i traded some internet stuff when they were flyin high. ive received several offers in the mail to join in share holder, class action lawsuits. i usually just throw em away because my holding period was very short. i got one the other day and it included copy of the filed pleading. defendents are merrill lynch and henry blodgett who was an internet analyst. among other things pleading claims that companies who merrill was doing investment banking for that were going public got to write their own recommendation and blodgett would just sign it. also claimed that blodgetts compensation grew from $1 million a year to $12 million a year due to bonuses from investment banking side of merrill operation. interesting document that pleading.


i also got to thinking about investment bankers, analysts, ceos, and market makers playing the game of bilk the investing public. to me this is how it went down.


-- wall street firms see that investing public has made a lot of money during early to mid nineties due to great stock market run.


-- wall street firms see that investing public is hot on companies like amzn which was one of the first "internet" companies.


-- wall street firms see a lot of potential investment banking business through ipos taking internet companies public. they get the analysts to start pumping these ipos by giving strong buy ratings. wall stree firms make a fortune in investment banking fees by takin em public but it doesnt stop there.


-- a lot of capital is raised for these companies and they start buying lots of gear. companies like csco,sunw, others profits get a monster boost due to the purchase of all this gear. analysts start gettin on board the bandwagon say that its hard to tell who the companies on the internet will be but the tech companies sellin the gear are a sure bet no matter who wins the battle over internet turf. ceos of course love it because they're making a ton of money off of options. market makers love it because theyre making big bucks. the firms love it because theyre sellin all the infrastructure stock floating around to their retail customers. thats not the end either. theres more.


-- all these rinky dink internet companies that arent makin a dime and never have a hope of makin a dime start running into trouble. wall street investment bankers to the rescue again. secondaries and bonds are sold and even reap more investment banking fees. the companies use this new capital to buy even more gear (gotta get market share). this keeps the infrastructure stocks profits soaring.


-- soon the money spigget drys up for these companies as investors get unsure about internet company profits. investors start balking at putting up $ for bogus companies. wall street firms maintain strong buy ratings and start selling the hell of this stuff. There's still more.


-- sucker rallies abound many investors chasing last bull market. wall stree firms jam them too and make lots of money off the NAS collapse.