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#1
08-23-2007, 03:38 PM
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Let\'s talk about Wall Street analysts
OK, we have some finance folks here. And a number of investors.
I have a lot of thoughts on the research side of the investment banking industry. But this news today really says it best. http://www.alleyinsider.com/2007/08/...eekers-yo.html Mary Meeker, MD and head of tech research at Morgan Stanley issues a report on YouTube advertising. Other analysts made projections in the tens to hundreds of millions of revenue impact. Mary's number? An incredible $4.8 BILLION - nowhere near what anyone else projected. The article above shows that her team made an incredibly basic error and was 1000x off on their numbers. This team is supposed to be among the leading experts in analyzing financial information and is 1000x off due to a math error - that part is sloppy, but hey, stupid mistakes happen. But the fact that not a single person on the team has the intuition to say "Hey guys, this just FEELS wrong" is really mind-boggling. 
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#2
08-23-2007, 04:33 PM
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Re: Let\'s talk about Wall Street analysts
I almost went into sell side research after working as an analyst in banking, this was around 2000, went to do PE instead, but strongly considered taking the research gig (it was at Morgan Stanley actually, with a very well respected telecom analyst at the time, he's been gone for a while and running his own fund). I learned alot about the process back then, and felt that alot of the work they did was very interesting (especially from the deal side) and I met alot of astute finance people, imo.
Meeker, Blodget, Grubman et al took alot of heat for their ridiculously bullish forecasting 1996-2000, but I don't think anyone ever questioned their basic valuation skill set. They were moving markets with a really transparent agenda. Also, this was back when sell side research analysts functioned as bankers, made deals, and there was essentially no Chinese Wall. With the new legislation in place, I've always just assumed sell side research analysts (even Meeker) weren't that important anymore in the grand scheme of things. Could be off. And I don't think institutional investors ever put too much stock in their analysis from a fundamental analysis point of view. Sure, less savvy / uninformed retail investors get hosed but hey, do your own damn due diligence I say! -Al
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#3
08-23-2007, 04:41 PM
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Re: Let\'s talk about Wall Street analysts
I wrote an article about the innumeracy of the press (specifically, the press covering the housing market) a while back. Some of the stuff I uncovered in my research was just staggering.
One example I uncovered from a site that was dedicated to noting instances of innumeracy had someone who was advocating a slower speed limit assert that, in one second, a car moving at 55 mph travels 807 feet, or, in the words of the lobbyist, "nearly the length of three football fields." It's one thing to make the math mistake. It's another to not recognize that 807 feet is a very long distance to travel in such a short period of time at a relatively pedestrian speed. But to then take that data and then compare it to something that we can more easily understand -- something more than just a number -- and still not notice something is amiss...wow. I recognize that this is not about Wall Street analysts, but it's relevant enough to the OP, I hope. -McGee
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#4
08-23-2007, 04:45 PM
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Re: Let\'s talk about Wall Street analysts
incredibly sloppy and should not happen, but given that it did I can only explain it by saying that from everything iv read there seems to be a ton of pressure on wall street to not take any big chances and to go with the heard. In this case it probably was alot of junior analysts knew it was wrong intuitively but didnt have the balls to correct their superior. She probably assumed the math was correct because that isnt her job, but it is pretty embarrassing for her considering she just went along with it too.
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#5
08-23-2007, 04:49 PM
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Re: Let\'s talk about Wall Street analysts
Aces - link to article? Sounds cool.
Diablo - oh and more directly to your OP, IIRC, sell side research teams are churning out tons of reports all the time, so I could see how some retarded Associate level kid who was supposed to sense check the numbers dropped the ball, not knowing a ton about the industry. Meeker may not even have read that specific report before it got published (though for a concern as high profile as YouTube, you'd think she must have). In general, very few of the sell side research analysts I met came with a strong background in industry. Which is why I personally tend not to care what they say, also since they're sell side obviously they're going to have alot of client biases built in to their analyses (even with strict Chinese Wall, I mean they're pumping their sales people with info all the time and looking to move stock, pretty sure commissions generated are factored into their bonus pool). Oh this is to the point you make in the OP: [ QUOTE ] This team is supposed to be among the leading experts in analyzing financial information [/ QUOTE ] I don't think that's the running assumption on the Street wrt sell side research. -Al
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#6
08-23-2007, 05:01 PM
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Re: Let\'s talk about Wall Street analysts
[ QUOTE ]
Aces - link to article? Sounds cool. [/ QUOTE ] I'm one of those people who would prefer that my real name stay relatively far away from my 2+2 indentity, so I'll PM it to you (and anyone who asks) and just request that you respect my wishes. -McGee
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#7
08-23-2007, 05:20 PM
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Re: Let\'s talk about Wall Street analysts
[ QUOTE ]
incredibly sloppy and should not happen, but given that it did I can only explain it by saying that from everything iv read there seems to be a ton of pressure on wall street to not take any big chances and to go with the heard. In this case it probably was alot of junior analysts knew it was wrong intuitively but didnt have the balls to correct their superior. She probably assumed the math was correct because that isnt her job, but it is pretty embarrassing for her considering she just went along with it too. [/ QUOTE ] Anyone with that attitude is getting fired on my watch. If people are working for you, you are responsible for their actions. It is your job to make sure they are doing their jobs correctly. If they aren't, train, develop or replace them. This woman has probably ruined her career over this mistake and I can't say I feel bad for her.
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#9
08-23-2007, 05:25 PM
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Re: Let\'s talk about Wall Street analysts
[ QUOTE ]
[ QUOTE ] incredibly sloppy and should not happen, but given that it did I can only explain it by saying that from everything iv read there seems to be a ton of pressure on wall street to not take any big chances and to go with the heard. In this case it probably was alot of junior analysts knew it was wrong intuitively but didnt have the balls to correct their superior. She probably assumed the math was correct because that isnt her job, but it is pretty embarrassing for her considering she just went along with it too. [/ QUOTE ] Anyone with that attitude is getting fired on my watch. If people are working for you, you are responsible for their actions. It is your job to make sure they are doing their jobs correctly. If they aren't, train, develop or replace them. This woman has probably ruined her career over this mistake and I can't say I feel bad for her. [/ QUOTE ] Hahaha, no. Probably shouldn't opine on Mary Meeker if you have no idea who she is. Al - shoulda gone with Flannery. That dude is good. ElD - no one really puts any stock in WallSt research [equity] in the first place. These kinda typos are very common, if not quite as large as this. Hell, the NYT ran an obit on a member of the Four Tops and said he was a member of the Five Tops. How does an editor/anyone miss that?
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#10
08-23-2007, 05:27 PM
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Re: Let\'s talk about Wall Street analysts
[ QUOTE ]
DDY, Mary Meeker's career will be 100% unaffected by this. I wouldn't be surprised if one or more of those junior analysts get fired, though. [/ QUOTE ] That's a shame. Maybe it's my (brief) time in the military, but when something goes south, I look at the boss first and workers second. What's your opinion, El D? [ QUOTE ] Hahaha, no. Probably shouldn't opine on Mary Meeker if you have no idea who she is. [/ QUOTE ] I don't know who she is, but that is one heck of a bonehead move so I think I'm justified in thinking the boss should be held somewhat accountable for it.
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