The PR hacks say another 4% decline in the S&P fully prices in a recession.

Time to watch out below?

Tech spending pessimism aside, ask yourself why a securities analyst makes a career change…into the public relations industry?!

I found the whole bit from Piper Jaffray suspect, at best.

It seems PJ completely blew their iPod projection, and the iPod touch isn’t breaking any records either. The analysts failed to mention that Apple was handing out big red sale flyers on Friday which subsequently wound up on shopping mall benches (hence, the draw). And, 5.3 Macs and 1 iPhone per hour - the numbers were 4.3 Macs and 1.3 iPhones per hour in August. Apple could fare no better on what is supposed to be the busiest shopping weekend of the year when compared to a so-so back-to-school sales period, with a “red flyer” sale going on?

There’s more speculation here.

Rhetorical, so you can’t fail:

• Everyone thinks Fannie Mae and Freddie Mac are hot right now, and it reflects in their rising stock prices. But who are they going to sell their bonds to if this becomes a trend?
• Why are moguls fighting over newspapers, and why are journalists rebuffing their advances?
• What should you pay a recruiter? I think the real question is why should you pay a recruiter.
• What does sell-side equity analyst heaven look like? Or is that hell?

Obviously a lot of people do, as do a lot of people’s brokers, who the people, in turn, listen to. And round and round we go.

From eWeek: The stock that bullish analysts on Wall Street said earlier this month was headed soon for $600 turned tail and fell below $400 as the shares suffered their worst day and week of trading since the Web search leader went public in August, 2004.

In just a week, poof! There goes $20 billion.

Once again, stock analysts cannot make up their minds about the search advertising model. Month on month, these guys swing recommendations like Babe Ruth swung at fastballs - with reckless abandon and little emphasis on quality. The latest is a flip flop by the folks over at RBC Capital Markets (see Google, Yahoo! Ripped).

Now, I have to give some minor credit, as the companies in question cannot proceed on their tracks forever. But putting in fairly aggressive buy recomendation in January, only to reduce the price target by close to 20% in February, leads me to believe that they really have no idea what is going to happen.

They don’t. Running searches on a Windows 2000 workstations, crunching a one page spreadsheet with nary a variable built in which resembles the companies’ business model drivers, and then issuing a public press release, hardly qualifies these analysts as credible. But that is IMHO.

For further reading, see Sell-side Equity Analysts Continue Guessing.

Meanwhile…

Online ad trends continue skyward at a blistering pace. I wonder if the analysts are reading articles like RED HERRING | Online ads up 32 percent, or just resaving their spreadsheets for General Motors as GOOGLE-YAHOO-COMBINED FORECAST.XLS.

Mark Cuban has an interesting post on shorting stocks, entitled I feel so dirty….Naked Shorts.

While most of Mark’s post targets SEC rules regarding stock loan regulation and its related market impact, I am not going to argue with him about shorting as he is right on target (most of the time). I short stocks as well - in fact I short more stock than I buy. Reason being something similar to what Mark says about bias.

Analysts heavily weight recommendations towards the long side. I think the balance of positive to negative recommendations is something like 15:1, but don’t quote me on it (just correct me - I’ll learn something new).

Everyone looks at bears as pessimists. I look at them as opportunists. If everyone is consistently long biased (and they are, right up until a crash), then the general market trend should be up. Now if a stock starts skidding, it is bucking the market forces. All the long bias isn’t helping, and that means it is in trouble.

I short stocks AFTER they have started their downward moves. What I do as far as the size of the position, setting stops, etc. is beyond the scope of this post, but let’s just say I am careful.

It works.

But then again, I am not a billionaire, so if anything here falls contrary to what Mark has said in his post, take his advice.

Eweek recently presented an article entitled Boggled by Google: Wall Street Way Off Mark. I say forget the analysts, and good for Google. Keep’em guessing boys, while you continue to beat the pants off even your own internal estimates. The game that is generally played between analysts and the companies they follow is getting turned on its head here. Google has a complex business model; one that a white-shoed analyst with a fresh Harvard MBA is going to have tough time picking apart (that is, unless he or she also has a PhD in mathematics from MIT).

Let’s cut to the chase folks. Sell-side equity analysts exist for one purpose, selling stock. These analysts mock up a spreadsheet based on what they heard in the last conference call, publish a report setting a “new target price” of “X”, then pass it on to their brokers. The brokers call all their clients, pushing said stock, using this fantastic report as justification.

Now in an environment where company “Y” is selling widgets, and every man, women and child needs exactly one widget, and each widget lasts exactly 1.5 years, maybe an analyst serves some purpose. Who has the time to extrapolate the widget manufacturer’s future results, using their present cost structure, the next five years’ demand for widgets from population growth estimates, and a probability factor for new companies entering the widget market? Not me.

But Google isn’t selling widgets. They are selling an extremely dynamic advertising model, one which has to take into account new AdWords clients, new AdSense publishers, ever increasing keyword rates on a virtually unlimited combination of said keywords, competition entering and leaving the nascent market, and a host of other variables. Furthermore, they have a slew of services they have not even applied a business model to yet, and they aren’t talking; this makes me believe they are up to some even bigger things.

And they don’t really need to talk. They have an ever growing pile of cash, and an issue with a thin float (as compared to many companies their size). They don’t have to impress anybody outside of themselves. I couldn’t think of a better position to be in, as a public entity.

If a glorified marketing assistant (which is essentially what a sell-side equity analyst really is) thinks they have a snowball’s chance in hell of actually predicting results on a company like Google, then please introduce yourself. If you can hit Google’s results, or the results of any other company like them (without being handed the financial statements the night before their release), I would like to follow you, or better yet, work for you, as you would obviously be a genius beyond compare that I could learn volumes from.