Posts filed under “Analysts”

Bank Earnings Forecast: +57%

Today’s howler comes from the fundamental banking analyst community. Recall that this is the group who once existed to help investors decide where to place their monies. When that did not work out, their bosses morphed their business model towards generating IPO and syndicate business. When that failed, they moved towards driving short term institutional trading.

Today, I have no idea what their business model is.

Despite having missed 2011′s declining earnings per share for the biggest U.S. banks, they are forecasting an even bigger profit surge for 2012, according to Bloomberg:

“The six largest lenders, including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS), may post an average profit increase of 57 percent this year, according to 184 analysts’ estimates compiled by Bloomberg. A year ago, analysts predicted profit at the banks would climb 32 percent in 2011. Instead, earnings per share probably fell 18 percent as the economic recovery analysts counted on never took hold.

Improved trading results, more investment-banking deals, expense-cutting measures and lower credit costs will lead to the increase in earnings that didn’t materialize last year, analysts say. That may provide a boost to stock prices after financials were the worst-performing industry in the U.S. in 2011.”

Exactly how does one forecast improved trading results? “I really feel these guys are not only going to have a better trading environment in 2012, but they are going to get better insight, cleaner executions and be a whole lot luckier than they were in 2011” said no one at all.

Its not just the Bank Analysts who stunk up the joint. Wall Street Market Strategists did not do much better, as this WSJ graphic shows:

The takeaway is you better have your own approach for investing and trading, rather than relying on 3rd party guesses . . .

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Sources:
Bank Earnings Jump 57% in Analyst Forecasts
Michael J. Moore and Dawn Kopecki
Bloomberg, Jan 3, 2012  
http://www.bloomberg.com/news/2012-01-04/bank-earnings-increase-57-in-analyst-forecasts-which-proved-wrong-in-2011.html

Street Wary on Its Random Walk
Strategists, on Average, See 6.1% Rise in S&P 500 for 2012 as Worries Abound on Europe, Earnings
STEVEN RUSSOLILLO
WSJ, JANUARY 4, 2012
http://online.wsj.com/article/SB10001424052970204368104577139023088982182.html

Category: Analysts, Earnings, Really, really bad calls

Sarkozy: French Rating Downgrade “Difficulty, not Insurmountable”

Following a drop of factory output by -5.1% in October YoY, as compared with a forecast decline of just -0.7%, the Indian Rupee is tumbling – its down over 15% against the US$ YTD. The SENSEX is down approx 23% YTD, making it one of the worst performers of the Bric countries, though China is down roughly around the same percentage;

Well, you heard it first from Sarkozy – basically he is trying to defuse the impact of the impending French ratings downgrade, likely imminently. Remember that S&P suggested a possible 2 notch downgrade for France. A downgrade is considered a near terminal event for Sarkozy’s Presidential reelection hopes. The current favourite to replace Sarkozy is Francois Hollande, leader of the French Socialist Party, who may add a further complication to the recent Euro Zone “fiscal  compact”.

Other euro Zone countries will be downgraded, including Germany, if S&P carries out their threat Fitch joined S&P and Moody’s in threatening a downgrade for a number of Euro Zone countries, warning of a “significant economic downturn” in the region;

It looks as if Commerzbank needs a 2nd state bail out since 2008, according to German political sources, though Government officials have denied the story – the EBA suggests that Commerzbank will need E5bn. The EBA has ordered European banks to raise E115bn by June next year which, whilst not enough, will still prove to be a struggle. European banks continue to reduce leverage – current estimates suggest that the need to reduce their balance sheets by at least E2tr;

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Category: Analysts, Credit, Think Tank

Fitch comments on EU summit results

After Moody’s did earlier today, Fitch is giving its thoughts on Friday’s EU summit. “It seems that a ‘comprehensive solution’ to the current crisis is not on offer.” They acknowledged the initiation of an “institutional and policy framework for a more viable eurozone and ultimately greater fiscal union, but taking the gradualist approach imposes additional…Read More

Category: Analysts, MacroNotes

QOTD: Ratings Agencies Jobs

What is the function of Ratings Agencies? The answer to that question was most pithily expressed thusly: might “The function of a ratings agency is to visit the field at the end of the battle and shoot the wounded.” -John Heimann, Spring 1998 (former U.S. Comptroller of the Currency and later vice chairman of Merrill…Read More

Category: Analysts, Really, really bad calls

EFSF

*EUROPEAN FINANCIAL STABILITY FACILITY MAY BE CUT BY S&P

Category: Analysts, Bailouts, MacroNotes

Do Ratings Agencies Still Matter?

Old joke about Analysts: You do not need them in a Bull market, and you do not want them in a Bear market. > I was thinking about that in light of the S&P’s mass EU downgrade threat. As always, the Credit Rating Agencies are quite late to the party. And consider that the European…Read More

Category: Analysts, Really, really bad calls

Over Rated

Source: Over Rated, Bloomberg Businessweek, Nov/Dec 2011

Category: Analysts, Bailouts, Think Tank

The Con Man’s Lament: Equity vs Commodity Firms

There may be no honor among thieves, but there has always been some small measure of dignity — even respectability — amongst the con men of the equity markets. Apparently, there is no such corresponding code of honor amongst commodity trading firms. I refer of course to the debacle that is MF Global. How on…Read More

Category: Analysts, Legal, Really, really bad calls, Trading

Moody’s threatens ALL Euro Zone countries with downgrades

Kiron Sarkar is an investor and advisor in London. Formerly in the M&A dept of N M Rothschild in London, he was head of M&A of Rothschild (Hong Kong) and worked on their international privatisation team. He worked as privatisation adviser to the UK Governments Know How Fund. Most recently, he was European Head of Media, Tech and Telecoms at CIBC World markets. Kiron has acted as a lead adviser in respect of over US$150bn of deals and has worked globally in both developed and emerging markets.

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Moody’s threatens to downgrade ALL Euro zone countries – hey, that includes Germany does it not. Off course it does. I really wonder what officials in the German Finance Ministry think of that – a bit of a shock – well, possibly stronger emotions than that, I suspect. However, why the surprise – in my view Moody’s is just reflecting the reality of the situation.

French newspaper reports (La Tribune) suggest that S&P may downgrade the country’s outlook to negative in the next few weeks – personally, I do not believe that France will be able to maintain it’s AAA rating, so no surprise. French unemployment rose to the highest since December 2009. Looks increasingly as if Sarkozy is “French toast” in next years Presidential elections – no great loss, but the likely winner (a socialist) – who knows what he will be up to. Basically, more
uncertainty – just hope (likely) that the euro zone issues will be sorted out before that – making it more difficult for the potential Socialist candidate to complicate the process.

The far more important point is that Germany is finally recognising that it is not financially immune. The other big issue is whether Germany comes up with a credible solution re the Euro Zone and, by default (maybe not the right word to use, given the current situation) for themselves.

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Category: Analysts, Bailouts, Think Tank

How The NY Fed Missed the Great Recession

You may have missed Simon Potter’s publication on Friday “The Failure to Forecast the Great Recession.” Potter is not merely a distant observer throwing stones; he is the Executive Vice President and Director of Economic Research of the Federal Reserve Bank of New York. He breaks down the economists’ collective research failure into three categories:…Read More

Category: Analysts, Federal Reserve, Really, really bad calls