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Was BlackRock's Permabull Bob Doll Fired For Stealing Financial Models?
Two weeks ago, when we remarked with great satisfaction that Wall Street's original pentagram of bull had now been cut to three, with the departure of BlackRock's hypermabull Bob Doll, we had one lingering question: why would a strategist, and not a trader, leave Wall Street in the "prime" of his CNBC prime-time years? After all, it is not like Doll ever was right, or was judged by the quality of his predictions - if that was the case he would have been fired years ago. Basically, there was a big question mark surrounding this departure. Today, we may have gotten our answer: as Reuters reports, it appears Doll may have been dipping into the wrong model. Financial model that is.
From Reuters:
"In January, BlackRock Inc made a significant, but easy-to-miss change in the fund literature for three of its mutual funds... This year's fund literature said the investing model used "quantitative factor models generated by third-party research firms." Typically such a change indicates a shift in a fund's methodology. But there was no shift in the investment process.... the new description came after the funds' board of directors learned that the investment models used for Doll's funds were never proprietary and had been based on other firm's models, according to two people familiar with the situation. Doll was not the one who alerted the company about the issue, they said. The two people did not want to be identified because they were told about the situation in confidence"... 'The change was made just months before 57-year-old Doll, a regular on CNBC who is best known for his annual predictions and perennial bullish outlook, announced his retirement. Doll's last day is June 30."
While we respect Reuters attempt at political correctness, we are somewhat more blunt when we ask: was Bob Doll "told to quit" after it became clear, from other sources, that he was incapable of even constructing the simplest financial model on his own and had to "borrow" others'? In other words: not only did Doll never have an original idea, he couldn't even come up with his unoriginal ideas on his own.
To everyone who has ever worked on the Street, a model, whether an M&A model, financing model, or some other generic form of pro forma excel analysis is the very first thing one learns as a financial analyst. An example of one can be seen below:
The inability to create one demonstrates nothing less than a total inability to tie in the income statement, balance sheet and cash flow statement. In other words - failing both Accounting and Finance 101.
Which just happens to describe precisely the "skillset" of your typical broken record permabull. Such as Bob Doll and all the other CNBC regulars.
More from Reuters:
In response to questions from Reuters, Doll said in an e-mailed statement that he had used a mix of several third-party models for many years.
"In some cases, I had the models customized for us to reflect my view of key input factors," Doll said. "I then applied a relative weighting to these models. We used these outputs as one part of my investment process, which also included a fundamental analysis."
For the past one, three, five and 10 years, the three funds have underperformed their benchmarks, according to Lipper.
Shocker.
Daniel Celeghin, a partner at Casey Quirk & Associates, a Darien, Connecticut-based consultant, said there is often a bias among money managers against buying third-party models.
"Most buyers would (ask) 'If this model is really good, why aren't they keeping it for themselves?'" he said.
Even so, most quantitative equity fund managers who buy third-party models tailor them to meet the needs of their portfolios. That can lead to ambiguity about what is - and is not - proprietary, fund experts said.
"(Managers) can use the inputs, or models, as a small part of that process or a meaningful part," said Vadim Zlotnikov, chief market strategist at Bernstein Research, who said he was not aware of the BlackRock situation.
A fund board signs off on each fund's registration statement - which includes details on its investment strategies and methodologies - attesting to its accuracy. It is the fund manager's responsibility to keep the board informed of details of the strategies and investment process.
From an investor's perspective, "the fact that the funds were using third-party models is not that big a deal," said Jeff Tjornehoj, head of research at Lipper. "But from a (fund) board perspective I could see why it would be important to disclose who owns what when it comes to the research."
Even worse, what it really indicates a laziness bordering on incompetence, and ultimately a complete collapse of faith in the manager, which, if justified can lead to the departure of the individual in question. Just like Doll.
What is great however, is that with each and every incident of this kind, main street is exposed to the real "talent" behind Wall Street's glamorous and grossly overpaid facade: a hollow core, where incompetence is masked by big and meaningless words such as "key input factors" and "relative weighting", where failure is rewarded with seven figure bonuses, and where the exposure of the real ugliness beneath it all is either promptly swept under the rug, with the quiet disappearance of the "weakest link" or in the worst case with Hank Paulson going to Congress with a three page termsheet and demanding a blank check for years of piling error upon error, or else guaranteeing the end of the world.
And that is really all Wall Street is.
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blow-up bob?
So he stole financial models and still underperformed? What does a guy need to do to get his money to outperform the market?
I am calling "The Paulson Disadvantage Fund" right now.
http://www2.blackrock.com/US/individual-investors/market-insight/investm...
He was fired for foolishly publishing his 10 predictions for 2012:
What, fraud on Wall Street - No!!!!!!!!!!
Cut 'n' Paste, Bitchez!
Like a pedophile priest he'll be shipped around until he's found a home at perhaps the IMF, World Bank or Washington!
Did someone say models? Mathematical models of complex phenomena are notirous for not working as weell as advertised. Some things CAN be modeled, at least to show characteristics of the system being looked at. However only simple things like what happens in inflation or in marginal utility and gold. The below article examines "y = e^x" and "y = ln(x)" and shows some simple models based on those two functions.
http://tinyurl.com/7enddwo
Bob Doll, my former boss at Merrill Lynch...
Hey Bob, guess what?
FUCK YOU ASSHOLE!
LOL!
###########################################################
# PROPRIETARY INFORMATION. USE PURSUANT TO MERRILL LYNCH. #
###########################################################
He always struck me as vacuous.
No more free coffee on Morning Surveillance, uttering bullish banalities.
AH,
Number 10 is what got him fired, being wrong on 1-9 was no biggie.
How hard is it to come up with a financial model?
1. Secure muppet funds
2. Select investment by throwing a dart
3. Flip coin - heads go long, tails go short
4. Appear on CNBC to talk your own book
5. Spend profits on hookers and blow or call Ben for bailout
EXACTLY! "just buy gold" should do. just "don't buy it from the Government. That's tungsten." Especially that "coined Morgan shit."
"How hard is it to come up with a financial model?"
Just sweet talk becky?
Oh, I see what you did there. Very naughty good sir.
Eventually people realize that computer models are nothing more than a crystal ball and that CNBC and Wall Street gurus are just a band of scheming Gypsies.....
Having studied econometrics I can tell you right now that all those models are only as good as the information put in them. If you use any data from a government institution you can bet on hedonic modelling, geometric weighting and substitution effects were used to "fit a political agenda."
However, even with un-manipulated data its difficult to forecast due to the numerous exogenous variables that exist.
if markets were perfectly rational and predictable, there wouldn't be outsized profits.
profits exist because markets are irrational which by definition is unpredictable.
wall st. sells themselves as future predictors, but they make the money on transactional volume as bookies.
gambling is for foolish customers.
dick... no wait... 'permadick'...
No one...and I mean not even ZH...should be surprised or curious about Bob Doll's lack of intellect, or morality...or anything really. It has been clear for a very long time that part of the problem with the criminal syndicate known as Wall Street is that the smartest people are not there. Brilliant people do not assume top roles on Wall Street. The least ethically challenged people are the ones that rise to the top. That, and people with "sales" skills.
The notion that the syndicate represents the best and the brightest in the nation is simply a myth..put out by the syndicate itself.
Once again, what is needed at the corner of Wall and Broad is a fucking fire hose. Good riddance where Doll's departure is concerned...whatever the reason.
Wonder what model he will use for his "philanthropy" that he said he wished to purse after leaving his job?
May be Cramer's "Charitable Trust"?
What type of financial model can a "permabull" steal? Is there a subtlety to "buying everything hand over fist"?
You need sophisticated algorithms to properly weight the proportions of Netflix, Groupon, Facebook, Pandora, and BATS.
What type of financial model can a "permabull" steal?
One that tells you precisely how much to overweight crap stocks in a melt-up.
(Serious answer).
Tyler man, I love you.....I hope you are independently wealthy allowing you to post forever.
those ads you see on the side (and sometimes blocking the headline on mobile) are paid for.
There is also a button at the top to donate. As many of his followers have done over the years. If you enjoy reading here, step up, open your wallet and donate. Those ads don't hardly cover the value.
The shirts are pretty cool too, and my coffee mug (Gold, Bitches) is always at hand.
Are these paid endorsements?
No, I have not been given a pile of fiat to endorse this site. Rather, I share my endorsement in the hopes that others will do likewise, so that I can continue to enjoy the content provided on this site. The gear is cool,and I am assuming that the Tylers derive some benefit from my patronage. There are many lurkers on this site (I should know, I was one of them for a long time) and I wish to encourage them to provide some tangible support by purchasing something.
And, even if I had been paid, what do you care? Are you unable to determine the value of the content here by applying your own critical reasoning skills? Or were you attempting to prove to everyone else what a gimlet-eyed cynic you are?
Finance 101 - Income statement, balance sheets, ha ha ha... Accounting 501 or Financial Analysis 501 is still based upon on bogus made-up accounting governed by Banksters "theories" of what the cashflow numbers should be, ha ha ha. Stop! Stop it! Ha, ha, ha.
Isn't there an excel module in Cuntism 101? No wonder kids can't get jobs these days.
Incompetence in managing OPM or stealing things has never been a firing offense on Wall Street. More likely that they caught him front running the funds positions or fucking the CEO's wife or a goat or something.
I'm sure they wouldn't care about the goat, it's BlackRock not PETA
Blackrock now has the same level of respect that GS has in my mind for hiring a man like Bob.
Hiring him is not quite the word. PNC bought 30% of Blackrock. Doll was previously producing the investment advice which would then be reproduced by financial advisors to PNC's wealth management clients. It was more of a lateral for Doll, it appears.
Seeking Alph-fool
WB7 I humbly request that you skewer that travesty which google news seems to think is a news source ...
Quantitative Models?
No, these are total bullshit fundamentalist hopium - muppet money extractors.
I met with someone last week who not only was paying an AUM fee and also paying a flat fee just to meet with their advisor but the advisor was using a SMA and the SMA was using mutual funds. The guy asked me if I thought his fees were excessive. The look on my face must have relayed a message that my words were not getting across. He summed it up with "but she's a real nice woman".
Sheep.
There's nothin' like a true sucker for a pair of nipples and a clit.
Ah so, the trioka of femininity!
Daniel J. Rice III (roman numeral guys are the worst - inbred, entitled are more often than not simply retarded), is also leaving due to "conflicts of interest". He co-managed $4.4B. Yet his "family" company "Rice Drilling" was involved in a JV with a company that became one of Rice's largest holding.
Rice Drilling, a subsidiary of Mr. Rice's family firm, formed a joint venture in 2010 with Alpha Natura Resources, a coal and natural-gas company that later became the largest holding in Mr. Rice's biggest mutual fund.
The fund's unrealized losses on Alpha Natural Resources recently exceeded $100 million, or more than 20% of its decline in performance over the past year. BlackRock says the fund's decision to invest in Alpha had nothing to do with Mr. Rice's family interests and that Alpha's recent losses are in line with a sectorwide slump in coal stocks.
Rice Drilling sold $60 million in high-yield debt to private investors last year; Mr. Rice's affiliation with BlackRock was cited in online marketing materials for the offering. That, said some legal experts, might have created the perception that Mr. Rice was using his professional affiliation to help raise money for his personal interests.
http://professional.wsj.com/article/SB10001424052702304441404577480972731325232.html?mod=WSJ_business_LeftSecondHighlights&mg=reno-wsj
I wish i had 60 million in high yield debt to sell. Actually..."i wish i had 60 million in high yield debt to sell that someone would actually buy." How about you?
I expect an entirely new form of "Rice Drilling" will become popular very soon!
" In other words - failing both Accounting and Finance 101."
precisely....and doll and his work, my friends, is among america's best and educated brightest, as judged by his peers....
i am so shocked and mortified to read that another wall street wonderboy has been exposed as a criminal or fraud....when will the punditocracy recognized krugman as the stooopid whore that he is?
He will probably start a hedge fund some place with a couple billion in assets.
Economic adviser for the Romney campaign.
"...And that is really all Wall Street is."
Words of comfort...
he could be an anchor on cnbs excuse-cnbc
Cartoon Network Business Channel
Empty out wall street and convert it into a giant chicken farm.
Great, next thing Lloyd Blank-fiend king of the chicken farmers becomes a top governmental official a la Himmler.
Jesus, it's way the fuck too close as is, already.
at least we know hildebrand is using his wife's prop model. Fisher is short duration.
Where does all this start?
Probably from youth and the education system.
I remember once recieving a strap on my open hands for watching two girls fight. I was about ten years old and there were four or five of us who were strapped.
It didn't kill me and I was not traumatized, although it is not something I wanted to happen on a daily basis.
Sometimes I wonder if we allow too much to go undisciplined and while our kids are learning how to cheat on exams and so much more, that now "spin" is an accepted part of life.
The school I recieved the strap in was the best I ever went to. Why?
When I recieved a concussion in a sports activity, the pricinciple and teachers actually came to my home.
There was discipline and caring. I learned something there.
No, he can't do your fancy shmancy "modeling". WoOOOooo. But he could, I tell you, suck a golf ball through a garden hose. And that is all that really matters, right?
Is he as vomit inducing as Dick (aptly named) Bove?
dick bove is worse.
I'm lovin' it.
I thought all i had to do was tie everything to the price (or is it cost? i get confused sometimes) of gold and i'd be good to go? i mean who doesn't know that "price only moves in one direction" (provided it's my price!)?
How sweet it is. Bob Droll
Once again the answer is 42!
the answer to life, universe and everything
http://www.youtube.com/watch?v=aboZctrHfK8
Nah, it's 64.
The article says Doll was using "quantitative factor models generated by third-party research firms." One of the Tylers even highlighted that in bold. So Doll probably wasn't cribbing integrated financial statement models, as suggested. First, because the type of model depicted in the graphic would best be described like I just did -- as an integrated financial statement model. A quantitative factor model can mean a lot of things, most of them very different from models that derive equity-pricing expectations from pro-forma forecasts of corporate financial performance (and some basic market-rate assumptions), as shown here.
It's true that Doll may be incapable of producing any type of model, but he was probably relying on something that generated weighted allocation recommendations. Or green-lighted investment styles (cyclicals vs non-cyclicals, say). Or used macroeconomic inputs like interest spreads and past price performance to rank styles or sectors. Or timing factors...
Almost any type of quant factor model would be more likely than what's assumed here. Especially given that Doll's an equity strategist. And whatever he was using seemed to be always stuck on "buy."
He won't be missed.
And the banjos keep playing...........http://www.youtube.com/watch?v=iYgGMrGgMzI&feature=channel&list=UL
the school yard in the seventies was a tough place in (some state), USA when your name was 'wang' but at least you could try and spin it into a positive, I can only imagine what it might have been like being named after 'Barbie"
...
You could just as easily make the case that any Board who thought that Bob Doll had some magic model that he had fine tuned over the years to be some fantastic and unerring profit prediction engine was a little off the reservation too. These "models" aren't worth shit. LTCM had some pretty good models too, I bet.
Which is more dangerous, a blowhard who doesn't know what he is doing or a PH.D who thinks he does?
A blowhard who thinks he does.
He was also on the board of a lot of muni funds. Just something to think about in light of the Matt Taibbi article.
as someone who had direct dealings with Doll 10 years ago, this lack of professional integrity comes as no surprise
len dykstra with a cfa
He was just a Doll ahead of his time.
Maybe he was borrowing Joseph Abby Cohen's model that ALWAYS says the S&P is going to end the year 150 points higher...
He'll still have a place on the Larry Kudblow show shilling for stocks
This is stupid, just because the guy cannot do a vba macro and put together a 1st yr analyst excel play model he cannot pick stocks?
Excuse me, when is the last time that financial anything, dilution, WACC, IRR, or another non-gaap metric matter what valuation any IPO gets? or stock pick- because if this was the case, every fucking CFA dickwad would have his own Ferrari 250 California and island. Create a spreadsheet and make a million(s)- what nonsense.
by this thinking any person using a simple stock scanner can profit?
He is a talking head- they are all idiots this is why they do this- go on TV, if they could really pick stocks that's what they would be doing.
what simpleton believes this is why he got the axe?
No BS story.....
So I'm a 50 year old rookie last year at one of the recently downgraded Ibanks. They had a huge client event with Bob Doll as the speaker. He graced our branch with his presence and spoke for about 30 minutes. Mind you, I've been balls deep in Zerohedge for the last several years. He starts going on about low multiples, the recession is over, 3% GDP growth in '12, on and on. At one point I let out a little guffaw. He didn't really acknowledge me but my branch manager did. I REALLY was struck by the fact that I felt like I knew more about investing and the current macro environments from reading ZH et al, than he did. And this guy was supposedly some kind of investing rock star. It was pathetic and all I could think about was what is this guy's agenda. Did he really believe the bullshit he was spouting or is that what he's getting paid to say.
I quit last November.
Exactly, budd this is what I am saying, he is not a genius, but just a product, a talking head. That's it. And the model, what's a model really going to tell you what an insider possibly could? (how is that differnet that buying a brand name product?)
That's why they have templates and they have standards- This is a gem that not many know about:
http://bpmmag.net/mag/super_models_best_bpm_1105/
Modeling standard, interchangeable, lets you know how someone else build it so you can vet it. Most excel models people build are wrong- errors.
www.operis.com
or these guys they use their own "FAST Standard" http://www.f1f9.com
Why did adam smith know back in the 1700's about the division of labour, but the financial industry doesnt seem to apply it and asks expensive "talent" to waste time on low dollar value tasks like models that may or may not work with no work standards? Or worst do all the work themselves, in this idiotic single heroic, hurclean tasks and ask them to put in 90h weeks.
For smart people they work pretty dumb.
Trade in: to BIG TO FAIL AND too hard to model?
LETS ALL FRONTRUN...
http://www.reuters.com/article/2012/06/13/us-blackrock-hildebrand-idUSBR...