2008's History Doesn't Repeat, But It Rhymes

Submitted by QTR's Fringe Finance

I was looking for something to watch on Friday night when I stumbled upon the movie Inside Job on Amazon Prime. It’s a documentary from 2010 that vividly recounts the global financial crisis of 2008.

In the first half hour of the movie, they set the scene for what led up to the crisis: all of the deregulation, speculation, derivatives, lavish Wall Street spending and euphoric attitudes that ran the show right up until the very day the world ran face-first into reality and the global economy bricked.

Watching the movie, I couldn’t help but feel like I could draw direct similarities to the market we are in today.

Sell Side Analyst Reports: Still Biased, Still Bullsh*t

For example, every day I wake up to a new email from a friend ridiculing a sell-side analyst note. I think to myself two things: first, it’s criminal that investment banks are allowed to put out absolutely bullshit projections while simultaneously trying to win the investment banking business of the companies they cover; and second, I can’t believe anybody on the Street takes these reports seriously.

Sell side analyst reports have become f*cking embarrassing. I mean, really bad. Making excuses for non-cash generating companies that can’t even hit whatever bullshit Non-GAAP KPI metric they’re distracting the market with. Initiating coverage on SPACs based on fairy-tale TAM slides, defending “disruptive” technologies that a 4th grader knows won’t work. Calling obvious financial frauds “overblown market concerns” . It’s theater dressed up as research, and the audience is clapping like trained f*cking circus seals.

Day in and day out, we read about upgrades and downgrades—almost all of which are issued after stock price moves and not ahead of them. And day-to-day, the market responds to the “analysis” of these investment banks, despite the fact that most people who have been in the industry for a while, and who are sharp, know not to pay them any heed whatsoever. Hell, even the Financial Times put out an article a week or two ago questioning one of the most egregious offenders on Wall Street and the frequency with which he pens his “analysis.”

In Inside Job, they set the stage for the financial crisis by talking specifically about how investment banks issued bullish research on names that, privately, they were referring to as “dogshit.” Before 2008, major Wall Street banks were accused of using sell-side research as a tool to serve their investment banking interests rather than investors. Analysts allegedly issued biased ratings—rewarding companies that hired their banks with positive coverage and punishing those that didn’t with negative or withdrawn reports—while internal communications often contradicted their public recommendations.

Regulators found that analyst pay and job security were tied to banking deals, creating deep conflicts of interest. This led to the 2003 $1.4 billion Global Research Analyst Settlement, which imposed reforms to separate research from banking, though critics argued informal pressures persisted up to the financial crisis. Banks promised to do better in the future, which is now. If you ask me, it looks like nothing has changed.

This Crisis’ Unregulated Time Bomb

Also, while setting the scene for the financial crisis, the movie talks about the deregulation....(READ THIS FULL ARTICLE, 100% FREE, HERE).