In the beginning of the year, I appeared on CNBC extolling the risks of the F.I.R.E. sector, Reggie Middleton Sets CNBC on F.I.R.E.!!!.
The day after the warning on the insurance portion of F.I.R.E it was announced that Insurers’ 2011 Catastrophe Losses Hit Record. I was the only one in the mainstream media warning of the multi-sector risk that I know of. As a matter of fact, there were several personalities stating the exact opposite of the main man (and I don't meanLobo).
Now, as you can see, there is a one quarter trading pop where the banks did well, but looking at the big picture and factoring in today's macro climate, I think it's easy to see where banks are bad news. Just ask Mr. Dimon. Where I believe Mr. Bove went wrong in the moderate term analysis is he, again, severely underestimated both the macro outlook for the banks, the fundamental risk of the trash on the balance sheets (almost none of which we are truly privy to) not to mention the extreme risk of the trading practices of these entities. These are the primary reasons why I have been so bearish on them. Time will tell who is right, and I believe I have time on my side.
Now, Dick Bove and I (with all due respect to Mr. Bove, this analyzing and predicting stuff is not easy!) have disagreed in the past, and more than once or twice - see CNBC Favorite Dick Bove Admits To Being Wrong On Banks, But For The Right Reasons, But Those Reasons Are Still Wrong!!! For those not familiar with Mr. Bove, he made an interesting bullish call on Bear Stearns which was essentially antithetical to my research - which essentially said Bear Stearns was done for back in Jaunary of 2008, see Is this the Breaking of the Bear? By March of 2008, Bear Stears was essentially done for. We also disagreed on Lehman Brothers, where Dick was bullish and I was quite bearish (see ). Karl Deninger's post from the Market Ticker explains the story explicitly, but of course from Karl's perspective, so to be fair to Dick all should keep that in mind:Dick Bove, Bear Stearns, And Controversy
Now, Dick Bove not withstanding, the sell side followed my lead for the big investment banks, albeit materially later. As excerpted from First I set CNBC on F.I.R.E., Now It Appears I've Set Sell Side Wall Street on F.I.R.E. As Well!!!:
If you remember, I also gave explicit warnings on the media's favorite bank, the "untouchable" Goldman Sachs! Well, it looks as if I've actually set the Wall Street Brokerage house on F.I.R.E as well. Lookee here: UBS, Goldman, Morgan Stanley Earnings Estimates Cut By JPMorgan Cazenove
JPMorgan Cazenove analysts cut their earnings outlook for investment banks for 2011, 2012 and 2013, citing worsening conditions in fixed income and equities.
Hmmmmm.... Where have we heard that befre???
UBS AG (UBSN) had its 2011 earnings-per-share estimate trimmed by 4 percent and the 2012 estimate by 11 percent, JPMorgan analysts including Kian Abouhossein said in a note to clients today.JPMorgan also curbed its Goldman Sachs Group Inc. (GS) forecast for 2011 by 37 percent and the 2012 figure by 19 percent.
The earnings downgrades of banks including Goldman and UBS “reflect weaker investment banking client activity and lower volumes across the board than previously anticipated,” JPMorgan’s analysts said. “Consensus needs to come down to reflect the weaker-than-expected environment” in 2011’s fourth quarter, they said.
JPMorgan also cut forecasts for other banks including Morgan Stanley (MS), whose estimates were reduced by 5 percent for 2011 and 17 percent for 2012.
From what I understand, Wells Fargo also issued a similar report on Goldman! Quite timely, fellas! Although this is not the First Time The Vampire Squid Get's Outed On TV!, I do believe it was the first time it was outright outed on the big MSM stations such as CNBC. Of course the sell side follows suit, after the fact. To wit, CNBC Favorite Dick Bove Admits To Being Wrong On Banks, But For The Right Reasons, But Those Reasons Are Still Wrong!!! I would like all to remember that Goldman, et. al. Suffer From The Same Malady That Collapsed Lehman and MF Global, Worlds 1st and 8th Largest Bankruptcies! This is proof positive that the BoomBustBlog Forecast Pan-European Bank Run Has Breached American Soil!!! Investors, pundits and analysts can sit idly by while Squids, Morgans & Counterparty Risk Blow Up The World One Tentacle At A Time or they can actively do something about it. The decision is yours to make.
Times are changing, y'all. Hey, when are rating agencies going to jump into the fray? Not! Maybe its time to pose the question "What Is More Valuable, The Opinion Of A Major Rating Agency Or The Opinion Of A Blog?" Go Ahead, I DARE You To Answer! In case I haven't delivered the hint strongly enough, let me be blunt. I'm directly challenging the the Sell Side house that is just now catching F.I.R.E. - Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?
Just As I Predicted Last Quarter, The World's First FDIC Insured Hedge Fund Takes A Fat Trading Loss
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On that note, I post this update on our outlook for the venerable Goldman Sachs for subscribers (click here to subscribe): GS Revenue Analysis_Q2 12 (103.95 kB 2012-06-13 10:39:33).
I will review the other sectors of my FIRE thesis in upcoming posts, leading with CRE and European banking.
For those who are encountering me for the first time or don't know who I am, feel free to find the answer to the question "Who is Reggie Middleton?"
Relevant subscriber research: