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On The Idiocy Of Sell Side 'Research' Lemmings

Tyler Durden's picture




 

Here's why you shouldn't trust sell-side research analyst expectations. Their 'normal' pattern is extrapolate trends in a lemming-like chase to be the headline-maker of the day ($1111 AAPL price-targets for instance) and then - when it's just too obvious (or when the company in question actually 'misses' what they extrapolated by a mile cough JCP cough) - they knee-jerk react at turning points - when it is already too late. So the next time someone on TV 'projects' value based on earnings or tries to convince you to part with your hard-earned money on a stock with great earnings prospects, perhaps this chart will remind you to reduce that exposure. The simple fact is - they do not know; and with the macro 'forest' becoming increasingly binary in its outlook, focusing on the micro 'trees' and supposed 'diversification' is irrelevant as correlations snap and as Goldman notes 'big revisions are the norm' as bottom-up earnings data (guided by the ever cautiously optimistic CEOs) is always slow to reflect much weaker macro data.

 

 

Chart: Goldman Sachs

 

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Fri, 11/09/2012 - 10:19 | 2964210 francis_sawyer
francis_sawyer's picture

purple crayons & Lazlo's ruler...

Fri, 11/09/2012 - 10:21 | 2964216 GetZeeGold
GetZeeGold's picture

 

 

Just point out what cliff we're suppose to jump off. We'd rather not think about it.

Fri, 11/09/2012 - 10:40 | 2964271 Boris Alatovkrap
Boris Alatovkrap's picture

Boris say just BTFD!

Fri, 11/09/2012 - 10:56 | 2964303 LawsofPhysics
LawsofPhysics's picture

Everyone needs to think about it this way;

 

Any technical analyis is useless if the data they are basing the analysis on is bullshit, moreover, the "flation" debate is also pointless when paper assets go bidless and physical assets of real value are hard to come by because people are not selling (for a host of reasons).  This isn't the 70's and there can only be so many "japanese economies" in the world.

Ask yourself, how did America get out of the 70's?  Go ahead raise interest rates, I double dog dare you.

This is a new world paradigm unlike anything experience before and I'll bet you any fiat that the U.N. or the IMF are cooking up a "world solution" at this very moment, hedge accordingly (it's all we can do anyway).

 

Fri, 11/09/2012 - 14:52 | 2965387 Boris Alatovkrap
Boris Alatovkrap's picture

"Go ahead raise interest rates, I double dog dare you."

Credit Card is certainly raise to rates, but Federal Reserve Discount Window is never again is to raise rates. Guaranteed, double dare dog! Problem for banks are Term Mismatch, borrow for days (short), lend for years (tall). If Fed is raise to rates, bank is to collapse. Includes Treasury Rates because if is raise to rates on T-Bills, savings is move from commercial banks deposits to T-Bills, banks is collapsing as Reserves in depletion.

Double Dare Dog is END GAME!

*If equity and vapor assets in Bank-o-sphere is not first rush to hard assets, then crash comes first and is not chance for raise interest rates anyway.

Mon, 11/12/2012 - 00:37 | 2971684 MeelionDollerBogus
MeelionDollerBogus's picture

makes Americanism most warm and fuzzy for nostaltgia in my citizenism

Fri, 11/09/2012 - 12:35 | 2964723 Silver Bully
Silver Bully's picture

'Boris say just BTFD!'

Um, which one?

Fri, 11/09/2012 - 14:54 | 2965400 Boris Alatovkrap
Boris Alatovkrap's picture

Which Dip? Or which is Boris?!

Fri, 11/09/2012 - 10:48 | 2964298 Whoa Dammit
Whoa Dammit's picture

The 1 foot high cliff is for the very wealthy. No danger to any, but the extremely clumsy may suffer a twisted ankle. (But remember most of them like things twisted).

The 10 foot high cliff is for the poor. Nothing to really harm them, merely useful for keeping them in line.

The 100 foot cliff is reserved for the middle class.

Fri, 11/09/2012 - 11:01 | 2964331 Spastica Rex
Spastica Rex's picture

I'm lucky I escaped from the middle class a few years ago.

Whew!

Fri, 11/09/2012 - 11:58 | 2964577 Cast Iron Skillet
Cast Iron Skillet's picture

sooo ... you looking at the 1 footer or the 10 footer?

Fri, 11/09/2012 - 12:56 | 2964802 Spastica Rex
Spastica Rex's picture

As a young man, I once skied off a 25ft cornice and landed head-first on a rock. I was hospitalized and was semi-conscious for several days.

10ft will be cake.

Fri, 11/09/2012 - 12:03 | 2964592 Flakmeister
Flakmeister's picture

Had to run off last night...  From  2963912

We got 7" of snow in Westchester, NY wed. evening and the roads were a shit show...

The little lady dragged me away to watch an absolute top-shelf PBS documentary on the Cuban Missle Crisis I had DVRed. I wish some of the Hedgies here would learn about Curtis LeMay. Kennedy was brilliant and one cannot help but be impressed by the rationality of Nikita with MAD staring him in the face...

Fri, 11/09/2012 - 16:03 | 2965743 smiler03
smiler03's picture

Lucky that it wasn't 7'

That woud've have been climate change.

Fri, 11/09/2012 - 16:15 | 2965803 Flakmeister
Flakmeister's picture

Yeah... the region that got 3' was pretty much limited to coal country.... fitting eh?

Fri, 11/09/2012 - 11:18 | 2964378 Hayabusa
Hayabusa's picture

GetZeeGold is correct... they would rather follow the pointing finger.  The market has turned into a show for the extroverts, by the extroverts and you know how extroverts operate... it's about how they dress, sound, look and feel and of course going along with the other vacuous, superficial and all sizzle no steak counterparts.  Much like our politicians, they make decisions based on what everyone else wants/does and have absolutely zero critical reasoning skills - extrapolating from a decision made today to what may happen tomorrow as a result of it is not in their repertoire... they are all lemmings jumping off a cliff smiling as they go and happy to do it because everyone else is doing it.... trouble is those idiots are dragging along the more introverted critical thinking segment along with them who can see what's going to happen but are powerless to do anything about it.  When guys like Ron Paul or Gary Johnson receive 1-2% of the vote you know the lemmings/cliff are your future.  Please fasten your seat-belt (if won't help you but it may make you FEEL more secure)

Fri, 11/09/2012 - 10:28 | 2964243 vast-dom
vast-dom's picture

Why you shouldn't trust ANY research analyst expectations. But in a world where hopium reigns supreme...

Fri, 11/09/2012 - 10:20 | 2964215 orangedrinkandchips
orangedrinkandchips's picture

Tyler,

 

good shit as usual, BUT, WHO ARE THE REAL IDIOTS? NOT THE ANALYSTS.....FUCK NO.

 

Getting paid millions to write up garbage?

 

Sounds like a SORE DICK! YOU CANT BEAT IT!

 

shit fire, if you can get paid millions to do jack-shit.....h/t to them!

Fri, 11/09/2012 - 10:22 | 2964220 GetZeeGold
GetZeeGold's picture

 

 

Just ignore them....works for me.

Fri, 11/09/2012 - 10:23 | 2964227 Schmuck Raker
Schmuck Raker's picture

A double spaced ode to lying, cheating, and stealing I could do without.

Fri, 11/09/2012 - 10:27 | 2964240 Dr. Engali
Dr. Engali's picture

I'm sorry but people like you and them are the problem, Corruption is unacceptable in any form, and that is exactly what they do because in the end their job is to create a story that will sell stocks.

Fri, 11/09/2012 - 14:16 | 2965169 laozi
laozi's picture

I am not so sure. There is no good way off banning idiots to speak their minds (and being handsomly rewarded for it).

The reader must shoulder the responsibility to find sources with a good track record.

Fri, 11/09/2012 - 10:56 | 2964317 onelight
onelight's picture

Reminds me of Rodney Dangerfield's character in Caddyshack: "Last time I saw a mouth like that, it had a hook in it.."

Fri, 11/09/2012 - 10:56 | 2964318 onelight
onelight's picture

Reminds me of Rodney Dangerfield's character in Caddyshack: "Last time I saw a mouth like that, it had a hook in it.."

Fri, 11/09/2012 - 10:21 | 2964217 LawsofPhysics
LawsofPhysics's picture

What?  Making predictions on "mark to fantasy" accounting doesn't work?  "Shocker"

Fri, 11/09/2012 - 10:28 | 2964242 fuu
fuu's picture

There goes silver.

Fri, 11/09/2012 - 10:34 | 2964257 GetZeeGold
GetZeeGold's picture

 

 

Yup....again.

Fri, 11/09/2012 - 10:36 | 2964266 fuu
fuu's picture

Half a pound of tupenny rice, half a pund of trecale, that's the way the money goes, pop goes the weasel.

Fri, 11/09/2012 - 10:58 | 2964322 tocointhephrase
tocointhephrase's picture

yee ha

Fri, 11/09/2012 - 10:32 | 2964250 adr
adr's picture

The entire point of sell side research is for insiders to profit off quick moves based on the bullshit predictions.

Analyst A predicts stock Q will head to $80 a share, doubling over the next six months. Based on absolutely nothing. But the other analysts chime in and make predictions in a range. Stocks get upgraded because some famous rich person somewhere looked at a computer screen and mentioned the company on TV.

The result is a quick move up, lately 15-20%. More money for insiders, the rest left scratching their heads as to why a stock jumped 20% for apparently no reason at all.

Fri, 11/09/2012 - 10:34 | 2964260 Yen Cross
Yen Cross's picture

Cramer likes his stocks to go "pyramid style"... The 200 day average doesn't matter. Someone run outside the exchange and grab a "Traffic Cone" for that dunce!

Fri, 11/09/2012 - 10:37 | 2964268 Abraxas
Abraxas's picture

Why the spike in Ag this morning? It feels good to see it.

Mon, 11/12/2012 - 00:32 | 2971673 MeelionDollerBogus
MeelionDollerBogus's picture

the matching term is "bull-trap" but that's OK if you're ready to BTFD soon:

http://flic.kr/p/dr5zxy

It's all about time-scale. In the long-term > 6 months this is of no concern, these are all discount prices

Fri, 11/09/2012 - 10:42 | 2964275 tocointhephrase
tocointhephrase's picture

Whoop whoop....ponzi alert....whoop whoop

http://www.bbc.co.uk/news/business-20268679

Fri, 11/09/2012 - 10:42 | 2964276 PUD
PUD's picture

Morgan cuts groupon to equal weight..bhwaaaaa JPM cuts csco bhwaaaaa How long them horses been gone? Quick close the barn door!

Fri, 11/09/2012 - 10:46 | 2964292 dirtyfiles
dirtyfiles's picture

upgrade/downgrade
poker face

Fri, 11/09/2012 - 10:49 | 2964299 cranky-old-geezer
cranky-old-geezer's picture

 

 

and supposed 'diversification' is irrelevant

"Diversification" is sell-side code for "more commissions" and "we really don't have a fucking clue what this thing is gonna do, so don't go all in on it"

Any "analyst" worth listening to will make all-in recommendations, bet the farm on it.

But listening to any "analyst" is taking the easy way out.  It's code for "you're too lazy to do the research yourself".

Fundamentals?   Here's the fundamentals:  Bennie is gonna keep printing and debasing the currency. 

Strategy?   Invest in good stores of value Bennie can't print more of.

Fri, 11/09/2012 - 10:55 | 2964309 ebworthen
ebworthen's picture

I hear Chipotle and Green Mountain Coffee are looking cheap!

JCPenney is going to go gangbusters soon, what with their lower case font/Ellen DeGeneris ads.  They haven't alienated their customer base in the leastl!

AAPL going to $1,100 because they are using all that cash to clone Steve Jobs and they stored his consciousness in Cupertino headquarters servers.  Until they have the body ready, they will channel him through Siri.

Fri, 11/09/2012 - 10:56 | 2964312 onelight
onelight's picture

..

Fri, 11/09/2012 - 10:58 | 2964319 Yen Cross
Yen Cross's picture

 The MSM has their heads up their asses on their interpretation of the news out of China last night. The first tranch during th Asia session was shitty.  The second tranch was better, but doesn't jive at all with the earlier news. They keep talking about China adding stimulous when we all know that would cause inflation hell in China. The MSM idiots need to do some homework and quit quoting everything that pops up on their BBG & RTRS terminals.

 CNY   Chinese CPI (MoM) -0.1% 0.1% 0.3%     17:30  CNY   Chinese PPI (YoY) -2.8% -2.7% -3.6%     17:30  CNY   Chinese CPI (YoY) 1.7% 1.9%

1.9

 

Fri, 11/09/2012 - 10:59 | 2964324 q99x2
q99x2's picture

Goldman: what idiots.

Fri, 11/09/2012 - 11:01 | 2964330 Miss Expectations
Miss Expectations's picture

Earnings Revisions "Ski Slopes"

Gosh, does that ever resonate with me.  Back in High School when I was an Intermediate skier (barely) I made a huge mistake and missed getting off the ski lift at the halfway point...  Next Stop...all the way to the top to the Expert Slopes.  Vermont skiing at it's finest: ICE.  Really sucks when the research analysts fuck with the signs.  All down hill on the black diamond.  Good luck with that.  It could get you killed.

Fri, 11/09/2012 - 11:29 | 2964462 orangegeek
orangegeek's picture

Dear Goldman,

 

Primary wave three down.

 

http://bullandbearmash.com/chart/sp500-weekly-closes-week-week-lot-worse/

 

Good weekend.

Fri, 11/09/2012 - 11:44 | 2964527 Liquid Courage
Liquid Courage's picture

I figured we were in for a wild ride the first time I saw an ad referring to Mutual Funds as “products”. Yes, quite a while back. I knew a gargantuan scam was coming down when a bit later I heard Bill “The Shill” Shatner - good ol’ Capt. Kirk - intone reverently: “It’s not just software ... it’s Asset Allocation Technology.”

Then the infamous Ibbotson Study concluding that “stocks always go up in the long term” so, y’know, BTFD. Well, if by “long term” you mean since the start of the secular Bull Market in 1982 or so, and if you don’t adjust for inflation and if you neglect to include survivor bias ... well then yes, I suppose Modern Porfolio Theory (MMT) based on the Efficient Market Hypothesis (EMH) is not the big bag of crap it appears to be, and I really should just BTFD and “hold for the long term”.

Interesting that this re-birth of the Mutual Fund idea came along just in time to separate Baby Boomers just passing the peak of middle age from their hard earned savings. Just a co-incidence I’m sure.

Nothing new, though ... just good old Stock Promotion. People want to be fooled, because they want to get rich and so few ever stop to ask: “If this “product” is so hot, why don’t you, Mr. Coldcall, just hang on to it,  get rich yourself, and leave me out of it?”

Fri, 11/09/2012 - 12:10 | 2964621 Catullus
Catullus's picture

There are few good sell side people industry to industry. I feel for people doing fundamental analysis in this market. It really is a bitch game. You're going to be wrong sometimes.

What I find interesting is the dynamic between sell side equity and debt analysts. Especially in a capital intensive business. There's just no having two ways when your cash flows are getting squeezed. And what I don't see is enough equity analysts being cognizant of it and evaluating based on credit downgrade potential.

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