THE DOT - if this turns orange or red be alert

Monday, June 23, 2008

Investment banks new trouble - analysts incompetence

Bloomberg analyzed 6000 calls of analysts for stocks and found out only 25% worked out, the rest were worthless - even a ape throwing darts makes better calls as a research WSJ did years ago was concluded, Ape's did even beat with a small margin portfolio-managers. All of these Ph.D.'s and MBA's do not produce any good for the average investor?? Over decades, actively managed portfolio's could by 80%, not even match the index which they had to track, but this guys earn salaries far beyond anything a hard working household can dream of to earn.

This world is out of any sane equilibrium, to pay for a man chasing a soccer ball (I love to see a good match) $100 mil. is just freaking crazy.

CEO's that loose substantial substance or bankrupt companies should sit in jails - not walk out with hundreds of mil. in bonus (that applies for most CEO's on Wall Street, since they simply gambled by gearing up the leverage), but it has become a bad habit in the corporate world in general and the politicians supporting them.

Goldman is making stranger and stranger calls going forward - at the low, the guy who replaced Abby Cohen said it would go lower before going higher - now at the high he just said the opposite. Both times he was dead wrong. What happened to the summer rally they called for at the end of May? Today they say underweight financial after a sharp drop after calling to overweight them at a temporary high. That's not even pathetic that's evil and most amazingly they are the guys outperforming the peers - definitely not if they follow their own calls.

CMBS (Commercial-mortgage backed securities) are now the new area of losses for banks, although the overall market is far smaller compared to the CDO market (they can drive some into chapter 11, again Lehman is one of the big players among them are Goldman, Merrill and Deutsche Bank which has a lot of LBO trouble ahead).

Excerpt from Bloomberg:

Lehman ranked among the biggest CMBS underwriters last year, managing or co-managing $48.2 billion of new securities, triple the amount in 2004, according to Commercial Mortgage Alert in Hoboken, New Jersey. Lehman now has $40 billion of CMBS, loans and other real estate investments on its balance sheet, more than twice the firm's stock-market capitalization.

Lehman also financed 23 residential developments, most of them in southern California, and a luxury high-rise built by Irvine, California-based developer SunCal Cos. Last October it teamed with Tishman Speyer Properties LP to buy Denver-based Archstone-Smith Trust, the biggest U.S. apartment real estate investment trust, for $13.6 billion.

Lehman's Losses

Lehman posted a second-quarter net loss of $2.8 billion, the first in its 14-year history as a public company, partly because of $900 million of losses on commercial mortgages and real estate investments. The firm marked its SunCal investments -- mostly senior debt -- to around 75 cents on the dollar and recorded a $350 million writedown on its Archstone stake, Lehman Chief Financial Officer Ian Lowitt told investors on a June 16 conference call.

Fuld played big to muscle himself into the top ranks and blew it and, as I said in an earlier post, time is short for him after he blew out two top managers. He bought some time for himself. The commitments from Blackstone and Greenberg are just stock lifting propaganda - sure they are not going bust like Bear Stearns with the FED financing there positions so far and new capital raised, but stockowners will get impatient if he can not turnaround the momentum soon. A takeover is problematic because the FED cannot offer another bailout package for the buyer and LEH has still too many toxic positions. I doubt that the sovereign funds keep throwing their money in to catch more falling knives.

The technical picture confirms though that we soon will have a short squeeze campaign coming up once the overall intermediate bottom is set, but that depends very much on the financial sector and should happen within 1-3 weeks.

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