Tuesday, May 25, 2010

The Least Helpful Call You Will Receive Today, Guaranteed!

We interrupt the 2010 Pilgrimage to Omaha series to bring you a NotMakingThisUp “Least Helpful Call of the Day.”

The Least Helpful Call you will receive today—and we are fairly certain there has been no less helpful call provided by Wall Street’s Finest this morning—is brought to you by J.P. Morgan Cazenove, whose analysts took it upon themselves to downgrade...the Greek banks.

We are not making this up.

As of this morning, to be specific, shares of the National Bank of Greece no longer merit an “Overweight” rating from the folks at JPMC.

The shares, currently quoted in ADR form at $2.47, within two pennies of their 52-week low, are now officially branded “Underweight” at JPMC.

As always, a tip of the cap from we here at NotMakingThisUp, and on behalf of investors everywhere who may have been holding on for dear life in this one, a hearty “Thanks guys!”

Jeff Matthews
I Am Not Making This Up

© 2010 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor: 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 investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


John Hempton said...

Strangest thing - and I know how you could make this mistake...

National Bank of Greece is a really quite good bank. It is not overlent. It has reasonable credit-risk control.

It is not dependent on interbank funding in a grotesque way.

Loan to deposit ratio is about 100 flat.

NBG is better than most American banks.

The only problem is that it is in Greece. Big problem that.


(I simplify a little. 20 billion interbank funding in 130 balance sheet. Holds 13 billion of the sovereign which is not worth 13 billion! But point still stands.

jim said...

Jeff, analysts should be made purchase securities that they recommend buying, and short sell those with a sell rating. After the event of course. i.e. if you feel so strongly about it, let us see that you're putting your own cash into the call. This mularkey of an analyst on CNBC saying buy/sell with the ubiquitous moniker "this analyst holds no shares in this company" is b££lshit. It is the least transparant trick I've come across. All the best. Jim.

Jeff Matthews said...

John Hempton knows his financials, and also writes a great blog (Google "Bronte Capital"), so it sounds like the folks at JPMC should have been UPgrading National Bank of Greece from 'underweight' to 'overweight,' not vice-versa.

Jim makes an excellent point: the idea that analysts have no skin in the game along with their clients has always been the most bizarre aspect of the sell-side compensation sweepstakes. (Although we don't need the Yahoo message-board style language to make the point!)

There is, in fact, an odd sub-plot involving analyst stock ratings: at least one large firm bases analyst compensation in part on how analysts do managing a phantom portfolio of their stocks, in which they can 'buy' and 'short' various stocks they follow in order to make a point to the sales force about how strongly they feel about an individual stock. The AEs pay attention to this, although it is not disclosed to clients formally, and will tell a client, "Fred put the stock in his portfolio" in order to make the pitch more effective...but it comes across as saying "Here's what Fred REALLY thinks."

It seems a byzantine way to get across a simple point. We like Jim's solution better.


Ben said...

Actually, most sell siders are actually prevented from owning the stocks they reccomend, strangely enough. Of course this would create somewhat of a conflict of interest - if you are reccomending a stock and own it, you have very low motivation to downgrade it and drive the stock down. If you were required to downgrade before you sold though, maybe it would force more intellecually honest behavior.

Funny post - classic sell side behavior. I might buy the stock based on the downgrade.