Not-So-Natural Forces at Work in the Market

For all the talk about its natural forces, the stock market is about as unadulterated as Linda Tripp's new look. CNNfn and SmartMoney.com eyeballed two big influences on investors - analyst reports and media appearances - and didn't like what they saw.

CNNfn's Martha Slud homed in on the dubious nature of stock analysis. Buying into an analyst's prediction means - or should mean - swallowing the assumptions behind it. Take PaineWebber's headline-grabbing bet that shares of Qualcomm will hit $1,000 within a year. The media picked up the news and ran with it, but according to Slud, PaineWebber's analyst had based his target partly on his confidence that Qualcomm's CDMA standard will storm into a whopping 85 percent of wireless phones by the end of the decade. That's quite a leap of faith considering the 1999 figure was merely 18 percent. Also casting doubt on the clarity of the crystal ball, Slud noted, was the fact that Qualcomm's stock was set for a 4-for-1 split the next day anyway. The split translated PW's $1,000 target to a more modest $250. The timing was a coincidence, according to analyst Walter Piecyk, who told Slud that personal reasons had prevented him from publishing his research report earlier.

As for the 30 percent pop Qualcomm's stock enjoyed on the day of PaineWebber's report, such rises are standard fare for the companies whose execs appear on CNBC's Power Lunch segment. But are the stock jumps due to the natural effects of the show's influence, or to its practice of releasing the show's guest list each day before the stock market opens? SmartMoney.com's Matthew Goldstein bet the latter. He reported that six of the seven stocks featured on the show the week before Christmas posted their intraday trading highs around the time the show was going on the air - a frenzy he attributes to day traders and stock-board chatterers deliberately driving up the stock. According to Goldstein, the stocks typically give up the gains just as rapidly - often plunging sharply while the program is still on the air.

Coincidence? Goldstein thinks not. CNBC execs defend the guest list as a marketing lure to draw viewers. "We are not in the pump-and-dump business," CNBC president William Bolster told Goldstein. "You can't stop people from doing what they want to." Not when it creates the kind of buzz that business shows crave.

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