Monday, February 12, 2007

To Herr is Human

This morning's post is not so much about the failed NDAQ bid for LSE, but about how ridiculous the The Wall Street Journal and KBW analyst Richard Herr were with their insight towards this headlining event.

On February 10, 2007, the WSJ ran an article by Alistair MacDonald with the headline, "With Nasdaq-LSE Deal Doubtful, Exchanges' Steps Are Unclear." In this piece, the Journal goes to long-time, get-it-wrong, analyst Richard Herr for insight.

The article reads, "...Just this past week, giving Nasdaq some last hope, the LSE's share price had fallen closer to the bid, suggesting that the result isn't certain. Richard Herr, an analyst from brokerage Keefe, Bruyette & Woods, said Friday that there was a 30% chance Nasdaq could get the votes for a majority stake in LSE Saturday..."

For NDAQ to be successful in their bid, they needed 50% of LSE shareholders to vote in favor of their deal. In the end, NDAQ received acceptances worth just 0.41 percent of the exchange's ordinary shares in return for its bid (click here for more on this).

Let's consider Herr's analysis. Among the first questions that come to mind is what model is Herr using that gives him this sort of information? The next question is, what other pieces of truly valuable, statistically-based information does Herr come up with when he publishes his research? These questions lead to the question of accuracy. How inaccurate is he/has he been regarding his high profile analysis of companies in ExchangeLand?

To get a sense of the last question above, just take a peak around the archives here at NYSE ArcaNews to learn how incredibly inaccurate Herr has been about NYX.

What will happen next with NDAQ will be interesting to watch. To be sure, there's no shortage of prognosticating among the popular media. One of the more interesting ideas centers around the idea that Project Torqouise is looking for a technology partner. It's well-known that SuperMontage and other NDAQ technological initiatives are not best in class, and it's become clear through the years that NDAQ can't get a multi-national strategy done right.

Similiarly, watching LSE attempt to stay relevant as NYSE EuroNext becomes an even stronger force to be reckoned with will be interesting to watch.

These NDAQ stories certainly make for entertaining fodder in between the real, landscape changing technological advancement and multi-national deals that NYX continues to execute.


Anonymous KayakHandy said...

While his numbers were wrong he was still right about the initial failure of the LSE deal. If you read the article you will see that HERR gives a seventy percent failure of the deal! Thats a high percentage of failure and many wallstreet bets are made with much less of an advantage.

While Herr is not my favorite, he's the one who got it right and you are wrong for bashing his correct final judgement on the outcome of the deal.

8:54 AM  
Blogger Barry said...

Thanks for cheggin' out NYSE ArcaNews. Different opinions are what make markets -- thanks for weighing in.

On the factual side of the Street, look at Herr's track record looking at NYX. Here's a reminder:

Most of the Street's sell-side anaysts clearly have erroneous models. In addition to their mis-guiding reports through the quarters, if you listen to the quarterly conference calls you will repeatedly hear the analysts demonstrate their poor handles on the ExchangeLand marketplace.

Most recently (the NYX conf. call held on 2-2-07), Mr. Reppetto was invited to take a bunch of his poor-model-revealing questions offline.

10:22 AM  
Anonymous Anonymous said...

kayakhandy said: "While his numbers were wrong"


10:30 AM  

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