Citigroup (C) cut is earnings estimates for Goldman Sachs (GS), Morgan Stanley (MS), and Lehman (LEH). Today, Bank of America (BAC) cuts its earnings targets for Goldman and Morgan Stanley. Sanford Bernstein and Oppenheimer have slashed most of their earnings predictions for banks and brokerages.

The contest to see how fast analysts can reset their expectations for the financial industry becomes more muddled every day.

The fact of the matter is that most of the revised figures are for the third quarter of this year. In other words, they do not look out very far. They are the products of analysts with limited minds and no appetite for risk. This does not do their institutional or retail clients any good. By the time a new downward revision hits the market, the shares which are being re-evaluated have already lost more of their value.

The primary weakness of Wall St. research remains that most calls come late in the game. Researchers spend so much time with analysis and so little time exercising common sense that their value to the investment population has become remarkably limited.

Perhaps it is not much to say that the IMF, Warren Buffett, and George Soros looked at the credit markets months ago and said they would get worse and that bank write-offs would soar. Perhaps their calculations were simply done on the back of envelops and would not pass the scrutiny of Wall St. research directors.

The credit crisis has been marked by two things. The first is that it continues to get worse even when there are many predictions that it will get better. The second is that investors continue to lose money in financial stocks to some extent because analysts are very late in making negative predictions.

A great deal of damage has been done to the global financial system this year. The reputation of Wall St. research has been hurt just as badly.

Douglas A. McIntyre

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