Monday, March 24, 2008

The Analysts

One of the major players in the 2001 Dot Com bust were "The Analysts". These were people who made and broke Silicon Valley stock prices by changing their "valuations". Silicon Valley (and those elsewhere) companies dared not risk "meeting analysts expectations" in doing whatever was necessary to meet those "expectations".

During the boom, when everyone was giddy with thoughts of internet profits, meeting or exceeding those expectations proved relatively easy. Later, as more people began to realize that lots of hard cash was being turned into even harder losses, more financial chicanery was needed to meet those lofty expectations.

But all was not lost as many companies could still win glowing analyst evaluations by... well, who can really postulate how without opening themselves up to libel suits? But as anyone familiar with WorldCom, Enron and the host of others knows, *somehow* some evaluations seemed to rise forever.

It should not be surprising then, to see the role that ratings agencies such as S&P, et. al. have played in this current financial crisis. With S&P downgrading the "creditworthiness" reports of Goldman Sachs and Lehman Brothers, once again the typical investor is made aware of how little these ratings reflect reality.

Do they not know what has been going on for the last fifteen months, since HSBC first signified something might be dreadfully wrong in the mortgage world by writing off billions of dollars of sub-prime loans that it had only recently written?

Apparently they do not, for only now, even as the seeds of a recovery are being planted and watered by an eager Federal Reserve, does this particular rating agency start to worry about what might be lurking inside Goldman Sachs and Lehman Brothers, two of the bigger mortgage players in existence. -- Jeff Matthews

The (formerly) 5th largest Wall St. investment bank collapses into a financial heap, requiring a government guarantee of $30B just to get a single competing offer to buy to send the Dow up 4% in a single day. Problem's over, Yay! $2 per share. Strange how no other competitors even squeaked for a chance at the "great deal", even with a $30B backstop. The silence speaks volumes.

No doubt the other banks were too busy putting the final flourishes on their latest "keep the government out of business/we don't need to regulation" oratories.

But these are not the only enablers. A quick look around the "news" (I use that term *very* loosely) channels reveals that despite the panic, downturns and financial meltdown on Wall St., everything is dandy! Buy! Buy! Buy!

Are You Ready for Dow 20,000?
Insiders, at Least, See Reason to Smile
-- courtesy The Big Picture

Just like everyone else in this chain, they don't get paid to make money... they get paid to make *customers*.

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