Whoa, whoa, whoa I think I'll need to get an overpaid analyst to check that before I believe it.
This game can't be this easy I think I'll give it a go. Ok I'm going to make an analysis, hold onto your hats:
In the coming months, Apple is expected to roll out new iMacs, new keyboards and new ipods.
BOOM, now someone pay me.
I'm getting sick of people talking trash about Wall Street Analysts. If you think its such an easy job, try doing it!!! In fact, follow these steps so you can make a couple million $$ per year as a Senior Research Analyst:
1. First go get about 5 years work experience at a top investment bank or a corporation or accounting firm.
2. Take the GMAT and get into a top 5 business school (Harvard, Stanford, Chicago, Wharton, or Northwestern will do). And graduate at the top of your class.
3. Get a CFA and CPA within a couple years of graduation (google them if you dont know what they are).
4. Land a highly-coveted job at an investment bank working 100 hours per week for about 5 years doing research for some jerk who has no respect for you, all the while developing your personal network of industry leaders.
6. Either get promoted or jump ship and land a job as a senior research analyst leading a team of analysts that cover a the technology sector where Apple resides.
If you can do all of those things, congrats!!! You have earned the ability to sit on your butt all day, make obvious predictions, and rake in a couple million per year. You see, the point is that they have a plush job and a beautiful office, but you have to go through hell to get there. If you think you can earn it, go for it!
So what you're saying is that it takes a long time and a lot of money, focus, and effort to get to the point where you can make your living making obvious or obviously wrong statements?
And that's something we should stop hating on?
How would you feel about an MD sent to med school for twelve years and countless years of crappy clinic duties afterwards who then gets to sit back, relax, and pull diagnoses out of her ass?
So what you're saying is that it takes a long time and a lot of money, focus, and effort to get to the point where you can make your living making obvious or obviously wrong statements?
And that's something we should stop hating on?
How would you feel about an MD sent to med school for twelve years and countless years of crappy clinic duties afterwards who then gets to sit back, relax, and pull diagnoses out of her ass?
I get your analogy... Those doctors wouldn't last a week in medicine. But the difference is that Medicine is a science. Its based on the physical world and facts. They carry a ton of malpractice insurance because people can sue for a wrong diagnosis. There's nothing scientific about equities. Even fundamental analysis is full of assumptions. And you cant sue an analyst for predicting a fall in AAPL during the month of June. Plenty of folks have tried to model the stock market, but the fact is that its irrational. You can read about this in a book called 'Random Walk on Wall Street'.
Analysts are paid because they sell their opinions primarily to mutual fund managers and to themselves (yes, the sales and trading departmetns of investment banks buy their own opinions at a transfer price). The ones who predict best are usually paid the most. The ones who are consistently incorrect get the boot and move down the heirarchy of i-banks.
Yes, a statement about how new imacs will increase AAPL share prices is obvious to you, but to a fund manager who is looking at about 25 different industries and potentially 200 different stocks at any given time, that is valuable information worth paying for. And they would rather buy it from a 'qualified' MBA/CFA/CPA analyst from Goldman or UBS than a couch potato mac geek (no offense if you are one of those, as Imay be one too!).
I understand your points perfectly well. You're saying that for better or for worse, analysts are making often uneducated guesses which they get paid for because they're not always off the mark.
I hope you can understand our frustration, however, with the idea of paying someone such sums for such lame advice. It's as if you paid your plumber $90,000 to tell you that your sink is probably clogged because you may be pouring non- water-soluble matter into it.
I'm not saying analysts should be jailed. I'm not saying I could be one. I'm saying it's an annoying profession which to use, people who often have more information and make better guesses, looks totally bananas.
And by the way, you can read Nassim Nicholas Taleb's new book, "The Black Swan" about why titles like "analyst" don't really mean anything reliable or imply any actual skill. It's closer to "psychic" than to "civil engineer" - it's not a very fact-based, performance-based, accurate field. It's more about BS than anything else.
Funny - i'm a financial analyst. I wouldnt say I have any knowledge or skill that you need to call yourself an analyst. But bad ones are weeded out quickly.
I just read an abstract of that book. Looks fascinating, but it seems to be based on studies done by Eugene Fama and Merton Miller at the University of Chicago in the 60s and 70s. Stocks are a random walk, in that you can not base future prices on historical data. He throws in some entertaining anecdotes I'm sure, but theres no new science there. 'Dont get me wrong, i'd like to read it anyway.'
In studying portfolio theory, you learn that company performance doesn't really drive changes in share price. Its driven by PERCEPTIONS in company performance. Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Ok, what nevenmrgan is exactly how most of us feel. It's all about how they reach meaningless statements in this context, irrespective of how much work they do to reach them. What's really more frustrating is why AI keeps putting them on the front page when there is far more interesting news going around.
Quote:
Originally Posted by bg_nyc
Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Well my perception of them is that they are a bunch of lazy bastards so maybe they need to work harder. Seriously though, since you know the game, if you could describe what research you would do in reaching a conclusion like this and it turns out to be quite involved, I'm sure we'd all be more understanding towards analysts.
Funny - i'm a financial analyst. I wouldnt say I have any knowledge or skill that you need to call yourself an analyst. But bad ones are weeded out quickly.
I just read an abstract of that book. Looks fascinating, but it seems to be based on studies done by Eugene Fama and Merton Miller at the University of Chicago in the 60s and 70s. Stocks are a random walk, in that you can not base future prices on historical data. He throws in some entertaining anecdotes I'm sure, but theres no new science there. 'Dont get me wrong, i'd like to read it anyway.'
In studying portfolio theory, you learn that company performance doesn't really drive changes in share price. Its driven by PERCEPTIONS in company performance. Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Then is it really not an analyst job and some type of bizarre third party PR job? Do they knowingly inflate or deflate estimates to drive buyers to and from a stock? As I recall, some of the analysts ended up being off on iPhone sales by a factor of two to three. If their job was to to pump up a stock, then they did that, if they were trying to be accurate, some of them were wildly off.
Then is it really not an analyst job and some type of bizarre third party PR job? Do they knowingly inflate or deflate estimates to drive buyers to and from a stock? As I recall, some of the analysts ended up being off on iPhone sales by a factor of two to three. If their job was to to pump up a stock, then they did that, if they were trying to be accurate, some of them were wildly off.
Jeff - Thats an interesting way to look at it. To say they are PR imlies that they add no value, they just disperse information for the benefit of their employer. So no, they would not be PR people. And to say that they knowingly inflate or deflate estimates implies that they actually know what the truth is beforehand, which they do not. Probably better to think of them as just another force in the market that has no more information than anyone who closely follows AAPL, but have leverage...
Their counterparts in industries like energy and retail do some serious work. To use energy as an example, research analysts spend hours and hours pouring over 10Q statements, analyzing factors like bbl production, oil prices across the world (there are a couple dozen quotes on various oil types), and refinery shutdowns to mention a few. Its a job that the average Joe simply cant do. But you dont need to pour over financial statements to give a recommendation for AAPL. Its driven by new products and sales data, information that is attainable just by reading press releases. This IS something the average Joe can do pretty easily. So we probably give these slobs who cover AAPL alot more leverage than they should have.
And keep in mind that Analysts have little to lose when making a ridiculous prediction. If they turn out to be right, way to go! They get a cash bonus and news coverage. If they are wrong, they are just another one of the hundreds who will say 'AAPL is too volatile and difficult to predict. We now revise our recommendation to...'
But given all those things, it presents a great opportunity for those who closely follow AAPL. If the analysts says something that is full of crap, it will probably move the market for AAPL shares regardless of its accuracy b/c of uneducated and/or timid shareholders. If we can recognize that, we can make a ton of $$! An example is just recently when someone announced production cuts. What kind of sense did that make?? AAPL dropped $7 per share and i picked up a handful b/c I knew the statement had to be false. Jobs would never recommend production cuts of the iPhone. It would be like admitting defeat, and just 3 weeks ago there was almost a shortage of iPhones to go around.
Ok, what nevenmrgan is exactly how most of us feel. It's all about how they reach meaningless statements in this context, irrespective of how much work they do to reach them. What's really more frustrating is why AI keeps putting them on the front page when there is far more interesting news going around.
Well my perception of them is that they are a bunch of lazy bastards so maybe they need to work harder. Seriously though, since you know the game, if you could describe what research you would do in reaching a conclusion like this and it turns out to be quite involved, I'm sure we'd all be more understanding towards analysts.
My friend, its the nature of the beast with AAPL, and its all because of investors! Yes, investors are to blame I say! We create a demand for sensational statements! We crave big announcements on AAPL. We visit AI in the morning hoping to hear than announcement about the new iMacs or the widescreen iPods. We lust for AAPL info! Am i right? Evidence of this is 1) prices are ridiculously volatile, and 2) trading volumes are at the top of the list for NYSE and NASDAQ combined on those days when any peice of info is released, whether it comes form AAPL or not and 3) You visited AI and MacRumors how many times this week?
I-bank managers see this, and you can bet they go to their tech sector analyst and say to him or her, 'Any piece of crap information you have, or think you have, put it out there! We need to sell some news and get coverage!' And the analyst does it. And the vicious cycle commences. More news. More excitement. More trading. More news. More excitement. More trading. So on and so forth.
Does it really make sense to release all this right at the end of the education season? All the students who were going the Mac + iPod route will have done so by the timeframe these guys are saying (I'm one of them)
Apple always does this. They use the educational season to clear out old stock and then release upgrades shortly thereafter.
Comments
Whoa, whoa, whoa I think I'll need to get an overpaid analyst to check that before I believe it.
This game can't be this easy I think I'll give it a go. Ok I'm going to make an analysis, hold onto your hats:
In the coming months, Apple is expected to roll out new iMacs, new keyboards and new ipods.
BOOM, now someone pay me.
I'm getting sick of people talking trash about Wall Street Analysts. If you think its such an easy job, try doing it!!! In fact, follow these steps so you can make a couple million $$ per year as a Senior Research Analyst:
1. First go get about 5 years work experience at a top investment bank or a corporation or accounting firm.
2. Take the GMAT and get into a top 5 business school (Harvard, Stanford, Chicago, Wharton, or Northwestern will do). And graduate at the top of your class.
3. Get a CFA and CPA within a couple years of graduation (google them if you dont know what they are).
4. Land a highly-coveted job at an investment bank working 100 hours per week for about 5 years doing research for some jerk who has no respect for you, all the while developing your personal network of industry leaders.
6. Either get promoted or jump ship and land a job as a senior research analyst leading a team of analysts that cover a the technology sector where Apple resides.
If you can do all of those things, congrats!!! You have earned the ability to sit on your butt all day, make obvious predictions, and rake in a couple million per year. You see, the point is that they have a plush job and a beautiful office, but you have to go through hell to get there. If you think you can earn it, go for it!
Remember: Don't hate the player... hate the game.
And that's something we should stop hating on?
How would you feel about an MD sent to med school for twelve years and countless years of crappy clinic duties afterwards who then gets to sit back, relax, and pull diagnoses out of her ass?
So what you're saying is that it takes a long time and a lot of money, focus, and effort to get to the point where you can make your living making obvious or obviously wrong statements?
And that's something we should stop hating on?
How would you feel about an MD sent to med school for twelve years and countless years of crappy clinic duties afterwards who then gets to sit back, relax, and pull diagnoses out of her ass?
I get your analogy... Those doctors wouldn't last a week in medicine. But the difference is that Medicine is a science. Its based on the physical world and facts. They carry a ton of malpractice insurance because people can sue for a wrong diagnosis. There's nothing scientific about equities. Even fundamental analysis is full of assumptions. And you cant sue an analyst for predicting a fall in AAPL during the month of June. Plenty of folks have tried to model the stock market, but the fact is that its irrational. You can read about this in a book called 'Random Walk on Wall Street'.
Analysts are paid because they sell their opinions primarily to mutual fund managers and to themselves (yes, the sales and trading departmetns of investment banks buy their own opinions at a transfer price). The ones who predict best are usually paid the most. The ones who are consistently incorrect get the boot and move down the heirarchy of i-banks.
Yes, a statement about how new imacs will increase AAPL share prices is obvious to you, but to a fund manager who is looking at about 25 different industries and potentially 200 different stocks at any given time, that is valuable information worth paying for. And they would rather buy it from a 'qualified' MBA/CFA/CPA analyst from Goldman or UBS than a couch potato mac geek (no offense if you are one of those, as Imay be one too!).
I hope you can understand our frustration, however, with the idea of paying someone such sums for such lame advice. It's as if you paid your plumber $90,000 to tell you that your sink is probably clogged because you may be pouring non- water-soluble matter into it.
I'm not saying analysts should be jailed. I'm not saying I could be one. I'm saying it's an annoying profession which to use, people who often have more information and make better guesses, looks totally bananas.
And by the way, you can read Nassim Nicholas Taleb's new book, "The Black Swan" about why titles like "analyst" don't really mean anything reliable or imply any actual skill. It's closer to "psychic" than to "civil engineer" - it's not a very fact-based, performance-based, accurate field. It's more about BS than anything else.
Funny - i'm a financial analyst. I wouldnt say I have any knowledge or skill that you need to call yourself an analyst. But bad ones are weeded out quickly.
I just read an abstract of that book. Looks fascinating, but it seems to be based on studies done by Eugene Fama and Merton Miller at the University of Chicago in the 60s and 70s. Stocks are a random walk, in that you can not base future prices on historical data. He throws in some entertaining anecdotes I'm sure, but theres no new science there. 'Dont get me wrong, i'd like to read it anyway.'
In studying portfolio theory, you learn that company performance doesn't really drive changes in share price. Its driven by PERCEPTIONS in company performance. Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Funny - i'm a financial analyst.
Prepare to be destroyed.
Ok, what nevenmrgan is exactly how most of us feel. It's all about how they reach meaningless statements in this context, irrespective of how much work they do to reach them. What's really more frustrating is why AI keeps putting them on the front page when there is far more interesting news going around.
Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Well my perception of them is that they are a bunch of lazy bastards so maybe they need to work harder.
Agreed on all points!!!
Funny - i'm a financial analyst. I wouldnt say I have any knowledge or skill that you need to call yourself an analyst. But bad ones are weeded out quickly.
I just read an abstract of that book. Looks fascinating, but it seems to be based on studies done by Eugene Fama and Merton Miller at the University of Chicago in the 60s and 70s. Stocks are a random walk, in that you can not base future prices on historical data. He throws in some entertaining anecdotes I'm sure, but theres no new science there. 'Dont get me wrong, i'd like to read it anyway.'
In studying portfolio theory, you learn that company performance doesn't really drive changes in share price. Its driven by PERCEPTIONS in company performance. Thats why CEOs are paid so well. thats also why there is not a perfect correlation between earnings performance and share price. And thats why Wall Street analysts have jobs. Their job is to mold perceptions, and they get paid alot to do so.
Then is it really not an analyst job and some type of bizarre third party PR job? Do they knowingly inflate or deflate estimates to drive buyers to and from a stock? As I recall, some of the analysts ended up being off on iPhone sales by a factor of two to three. If their job was to to pump up a stock, then they did that, if they were trying to be accurate, some of them were wildly off.
Then is it really not an analyst job and some type of bizarre third party PR job? Do they knowingly inflate or deflate estimates to drive buyers to and from a stock? As I recall, some of the analysts ended up being off on iPhone sales by a factor of two to three. If their job was to to pump up a stock, then they did that, if they were trying to be accurate, some of them were wildly off.
Jeff - Thats an interesting way to look at it. To say they are PR imlies that they add no value, they just disperse information for the benefit of their employer. So no, they would not be PR people. And to say that they knowingly inflate or deflate estimates implies that they actually know what the truth is beforehand, which they do not. Probably better to think of them as just another force in the market that has no more information than anyone who closely follows AAPL, but have leverage...
Their counterparts in industries like energy and retail do some serious work. To use energy as an example, research analysts spend hours and hours pouring over 10Q statements, analyzing factors like bbl production, oil prices across the world (there are a couple dozen quotes on various oil types), and refinery shutdowns to mention a few. Its a job that the average Joe simply cant do. But you dont need to pour over financial statements to give a recommendation for AAPL. Its driven by new products and sales data, information that is attainable just by reading press releases. This IS something the average Joe can do pretty easily. So we probably give these slobs who cover AAPL alot more leverage than they should have.
And keep in mind that Analysts have little to lose when making a ridiculous prediction. If they turn out to be right, way to go! They get a cash bonus and news coverage. If they are wrong, they are just another one of the hundreds who will say 'AAPL is too volatile and difficult to predict. We now revise our recommendation to...'
But given all those things, it presents a great opportunity for those who closely follow AAPL. If the analysts says something that is full of crap, it will probably move the market for AAPL shares regardless of its accuracy b/c of uneducated and/or timid shareholders. If we can recognize that, we can make a ton of $$! An example is just recently when someone announced production cuts. What kind of sense did that make?? AAPL dropped $7 per share and i picked up a handful b/c I knew the statement had to be false. Jobs would never recommend production cuts of the iPhone. It would be like admitting defeat, and just 3 weeks ago there was almost a shortage of iPhones to go around.
Sorry for the long post.
Prepare to be destroyed.
Ok, what nevenmrgan is exactly how most of us feel. It's all about how they reach meaningless statements in this context, irrespective of how much work they do to reach them. What's really more frustrating is why AI keeps putting them on the front page when there is far more interesting news going around.
Well my perception of them is that they are a bunch of lazy bastards so maybe they need to work harder.
My friend, its the nature of the beast with AAPL, and its all because of investors! Yes, investors are to blame I say! We create a demand for sensational statements! We crave big announcements on AAPL. We visit AI in the morning hoping to hear than announcement about the new iMacs or the widescreen iPods. We lust for AAPL info! Am i right? Evidence of this is 1) prices are ridiculously volatile, and 2) trading volumes are at the top of the list for NYSE and NASDAQ combined on those days when any peice of info is released, whether it comes form AAPL or not and 3) You visited AI and MacRumors how many times this week?
I-bank managers see this, and you can bet they go to their tech sector analyst and say to him or her, 'Any piece of crap information you have, or think you have, put it out there! We need to sell some news and get coverage!' And the analyst does it. And the vicious cycle commences. More news. More excitement. More trading. More news. More excitement. More trading. So on and so forth.
Does it really make sense to release all this right at the end of the education season? All the students who were going the Mac + iPod route will have done so by the timeframe these guys are saying (I'm one of them)
Apple always does this. They use the educational season to clear out old stock and then release upgrades shortly thereafter.