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Analysts getting death threats over reports

Luke Fichthorn, an analyst with Lazard Freres & Co., never thought being an analyst would be easy. But he never suspected it would be life threatening, either.

Luke Fichthorn, an analyst with Lazard Freres & Co., never thought being an analyst would be easy. But he never suspected it would be life threatening, either.

Last Thursday, after Fichthorn put an "underperform" rating on Xcelera, a Cayman Islands-based Net incubator company, he was barraged with mean-spirited emails and phone calls. On the financial chat boards, anonymous investors even made postings about Fichthorn that could be interpreted as death threats.

"There was one about a golf club to the head, and one said, 'Watch your six,'" said the University of Virginia business school graduate, who has been working for the New York firm for two years. "That means watch your back."

Fichthorn is not alone. Several analysts who have downgraded popular stocks in recent months say they have received physical threats from angry investors. Hostile, even homicidal, comments targeted at analysts regularly appear on Internet chat boards hosted by Yahoo and other investor-frequented sites.

Last week, Lehman Brothers analyst Dan Niles was reported to have received death threats after downgrading Dell Computer. Salomon Smith Barney analyst Jonathan Joseph was also reportedly threatened after downgrading semiconductor stocks.

Analysts blame the threats on inexperienced investors, who typically have less understanding of the stock market and individual companies than seasoned portfolio managers. Analysts suspect that some amateur investors, especially those who started trading during the bull run of the mid- to late-'90s, don't understand that the stock market works in boom-and-bust cycles, and they don't realize that they may lose some or all of their investment.

"These people are unsophisticated in the true sense of understanding the volatility of today's market," said Jim Drewitz, owner of Dallas-based Creative Options, which represents small capitalization companies. "They read and hear that so-and-so made 30 percent or 130 percent, and they think that every stock they invest in should have that kind of return."

Adds Fichthorn: "Retail investors tend not to do as much homework and therefore tend to get blindsided by negative information. When a professional money manager takes a position, it's frequently done after a large amount of homework, or a fair amount of homework."

A few amateur traders have become homicidal or suicidal after losing money during the wild stock market swings of the past year and a half. And analysts, who have increasingly become the target of investor ire, are getting nervous.

A US Bancorp Piper Jaffray analyst who also asked for anonymity recalls a threat made against him after downgrading Dell Computers.

"One (threat) said, 'We know exactly where your office is located,'" the analyst said. "Another said, 'Make sure you check before you turn your car on in the morning.'"

Another analyst, who didn't want his name published after making a controversial call, said, "There's always been the random email saying 'You're a jerk' or 'We're going to turn you over to the SEC,' but not death threats."

Although many believe the threats are coming from amateur investors, another phenomenon may be contributing to analysts' troubles.

Before the Internet, an analyst's audience was largely limited to portfolio managers, company executives and other investment professionals. Now anyone with cable television or a computer can access broker reports, and analysts have become media personalities. They are fixtures of financial shows on television and are frequently quoted in business publications, from The Wall Street Journal to esoteric trade publications.

"The first thing people hear in the morning is (CNBC Wall Street reporter) Maria Bartiromo saying, 'This analyst just downgraded Dell, and now the stock is down,'" said one analyst. "Now they know whom to blame."

The government seems to be taking steps to curb the increasing violence within the financial community. Nearly a year after a trader gunned down nine people at two Atlanta brokerage firms, the Securities and Exchange Commission approved a rule last week requiring some firms to disclose the financial risk the stock market poses.

Despite these precautions, death threats to analysts are not likely to disappear anytime soon. Many of the popular Internet message boards, including Yahoo Finance, are not monitored for disparaging remarks toward analysts.

"If someone violates our terms of use and it is brought to our attention, we can take it off," Yahoo spokesperson Shannon Stubo said. "But our boards are not proactively monitored. We rely on users."

In the meantime, analysts who have been the target of threats have been delisting their home phone numbers and screening work calls more carefully.

"Unfortunately nobody ever makes you take a course on investing before you invest," one analyst said. "I think a lot of people investing now know nothing but a bull market. Anytime anything goes wrong, it's somebody's fault but never the fault of the market or the stock."