Analyst Earnings Forecasts More Misleading Than Ever
"The CHART OF THE DAY shows analysts correctly predicted results for 6.7 percent of the companies in the Standard & Poor's 500 Index that released second-quarter earnings, the fewest since Bloomberg began tracking the data in 1992...
....At the start of the year, profits at banks, brokers and insurance companies were projected to rise 22 percent in 2008, according to the average estimate of analysts surveyed by Bloomberg. They're now expected to decline 48 percent. Analysts forecast an 11 percent gain in retailer earnings when 2008 began, compared with an 11 percent drop now, according to data compiled by Bloomberg."
It should be again noted that although the divergence was unusually large this year, we've seen similar misses most quarters and years. The big question is, why does anyone trust these guys? Who hires them? It would be a lot cheaper for the banks to simply have a computer program that randomly chose earnings growth forecasts between 10 and 20% for selected industries. That would likely give about the same forecasts that we receive today.