The Interloper and Why I ♥ the Financial Blogosphere

When I started writing my stuff here three years ago, I was an utter nobody.  I worked at a stupid little broker-dealer in Manhattan, never had anything published anywhere, never had any kind of newsletter following or nothing.  I just started a WordPress account, did my little posts, spammed the Yahoo Finance message boards and emailed a handful of “influentials”.  The rest is history (or the future depending on what you think my longevity as a pundit might be.)

The fact that this is even a thing that is possible for me or anyone else is simply enthralling, magical even.

And so it is with great pleasure that I present a blogger to you that you’ve probably never heard of this evening.  He is nameless and faceless (like many active industry participants are forced to be) but he has written something truly important today and I simply must have you read it.

His site is called Interloper and his About Page mentions a 20-year career spent at three of the largest investment banks on The Street.  His first three posts came out this week and I’m already hooked.  I’m guessing Tadas will be as well and I’m pretty proud of myself for unearthing this site before he did (it’s a blogger thing, you wouldn’t understand).

The Interloper’s site came to my attention via a tweet but I do not have his Twitter handle just kidding, now I do: @Real_Interloper.  Without any further ado, here is one of the most blistering and merciless assaults on the optimism bias among big firm brokers and analysts that you’ll read anywhere…god I love the financial blogosphere:

As though we needed another reminder, the early-year plethora of “second half recovery” economic and corporate earnings forecasts highlighted the consistent over-abundance of optimism  among sell side analysts. In order to understand this phenomenon it is important first to throw out any assumptions you have about investing and then fully comprehend that the goal of every capital markets participant is not to correctly predict the course of markets  – it is to generate commission today. The entire structure of the industry, from the personality types favored by HR to the compensation structure to the seating arrangements are all designed to facilitate this.

Consider the daily routine of, say, a typical institutional equity salesperson. They are generally at their desks reading news feeds and research published overnight by 7:00am. The research meeting starts at 7:30 and the analysts present any changes to the earnings forecasts of their companies and the economists and strategists may outline their predictions. At 8:00 they return to their desks and at this point the truly rich separate themselves from the merely wealthy.

The concept explained here is one that will save you huge money as an investor once you fully comprehend it and acknowledge its truth.  Read the whole thing below and then subscribe in your reader, because if the writer keeps this level of quality up we may be in for a treat.


sell side over-optimism explained as the trend fades (Interloper)





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