This article, “Dow will repeat 2007-2008 peak-crash cycle: It’s deja vu as lessons of meltdown go unheeded” strikes a chord this morning as I prepare for my next business publication interview where the author would like to know my “2 best stock picks” for the next 6 months. This is a typical format and a frequent challenge as someone who is called 2-4 times a week for media interviews and speaks at at least 1 financial trade show a month. I can honestly say that I am frequently sickened by my peer group.
Most commentators are sell-side or long-always managers whose business model makes them congenitally wired to always say that people should be buying and holding stocks regardless of price, regardless of the person’s age or circumstances, regardless of where we may be in a business cycle, regardless of the probabilities for capital loss. Business media collects its revenue from the sell-side, long always firms. It has self-styled its business model as the source “for information so that viewers know what to do with their money”, and many of the anchors and hosts certainly seem to have deluded themselves into thinking that they are offering important insight and information. But in reality a more honest mission statement would read “the source for publicly traded companies and financial firms to flog themselves to new, mesmerized, victims.”
The article offers a wonderful laundry list of some well known offenders. But most important is the realization that these same people and their many colleagues are saying the same bullish things today that they have continued to say through the past 13 years of a secular bear market where their followers and clients have suffered huge risk and huge stress and have flat to negative gains for the experience.
“So if you remember nothing else today, here’s your big take-away: You can never trust Wall Street bulls, they’re lying to you 93% of the time. Studies tell us analysts signal “buys” vastly more than “sells.” And behavioral-science research tells us that bankers, traders and other market insiders are misleading us, manipulating us 93% of the time in their securities reports, PR, ads, speeches, sales material, in their predictions on television, cable shows and when quoted in newspapers and magazines…
March 1999: Harry S. Dent, author of “The Roaring 2000s.” “There has been a paradigm shift.” The New Economy arrived, this time really is different.
October 1999: James Glassman, author, “Dow 36,000.” “What is dangerous is for Americans not to be in the market. We’re going to reach a point where stocks are correctly priced … it’s not a bubble … The stock market is undervalued.”
August 1999: Charles Kadlec, author, “Dow 100,000.” “The DJIA will reach 100,000 in 2020 after “two decades of above-average economic growth with price stability.”
December 1999: Joseph Battipaglia, market analyst. “Some fear a burst Internet bubble, but our analysis shows that Internet companies … carry expected long-term growth rates twice other rapidly growing segments within tech.”
December 1999: Larry Wachtel, Prudential. “Most of these stocks are reasonably priced. There’s no reason for them to correct violently in the year 2000.” Nasdaq lost over 50%.
December 1999: Ralph Acampora, Prudential Securities. “I’m not saying this is a straight line up. … I’m saying any kind of declines, buy them!”
February 2000: Larry Kudlow, CNBC host. “This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.” He’s still hosting his own cable show.
April 2000: Myron Kandel, CNN. “The bottom line is in, before the end of the year, the Nasdaq and Dow will be at new record highs.”
September 2000: Jim Cramer, host of “Mad Money.” Sun Microsystems “has the best near-term outlook of any company I know.” It fell from $60 to below $3 in two years.
November 2000: Louis Rukeyser on CNN. “Over the next year or two the market will be higher, and I know over the next five to 10 years it will be higher.”
December 2000: Jeffrey Applegate, Lehman strategist. “The bulk of the correction is behind us, so now is the time to be offensive, not defensive.” Another sucker’s rally.
December 2000: Alan Greenspan. “The three- to five-year earnings projections of more than a thousand analysts … have generally held firm. Such expectations, should they persist, bode well for continued capital deepening and sustained growth.”
January 2001: Suze Orman, financial guru. “The QQQ, they’re a buy. They may go down, but if you dollar-cost average, where you put money every single month into them, I think, in the long run, it’s the way to play the Nasdaq.” The QQQ fell 60% further.
March 2001: Maria Bartiromo, CNBC anchor. “The individual out there is actually not throwing money at things that they do not understand, and is actually using the news and using the information out there to make smart decisions.”
April 2001: Abby Joseph Cohen, Goldman Sachs. “The time to be nervous was a year ago. The S&P was overvalued, it’s now undervalued.” Markets fell 18 more months.
August 2001: Lou Dobbs, CNN. “Let me make it very clear. I’m a bull, on the market, on the economy. And let me repeat, I am a bull.”
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We all know (or at least we should) that the financial press is little more than the marketing/PR arm of Wall Street. They are playing the ultimate CONfidence game. Not only is this glaringly obvious to anyone still capable of an inkling of critical thought, but I have had it verified by a number of insiders (brokers, investment bankers, analysts, advisors) that I have personally known or spoken with.
At the end of the day it’s all about the “smart money” taking the golden crumbs from the “dumb money.” Were it not for people like Danielle, the little guy would have absolutely no chance.
So, for anyone reading this: please, please don’t get suckered in. The markets may go up or they may go down, but either way, when you listen to the financial press, you’re chances are no better than going to a casino. In fact, a casino is how the system is set up (the house always wins).
BTW: I loved the Greenspan quote. You can’t help but read it in his gruff, banker’s monotone with words that are designed to obfuscate rather than elucidate.
And one more thing: The quotes list did not include one of the most famous of all: the Irving Fisher quote of 1929, when he said the markets have reached “a permanently high plateau” just before the DOW would crash almost 90% over the next three years.
A litany of losers! All woefully wrong!
And not ‘one word about GOLD’, the single best success story since the beginning of the new century. Amazing, and outrageous. Imagine…..257 to 1,772 and not any of those stock dunces, some still living, some dead would give the store of value the time of day. Woe to them, victory is at hand to the Bugs.
mommybomm,….
Bull or Bear, those who live in a paper world are loath to acknowledge anything that is out side the boundaries of their mindset.
Those who continually call for regulation in a systemically corrupt “industry” that simply cannot be regulated are just blowing smoke or perhaps deluding themselves.
That being said I think it may be getting close to the time for the Bugs to get another lesson from the commercials.
We are going to find out pretty soon now.
It is nothing but the ‘greater fool theory’ of investing! So called momentum investors, who in reality are stock holders but masquerade as financial commentators, buy a stock not because they believe that it is worth the price, but rather because they believe that they will be able to sell it to someone else at an even higher price. Hence the need to issue misleading buy signals to increase the forward price momentum of the stocks that they themselves own. For the novice investor who reads the investing section of national newspapers or who listens to radio/tv investment programs that person becomes the ‘greater fool’ if he/she buys the bait and purchases the stock!
Great comments from John C. Attached is the VIX ” fear index” which won’t lie to you.
It’s again warning of lower equity prices to come.
http://screencast.com/t/2lHAtvI1zR
I continue to follow you Danielle. What you say makes sense, but its tough sitting here having my money do nothing while the market goes up. By the way, I loved the quotes you cited. Do you have any more recent ones, epecially around the 2008/09 mess
Ralph
“… I can honestly say that I am frequently sickened by my peer group.”
Danielle,
Why do people put so much blind faith in the Financial Industry, and its leaders?
Cheers :))
Sorry Danielle, although I love your blog, I have to correct your headline: “Warning: 93% of financial commentators offer misleading B.S.” Basically “misleading” and “B.S.” are one and the same, thus creating a double negative which implies the 93% are straight-up….and yes my tongue is firmly planted in my cheek!
Mainstream analysts, spouting mainstream advice. Curiously, Peter Schiff, Kyle Bass, and many others who run against the grain are missing from that list. Why? Because they were right on the money before the markets crashed in 2008 and were typically mocked when invited to give interviews on major financial news networks.
I don’t know what Kyle Bass was saying or doing back then. But I do remember Peter’s tv appearances and I put a couple of his clips on this blog. Then a reader posted a comment in response that included a clip of a call in radio show in 2009 where Peter Schiff was talking about how he saw the financial crisis coming. During the clip a couple of people called in to ask why he had left his clients fully invested in equities if he knew the market risks were over the top. I recall one particularly repulsive exchange where a client said he had lost 70% of his capital with Peter’s investment firm and Peter argued him down with insane statements along the lines of you haven’t lost because you are collecting dividend income. The clip was originally available on the internet but has since mysteriously vanished.
Would love to see a follow-up post of the 7% that are worth listening to.