Monday, September 17, 2007

The Least Helpful Research Call You Will See Today

While nearly every business day brings at least one unhelpful research “call”—an analyst upgrading or downgrading a stock long after the news behind the call has already been reflected in the stock price, much the way Wall Street economists have begun to fret over weak housing sales, weak retail sales, and weak employment trends long after all three became obvious to anybody with a pair of eyes and a subscription to the Wall Street Journal—some days one call stands out particularly starkly even in a bleak landscape.

Today that call must belong to the Merrill Lynch analyst who has chosen to downgrade Northern Rock, the U.K. version of Bailey’s Building & Loan—that is, a bank suffering an actual run on deposits, and whose problems were front-page news last week—from a “Buy” to a “Neutral.”

The price on the report? Down two-thirds from its 52-week high.

Nobody can make this up.

Jeff Matthews
I Am Not Making This Up

© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Unknown said...

Oh, I think there's another call from Merrill this morning that is even less helpful--their downgrade of the newspaper group from neutral to sell. MNI is down 50% thus far this year.

Drew Yallop said...

Lovely Jeff.

The "call" resonates, sending replicating, overlapping fractals through the analytical body electric. We are all mesmerized by the genius of Wall Street.

Drew Yallop

Dan said...

why the hate? perhaps you know this analysts track record and did not discuss it in your posting? I don't see how drawing a conclusion from a single data point is particularly more intelligent than downgrading a stock on historical data points. One thing we know for sure is no analyst will be right all of the time. by definition when an analyst is wrong he will have to publish after the fact. The surprising thing would be if analysts were never wrong. However, any observation of single data points are meaningless. Making lists of single data points, that are expected outcomes by the way, with out any context is not knowledge accretive.
Wall street analysts may be complete idiots, this particular ML analyst may be the biggest idiot, i just don't know.

DaleW said...

Classic, Drew.

fred said...

good thing he wasn't bearish. the lines outside the bank might have gotten really long.