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Wednesday, September 7, 2011

Wall Street's Naughty 4-letter word

~ "If you were smart like me, you'd be Buying stocks Now!!.. Boingg!  Boingg!"

There are some words that some people can never say to another.

Some people can never say the word "Love" to a spouse or a child.

Some employers can never ever tell their employees "Good" as in 'Good Job'

And when it comes to Wall St. they can never say "Sell".  

You see it on CNBC and most financial advice columns-  Don't sell.  If market is dropping, Don't Sell...  Well if it is bad to sell stocks when they're continually rising, and one should not sell when they are continually dropping, when the hell should someone sell??  

Of course its quite easy to make that recommendation to 'hold' and calmly rationalize the situation when its not the advisor or TV huckster's money in question. Financial advice like ignorant opinions are like bum-bums.. everyone has one.

 There was a column today in MarketWatch which was surprisingly honest when it comes to how often Wall St advises clients and investors to sell their stocks when underperforming:  "With the economy teetering on the verge of another recession, none of the 1,485 stocks that make up the S&P 1,500 has a consensus “Sell” rating. And just five, or 0.3%, are ranked as being a “Weak Hold.”"

In the article, it mentions Standard & Poor's recently researched 19,868 Wall Street research reports and found just 167 (0.08%) “Sell” recommendations and 697 (4.2%) “Weak Hold” recommendations.
Think about it this way in layperson terms:  There are 30 Major League Baseball teams.  Imagine if you turn on ESPN and their baseball 'experts' told you as of today, 29 out of the 30 teams still have a chance to win the World Series so fans of those teams should not 'sell' their interest in following their teams and give up hope?  You'd think 'What Rubbish!"  It is little different.

So why is this?  For many advisers, this is the nature of the beast.  How can you make commissions off investment if no one is continually investing?  And in the case of the TV swill peddlers, how can you maintain the necessary ratings to justify what you're charging advertisers if the information you present tells viewers to not risk their money in shark-infested waters, and thus not to have reason to watch the financial news network?

There's also this misguided, delusional belief from many in the finance community that stocks are on a constant upward trajectory; that they are going to soar and soar to infinity, and thus any drop in value is looked upon as modest 'corrections', 'natural adjustments' or 'Buying Opportunities!'

But is that really true?  Yesterday the Dow finished at 11,139.   On May 24, 2001 which was 10 years and 3+ months ago, the Dow finished at 11,122.  That's a total increase of 17 pts.-- in TEN years.   In fact, since that 2001 trading day, the next time the Dow reached around that mark was February 16, 2006 when the trading day closed at 11,120.  It took the market close to Five Years!! between 2001 to 2006 to get back to that specific trading close.

And every day was told to be another "Buying Opportunity"!
Picture yourself in a casino.  You're playing roulette.  You bet $100 on 'red' and lose.  A casino adviser whispers into your ear that the next spin is going to be 'red' so you bet...  and you lose.  And you look at the 'adviser' and he says, "This is not the time to sell your chips- 'red' will be on the next spin..."

No different.

One other aspect of why the constant hard-push to Buy! or hold comes not from those doing the barking but the investor him/herself.  The person is addictive, compulsive, greedy--  must make money... must put it somewhere.. Must.. Must..!!  That person doesn't want to hear 'Sell' or 'Warning: Risk'.  So the dirtballs in financial media and financial advisers simply tell the investor what he/she wishes and demands to hear.

Here's the honest truth-- When 9/11 occurred, no one in financial media advised people to sell their stocks.  I mean No one. And if you listened, you were fucked for Two Months.    On Monday September 10, 2001, market closed at 9,605.  After the terror attacks, Wall St closed for rest of week.  On Monday September 17th, the Dow closed at 8,920 and did not reach pre-9/11 level until November 13th of that year when the market closed at 9,750.

Truth Example #2--  On Monday September 29, 2008 in the wake of the Lehman Collapse, the Dow fell in one trading day from 11,143 to 10,365.  The lowlifes at CNBC and Bloomberg told people not to panic and sell.  Also told of great buying opportunities-- undervalued stocks..deals..discounts..  They never once advised caution and prudence; to simply not invest at this time.  So what happened?  Wall St finished 2008 under 8,500 and it took another year or so to reach pre-Lehman Brothers levels for the Dow.  And those who listened to Jim Cramer and the other losers for their investment advise were also.. yes... fucked.

This is going to be a very bad autumn for the market. It is far more prudent to sit and wait out the turbulence.  But.. If you must invest.. Must.. Must.. well..  Happy Investing~