Posts filed under “Valuation”
"At the start of the year, profits at banks, brokers and insurance companies were projected to rise 22 percent in 2008, according to the average estimate of analysts surveyed by Bloomberg. They’re now expected to decline 48 percent."
-Bloomberg’s Chart of Day
How bad are fundie analysts as a group? Well, as the chart up top shows, the earnings forecasts of Wall Street Analysts "missed the mark by the biggest margin in at least 16 years last quarter," according to Bloomberg data.
How often did the Street get it right? Try 6.7% for the companies in the S&P500 Index in Q2. That’s the worst showing since Bloomberg began tracking this data way back in 1992.
While some blame the credit crunch, Oil, and Housing as the problem, a more likely source of error is Reg FD. Analysts have been increasingly wrong since the adoption in October 2000 of Regulation Fair Disclosure. The regulations barred CEOs and CFOs from giving the inside dope to the outside dopes. No more whisper numbers to favored bankerd or their pet analysts.
What does this mean to investors? Well, traditional Wall Street Research seems to be of minimum value to investors. Its no surprise that the fastest growing form of analytics (yes, I am talking my own book here) is quantititive — no C-level execs needed.
Follow Analysts at Your Own Financial Risk (June 2008)
Schwab: We Don’t Need Your Stinkin’ Analysts (April 2008)
Analysts’ Profit Forecasts Missing More Than Ever: Chart of Day
Bloomberg, Aug. 20 2008
Another fun discussion with Henry. As you can see, I have trouble forming an opinion . . .
Note: I have a great deal of respect for Tom Brown — like Dick Bove, another smart guy I hate being on the opposite side of a trade from — but he has simply been way too early in his bottom calls.
Street Fight: Analysts Battle Over the Bottom in Financials
Yahoo, August 12, 2008
RBS slumps to one of biggest losses in UK banking history
Telegraph, 10:35am BST 08/08/20081
Wachovia boosts loss to $9.11 bln, cuts more jobs
Reuters Aug 11, 2008 7:02pm EDT
Michael Price Shorts Citigroup, Sees Few Banks to Buy
Bloomberg, Aug. 12 2008