no profits, 
isn't that a relevant and interesting fact?

Doug

RE: Re: Re: RE: RE: Profit Rates -- From Michael Yates

[Davies, Daniel]

To be fair, although there are known serious problems with depreciation, the
WorldCom and Global Crossing affaires aren't really relevant to the
statistics Doug quoted.  The assets of WorldCom and Global Crossing are
worth exactly what they were worth before the meltdown, as stock market
movements don't mean much to cables in the ground.  The fact that the stock
market's assessment of the future excess returns to be earned from renting
out those cables no longer provide a viable basis for making interest
payments don't change the capital employed for the purpose of the BEA
numbers.

dd


>Gene, this is one of the great secrets of economics.  Of course, everyone
knows,
>as Jim mentioned, that we have no theory of depreciation, but we go on
pretending
>that out data is of good quality.

>Eugene Coyle wrote:

>> How do you adjust for the change in "capital" in telecom companies,
before and
>> after the melt-down?  What's the denominator?
>>
>> World Com
>> Global Crossing
>

--

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]



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