SpaceX and the myth of independent Wall St research

Wall Street “analysts” are as right about the market as a coin flip. Downgrading a price target from $30 to $28 when the stock has trended from $20 to $15 in the last 12 months or raising the target from $450 to $500 when the stock price grew from $300 to $320. They’re not even remotely right on most things and are lagging indicators when they right.

Que? Market analysis thinks SpaceX sucks as a stock.

Heck, it goes against all my value investing instincts for me to even have 2% of my net value in it. To be fair however, 15% of my net value came from Tesla. I obviously have brain worms.

Like every other group, there is some amount of groupthink happening with Wall Street analysts. They all came to similar incorrect conclusions because they are working with similar information using similar techniques towards similar goals. This creates a level of bias, even if banks didn't have incentives to write bullish projections.

Getting a diversity of opinions doesn't mean talking to 10 experts in the same field, but talking to experts in 10 related fields.

Money talks, even through the walls that should keep analysts and bankers from talking.

And fomo is human.

We need transparency combined with widespread education and high trust so folks believe the few that investigate. All these pillars are needed - that's why we see attacks on all of them.

> Deutsche Bank, for example, hailed SpaceX as “the apex of civilizational ambition, oftentimes expressed in steel and fire, bending the arc of history”.

This is pitiful. Not least because it is execrable writing. It’s 50 Shades Of Grey applied to investment advice.

TLDR research teams at nearly all the big Wall St banks wrote bullish reports on SpaceX and recommended buying it, some with very optimistic projections. The author says you can't always trust these reports because these banks also have a financial incentive to sell management services. Also covers how there is existing government regulation by Spitzer from 2003 dealing with this situation, where research teams are kept independent of the sales side but implies that doesn't eliminate financial incentives entirely, but also claims the regulation is still well enforced within banks. Other Wall St investment firms allegedly don't rely on these reports heavily and do their own research before investing.

Nothing too deep here.