The quality of the expert is not in how correct his/her prediction is.
It's the consistency of their prediction.
As long as their opinion consistently correlates with reality , it could be useful.
It is common practice in tea/coffee professional tasting to make a correlation matrix for experts. It is ok for numbers to be negative in that matrix as long as they don't deviate over time.
Same approach should be applied to financial analysts.
Read Q&A sections of transcripts of the conference calls with analysts and you will abandon any hopes for quality of their predictions.
Used to be that the analysts had more intimate (now considered illegal) contact with the companies they covered. Also, companies used to be able to say a lot more than they are legally allowed to say today. The effect is the analysts are flying by the seat of their pants more today than in the past. It becomes a numbers guessing game rather than having a real understanding of the business. It has become this way because of real fraud and abuse on both sides in order to manipulate the market(s).
I for one do not like the idea of so many analysts paid by brokerage companies. It is a conflict of interest IMO. But I also fault investors who make investment decisions on what an analyst says when the analysts often express opinions such as "being worried that earnings came in 1 cent short of expectations..." and so on. Not one of them could run the companies they cover for a microsecond.
@resistion- We at EE Times report what analysts have to say because by and large they offer good and worthwhile information. In this case, the financial analysts underestimated Intel's performance in the fourth quarter. But as the article makes clear, this had a lot to do with Intel's own gudiance for the quarter, which turned out to be far short of actual results. This article is not meant to be a slight to analysts.
EETimes reports on the analysts' failure this time, but it seems they report analysts results all the time, thereby encouraging or promoting belief. EETimes should do some self-examination here. Maybe don't report analysts claims anymore?
I think Vince has it right! A more serious description is that 98% of analysts add no value whatsoever. In fact, they are typically in cahoots with the company and just relay the "wink-wink, nod-nod" from management on future results and cannot be trusted to be independent. In fact, their projections often can be used as a counter-indicator to reality, as they are part of wall street's reality-distortion system.
Analysts are the clowns of the financial circus. Their job is to spray seltzer down their pants and trip over each other to entertain and amuse in between the serious financial acts. As with all clowns they are highly trained but shouldn't be taken seriously.
Sometimes I wonder if Tech Industries don't have too many analysts. We need some, but just enough to give a mix of view points with backup material for their statements. So many got it wrong in the lead up to the start of the GFC and these (yes, famous or infamous firms) are still killing credit ratings for everyone from the smallest startup to the biggest country. Don't any of us remember how badly they got it wrong? They earn a great deal for commenting on things that are the product of real talent, our hard work, sweat, brains and anguish. Much less analysing of the industry financials would do us all some good. In this story they clearly didn't even do enough research! If one can even come close and explain how they did and the others are miles off target.....it seems little better than bad sports writing and it kills businesses and careers in just the same manner. Some ethics in the business might be a start.
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