Post of the Day
November 3, 1998

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[This post is short, but very sweet. It illustrates what Fools have been saying for years. Why do we sanction the promotion and sale of securities by people that have a vested interest in those securities, but are also charged with looking out for their client's interests? Do you know why your broker is calling you?]


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Subject: Re: Broker recommendations
Author: GlowingFire

"Suppose the analyst works for a firm which underwrites the company whose stock is of interest. He or she is under great pressure to make the stock's float successful. After all, any inventory which the underwriter(s) hold is at stake."

A woman I work with is heavily interested in day trading and IPOs and such. Her broker called early last week. Seems he was certain that she would want to make a move on the Conoco IPO. Big oil is about to move ... (which direction he didn't say exactly) ... DuPont is a great company ... and he thought the time was ripe to ditch her holdings in Philip Morris. Their stock has appreciated about as far as it's going to for now ... blah-blah woof-woof.

But my co-worker didn't want to sell her Philip Morris. She wanted to just hold this one for a while. Of course, she didn't have any other spare cash, but she thought she'd sit this IPO out. Never fear, her broker pressed, and cajoled, and (finally) talked her into it anyway. MO gone, replaced by COC. But now she's pretty upset. Usual day trader stuff ... MO went up a bit, COC went down a bit ... and she's looking for someone to blame. She's found a good target this time, though. Seems her broker is with Dean Witter, one of the underwriters of the Conoco IPO.

But as InfernalElk suspects, this is undoubtedly a coincidence. :c)

==> david


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