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#11
08-23-2007, 05:37 PM
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Re: Let\'s talk about Wall Street analysts
DDY: You are completely justified in your opinion and it's not all that different from how I feel from a logical and business management perspective. But ND and I are both correct in that this is not the way Wall Street works and she is a super high profile big name in the firm high in the power structure, so she's not feeling anything besides a bit embarrassed about this. At some corporate exec retreat or something in Aspen there will maybe be a skit where they poke fun at her.
ND: Yeah, I mean, I know what you and Al are saying about their increasing lack of relevance, and that is something I've felt for a while. But nonetheless, the whole idea that a report can go out that is orders of magnitude off just puts it in such a stark light that I can't help but shake my head. It's like a retail food service analyst putting out a report talking about how well McDonald's will be doing next quarter because they increased the price of Big Macs to $399 each. Al: Good posts. Not being in finance and not being an active public markets investor, I'm not super informed about this stuff. My closest involvement with these people was being involved in banking sales presentations at a few companies where the analysts provided "sample reports" that were more bullish than anything that any of the companies would have ever considered putting together as a marketing piece, haha. 
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#12
08-23-2007, 05:46 PM
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Re: Let\'s talk about Wall Street analysts
Naj - yeah, I thought he was very good also, think it says alot that I almost considered taking the research job when I had some good PE / VC offers in hand (this was before April 2000 haha).
Actually, any buy side or independent research firm's reports that you'd strongly recommend? I have a couple buddies at Sanford Bernstein, always seemed like they have a solid rep. I also use their reports from time to time and think they're good. -Al
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#13
08-23-2007, 05:48 PM
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Re: Let\'s talk about Wall Street analysts
increasing?
Those reports lost relevance completely around 2002 if not earlier. And were recognized as such. The Richard Perry's and Steve Mandel's of the world left the sell-side a long, long time ago. HFs hire top analysts directly, a 'learning period' at a WallSt bank is no longer required at all - a big change from 20 years ago. You can [and many will] make the case that Mandel is the top retail analyst in the world. But rather than publish for GS, he's running about $8bn or more and is regarded as one of the top 5 HF managers for equities.
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#14
08-23-2007, 05:52 PM
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Re: Let\'s talk about Wall Street analysts
Two things at work here I think. One is human error, the other is bias.
These kind of gross calculation errors are avoidable, yet inevitable. The bigger problem imo is the bias in industry analyst forecasts/recommendations. Even the existence of intentional bias has been well documented but it's something I fear we'll always have to live with. I guess I'm a pessimist when it comes to these things.
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#15
08-23-2007, 05:55 PM
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Re: Let\'s talk about Wall Street analysts
ND: I have had this discussion w/ people like you (professionally) and I think people in the industry underestimate the amount of relevance these types of reports have on retail investors and the media.
Al: "Sanford Bernstein" - I've had a couple of friends work there and have been very impressed with what I've seen from them.
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#16
08-23-2007, 06:00 PM
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Re: Let\'s talk about Wall Street analysts
[ QUOTE ]
The Richard Perry's and Steve Mandel's of the world left the sell-side a long, long time ago. HFs hire top analysts directly, a 'learning period' at a WallSt bank is no longer required at all - a big change from 20 years ago. [/ QUOTE ] From the point of view of one of those direct-to-HF analysts, I don't think it's as black and white as you make it sound. Do you really think the HFs are getting all the talent? I know a bunch of really smart kids who are working sell-side currently.
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#17
08-23-2007, 06:05 PM
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Re: Let\'s talk about Wall Street analysts
The research side of I-Banking is a really interesting field. I would never personally want to go into it, but the fact that analysts predictions can be self-fulfilling prophecies creates an interesting point of discussion.
Henry Blodget came and lectured to a seminar of mine last year for 2 hours and then took questions. We could not ask questions related to the legal proceedings, but he explained some very interesting things about their research. First, he swore that he really believed in his picks at the time. Looking back he said he realizes that he was caught up in the hype of the bubble, but when all his picks kept hitting ridiculous targets why would he doubt that the "new economy" that was driving the tech boom. He claimed that although some e-mails with colleagues reflected different setiment than his actual picks, this was like any other internal communication a t a big company where people question themselves and others. I tend to agree with his claims and do feel that Spitzer needed someone to go after once the dot-com bust happened. He also basically implied that a majority of analysts who last more than a year or two are more than competent. The only ones to gain notoriety are the ones who make some unexpected picks which hit. He picked Amazon to hit $400 when it was trading at $175 and became a superstar when it happened just months later. In his time a good analyst made huge money, but that all changed after the dot-com bust and subsequent legal action. Now there are really very few superstar analysts as the best ones move to more lucrative jobs at hedge funds very quickly. Meeker was very lucky in the fact that she did not lose as much credibility or have legal action taken against her, primarily because Morgan Stanley did not save e-mails. I don't take too much stock in analysts positions other than how their changes affect a stock's price.
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#19
08-23-2007, 06:31 PM
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Re: Let\'s talk about Wall Street analysts
jws - here's a quickie recap of Blodget's career (I am friends with someone who worked with him at Oppenheimer, where he made the Amazon $400 pick).
Graduated Yale (I did too, I guess you did also, so we both know that doesn't mean much), didn't know what to do with himself so taught tennis to married chicks, one of them was married to a Prudential Securities research analyst, hooked him up there, somehow got the Oppenheimer gig, based solely on the Amazon pick got hired by a legitimate bulge bracket (Merrill). I stopped paying attention to him around 2002, but he was a complete joke on the Street while he was a high profile analyst. Can't imagine what he's done in the intervening years to give him a shred of credibility (unless the point to your post is he's just not that bright, which I would agree with you wrt financial analysis). Compare him to Meeker for instance, someone with strong industry experience and had been doing equity research for years prior to the boom. -Al
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#20
08-23-2007, 06:41 PM
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Re: Let\'s talk about Wall Street analysts
Al,
"I stopped paying attention to him around 2002, but he was a complete joke on the Street while he was a high profile analyst. Can't imagine what he's done in the intervening years to give him a shred of credibility" He has a blog? I don't know anyone in tech or finance who doesn't still consider him a joke.
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