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Friday, 24 October 2008 06:00

Blog vs. Broker, whom do you trust!

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The Name Brand - that bastion of marketing that the finance and investment industries have come to rely on to convince those who should no better to do things that they shouldn't -has come under attack. "Attack by who?", you may ask. Attack by me, Reggie. "Who the hell is Reggie?" you ask. Well, a quick bio , and a list of writings that have brought use here so we can move on...

In the past week or two I attempted to debunk the "'Name Brand' is the best" mentality of so many individual and INSTITUTIONAL investors enamored by the marketing machine that is the Wall Street banks, brokers and Greenwich/mid-town hedge funds. In attmepting to do so I have released this blog's research model results, provided a glimpse into my proprietary trading, a backgrounder on my investing style, and a comprehensive comparison of both the blog and my results as compared to all major (and minor) hedge fund indices.

Now that we know:

that a man can beat market averages,
we know hedge funds don't necessarily deliver that much absolute alpha,
we know the difference between relative and absolute return,
we know the difference between return and risk adjusted return,
and know who the hell Reggie is...

It's time to move on to what is the actual essence of Wall Street, the big money center banks and brokerages (or at least what's left of them). As representative of Wall Street, I am using the four largest and most representative banks and brokerages - Goldman Sachs, Citibank, JP Morgan, and Morgan Stanley.

I compared the 62 companies' opinions that I have covered in the blog with that of the big Wall Street name brands' analyst buy/sell recommendations. Needless, to say, the results are not even close. I have started the blog in September of 2007, and have been patently negative every day since. Both the blog research and my proprietary trading account have been short, save for one long call - Bear Stearns after going short from the 130's to the JP Morgan announcement to buy the company for two or three dollars per share. I knew this to be unlikely to go through, and announced that strategic calls were totally underpriced. We all know how that story ended.

Since nearly all of my positions were short, I am using a margin account to quantify the blog's research, which I feel is most realistic since you can't short in a cash account.

image007.pngimage007.png

	Cash	Margin account ^{(most realistic, since shorts often recommended)}
Reggie's Blog Research returns	42.4%	81.6%
Citi	-30.6%
GS	-33.0%
MS	-22.4%
JPM	-40.2%

Just to be as conservative a possible, I included cash comparisons as well. Same story, different numbers.

image005.pngimage005.png

Below is a table of the 62 stocks that I covered in the blog, with a direct comparison with the guidance of the big boys, stock by stock. For those who want even more proof and meant, I have included all of the numbers and calculations that went into this via pdf download (57 pages of stuff). This document is available to download for free, without registration - icon Blog vs. Broker Analysis - supplementary material (1.09 MB 2008-10-24 14:43:34).

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I literally expect every brokerage and wealth management client of all of these banks to buy a subscription to this blog. All I ask is,

"Who has issued the best guidance during these turbulent times?"
	BoomBustBlog's Holding period return (short, margin account)	Reggie's HPR without margin and commissions			Brokers (Holding period return)
Stock		1 month	3 months	Since invested	Citibank	Goldman Sachs	JP Morgan	Morgan Stanley
len	143.4%	52.0%	36.0%	74.7%	-37.9%	69.5%	-93.7%
hov	134.4%	53.8%	47.3%	70.2%	-65.2%		-62.4%
phm	98.4%	46.1%	26.5%	52.2%	-35.0%	-44.6%	-44.2%
ctx	131.8%	43.5%	30.6%	68.9%	-39.2%	-65.1%	63.2%
dhom	130.6%	0.0%	0.0%	68.3%		No coverage
bzh	150.3%	58.2%	50.3%	78.1%		-70.9%	80.0%
rdn	164.5%	44.7%	-32.0%	85.2%		No coverage
mtg	176.2%	65.4%	50.8%	91.1%			-65.4%
dhi	127.5%	61.1%	52.5%	66.7%	98.7%	-61.4%	-65.4%
tol	25.1%	24.9%	4.3%	15.5%	-10.6%	-9.3%	-11.7%
bsc	182.7%	33.2%		94.3%		No coverage
cfc	151.2%	0.0%	0.0%	78.5%		No coverage
mbi	172.4%	45.6%	-24.0%	89.1%		37.4%	-79.6%
abk	187.3%	26.8%	-0.9%	96.6%	4.7%		-90.9%
wm	193.7%			99.8%		99.5%
ryl	62.6%	37.3%	26.0%	33.8%	-26.5%	-28.3%	-56.1%
ms	123.6%	27.1%	51.5%	63.9%	-71.2%	-70.1%	-70.6%
ggp	179.2%	82.3%	90.4%	91.7%	56.5%	-94.6%	-93.7%
bac	78.9%	30.5%	24.9%	41.4%	-52.9%	-29.5%	-54.6%	-55.5%
kbh	84.4%	34.9%	20.8%	44.1%	-25.4%	-47.3%	-70.5%
lehmq	196.3%			99.8%		-99.9%
ago	103.8%	42.8%	10.4%	53.8%	0.0%	-57.8%	-46.0%
key	109.1%	24.0%	10.0%	56.3%	-69.9%	-59.8%		47.7%
ffhs	58.5%	10.8%	10.1%	31.0%		No coverage
c	90.6%	30.9%	31.2%	47.0%		6.6%	-63.5%	-7.1%
wfc	-1.1%	8.6%	-7.5%	1.1%	4.7%		-15.2%	-9.3%
gs	74.2%	18.4%	39.8%	38.8%	-46.8%		-44.3%	-37.9%
mer	132.2%	33.8%	39.7%	67.8%	-72.3%	-67.8%	-76.4%	-44.8%
wb	163.4%	58.3%	63.3%	83.4%		No coverage
kfn	-72.8%	33.2%		-34.9%	-81.2%		-73.4%
jef	147.8%	60.5%	68.0%	75.4%		-45.4%
pnc	53.4%	43.4%	32.2%	27.8%	-80.9%	-80.6%		-83.6%
bpop	33.9%	21.9%	16.3%	18.0%		No coverage
sti	89.2%	33.1%	9.3%	45.7%	-27.1%	-43.9%	-51.1%	-48.3%
snv	65.8%	28.1%	7.8%	34.0%	-28.1%		-31.3%	20.7%
mi	57.3%	20.2%	7.0%	29.7%	-28.6%	28.9%	57.4%	-28.7%
asbc	57.6%	22.7%	-10.1%	29.9%				-46.8%
fctr	62.0%	13.4%	-15.1%	32.1%		No coverage
mtb	-1.0%			0.6%	-60.3%	-48.3%	-50.5%	-66.5%
hban	33.1%	16.2%	-8.1%	17.6%	10.6%	-10.9%	-27.3%	-38.2%
bbt	15.4%	9.5%	-21.0%	8.8%	10.6%	-10.9%	-27.3%	-38.2%
jpm	17.2%	21.6%	-10.6%	9.7%	-18.9%	-11.2%		-19.5%
usb	22.0%	6.5%	3.3%	12.1%	13.4%	-15.6%	-17.0%	-20.4%
cof	25.3%	15.3%	1.2%	13.7%		-24.7%
nara	51.8%	32.0%	10.0%	27.0%		No coverage
sasr	54.9%	35.5%	10.1%	28.5%		No coverage
hnbc	60.4%	19.3%	-16.6%	31.3%		No coverage
cvbf	16.8%	24.0%	9.0%	9.5%		No coverage
gbci	-8.0%	25.2%	1.1%	-2.9%		No coverage
fhn	7.3%	22.0%	-2.4%	4.8%	-54.3%	46.5%	-43.5%	44.8%
ncc	-29.6%	11.2%	-15.2%	-13.7%	-88.1%	-83.5%	-89.5%	-53.9%
cfc	16.6%	0.0%	0.0%	9.4%		No coverage
rf	95.5%	24.8%	3.6%	48.9%	-24.8%	-58.7%	-59.0%
zion	53.2%	21.0%	-15.6%	27.7%	-3.7%	-84.4%	-56.2%	-31.0%
tcbk	-15.5%	13.8%	-28.0%	-6.7%		No coverage
fitb	84.0%	31.5%	16.7%	43.1%	-62.2%	-19.1%	67.6%	59.9%
sov	140.7%	67.7%	69.9%	71.4%	-76.0%
ge	68.5%	23.5%	34.5%	35.1%	-51.8%	-55.0%	-55.0%
axp	68.0%	34.6%	32.6%	34.7%		-44.4%	-47.2%
hbc	42.7%	19.5%	21.5%	22.0%			28.2%
nav	95.7%	50.9%	52.8%	48.3%			-47.8%
wire	33.4%	16.9%	18.3%	17.2%		No coverage
sfd	70.2%	19.7%	36.5%	35.3%			-45.3%	-14.4%
Reggie's Returns	81.6%	30.6%	16.7%	42.4%	-30.6%	-33.0%	-40.2%	-22.4%

As compared to ALL of the popularly followed indices...

	BoomBustBlog's Holding period return (short, margin account)	Reggie's HPR without margin and commissions			Brokers (Holding period return)
Stock		1 month	3 months	Since invested	Citibank	Goldman Sachs	JP Morgan	Morgan Stanley
Reggie's Returns	81.6%	30.6%	16.7%	42.4%	-30.6%	-33.0%	-40.2%	-22.4%
DJI Index		-21.5%	-26.8%	-36.7%
CCMP INDEX		-25.0%	-30.5%	-38.6%
CTRN Index		-24.7%	-32.2%	-40.9%
UTIL Index		-20.1%	-28.3%	-29.5%
UKX Index		-22.7%	-27.2%	-36.7%
HSI Index		-27.1%	-40.5%	-36.3%
RTY Index		-29.2%	-30.2%	-37.3%
OEX Index		-21.6%	-27.4%	-38.0%
SPX Index		-24.5%	-30.1%	-39.8%
AS30 Index		-20.5%	-23.7%	-37.2%
SPTSX Index		-26.3%	-31.6%	-31.3%
MXWO Index		-27.2%	-34.3%	-41.5%
FTAW11 Index		-33.8%	-42.7%	-48.1%
MXEUG Index		-21.5%	-26.8%	-41.5%
MXWO Index		-27.2%	-34.3%	-41.5%
MXEU Index		-21.3%	-26.6%	-42.1%
DJGT Index		-22.9%	-29.7%	-39.8%
SGX Index		-24.7%	-30.2%	-36.8%
SVX Index		-24.4%	-29.9%	-42.7%