I’ve written much about the pervasive negativity towards the markets and the economy these days, mostly as represented by consumer confidence and reflected in the media.
Today the Economist presents a very interesting case that this negativity is also being reflected in the popularity of financial analysts:
Ten years ago it was easy to make your name as a securities analyst. Take a technology stock, think of a number, double it and then announce that as your price target. Time it right and your call would be a self-fulfilling prophecy, as investors worldwide would regard your views as a buy signal. Mary Meeker of Morgan Stanley and Henry Blodget of Merrill Lynch ruled the markets.
Nowadays you establish your reputation by being as gloomy as possible. Meredith Whitney, a banking analyst at Oppenheimer, scared the markets last year by sounding a warning about the financial health of Citigroup. Kathleen Shanley, an analyst at Gimme Credit, recently caused a brief flurry by opining that creditors were withdrawing funds from Washington Mutual (which the company quickly denied).
I find it very interesting to consider that there are virtually the same rewards today for analysts one-upping each other with dramatically apocalyptic projections as there were during the dot-com bubble for analysts one-upping each other with wildly optimistic visions.
Just as the prevalence of competing pollyannas was a sign of over-exuberance during the internet bubble, I believe the super-star status of today’s competing cassandras it is another clear sign that the pessimism has gone too far.
The rise of the bearish analyst
July 31, 2008