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A Truly Embarrassing Chart For Wall Street Stock Analysts

Source: http://www.businessinsider.com/this-chart-shows-why-wall-street-stock-ratings-are-a-joke-2012-2


Only five percent of ratings on companies in the S&P 500 are sell ratings.

That’s right: 95 percent of ratings tell investors to hold or buy and only 5 percent say you should sell.

The following chart comes from FactSet via Cullen Roche:

chart

Henry Blodget recently offered a few reasons why you rarely see sell ratings:

  • Most stocks–especially growth stocks–generally trend up over the long haul, so saying SELL often means betting against the odds and/or making a short-term timing call.
  • Stocks with excellent fundamentals don’t often go down just because they’re “expensive”–instead, they just get more expensive. So saying “SELL” based solely on valuation often sets the analyst up to be wrong.
  • The lack of SELL ratings makes SELL ratings sound like a complete condemnation of the company, to the point where it seems the analyst has a vendetta against it. The more polite way to tell people to sell, most folks on Wall Street whisper, is to say “hold”–or just ignore the stock altogether.
  • The issuance of a SELL rating often drives a stock down, hurting investors who own it. These investors will not usually say “thank you.” Instead, they’ll want your head.
  • Most investors are long-only, meaning they can only buy stocks, not short them. Thus, “SELL” ratings are only useful to hedge funds and investors who already own stocks.
  • Most companies refuse to talk to analysts who hit them with SELL ratings, thus reducing the analyst’s ability to gather information about the company.

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Wednesday, February 15th, 2012 news No Comments

I Read 21 Books About The Financial Crisis And They Explained Nothing

Source: http://www.businessinsider.com/andrew-lo-21-books-financial-crisis-2012-2


andrew lo

Ever thought you would have to read 21 books to get to the bottom of what caused the financial crisis?

Andrew Lo, an economist at MIT, has some bad news: it’s going to take at least 22.

Lo, a leading expert on hedge funds and financial engineering, has written a paper (h/t NPR) for the Journal of Economic Literature describing his experience reading 21 books on the crisis — nine by journalists, 11 by academics and one by a former Treasury Secretary.

His conclusion: In a field that prides itself on its scientific rigor (however dismal), the books reveal that alarmingly few facts about the crisis have been agreed upon. Was there too little or too much regulation? How much of a factor were low interest rates? No one’s been able to say conclusively.

“After each book, I felt like I knew less,” Lo told NPR’s Planet Money.

Economics, he says, has fallen well short of that standard when it comes to understanding the crisis:

“Many of us like to think of financial economics as a science, but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality.”

Read Andrew Lo’s Reading About the Financial Crisis: A 21-Book Review >

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Monday, February 6th, 2012 news No Comments

Americans Haven’t Been This Angry About The Economy Since March 2009

Source: http://www.businessinsider.com/americans-havent-been-this-angry-about-the-economy-since-march-2009-2012-1


According to the Chicago Booth/Kellogg School Financial Trust Index (h/t WSJ’s Sudeep Reddy), only 23% of Americans trust the financial system.  And 62% are either “angry” or very “angry” about the state of the economy.

Trust in the financial system hasn’t been this low and anger in the economic situation hasn’t been this high since March 2009.  And March 2009 was when the S&P 500 hit that horrific low of 666.

“In an election year, this certainly indicates the importance of the economy to the political agenda,” wrote Paolo Sapienza.  Sapienza co-authored the index with Professor Luigi Zingales.

chart

chart

Then again, March 2009 turned out to be an amazing time to buy stocks.

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Friday, January 27th, 2012 news No Comments

Bloomberg Didn’t Sell Enough Terminals So Now Everyone’s Bonuses Are Getting Whacked

Source: http://www.businessinsider.com/bloomberg-didnt-sell-enough-terminals-so-now-everyones-bonuses-are-getting-whacked-2012-1


Bloomberg Terminal

The lower bonus situation on Wall Street isn’t just for the bankers, but for the companies that service the bankers as well.

Since Bloomberg LP failed to meet its quota for selling its famous terminals, everyone at the financial media giant will receive lower bonus payouts, the New York Post reported citing an internal memo.

That means your favorite Bloomberg News reporters and Bloomberg TV anchors will take home a lower paycheck, according to the report.

If you’re not already familiar with the Bloomberg terminal, it’s basically a computer that’s targeted toward financial professionals so they can message other users, obtain real-time market data, news and stock quotes among many other functions.

They’re really awesome.

According to the Post, there are currently 310,000 terminals that are being used worldwide.  However, the company only added 13,672 in 2011, which was short of its internal sales goal of 15,000.

So if they sold 1,328 more they wouldn’t be having this lower payout problem.  Of course, it’s not exactly the best environment out there on Wall Street.

On a side note, revenue at Bloomberg climbed $720 million, or 10.5%, to $7.59 billion, the Post reported.

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Thursday, January 26th, 2012 news No Comments

Check Out The Correlation Between Market Volatility And Google Searches For ‘Gold’

Source: http://www.businessinsider.com/awesome-google-labs-chart-shows-gold-and-volatility-go-together-2011-12


This chart from The Economist shows just how correlated popular interest in gold and market craziness are.

A great reminder that market data has a broad definition and comes from diverse sources.

(H/t to Ben Malbon at Google Labs.)

Fear Indices By Ben Malbon

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Thursday, December 29th, 2011 news No Comments

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