Bear necessities. (Wall Street West).

Why is this bear market different? "We have two related problems... that have broken investor trust," said Tom Weary, president of Diamond Portfolio Advisors LLC in Santa Monica Problem No. 1, as evidenced by Merrill Lynch & Co.'s recent woes, is that brokerage analyst research has become corrupted. "Trading commissions just don't cover the cost of research. So the brokerages have turned the research into support staff for the investment banking arms," Weary said.

The second problem is that auditing firms want consulting business. 'The auditing firms are low-bailing the auditing fees, to get highball consulting contracts," Weary said.

These constitute broken business models, Weary said. In the bear market of the 1970s, there were some scandals, but nothing to suggest that the foundations of Wall Street were rotten. "How do you get investor trust back?" he asks. "You can't trust the brokerages, and you can't trust the auditors."

Weary advises money managers to beef up research operations, and investors to pick stocks they way they might pick mates -- character counts for a lot. "Character is destiny," he said. "The future is unknowable, but if you know a corporation's culture, you know how they will react to the future."

Despite the gloom, Weary likes some drug stocks, including Johnson & Johnson and Pfizer Inc. both for steady track records and large pipelines of promising drugs or devices.

He also likes motorcycle manufacturer Harley-Davidson. "They make good bikes," he said. "It is what they are devoted to. Companies which have a mission seem to attract better people."

Contributing columnist Benjamin Mark Cole writes about the local investment community. He can be reached at [e-mail].