Is equity research from large banks reliable?
"If by ""can we trust the analyst recommendations"" you mean ""are they right 100% of the time"" the answer is absolutely no.  Analysts are human and make mistakes, some more than others.  There are many stories of ""superstar managers"" that make killings for several straight years, then have a few bad years and lose it all back. However, don't take ""you can't trust them"" to mean that they are nefarious in some way. While there may be some that recommend stocks for selfish purposes, I suspect that the vast majority are just going off what information they have, and can't predict market behavior or future performance with perfect accuracy.  Look at many analysts' recommendations.  Do your own analysis. If you're still not comfortable buying individual stocks, then don't buy them.  Buy index funds if you are satisfied with market returns, or other mutual funds if you want to invest in specific sectors.  Or at the very least make sure you are sufficiently diversified so that you don't lose your entire investment by one bad decision.  One rule of thumb is to not have more than 10% of your entire portfolio in any one company." "They aren't necessarily trustworthy. Many institutions claim to have a ""Chinese Wall"" between their investment banking arms and analysis arms. In practice, these walls have sometimes turned out to be entirely imaginary. That is, analysis is published with an eye to what is good for their investment banking business. One of the most notorious cases of this was Henry Blodget, an analyst with Merrill Lynch during the dot-com bubble. Blodget became a star analyst after he correctly predicted Amazon would hit $400/share within a year. However some of his later public analysis dramatically conflicted with his private comments. Famously when he started covering GoTo.com, rating it as ""neutral to buy"", he was asked  ""What's so interesting about Goto except banking fees????"" Blodget replied, ""nothin"". Eventually he was permanently banned from the securities industry."
Okay, first of all Fair value may not be target price. Lots of things can go into a price that won't be in fair value such as expected future price.  Second of all, if you were good at equity research and could make money off of doing it, you would start a hedge fund or get paid very well by some company. If you aren't good at equity research but still want to do it you do journalism and estimates on 'fair value' &gt;Sounds like bullshit. Silicon Valley is largely research and development, not manufacturing. Saying that you'll replicate the success of software engineers earning $120k a year by bringing in more $50k a year manufacturing jobs is misleading at best.   Today it is largely research and development but a few decades ago there was a production manufacturing capacity to it that was by in large far greater then what remains today. I don't know much about Amit Mehrotra individually, or much about Deutsche Bank's equity research division. I was just trying to point out that the source of this information is a corporation that does not have stock in the debate between Amazon, WalMart, and the Trucking Companies, and is a company that doesn't really have an interest in this debate as a whole, because Deutsche Bank isn't involved in the US consumer products market, the US shipping market, or the US trucking market. It is secondhand knowledge at best, and secondhand knowledge from a totally disinterested party at that. "You are co-signer on his car loan. You have no ownership (unless the car is titled in both names).  One option (not the best, see below) is to buy the car from him.  Arrange your own financing (take over his loan or get a loan of your own to pay him for the car).  The bank(s) will help you take care of getting the title into your name.  And the bank holding the note will hold the title as well. Best advice is to get with him, sell the car. Take any money left after paying off the loan and use it to buy (cash purchase, not finance) a reliable, efficient, used car -- if you truly need a car at all. If you can get to work by walking, bicycling or public transit, you can save thousands per year, and perhaps use that money to start you down the road to ""financial independence"".  Take a couple of hours and research this.  In the US, we tend to view cars as necessary, but this is not always true.  (Actually, it's true less than half the time.) Even if you cannot, or choose not to, live within bicycle distance of work, you can still reduce your commuting cost by not financing, and by driving a fuel efficient vehicle.  Ask yourself, ""Would you give up your expensive vehicle if it meant retiring years earlier?""  Maybe as many as ten years earlier." "I don't know what angle you're trying to push or why, but are you also saying that Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz are similarly lacking the understanding of financial concepts when they published a [paper](http://www.imf.org/external/pubs/ft/wp/2012/wp12128.pdf) ""Quantifying Structural Subsidy Values for Systemically Important Financial Institutions""?  Are you suggesting a similar ""entire shaker of salt"" when they ""estimate[d] the structural subsidy values by exploiting expectations of state support embedded in credit ratings and by using long-run average value of rating bonus""?  Should we really be so skeptical when they conclude:  &gt;Section III has provided estimates of the value of the subsidy to SIFIs in terms of the overall ratings. Using the range of our estimates, we can summarize that a one-unit increase in government support for banks in advanced economies has an impact equivalent to 0.55 to 0.9 notches on the overall long-term credit rating at the end-2007. And, this effect increased to 0.8 to 1.23 notches by the end-2009 (Summary Table 8). At the end-2009, the effect of the government support is almost identical between the group of advanced countries and developing countries. Before the crisis, governments in advanced economies played a smaller role in boosting banks’ long-term ratings. These results are robust to a number of sample selection tests, such as testing for differential effects across developing and advanced countries, for both listed and non-listed banks, and also correcting for bank parental support and alternative estimations of an individual bank’s strength.  I ask because this article is founded on that study - linked to by Bloomberg which is then linked to in OP's Huffpo article.  While you can certainly claim that Mark Gongloff ""shows a basic lack of understanding"" of whatever, why don't you put some skin in the game and demonstrate how he somehow misses the entire point of that study, or better yet really wow us by de-bunking that study." "&gt;*""Date of creation: Jan 2006""*  It was pre-GFC. Since that study was done a huge percentage of American families (as well as the taxpayers) have lost major amounts of equity due to out of control deregulation of financial institutions.  Now the US is trying to [push TiSA](http://www.smh.com.au/federal-politics/political-news/secret-trade-negotiations-is-this-the-end-of-the-big-four-20140619-3ah39.html) which tries to continue the deregulation, which is exactly the worth possible thing to do. [TiSA will also globalize millions of service jobs around the world](https://www.youtube.com/watch?v=2_pPqnbXpA4), including in the US.   Thats not what US families need, to suddenly be facing this." "I know I replied in another section of this tread as well, but are you looking at MS/Smith Barney, trowe advisory planning, or directly within their mutual fund equity research? The reason I ask is because often there is a misunderstanding between Financial Advisory (FA) work and working directly within a fund doing equity research (Equity Analyst).  People often think FA's do a lot of research, and they do, but you'll effectively blackball yourself from **ever** entering research because there's a ""sales-person"" stigma attached to being an FA." "Well there are a few comments that need to be made here I suppose. Though at work now so this will be short.   First there is the difference between banking, which indeed mostly looks at capital adequacy ratios and uses VaR as one of the methods to get to the risk-weighted assets. Then there is the buy side which is more interested in ""how much would I stand to lose in portfolio X if markets head south, and how does that relate to what a have promised my client?"" In the first situation it is the bank itself taking on the risk, in the second the risk lies entirely with the client. An asset manager could lose 100% on your regular old equity mandate and it wouldn't hit him except for loss in fees, whereas a significant trading loss for a bank can put it out of business..   My personal view is that all of these metrics are merely useful instruments and for a large part they all tell me the same thing. A higher duration on a fixed income mandate will give a higher VaR, a higher shortfall, more negative results on rates stress scenarios etcetera. They only really become useful when imposing limits on them, or using them to steer based on whatever the prevailing risk appetite is at a certain point in time. Or when looking at trends, or relative risk of portfolio A vs B  Don't get me wrong, I too can debate for hours about VaR parameters. Confidence intervals, look back periods, return frequency, decay factors, parametric or historical / monte carlo simulation, etcetera. But I think in practise that is really of limited use. If you take any ex ante risk measure and you thoroughly understand it, make an informed choice about risk appetite and steer on it, you basically have done your job as a risk manager.  Sorry I know I am not answering your questions in a structured way but am on my phone so it's hard to keep overview. PM me if you want to discuss things in detail."