STREET DOGS: John Cornford on stockbrokers
A question often asked is ‘Are analysts necessary’?
From John Cornford, at Master Investor: "Are analysts necessary?" is a question that’s often asked. Well they certainly weren’t before the early 1970s, when stockbrokers made their cosy equity commissions on "tips from the horse’s mouth" circulating on the stock exchange floor at a time when the steady, profitable business in gilts still fed thick, reliable gravy to the brokers. When historians look back on 20th-century American capitalism they will be astonished by the role played by our stockbrokers. But I wanted to work out whether and how my fellow analysts successfully found profitable situations. So I started to check all my peers’ success rates. I can truly say that among all the "top" analysts, in all the "top" broking firms, I cannot remember finding any with better than 51% of their price predictions proving correct. Most were wildly wrong — a finding supported by much research on Wall Street. And anyone who understands how analysts work will know why. At one firm (where I...
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