Monday, January 3, 2011

The Wall St Pump Job: Leading the Sheep to Slaughter

Articles like the one below really bother me after the rally we have seen in the past two years:

"Is the retail investor returning to stocks?

NEW YORK (Reuters) - U.S. stocks just posted back-to-back years of strong gains, yet the small U.S. investor largely remained a spectator. Now financial advisers say investors, many of whom rode out the financial crisis in cash and bonds, are slowly regaining confidence.

"What I'm seeing now is there's a lot more talk about getting into stocks," said David Gottlieb, a Cleveland adviser for Edward Jones, a nationwide brokerage catering to middle-class Americans.

Gottlieb, who for several months has encouraged clients to increase their stock allocations, advises reducing bond holdings and buying dividend-paying stocks.

The Standard & Poor's 500 Index (^SPX - News) kicked off the new year by rising 1.1 percent on Monday, reaching levels not seen since the weeks before Lehman Brothers collapsed in September 2008. Large company shares, as a group, have nearly doubled since their March 2009 lows, reflecting two years of double-digit gains.

Worries of a banking system collapse and the deepest recession in more than 70 years drove many retail investors out of the stock market back in 2008. And the May 2010 "flash crash," when stocks lost 700 points in minutes for no apparent reason, further undermined confidence.
Investors showed their dismay by pulling money from stock mutual funds month after month, opting for the perceived safety of cash and bonds."

My Take:

What's your point Reuters?  Are you telling investors to buy stocks because confidence is slowly coming back? Is that a solid fundamental reason to buy?

Is now REALLY the time to buy stocks after the equity markets have basically doubled since the lows?

There are just as many money managers advising caution in our current investment environment as there are money managers who are advising investors to take on more risk.  There are severe structural issues with our economy that are not going away, and it angers me that just about every article out of the media slants their articles into suggesting that you should buy stocks.

Shouldn't the media be totally skeptical of Wall St after watching equities plummet 50% TWO TIMES within the same decade?  Also, let's not forget that these are the same criminals that just finished putting of millions of Americans into homes that they cannot afford which are worth 30% less than what they paid for them.

Shouldn't the press be relentlessly hammering Wall St after causing Americans so much financial pain in the last decade? 

I don't get it:

Why does Wall St always get a free pass when they destroy America's 401k's?  Why isn't the article above titled "Is Now the time to sell stocks after a 90% rally?"

The media needs to understand that they have a responsibility when they write this kinda fluff.  To be fair Reuters did toss in a paragraph in the middle of the piece warning of the risks of getting into stocks:

"Still, some advisers are being very cautious.

William Jordan of William Jordan Associates in Laguna Hills, California, says he is telling clients not to increase their stock exposures.

"As good as the past two years have been, you can't say the stock market is undervalued. I'm not bailing out, but I'm advising people to take some profits."

Clients also are encouraged to stick with their investment plans. Scott Smallman, a Seattle broker for Wedbush Securities, said he has been checking to see if the stock market rebound has pushed some stock exposures too high.

"When markets are good, our job is to talk clients down from the ceiling," said Smallman, who on Monday encouraged some clients to consider buying municipal bonds."

The Bottom Line

IMO, this article is far from "fair and balanced". Reuters quoted 4 "pump monkeys" advisers suggesting that everyone should be piling into stocks versus only 2 advisers that were "cautious". 

There were zero "bears" in the piece which is ridiculous when you look at Wall St's performance over the last 10 years.  You are down 20% if you listened to these bubble makers over the last decade. 

There are numerous potentially catastrophic risks that remain out there and they are rarely if ever laid out by the MSM ......High unemployment, bankrupt banks, and insolvent countries are just just a few that come to mind.

I am amazed at how short all of our memories are when it comes to Wall St.  The financial system was brought to it's knees two years ago by these pigs, and it's still sitting there crippled as the Fed runs up the credit card pretending that the economy is recovering.

The MSM should be ashamed of themselves for ignoring the financial fraud and printing pieces of garbage like the one above.

What ever happened to hardcore journalism?  Walter Cronkite must be rolling over in his grave.

Sadly, our media outlets now have the attentian span of an 8 year old with ADD.  If the news is a week old then it's history in their books.

CNBC was no better today as they allowed Goldman to use their network as a sound board for market pumping:

"The one economist all of Wall Street (and I am sure many in the Federal Reserve) listens to, has changed his tune quite substantially the past 3-4 months. Goldman’s Jan Hatzius had a quite dour outlook just this past October but 2 months later as the massive “don’t call it yet another stimulus” plan looked headed for approval turned quite bullish. Indeed the surprise of the payroll tax holiday and some of the other goodies stuffed into the Bush tax cut extensions led him to believe that GDP will be pumped up by an additional 0.5 to 1.0% in 2011."

Take Continued:

The pumping was non stop today as stock after stock was upgraded. 

The markets rallied hard on another FED POMO spending spree in combination with all of the rainbows that were painted by the stock analysts today.

I tell you what:  The Wall St PR machine is something to behold.  They really have it down to a science.  Watching Goldman's chief economist do a total 180 degree turn in a matter of 3 months is comical. 

The fundamentals haven't changed and there is no real recovery and he knows it.  Any GDP growth will be stimulus based and unsustainable.  Show me 400k per month job growth and I will become a believer. 

Let me end with a warning.  When Wall St gets this bullish after a big move up you need to be careful.  The pigmen love to use opportunities like this to sell all of the over priced stocks that they own to the sucker retailers that want to "get back in the game" after becoming mesmorized after seeing such huge stock returns.

Don't be a sheep and get slaughtered.


getyourselfconnected said...

Yeah its ugly but the joke is still running. It's different this time with the stock market economy!

Jeff said...


I figure as long as the Fed has POMO/QE the market will melt higher.

It's sad because it's going to suck a lot of innocent people in and they are gonna get stuck holiding the bag.

getyourselfconnected said...

I agree and at tops is when the retail idiot gets in 100%. Ugg!

Sorry my Paulosn DC home loss link got cut off!

flipdippy said...

The market will fail 1 day after you end your blog, no sooner:

Jeff said...

Hehe Flip

Your probably right. I don't see me going anywhere soon so....

I read about that. The quants are even reading tweets on twitter now.

What a sham. Investing is gone forever thanks to the robots.