Banking: Bursting the analysts’ bubble

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Banking: Bursting the analysts’ bubble

The reputations of many analysts soared as other bankers lost credibility. But are their opinions as sound as many think?

The financial crisis rocketed analysts back into the spotlight. In the years leading up to 2008, we had almost forgotten that they existed. A few spoke out publicly but for the most part their analysis was attributed to the firms for which they worked, and it was hard to find analysts that really wanted to put their necks on the line.

Now, however, they are revered. It took a prediction of the housing crash for Nouriel Roubini, whose history boasts roles at the IMF and Treasury, to become so noted that he appears in the movie Wall Street 2. Meredith Whitney shot to fame after her accurately damning report on Citigroup back in 2007, and now runs her own research firm. Dick Bove, analyst at Rochdale Securities, is also now a household name for his outspoken critique of the banking industry – although he has not yet made it to Wikipedia, unlike Roubini or Whitney.

It’s fair enough. After sentiment developed that the ratings agencies, banks and regulators were all in bed together, the analyst is now regarded as the unbiased voice of Wall Street. And those who predicted correctly the events of 2008 and early 2009 are naturally held in high regard.

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