Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble

Beware of “Buyer Beware”

The American regulatory agencies, described by Henry Kaufmann as “… less than robust… Understaffed, under-funded, and badly fragmented,” have been, in his words, “slow to recognize some of the more serious abuses” in the financial markets.^[70]

Among the biggest abuses—now recognized as a result of the bubble—have been those of the analysts who worked in the investment banks. The banks employ two kinds of analysts: Those who issue recommendations about individual firms, and those who try to get investors to buy the stocks. For an investor to have any confidence in a bank's analysts, he or she must believe that an analyst's report is something more than a disguised sales pitch. So banks have ordinarily insisted that analysis ...