4 ms·

SpaceX and the myth of independent Wall St research

49 points by JumpCrisscross 4mo ago

sixtyj 4mo ago
https://archive.is/TSTgD https://archive.is/TSTgD
cadamsdotcom 4mo ago
Money talks, even through the walls that should keep analysts and bankers from talking. And fomo is human. We need transparency combined with widespread education and high trust so folks believe the few that investigate. All these pillars are needed - that's why we see attacks on all of them.
- grim_io 4mo ago
  That "wall" doesn't exist anymore. Trump tore it down.
dmix 4mo ago
TLDR research teams at nearly all the big Wall St banks wrote bullish reports on SpaceX and recommended buying it, some with very optimistic projections. The author says you can't always trust these reports because these banks also have a financial incentive to sell management services. Also covers how there is existing government regulation by Spitzer from 2003 dealing with this situation, where research teams are kept independent of the sales side but implies that doesn't eliminate financial incentives entirely, but also claims the regulation is still well enforced within banks. Other Wall St investment firms allegedly don't rely on these reports heavily and do their own research before investing. Nothing too deep here.
zulux 4mo ago
Que? Market analysis thinks SpaceX sucks as a stock. Heck, it goes against all my value investing instincts for me to even have 2% of my net value in it. To be fair however, 15% of my net value came from Tesla. I obviously have brain worms.
- hdgvhicv 4mo ago
  It’s not about fundamental value, it’s about how rational everyone else is.
  - zulux 4mo ago
    Yep. Keesian Beauty Contest! (Dear Reader, if you have no idea what that is, it's a good idea to know about in my opinion)
    - noosphr 4mo ago
      Emperors new clothes.
      - zulux 4mo ago
        There's a relationship in that a persuasive kid pointing out the obvious flaws could collapse a Keynesian beauty contest.
    - el_jay 4mo ago
      To save other readers a web search: in a *Keynesian beauty contest, you pick the winners based on who you think others will find most beautiful.
- jordanb 4mo ago
  Professional Wall Street analysis is incredibly bullish: https://www.msn.com/en-us/money/topstocks/wall-street-is-bullish-on-spacex-stock-and-believes-it-can-rise-50/ar-AA27o2os https://www.msn.com/en-us/money/topstocks/wall-street-is-bul...
hx8 4mo ago
Like every other group, there is some amount of groupthink happening with Wall Street analysts. They all came to similar incorrect conclusions because they are working with similar information using similar techniques towards similar goals. This creates a level of bias, even if banks didn't have incentives to write bullish projections. Getting a diversity of opinions doesn't mean talking to 10 experts in the same field, but talking to experts in 10 related fields.
- khurs 4mo ago
  It's not Group Think I would say, more capitalism. SpaceX has all the big name banks and VCs and investors involved. So the banks know that if they don't fall in line, the VC's may not select them for future IPOs/make them lead bank and also not use them for other work. And the banks know that the big name investors who invested in the VCs are also their high net worth day to day clients buying their services. The banks loyalties and financial interests are not in protecting normal everyday people, it's protecting their business and individual bonuses. (SpaceX paid around $600 Million in fees for the IPO! And that's after negotiating a low percentage). The news sites know that if they speak out of line too boldly, they won't be 1st in line to get exclusive stories and invites to events. Or Advertising Spend. It's for governments and regulators to put rules in, otherwise capitalists will carry on in their own interests.
- pinkmuffinere 4mo ago
  > This creates a level of bias, even if banks didn't have incentives to write bullish projections. I don't necessarily disagree with you, but I think this is misleading. The bad estimate of fair price is _overwhelmingly_ due to incentives for bullish projections. I have no source to back this up, aside from common sense. SPCX is supposedly an AI-company now, even though we all know this is a lie. It's AI-only revenue within 5 years[1] is projected to be larger than most SP500 companies' full revenue today[2]. On the face of it, this is silly, and I don't accept that all the analysts group-thought their way to believing it. [1] https://finance.yahoo.com/sectors/technology/articles/goldman-sachs-expects-spacexs-ai-152151131.html https://finance.yahoo.com/sectors/technology/articles/goldma... [2] https://stockanalysis.com/list/sp-500-stocks/ https://stockanalysis.com/list/sp-500-stocks/
darth_avocado 4mo ago
Wall Street “analysts” are as right about the market as a coin flip. Downgrading a price target from $30 to $28 when the stock has trended from $20 to $15 in the last 12 months or raising the target from $450 to $500 when the stock price grew from $300 to $320. They’re not even remotely right on most things and are lagging indicators when they right.
- onlyrealcuzzo 4mo ago
  Nassim Taleb has statistically proven that there is only a handful of investors ever who's returns over the market average can't be explained by random noise. That doesn't prove there is no such thing as "talent" wrt investments, but it is proof there is almost no proof anyone has "talent".
- wat10000 4mo ago
  If they did significantly better than random chance, they should be able to use that to become filthy rich in fairly short order, and you’d only be hearing their advice because they publish it as a hobby in between yachting. I don’t think there are any analysts like that.
  - JumpCrisscross 4mo ago
    > If they did significantly better than random chance, they should be able to use that to become filthy rich To be fair, this is many analysts’ ambitions. Use the role to build contacts and a public track record. Then go out and raise a fund.
- JumpCrisscross 4mo ago
  > Wall Street “analysts” are as right about the market as a coin flip Source? (Not doubting. Just haven’t looked at this for a while.)
  - darth_avocado 4mo ago
    There are plenty of sites that track analyst performance, some paid others not.
saaaaaam 4mo ago
> Deutsche Bank, for example, hailed SpaceX as “the apex of civilizational ambition, oftentimes expressed in steel and fire, bending the arc of history”. This is pitiful. Not least because it is execrable writing. It’s 50 Shades Of Grey applied to investment advice.
hduto 4mo ago
Matt Levines predicted "everything but space x' etf is looking more and more appealing. Iirc someone has established this fund already.
- fragmede 4mo ago
  QQNE and SPNE, but look carefully at their management fees.
tclarke142 4mo ago
Sell side research exists to get deals and sell securities. The main reason Morgan Stanley gets so much business from Musk is because Adam Jonas (probably Musk's No.2 fan after Cathie Wood) loves insane upgrades and price targets on TSLA. But to be fair to Musk he is probably the GOAT at executing unlike Cathie who incinerates money by the tonne.
daft_pink 4mo ago
Wall Street research is a scam mostly because efficient market hypothesis suggests that real research would cost so much more than this type of coverage and distribution would be much less so obviously the research is for some other purpose and you can’t purchase stock advice for far less than it is worth and most people can’t afford it.

https://archive.is/TSTgD https://archive.is/TSTgD

Money talks, even through the walls that should keep analysts and bankers from talking. And fomo is human. We need transparency combined with widespread education and high trust so folks believe the few that investigate. All these pillars are needed - that's why we see attacks on all of them.

grim_io 4mo ago
That "wall" doesn't exist anymore. Trump tore it down.

dmix 4mo ago

TLDR research teams at nearly all the big Wall St banks wrote bullish reports on SpaceX and recommended buying it, some with very optimistic projections. The author says you can't always trust these reports because these banks also have a financial incentive to sell management services. Also covers how there is existing government regulation by Spitzer from 2003 dealing with this situation, where research teams are kept independent of the sales side but implies that doesn't eliminate financial incentives entirely, but also claims the regulation is still well enforced within banks. Other Wall St investment firms allegedly don't rely on these reports heavily and do their own research before investing. Nothing too deep here.

zulux 4mo ago

Que? Market analysis thinks SpaceX sucks as a stock. Heck, it goes against all my value investing instincts for me to even have 2% of my net value in it. To be fair however, 15% of my net value came from Tesla. I obviously have brain worms.

hdgvhicv 4mo ago
It’s not about fundamental value, it’s about how rational everyone else is.
- zulux 4mo ago
  Yep. Keesian Beauty Contest! (Dear Reader, if you have no idea what that is, it's a good idea to know about in my opinion)
  - noosphr 4mo ago
    Emperors new clothes.
    - zulux 4mo ago
      There's a relationship in that a persuasive kid pointing out the obvious flaws could collapse a Keynesian beauty contest.
  - el_jay 4mo ago
    To save other readers a web search: in a *Keynesian beauty contest, you pick the winners based on who you think others will find most beautiful.
jordanb 4mo ago
Professional Wall Street analysis is incredibly bullish: https://www.msn.com/en-us/money/topstocks/wall-street-is-bullish-on-spacex-stock-and-believes-it-can-rise-50/ar-AA27o2os https://www.msn.com/en-us/money/topstocks/wall-street-is-bul...

hx8 4mo ago

Like every other group, there is some amount of groupthink happening with Wall Street analysts. They all came to similar incorrect conclusions because they are working with similar information using similar techniques towards similar goals. This creates a level of bias, even if banks didn't have incentives to write bullish projections. Getting a diversity of opinions doesn't mean talking to 10 experts in the same field, but talking to experts in 10 related fields.

khurs 4mo ago
It's not Group Think I would say, more capitalism. SpaceX has all the big name banks and VCs and investors involved. So the banks know that if they don't fall in line, the VC's may not select them for future IPOs/make them lead bank and also not use them for other work. And the banks know that the big name investors who invested in the VCs are also their high net worth day to day clients buying their services. The banks loyalties and financial interests are not in protecting normal everyday people, it's protecting their business and individual bonuses. (SpaceX paid around $600 Million in fees for the IPO! And that's after negotiating a low percentage). The news sites know that if they speak out of line too boldly, they won't be 1st in line to get exclusive stories and invites to events. Or Advertising Spend. It's for governments and regulators to put rules in, otherwise capitalists will carry on in their own interests.
pinkmuffinere 4mo ago
> This creates a level of bias, even if banks didn't have incentives to write bullish projections. I don't necessarily disagree with you, but I think this is misleading. The bad estimate of fair price is _overwhelmingly_ due to incentives for bullish projections. I have no source to back this up, aside from common sense. SPCX is supposedly an AI-company now, even though we all know this is a lie. It's AI-only revenue within 5 years[1] is projected to be larger than most SP500 companies' full revenue today[2]. On the face of it, this is silly, and I don't accept that all the analysts group-thought their way to believing it. [1] https://finance.yahoo.com/sectors/technology/articles/goldman-sachs-expects-spacexs-ai-152151131.html https://finance.yahoo.com/sectors/technology/articles/goldma... [2] https://stockanalysis.com/list/sp-500-stocks/ https://stockanalysis.com/list/sp-500-stocks/

darth_avocado 4mo ago

Wall Street “analysts” are as right about the market as a coin flip. Downgrading a price target from $30 to $28 when the stock has trended from $20 to $15 in the last 12 months or raising the target from $450 to $500 when the stock price grew from $300 to $320. They’re not even remotely right on most things and are lagging indicators when they right.

onlyrealcuzzo 4mo ago
Nassim Taleb has statistically proven that there is only a handful of investors ever who's returns over the market average can't be explained by random noise. That doesn't prove there is no such thing as "talent" wrt investments, but it is proof there is almost no proof anyone has "talent".
wat10000 4mo ago
If they did significantly better than random chance, they should be able to use that to become filthy rich in fairly short order, and you’d only be hearing their advice because they publish it as a hobby in between yachting. I don’t think there are any analysts like that.
- JumpCrisscross 4mo ago
  > If they did significantly better than random chance, they should be able to use that to become filthy rich To be fair, this is many analysts’ ambitions. Use the role to build contacts and a public track record. Then go out and raise a fund.
JumpCrisscross 4mo ago
> Wall Street “analysts” are as right about the market as a coin flip Source? (Not doubting. Just haven’t looked at this for a while.)
- darth_avocado 4mo ago
  There are plenty of sites that track analyst performance, some paid others not.

saaaaaam 4mo ago

> Deutsche Bank, for example, hailed SpaceX as “the apex of civilizational ambition, oftentimes expressed in steel and fire, bending the arc of history”. This is pitiful. Not least because it is execrable writing. It’s 50 Shades Of Grey applied to investment advice.

hduto 4mo ago

Matt Levines predicted "everything but space x' etf is looking more and more appealing. Iirc someone has established this fund already.

fragmede 4mo ago
QQNE and SPNE, but look carefully at their management fees.

tclarke142 4mo ago

Sell side research exists to get deals and sell securities. The main reason Morgan Stanley gets so much business from Musk is because Adam Jonas (probably Musk's No.2 fan after Cathie Wood) loves insane upgrades and price targets on TSLA. But to be fair to Musk he is probably the GOAT at executing unlike Cathie who incinerates money by the tonne.

daft_pink 4mo ago

Wall Street research is a scam mostly because efficient market hypothesis suggests that real research would cost so much more than this type of coverage and distribution would be much less so obviously the research is for some other purpose and you can’t purchase stock advice for far less than it is worth and most people can’t afford it.