Monday, May 17, 2010

Help me please I am a Poor Stockbroker

There is little or no coverage of smaller stocks listed on the NZX and that is a shame because some of them are better in quality than a number of the so-called "Blue Chips". Telecom NZ [TEL.NZ] being a glaring example of a big stock with little reason to cover but the broker boys all have an opinion on it.

Less coverage of smaller, quality stocks, leads to less investment in those companies through the stockmarket and investment only by those willing to do their own research - which of course aint such a bad thing.

Much of our stockbroker analysing isn't worth the paper it is written or file it is saved in. You simply cant trust it because of the financial conflicts brokers have with the companies they are writing about and rarely is there any disclosure of conflict. The quality of the researchers and their methods often run in a contrary nature to basic investing tenants, like a long-term view to investing rather than research based on the day to day fluctuations of the share price of a company.

It seems though that the bureaucrats have been "working on it" -we are the Government and we are here to help you - and it looks on first glance that there could be a taxpayer handout to some of these broker cowboys so they can do the research for us on these aforementioned smaller companies:

"Work is under way at Treasury on an "analyst research scheme" proposal which would ensure smaller stocks ignored by the broking industry would get coverage.

The scheme was suggested by the Capital Market Development Taskforce (CMDT) in December, which invited the NZX, Treasury and the Ministry of Economic Development to consider the idea...

A Treasury spokesman said questions such as who would pay for such a scheme were still being worked on."

So the brokers will cover those smaller stocks but only if someone else is paying for it?

Who gets the revenue from the interest gained from publishing these company reports? Would it be brokers themselves? Surely NO!!!

Well the CMDT, all who have skin in the game, seem to think that welfare for brokers might just be the answer to the "problem" of small company coverage.

Since when is the answer to any "problem" Government intervention, with taxpayer dosh swilling around the trough ready for brokers to start taking an interest in those lonely small listed businesses?

Anything Government gets involved in turns into a mess and this hair-brained idea is no different. It is bound to be wrapped in layers of red tape with the very opposite objective being the outcome.

Let the market decide aye boys, until the taxpayer intervenes with a reason for you to move.

Nice work if you can get it.

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