Do you think anybody remembers that Bank of America once owned Charles Schwab, Inc.? They lost a bundle on that one! And do you think anybody has thought how many internal investment management departments B of A has driven into the ground? A few months ago everybody was worried that the Countrywide acquisition would cripple B of A – and maybe even cause it’s demise. The question in my mind now: How long can it sustain Merrill’s burn rate?

When I heard the news I thought A.P. Giannini must be kicking out the slats on his coffin. In case you don’t remember old A.P. founded the Bank of Italy which became the Bank of America. Then after the depression Congress passed the Glass Steagall Act and poor old A.P. had to seperate the commercial bank from its insurance and investment operations (Transamerica Insurance). Funny thing, during the Clinton administration Robert Rubin spearheaded the emasculation of the Glass Steagall Act and after Bush’s first election Rubin headed-up Citibank for his friend Sandy Weill (see: http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html ). Not long thereafter we had “too big to fail”.

Related to “The Diaspora” article, if the markets are even somewhat efficient, then the broadly disseminated widely availeable (proprietary) brokerage house research has momentary and fleeting value (because such information is impounded into security prices very rapidly). The true value of such brokerage house research is the value of the straw-dog which helps conceal the quid-pro-quos exchanged for excess commissions paid-up above the fully-negotiated costs of brokerage execution. The Institutional Investor All Star competition is a beauty contest which helps keep the straw dog in play.
> http://query.nytimes.com/gst/fullpage.html?res=9C06E6D91E31F930A25752C1A9649C8B63&sec=&spon=&pagewanted=all

The demand for (and compensation levels of ) brokerage house employed investment research analysts may not be so directly related to the quality of their research. It may be related to other less obvious factors. (I enjoy Henry Blodgett’s writing far more now than I did in early 2000, but then, I’ve always had a preference for non-fiction) And the market might be less volitile if the number of analysts, and costs associated with analysts / touts / shills / straw dogs was reduced.

It seems that research that can be held closely and capitalized on without wide discovery is the research that truly leads to the capture of value from mispriced securities. The rest is “noise” (IMHO).

The more things change, the more they seem to remain the same.

Another correction is the percentage of analysts placed with JP Morgan. Approximately one third of the senior analysts were retained by JP Morgan.

Omissions included many ranked senior analysts that found jobs at other bulge firms. Full comment below:

“We had 90 senior analysts globally. All of them have been placed either at JP Morgan, at other sellside firms or on the buyside. About 1/3 went to JP Morgan. Some names on your list were associates not senior analysts. Kuni Chen was never at Bear. He was always at Bof A. They fired him and then rehired him. Other ranked analysts from Bear not on your list include John Boris who covers Pharma at Citigroup, Robin Shoemaker oil services at Citigroup, Peter Nesvold industrials at Lazard Asset mgmt. Phil Cusick telecoms at Macquarrie, Christine Augustine retail on the buyside, Rob Peck Internet at Baron Capital, David Hilder at Putnam, Sal De Martino at Banco Santander etc. Many in London are at Jefferies. The Latin team landed at Fortress and Wexford.

While this doesn’t necessarily change the thesis I take great pride personally in having helped place all the Bear analysts prior to the merger close date either internally or externally.

Many of the Bear analysts had multiple offers for both buy and sellside firms.”