(Note: this article has been updated to add corrections at the end.)

IT IS earnings season again. This is the time for manipulation of expectations, when a billion-dollar loss can be a “good number”, and a billion-dollar profit a “bad number”.

This is when a bunch of desperate people (stockbrokers) madly tweak their estimates in the hope of enticing commissions from a bunch of overpaid people (fund managers). Their profit estimates are rarely too far wrong, as the brokers will have been “guided” to within a few points of the result by the investor relations team at the company.

This year’s season has been in swing for just a week. Earnings for June 2012 have already been revised down by 20 per cent to 4 per cent. It’s ugly.

Now, after downbeat comments from Stockland, Cochlear, Leighton, Reckon, Transurban and Bradken, Goldman Sachs is winding back next year’s forecasts to below 10 per cent.

The year just passed will be the fifth in a row that earnings growth (EPS) has been below 5 per cent. And growth in 2013 is now tipped to be closer to 8 per cent.

Yes, a broker’s “buy” recommendation still means “hold”, a “hold” really means “sell” and a “sell” means the investment bankers on the other side of the Chinese wall have just lost a client.

Apart from that, the game has changed. Trading volumes have halved, investment banking is half-dead and high frequency trading is robbing retail brokers of any profit margins – margins already savaged by the internet.

So another shakeout looms. Its share price still in a deathly spiral from $4.50 five years ago to 18¢, a bevy of Wilson HTM’s business writers, including two top 20 shareholders, have just defected.

Though costs have been cut to the quick, the biggest independent broker – Bell Potter – has just slipped into the red. Elsewhere, as brokers scramble to reinvent themselves as “wealth managers”, many who once made a poultice have been putting it back.

Take Otto Buttula, who made his first fortune with Anton Tagliaferro in the early days of boutique funds management. In 1999 he floated broking house IWL, selling out to Commonwealth Bank with exquisite timing in September 2007 – and walking away with a tidy $52 million.

But it’s hard to pick the turn of the market twice. In 2008, he tried again, mopping up fly-by-night broker Findlay Securities for a song, cleaning up its slather of dodgy broking penalties and Melbourne underworld figures on its client base, and rebranding it InvestorFirst (as opposed to BrokerFirst-InvestorLast).

This week Otto left, but not before taking the historical step of suddenly launching a share placement in the middle of a struggling rights issue. He was reported to have sold his shares to none other than Mariner Corp, now run by a bloke who must be the keenest contender for a deal in modern market history, Darren Olney-Fraser. But he told us yesterday he was not the buyer. Whoever it was, chairman Otto described the approach as “subject to unspecified conditions” and “changes in pricing”.

Across town, notwithstanding Mariner’s market cap of $3 million – and the inconvenient fact that it didn’t have any cash – Olney-Fraser had boldly declared an intention to make a $10 million offer for Austock at 10.5¢ a share.

Bill Bessemer, the Austock boss and an old mate of ABC Learning’s Eddy Groves, had been talking with Greg Paramor, the Sydney property guru who had had a corporate rebirth himself and was on the hunt for assets for his new investment vehicle, Folkestone.

Bessemer was a seller of Austock’s $550 million childcare centre fund and he and Paramor were in talks when Olney-Fraser arrived with his takeover.

Austock rejected it, telling Mariner its “offer” was in breach of the Insurance Acquisitions and Takeovers Act, the Financial Sector (Shareholdings) Act, the Pooled Development Funds Act and the Corporations Act.

Nonplussed by the significant headwinds, Olney-Fraser bounced back with an 11¢ offer the next day. Off to the Takeovers Panel went the matter as Olney-Fraser alleged foul play by Austock, which he claimed had frustrated his bid by agreeing to sell its property fund to Folkestone.

Late yesterday, the panel claimed Mariner had no money to bid for Austock. But Olney-Fraser told us there was a leading investment bank behind the deal, as yet unidentified. In any case, Mariner was looking at Wilson HTM too, he said.

Back to InvestorFirst. Buttula had paid $20 million to buy an investment platform called HUB24 from one of the market’s true super salesmen, Darren Pettiona. That was in 2010. After selling a financial services company called Coin Software to Macquarie at the peak of the boom, Pettiona had flogged HUB24 into InvestorFirst for $20 million, including goodwill of more than $19 million.

In possibly the most hairy-chested presentation of the decade, InvestorFirst predicted HUB24’s earnings growing to $80 million by 2018, and funds under management at $20 billion.

There are no earnings yet and not much FUM either. It’s tough out there in broking land.

 Corrections: The departure of Otto Buttula was announced on July 25, effectively immediately (not last week). Otto therefore was not involved with the share placement announced on August 7

  • Hub24 doesn’t manage funds so there was never any FUM target. At the time the merger of Hub24 was announced there was a presentation (October 2010) with a chart projecting revenue (not “earnings”) would exceed $80 million in 2018. In terms of earnings, the same chart projected EBITDA of ~$50m (and thus net profit would be somewhat less than $80m).
  • Finally, this was not a point discussed with InvestorFirst but for the sake of clarity it should be said that the “BrokerFirst/InvestorLast gag was designed to be a generic stock broker gag rather than any comment on the firm’s integrity or practices. The author knows a few of its staff personally and regards them as fine, upstanding citizens.