My Rant On Analysts and Capitulation!

First on the topic on analysts. Merrill Lynch today said Fiat will have problems. Based on what?

Merrill Lynch downgraded Turin, Italy-based Fiat to “underperform” from “buy,” citing falling car and truck sales in Italy and the rest of Europe. The brokerage lowered its price estimate on the stock to 10 euros from 15 euros.

“Fiat’s earnings risk is increasing sharply into the second half of 2008” on a declining economy, London-based analyst Harald Hendrikse wrote in a report sent to investors today. “2009 assumptions from Fiat seem to be looking optimistic relative to current economic conditions.”

Hmmm, this seems very suspect to me.

Fiat shares have fallen 25 percent since Merrill initiated coverage of the carmaker with a “buy” rating earlier this year, according to the report.

As Saturday Night Live would say, "Isn’t that connnvvviiiieeennnttt". Get a big wig analyst to say, "Fiat will not make its earnings" after having rated it as a buy and it dropping. Come on, analysts get with the show will you? It is this kind of analysis that has me completely annoyed because it is not analysis, but making up things as we go along.

Or how about Goldman Sachs and their "prediction" of more hard times to come for all financial’s.

NEW YORK -(Dow Jones)- In a research note Tuesday, Goldman Sachs Group Inc. ( GS) widened its loss estimates or cut profit views for many of its Wall Street broker rivals because it expects more write-downs and losses on mortgages, and warned that the "tides are not changing."

Ok Goldman, what about yourself? As Saturday Night Live would say, "Isn’t that connnvvviiiieeennnttt". Are you saying Goldman that you will not have problems? You will be able to figure it out and navigate these storms with superpower abilities? YEAH RIGHT! Give me a freaken break!

But Goldman does not stop there, they are now saying the following:

LONDON, Aug 20 (Reuters) – Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) reiterated on Wednesday its year-end price forecast of $149 a barrel for U.S. crude oil, and said strong fundamentals were a more important factor than a strengthening dollar.

Really, wow Goldman, were you not the ones who said the following:

KUALA LUMPUR (Reuters) – Oil prices are likely to hit $150 a barrel this summer season, the global head of commodities research at Goldman Sachs said on Monday, as tighter supplies outweigh weakening demand.

And what happened? Oil hit 149 and fell like a rock. Yet what is Goldman reiterating? 149 USD barrel oil, as Saturday Night Live would say, "Isn’t that connnvvviiiieeennnttt". Why is Goldman not saying 150? It is only a dollar more? Probably because this is not analysis, but a crap shot on the hopes that oil will go up again. What I wonder is how many positions Goldman has in oil and at what level!

I personally don’t think oil will reach 149 under conditions like we have had at the beginning of this year. I talked to people across the planet and I asked them about their habits. What they told me is very interesting in that they are changing habits. They buying more fuel efficient vehicles, they are driving less. And in China they have introduced a tax on gas guzzling vehicles. There will be demand destruction and it will be a major shift. Why is Goldman not understanding this?

I personally would be very hesitant to make such a call, not that 149 USD oil could not happen. My call right now is to stay on the sidelines.

So what is going on? On Monday I was watching CNBC Europe and they had on a guest from the fund Electicka. This guy is very interesting and I like to hear what he has to say. Though today he was very subdued and almost depressed. The hosts asked what was going on? The answer is that he does not know where to look for something going up. Well folks we have capitulation. Here is the email that I sent to CNBC and was discussed.

Hmmm…..
Is everything so doom and gloom? I actually think not! Want to know the difference right now? And why now the world is coming to an end? RICH people like your hosts are being squeezed… They have nowhere to make MONEY… And they have to make money! That’s the problem! Until now it was easy, put your money in commodities, put your money in Potash! Now they actually have to earn their money! HA!
Here is a statistic, California, one of the poster boys for real estate, has dropped 31%, yet sales volume has increased 21%… Chew on that one please…

The real problem is that many fund managers are not earning their keep. I am not finger point at the guy from Electicka because I don’t envy his position. I am saying right now analysts, hedge funds are pancing because they don’t know what to do. The guy from electicka was honest and said in a muffled voice, "I am buying bonds". Good for him he knows when things are too big for him and he is doing the right thing!

The real problem we have right now is that the rich people are not making money like hay. Their pocket books are hurting. As most of my contacts said, "Those people who kept their head screwed on right during the crazy times are doing ok. But those that spent on stocks, houses and other things are hurting because they were living beyond their means." That is the problem we have and I am rather confident right now.

Buffett himself said that his best investments were made in the early 70’s much times like now. I completely concur.

"Be greedy when others are fearful", Warren Buffett has said