Analysts Stink..Listen to Bloggers

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.

Source: Bloomberg

16 Responses to “Analysts Stink..Listen to Bloggers”

  1. I don’t have a specific comment about bloggers vs. analysts (my gut tells me you’re right – I read your blog, and I don’t listen to analysts at all), but I will note that comparing analysts recommendations about banking stocks vs the performance of the S&P500 seems wrong.

    When trying to judge the performance of a given mutual fund, Morningstar compares each mutual fund performance against the nearest passive index – a managed small cap fund vs. a small cap index, a large cap fund vs. a large cap index, etc.

    So it would seem to me, we should do the same thing for the bank analysts. Let’s compare them against their nearest index. Take the chart of EBW, an ETF that tracks the “money center banks” index KBW. That ETF has dropped from 58 (6/2/07) to 34 (6/2/08) – a drop of 41%. If you chose to invest in banking stocks, I’d say the analysts did pretty darned well. They only lost 17%, beating that ETF by an amazing 24%.

    I don’t own bank stocks. Actually, I’m short bank stocks. I’m not an analyst, I don’t know any analysts, I’m not an analyst apologist, but I’m going to call bullshit on this particular Bloomberg story.

  2. fair enough, but the Bloomberg story gave me a great reason to vent!

  3. In every bust, the mainstream media is pompous and tries to fool the average Joe. How can “experts” continue being “experts” when they get some major recommendations wrong?

  4. the analyst crowd has been a disaster since day 1 calling the crash in financials. That is a fact. Especially the analysts they prance across the stage on the cnbc variety show.

  5. “The relentless upgrades of troubled financials over the past year has been not only reckless” The other day didn’t Merrill upgrade Lehman? LOFLMAO

  6. Analyst motto: “Don’t make waves, don’t rock the boat.” Exactly like the prostitutes called TV annoucers, TV anchormen and women and TV journalist.

    I am waiting for the day that one these prostitutes announce the bankrupcty of GM and Ford. As usual they will look all surprised.

    Expect nothing frome these hoares. They fundementally do what they are told to do, that is, shut their herpes infected mouth, pump and dump. A hooker is less vulgar than an analyst or a TV journalist. A hooker is more ethical.

    I like to watch both and see what the stupid morons called investors will be doing after. It’t real funny.

  7. Analysts: “The best little whore house in town.”

  8. I agree 100%.

    In addition, most “analysts” live and work in the NE and think that is the way it is everywhere else. Couldn’t be further from the truth.

  9. News is breaking that LEH will announce a $2 billion loss for Q2 or $3.76 per share. That is about $3 MORE than the worst estimate. Thanks for the upgrade Merrill you lousy peices of sh*t!

    Funny part is, when you are going down in flames in the next couple of months. LEH won’t back you up. Idiots.

  10. I think most of us here have figured out by now that if you say something honest on bubblevision you won’t get your “guest fees” next week – or in Cramer’s case out of an easy gig – they play us for sheep – well, not “us” per se – I was warning a girl friend of mine about 5 months ago that this crud was gonna get way worse, and to stay as solvent as possible – (mind you, I was preaching to her about a housing bubble 4 years ago, when I moved out of a very expensive area), anyway, she said to me – yeah, but did you think it (the housing crash) was goning to happen this fast? – I laughed, and said my husband and I were wondering why it had taken so long….:)

    by the time the main stream news gets to the people – it is most likely way too late – just like all the people that decided they would get rich flipping houses in 06′

    Mr M – I can see why you would be annoyed, but many who are open to not so great news really do appreciate it, and benefit – so screw the bastards, and keep up the good work 🙂

  11. The European Union banks and pension funds are stuffed with Wall Sreet dross,yet silence reins.The media is purposefully ignoring or are ignorant of this wealth destruction,the likes of which I have not seen in my 50 years.German banks,not the most opaque intitutions at the best of times,are now so sullenly silent just like a grumpy teenager on steroids,are terrified anyone should point a spotlight at them.UBS and Lehman,although going through their own difficulties,well German banks will be making them look good soon.

  12. Let’s not forget about Cramer’s prediction that Fannie Mae was going from $65 to $100. After FNM headed down, we did not hear a word.

  13. In all fairness to Creamer, he does have the ability to change his mind, rather quickly, (too quickly for some). He is not wed to his current opinion, he is flexible. All reasons that made him a successful hedge fund manager.

    This is simply a lesson to never, blindly follow, anyone. Including a Mr Mortgage, an analyst, a blogger, a Warren Buffett, etc.

    On Kass: He is often right, and just as often, absurdly painfully early. In this particular bank call, considering he considers himself a former bank analyst, its a particularly egregious, controversial/contrary call.

  14. LEH 2,8 billion loss. Now what about all the rest ?

    What about even JP Morgan, Morgan Stanley, Merril Lynch.
    Death spiral dilution for most banks and financial institutions in the US but also in the UK and Spain. Either dilute or reflate. They have no choice. Inflation is the only option. Banks with consumer exposure also will be fun to follow.

  15. JP Morgan and things like Wachovia are superb bearish bets if you are convinced that the consumer is busted and tapped out. Real estate loans are problematic. But what about all the other loans ? The next on the chopping block are consumer loans.

  16. Has Cramer a mind or a soul ? God forbid ! If you want a figure of decadence, Cramer is it. When I see that moron, I think of a vilain in Batman, a comic strip characeter. I love the old Batman series but I never thought that the Joker would give investment advice in Gotham City. He is the perfect incarnation of end of reason. Not surprised that he was a bank analyst. He was a long time ago a butcher. No kidding. He should go back killing chickens. “Mind you, sheep are just fine too. Buy Lehman, it’s a real steal. :)”

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