Posts filed under “Analysts”

Luskin: Buy Stocks, Buy Citi (11/07) Sell Stocks (3/09)

Invictus is a bulge bracket asset manager with $100+ million AUM. He has no patience for money losers, hacks, partisans pretending to be financial analysts . . .  this is the first in a series of critical looks at analysts, media, economists, financial TV. Feel free to share any thoughts in comments.

Here’s Invictus:


I’ve been reviewing some older columns that stood out to me as giving especially bad advice during  the period near the market peak. One in particular stands out as especially bad — poorly reasoned, not well thought out, full of weak analysis. It was amongst the worst of the money losing financial advice Smart Money has ever run. If I find more examples as bad as this one I am going to suggest the magazine change its name to Dumb Money.

Let’s set this one up first: This weekend, in Barron’s Alan Abelson devoted part of his column to the travails of Citibank:

“THE CITI NEVER SLEEPS. AND WE couldn’t, either, if we were Citigroup, given the way things have been going for the bank and its shareholders. The bank is wallowing in the red, and the stock, which sold at 56 and change in 2007, is now less than 3.50.

Moreover, among its other woes, it’s in a legal battle with Abu Dhabi, whose sovereign wealth fund is trying to squirm out of a deal closed back in November ’07 that obligates it to buy $7.5 billion of Citi stock at $31.83 a share come March.”

It seems like only yesterday that Don Luskin, a top Ideological Hack Hall of Famer, told us the 11 Reasons to Buy Now — this was in November 2007, a month AFTER the top, that Abu Dhabi’s investment in Citi was proof that Citigroup and the market were both cheap:

“ADIA’s investment in Citi means that stocks have gotten very, very cheap. Mega-investors like that only step in with $7 billion when they are getting a deep bargain.”

Or not.

The S&P was in the 1400′s at the time, Citi in the mid-30′s or so.  I’ve chronicled Luskin from time to time, and put together an incomplete Greatest Hits over a year ago.

It’s not just his pompous, arrogant, know-it-all attitude that is annoying about Mr. Luskin. Rather, its that all of his commentary seems to be that of a broken clock. He has been bullish as long as he has been on TV. The only time I have seen him bearish was yhis one exception: On March 6, 2009, he finally capitulated his bullish stance. Of course, this was RIGHT AT GENERATIONAL MARKET LOWS. Luskin wrote in Even Worse Than the Great Depression that:

“We can’t blame President Obama for the mess he inherited. But we can definitely blame him for making it worse. Stocks are off 28.4% since his election, 15.2% since his inauguration, and 17.2% since his so-called “stimulus” bill was enacted. To say the very least, whatever he’s doing, it ain’t working.”

And there is the partisan hackery he is so famous for. Since that politically inspired post, the S&P has rallied 63%. No word from DL as to what this rally means.

I hold no animus toward those who get it wrong in finance/economics. We all do. It goes with the territory. I do hold a fair amount of ill will toward those who distort facts, deliberately mislead others, or otherwise dissemble to support an ideological position. (As another example, see this 2008 foolishness about Housing  data).

Refusing to acknowledge one’s mistakes when presented with incontrovertible evidence is similarly a no-no in my book. And these folks need to be called out on their nonsense. It is both intellectually dishonest and counter productive.

Smart Money readers should learn to ignore his money losing advice . . .


11 Reasons to Buy Now
Donald Luskin
Smart Money, November 30, 2007

Category: Analysts, Media, Really, really bad calls, Research

Time Capsule Post (2010 Forecasts) — Open One Year Hence

I hereby invoke Bob Farrell’s Rule #9: When all the experts and forecasts agree — something else is going to happen. Let’s look at the forecasted year-end 2010 levels for the S&P500 and S&P500 earnings: Firm Strategist 2010 Close 2010 EPS Bank of America David Bianco 1275 73 Bank of Montreal Ben Joyce 71 Barclays…Read More

Category: Analysts, Investing, Markets

Mystery Writer

In today’s Baron’s, Mike Santoli discusses “A forecaster worth listening to sees more gains ahead.” He has penned missives such as “A Bear Is in Sight” and “Why This Rally Is Really Different” Santoli adds: This guy, though, is the one whose dispatches I saw as the very uncertain market trajectory took shape, illuminating the…Read More

Category: Analysts

The Folly Of Economic Forecasts

> Interesting discussion on one of my favorite subjects — The Folly Of Forecasts — on NPR with Chicago/Austrian economist Russ Roberts, now at George Mason University. click here for audio > Previously: Apprenticed Investor: The Folly of Forecasting Barry Ritholtz, June 07, 2005 Source: The Folly Of Economic Forecasts NPR, December 7,…Read More

Category: Analysts, Economy, Really, really bad calls

When Economists Collide – Part II

Invictus is a street insider, a long-suffering “lifer” whose close work with Wall Street research teams gives him unique insight into the current strategist spat. Enjoy: ~~~ It was noted back in October that a feud seemed to be simmering between the former Merrill Lynch Chief North American Economist David Rosenberg (now at Gluskin Sheff)…Read More

Category: Analysts

Modern Market Myths

Barron’s Mike Santoli points out a short list of market myths that currently seem to have currency amongst the investing and chattering classes. The five are: • “The dollar is collapsing.” • “Portfolio managers are trailing the market and might need to rush into stocks.” • “The hoopla over Dow 10,000 shows that Wall Street…Read More

Category: Analysts, Markets, Psychology

King Report: Goldman’s First Call ?

> Citigroup and BAC jump on Friday afternoon; JPM and then the S&P 500 followed: > > Stocks tanked on Friday with the ugly employment report. But stocks rebounded, led by a big rally in major banks stocks. Yesterday Goldie touted the big bank stocks. Did you get a Friday afternoon call? The S&P 500…Read More

Category: Analysts, Technical Analysis, Think Tank

Goldman Sachs: The “Smart” Money?!

U.S. stocks rebounded today, aided by a rally in financials. Why was the group strong? Because a team of analysts at a well-known Wall Street firm upgraded the large banks sector. And why did they do that? Bloomberg gives us the lowdown in “Wells Fargo, Biggest U.S. Banks Raised by Goldman”:

Wells Fargo & Co., JPMorgan Chase & Co. and the biggest U.S. banks were raised to “attractive” from “neutral” by Goldman Sachs Group Inc., which said share prices don’t reflect prospects for earnings growth.

“We believe this difference in earnings power hasn’t been fully reflected in share prices,” New York-based analysts led by Richard Ramsden wrote in a note to clients today. “We estimate that normalized earnings for large banks are 39 percent higher than in 2007 despite the 36 percent decline in share prices.”

Wells Fargo, based in San Francisco, was upgraded by Goldman to “buy” from “neutral” after its tangible assets per share increased 70 percent in the second quarter. “The reason is simple: Wells bought Wachovia at a depressed price,” Ramsden said. Banks have increased earnings with acquisitions that will add to earnings over the “long term,” he said.

Wow, pretty powerful stuff, eh? Then again, maybe not. You see, if you go back and look at what Goldman said in late-January, when most bank stocks were trading at far lower levels than they are now, the firm wasn’t exactly upbeat on the group. Again, Bloomberg had the details in “U.S. Banks May Be the ‘New Utilities,’ Goldman Says”:

Large U.S. banks risk becoming the “new utilities” as governments introduce greater regulation and force lenders to increase capital ratios, Goldman Sachs Group Inc. analysts said.

Return on equity at the biggest U.S. banks will be limited by higher capital requirements and greater regulatory controls, analysts led by Richard Ramsden in New York said in a report to clients today. The measure of how effectively banks invest earnings may shrink to between 10 percent and 12 percent, from the 15 percent banks generated between 1990 and 2006, they said.

U.S. Bancorp was cut to “sell” because the Minneapolis- based company, while “a good bank,” is already highly valued, the analysts wrote. Goldman also re-instated its sell rating on Citigroup Inc., saying “investors should avoid the stock given no core earnings power clarity.”

Bank of America Corp. was cut to “neutral,” the same rating given Morgan Stanley, Wells Fargo & Co. and PNC Financial Services Group Inc. The analysts recommend buying JPMorgan Chase & Co., which they said may show earnings improvement as the economic cycle turns.

Large banks, particularly Citigroup, U.S. Bancorp and Bank of America, have “thin” capital cushions compared with Goldman’s estimates for losses in the industry, the note said.

Read More

Category: Analysts, Contrary Indicators, Think Tank