Posted on June 8th, 2008 in Daily Stock Market / Economic News - The Real Story
I read several bloggers each day along with the mainstream media. Many bloggers have nailed specific stocks for well over a year while Wall St analyst have consistently been wrong. I have often said ‘they get paid for this?’
The relentless upgrades of troubled financials over the past year has been not only reckless, but also shows that many analysts really do not understand the companies they cover and work for a constituency other than those who want to know where a certain stock price or the market in general is headed.
Bloomberg put out some good stats on this last Friday. There is an excerpt pasted below. In a nutshell, this just pisses me off. How can so many off-Wall St bloggers (including myself), have been so right over the past year and a half and so many highly paid ‘profesional’ analysts been so wrong?
When you get to the end of the Bloomberg report, they begin to interview Dick Bove, which is where I quit paying attention. Despite doing a great job in warning of the crash in financials early in 2007, he has been consistently wrong since Q4 2007 and his ‘generational buy of a lifetime’ prediction right after Bear Stearns went out of business will likely be responsible for his departure from Wall Street. As a matter of fact, he has already turned around much of his recent bullishness by downgrading the brokerages about a week ago…the very same brokerages that were a ‘generational buy of a lifetime’ two months ago. Dick is definitely the ‘Flip-Flop King of Wall Street’. By the way, my buddy Karl Denninger dismantled his March analysis. What a read! Come now, Dick!
Another one to watch out for lately is Doug Kass. He is not an analyst but plays one on TV. He is a well-known short and has been getting a lot of airtime since Q4 2007. He is another one who called the financial meltdown early, but lately has been consistently wrong. Lately, if Doug Kass says buy, feel free to short at will. The opposite applies as well. He came out a couple of weeks ago with his very own ‘generational buy of a lifetime’ (he actually said those words) pump, saying CITI will ‘quintuple’ in the next five years. His commentary was spewed all over CNBC and other financial media and in every stock chat-room on the Internet for two days. I think this makes the third or forth time since Dec that Kass has publicly announced he was changing positions for the long haul. To be fair, I think the ‘four times’ includes his ‘April Fools Joke’. On April 1st 2008, he emailed a bunch of media contacts saying he was now 100% bullish and is starting a new bull fund for financials etc. When the mainstream media broke this news pre-market, thinking it was real, DOW futures shot up nearly 100 points. Anyway, within two days of his most recent financial sector self-serving pump, the financials were falling from the sky with Lehman leading the way. To top it off, last Friday was one of the worst days in the market in months. If you would have loaded up on financials two weeks ago when Kass told everyone he was long and you should be too, you may have been destroyed over the past two weeks. Thanks Doug!
I still think the worst stock picker of all time when it comes to the financials is Cramer. For months and months in 2007, he promised that there was ‘nothing to see’ and ‘subprime was contained’. In Aug of 2007, he was writing DSL (Downey Savings) across his knuckles saying it was going to $100. Unfortunately it never made it, but I was happily shorting at $75. As a matter of fact, I just covered my last 500 shares at about $10. Trying to pump financials and consistently being wrong drove him crazy, if you remember. Whenever he would make a pick, the stock would tumble within a week. Then, all of a sudden somebody who knew what they were talking about must have taken him aside and gave him the real story because Cramer literally went from ‘DSL to $100’ to ‘the housing market is crumbling and banks are going to fail’ in a single week. Then, of course, he says he has been warning people about the financials since the beginning. Well, Creamer, I have lots of profits that say you were not. Since he turned bearish on the financials he has gone wildly bullish several times, mostly around the time of Fed cuts or when the market is very short financials so he has a better shot at being right. By the way, my non-profane nickname for him in ‘Creamer’ because if you listen to him, most of the time you get ‘creamed’.
June 6 (Bloomberg) — Investors who followed the advice of analysts who say when to buy and sell shares of brokerage firms and banks lost 17 percent in the past year, twice the decline of the Standard & Poor’s 500 Index.
Buying shares on the advice of Merrill Lynch & Co.’s Guy Moszkowski, the top-ranked brokerage analyst in Institutional Investor’s annual survey, cost investors 17 percent, according to data compiled by Bloomberg. Deutsche Bank AG analyst Michael Mayo‘s counsel to purchase New York-based Lehman Brothers Holdings Inc.lost 59 percent. Citigroup Inc.’s Prashant Bhatia still rates Merrill “buy” after its 56 percent retreat from a January 2007 record.
Of the 39 analysts tracked by Bloomberg who follow stocks in the Amex Securities Broker/Dealer Index, 32 produced losses for investors. Investors who bought brokerages on “buy” recommendations, sold when they switched to “hold” and speculated prices would decline when analysts said “sell,” lost 17 percent in the last year through June 3, compared with the S&P 500’s 8.5 percent drop.