Faber Report: CNBC's "The Brain" Tells You How Wall Street Really Works and How You Can Make It Work for You

by David Faber, Ken Kurson

Overview

These days, when CNBC's David Faber talks, Wall Street listens. Unlike the talking heads that populate the financial news channels, Faber is a down-and-dirty investigative reporter. For six years, on CNBC's popular Squawk Box and in his own segments, Faber has broken story after story. Each day over one million people tune in to hear his daily report. Those who know the score know that Faber is the one to listen to -- especially now that the market isn't doing as well as it used to.

Now Faber has written the smartest, most innovative investment book to be published in years. Like Harvard Business School's famous case study method, each chapter is built around a story -- the story of how a stock was presented to the public. Then Faber extracts clear, easy-to-follow lessons and instructions on how readers can learn the stocks real story, just as he does everyday on CNBC. Readers learn not just how to pick the stocks they want to invest in, but how to avoid joining the "penguins" lining up for big losses. The Faber Report combines practical, down to earth investment advice with wild accounts of investor fraud, company misdeeds, and famous investors and banks that have led investors astray. A quantum leap beyond the usual investment books, The Faber Report is essential reading for anyone who wants to profit-bulls or bears.

Product Details

ISBN-13:	9780759527256
Publisher:	Little, Brown and Company
Publication date:	05/01/2025
Sold by:	Barnes & Noble
Format:	eBook
Pages:	320
File size:	950 KB

Read an Excerpt

The Faber Report

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By David Faber and Ken Kurson

Little, Brown

Copyright © 2002 David Faber
All right reserved.
ISBN: 0-316-08742-4

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Introduction

In January 1987 I accepted a position to cover corporate banking for a newsletter owned by Institutional Investor magazine. I had graduated from college eighteen months earlier with a B.A. in English. I had worked in politics since graduating. I had never taken an economics course during college or high school. I had never read the Wall Street Journal. I had never owned a stock, never owned a bond, and had never met an investment banker, a risk arbitrageur, a CEO, or an analyst. Upon being led to my dingy cubicle on the fourteenth floor of 488 Madison Avenue, I nervously eyed the telephone, the typewriter, and the condiment-stained walls. I was certain I would be fired before the month was out.

Fifteen-plus years, thousands of business meals, and close to a million phone calls later, I'm still covering Wall Street. The world has changed since my early days in financial journalism - and not just because I no longer use a typewriter. Wall Street and the stock market have taken over a rather large piece of real estate in our national consciousness. Kids in high school can rattle off the words behind the initials IPO, and CEOs have become celebrities. Still, I think back to the winter of 1987 and how much I had yet to learn.

My first three months as a reporter were terrifying. I would have trouble breathing some mornings, as though the stress of it all were crushing my lungs. It wasn't just the pressure of having to call complete strangers, trying to find out things they might not want to tell me. That can be tense, but I've always found it an exciting challenge. The real tension derived from the fact that I knew nothing about the field I was being asked to cover - even more so, because I couldn't really fake it. There is a language of finance, a language that belongs only to Wall Street. Though not difficult to understand once explained, it is an idiom designed to intimidate. I was intimidated. But I was also determined not to fail. I had no money. I was living at home in Queens after having moved from Washington, D.C., and was not about to give up without a fight the luxurious annual salary of $21,000 and the promise of an apartment of my own.

Slowly, but with certainty, I learned about Wall Street. First came the ability to speak the language, then the ability to understand it. I'll never forget the first time I was able to ask a followup question after receiving a particularly stupid but jargon-heavy answer. It took quite a few years, but in time I gained some perspective on how Wall Street really works. I also managed not to get fired.

I spent almost seven years at Institutional Investor. I started on the banking beat, moved over to cover the stock market a year later, and became an executive editor of the newsletter division a year after that. It was a wonderful time in which to learn. I covered the heady deal days of the mid to late 1980s, complete with corporate raiders and insider trading. I covered the demise of the commercial banking industry, swollen with losses from failed buyouts and real estate loans. I covered the emergence of capital markets in developing countries in the early 1990s and at one point embarked on a round-the-world business trip that still provides me valuable perspective to this day. And then I made my move to television, joining a fledgling cable network in September 1993.

When I joined CNBC, the economy was just getting roused from a deep slumber and few of us had any idea how successful and influential our network would soon become. My ambitions were fairly modest: I wanted to find out things before anyone else and tell the world. And I wanted to make Wall Street accessible and comprehensible to people who might have been much the same as I had been in the winter of 1987.

This book is simply a continuation of that ambition. The same traits that make a good journalist make a good investor. It really is that simple. Skepticism. Curiosity. A penchant for research. Quick analysis. The ability to sniff out a story. A nose for rumor and an ear for BS. The courage to go with your gut when you're right and the prudence not to leap too soon.

Combing through balance sheets, cutting through the wellrehearsed corporate-speak of company executives, discerning relevant fact from rumor (and true rumors from false ones!) - these strategies and techniques are available to any investor with a little gumption. And they're the same strategies and techniques I used to break stories such as the takeover of MCI in 1996, United Technologies' and GE's offers for Honeywell, the fall of Long-Term Capital, Amgen's purchase of Immunex, and the death throes of Enron, among others.

The people I've spent my career getting information from share one overriding ambition: to make as much money as possible. No doubt, they enjoy the challenge of their jobs and the gratification that comes from a job well done. But of the many thousands of bankers, traders, money managers, and brokers I've spoken to, not one came to Wall Street in order to do good for his or her fellow man. In fact, many of these same people do devote themselves to improving humanity after their Wall Street careers have ended. But while they're working, their interests are not always aligned with those of investors. So although I have certainly not been curing world hunger during my time at CNBC, I have been trying to level the playing field. I have tried to give anyone who cares to watch and learn an opportunity to use the same information that is available to those who make their considerable living working on Wall Street. There have been plenty of wealthy people whom I have helped make even wealthier. That's the price of doing business. But I like to think that there have also been people of more modest means who have come to understand how Wall Street works and have used that knowledge to help them make sound investment decisions.

I haven't always been kind to Wall Street and I won't be in this book, either. I respect the men and women of Wall Street and within the business community. I count many of them as my friends. But I'm not sure they're going to like this book. In fact, it will be the ultimate compliment if they don't. And that's fine with me.

In the fall of 2001, before the collapse of Enron became front-page news, there was a maudlin but typically funny e-mail making its way around Wall Street:

If you bought $1,000 worth of Nortel stock one year ago, it would now be worth $49. $1,000 worth of BroadVision is now worth $22. $1,000 worth of JDSU is now worth $52. Now consider this ... If you bought $1,000 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, and traded in the cans for the nickel deposit, you would have $79. My advice ... start drinking heavily.

Wall Street loves to proclaim "a new paradigm" where the old rules don't apply. But that's never true. In the end, the old rules simply adapt, and always apply. Because if we've learned anything over the past two years, it's that stocks do go down. And when they do, the pain is ample.

Much of the information imparted in this book may help you make money. But I can't guarantee that following my advice unfailingly leads to fortune. Still, if information is power, and the ability to understand that information more power still, this book should stand you in good stead. If you want to know how Wall Street really works, if you want to know what your broker or fund manager is really doing, if you want to know why analysts are sometimes dirty and short sellers often are not, if you want to know how Wall Street frauds function or the stories behind some of my best stories, then read on. It may not be pretty, but I guarantee it will be worth your time.

(Continues...)

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Excerpted from The Faber Report by David Faber and Ken Kurson Copyright © 2002 by David Faber . Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

	Introduction	3
1	Why I Hate Analysts	9
2	Why I Love Short Sellers	62
3	Fraud: It Can Happen to You	106
4	The Truth About Your Broker	142
5	Fun with Funds	173
6	How to Play M&A	204
7	Ceos Are People, Too	250
	Conclusion	275
	Index	277

Introduction

INTRODUCTION

In January 1987 I accepted a position to cover corporate banking for a newsletter owned by Institutional Investor magazine. I had graduated from college eighteen months earlier with a B.A. in English. I had worked in politics since graduating. I had never taken an economics course during college or high school. I had never read The Wall Street Journal. I had never owned a stock, never owned a bond, and had never met an investment banker, a risk arbitrageur, a CEO, or an analyst. Upon being led to my dingy cubicle on the fourteenth floor of 488 Madison Avenue, I nervously eyed the telephone, the typewriter, and the condiment-stained walls. I was certain I would be fired before the month was out.

Fifteen-plus years, thousands of business meals, and close to a million phone calls later, I'm still covering Wall Street. The world has changed since my early days in financial journalism - and not just because I no longer use a typewriter. Wall Street and the stock market have taken over a rather large piece of real estate in our national consciousness. Kids in high school can rattle off the words behind the initials IPO, and CEOs have become celebrities. Still, I think back to the winter of 1987 and how much I had yet to learn.

My first three months as a reporter were terrifying. I would have trouble breathing some mornings, as though the stress of it all were crushing my lungs. It wasn't just the pressure of having to call complete strangers, trying to find out things they might not want to tell me. That can be tense, but I've always found it an exciting challenge. The real tension derived from the fact that I knew nothing about the field I was being asked to cover - even more so, because I couldn't really fake it. There is a language of finance, a language that belongs only to Wall Street. Though not difficult to understand once explained, it is an idiom designed to intimidate. I was intimidated. But I was also determined not to fail. I had no money. I was living at home in Queens after having moved from Washington, D.C., and was not about to give up without a fight the luxurious annual salary of $21,000 and the promise of an apartment of my own.

Slowly, but with certainty, I learned about Wall Street. First came the ability to speak the language, then the ability to understand it. I'll never forget the first time I was able to ask a followup question after receiving a particularly stupid but jargon-heavy answer. It took quite a few years, but in time I gained some perspective on how Wall Street really works. I also managed not to get fired.

I spent almost seven years at Institutional Investor. I started on the banking beat, moved over to cover the stock market a year later, and became an executive editor of the newsletter division a year after that. It was a wonderful time in which to learn. I covered the heady deal days of the mid to late 1980s, complete with corporate raiders and insider trading. I covered the demise of the commercial banking industry, swollen with losses from failed buyouts and real estate loans. I covered the emergence of capital markets in developing countries in the early 1990s and at one point embarked on a round-the-world business trip that still provides me valuable perspective to this day. And then I made my move to television, joining a fledgling cable network in September 1993.

When I joined CNBC, the economy was just getting roused from a deep slumber and few of us had any idea how successful and influential our network would soon become. My ambitions were fairly modest: I wanted to find out things before anyone else and tell the world. And I wanted to make Wall Street accessible and comprehensible to people who might have been much the same as I had been in the winter of 1987.

This book is simply a continuation of that ambition. The same traits that make a good journalist make a good investor. It really is that simple. Skepticism. Curiosity. A penchant for research. Quick analysis. The ability to sniff out a story. A nose for rumor and an ear for BS. The courage to go with your gut when you're right and the prudence not to leap too soon.

Combing through balance sheets, cutting through the wellrehearsed corporate-speak of company executives, discerning relevant fact from rumor (and true rumors from false ones!) - these strategies and techniques are available to any investor with a little gumption. And they're the same strategies and techniques I used to break stories such as the takeover of MCI in 1996, United Technologies' and GE's offers for Honeywell, the fall of Long-Term Capital, Amgen's purchase of Immunex, and the death throes of Enron, among others.

The people I've spent my career getting information from share one overriding ambition: to make as much money as possible. No doubt, they enjoy the challenge of their jobs and the gratification that comes from a job well done. But of the many thousands of bankers, traders, money managers, and brokers I've spoken to, not one came to Wall Street in order to do good for his or her fellow man. In fact, many of these same people do devote themselves to improving humanity after their Wall Street careers have ended. But while they're working, their interests are not always aligned with those of investors. So although I have certainly not been curing world hunger during my time at CNBC, I have been trying to level the playing field. I have tried to give anyone who cares to watch and learn an opportunity to use the same information that is available to those who make their considerable living working on Wall Street. There have been plenty of wealthy people whom I have helped make even wealthier. That's the price of doing business. But I like to think that there have also been people of more modest means who have come to understand how Wall Street works and have used that knowledge to help them make sound investment decisions. I haven't always been kind to Wall Street and I won't be in this book, either. I respect the men and women of Wall Street and within the business community. I count many of them as my friends. But I'm not sure they're going to like this book. In fact, it will be the ultimate compliment if they don't. And that's fine with me.

In the fall of 2001, before the collapse of Enron became front-page news, there was a maudlin but typically funny e-mail making its way around Wall Street:

If you bought $1,000 worth of Nortel stock one year ago, it would now be worth $49.
$1,000 worth of BroadVision is now worth $22.
$1,000 worth of JDSU is now worth $52.
Now consider this . . .
If you bought $1,000 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, and traded in the cans for the nickel deposit, you would have $79.
My advice . . . start drinking heavily.

Wall Street loves to proclaim "a new paradigm" where the old rules don't apply. But that's never true. In the end, the old rules simply adapt, and always apply. Because if we've learned anything over the past two years, it's that stocks do go down. And when they do, the pain is ample.

Much of the information imparted in this book may help you make money. But I can't guarantee that following my advice unfailingly leads to fortune. Still, if information is power, and the ability to understand that information more power still, this book should stand you in good stead. If you want to know how Wall Street really works, if you want to know what your broker or fund manager is really doing, if you want to know why analysts are sometimes dirty and short sellers often are not, if you want to know how Wall Street frauds function or the stories behind some of my best stories, then read on. It may not be pretty, but I guarantee it will be worth your time.

Copyright © 2002 by David Faber

Editorial Reviews

This special edition of The Faber Report has been personally signed by the author. Pick up your copy while our supplies last!

The Barnes & Noble Review
As a matter of course, most investment books will warn you that Wall Street analysts' advice is often far from objective and impartial. However, The Faber Report -- in addition to offering a candid assessment of how the financial world really works -- teaches nonprofessional investors the techniques that the experts use to distinguish hype from substance, spin from truth. As CNBC's Wall Street correspondent and an anchor of its popular Squawk Box program, David Faber is uniquely qualified to provide honest advice that will enable you to become a "stock detective" -- a person who knows which numbers to heed or to disregard, which mergers mean danger, and which companies will prove to be of lasting value even in troubled times. Whether you're a novice investor or a seasoned veteran, this outstanding book will prove to be an invaluable resource.

Faber's fans will enjoy the book's introduction, in which the author describes his humble beginnings as a reporter on corporate banking for Institutional Investor magazine. Working in a dingy cubicle in a Madison Avenue office building, Faber began building his familiarity with the inner workings of the Wall Street financial machine. As he moved up through the ranks at his company and later at CNBC, he developed a sense of purpose that he describes in these terms: "I have tried to give anyone who cares to watch and learn an opportunity to use the same information that is available to those who make their considerable living working on Wall Street." As the book progresses, Faber offers detailed case studies that reveal how major companies were presented to the public; these blow-by-blow summaries reveal the ways in which savvy investors can learn to protect themselves and thrive. Accessible, trustworthy, and helpful, The Faber Report puts the power of knowledge back into the hands of the average citizen. (Sunil Sharma)

bn.com

...shows, with clarity, that far too many investment bankers and money managers are simply promoters... this is must reading.

Carl Icahn

David Faber was poking at the Wall Street bubble way before it was cool...the CNBC star names names, kicks butt, cracks the market's code and has plenty of fun in the process.

Howard Kurtz