Wall Street Futures

Revisiting Wall Street way!


WALL STREET'S BIAS review! June 20, 2008.

Wherever we are in a cycle of an investor on Wall Street listens representatives on financial television programs, or to have their advice in financial publications, means only that they should be buying stocks somewhere, never take profits, or heaven forbid, the repositioning of the decline by selling short or buying mutual funds and inverse ETF.

To hear the Wall Street say there is no time it is wise to sell, no time it is wise to take profits. Oh sure, after a sharp drop has created serious losses in one sector or the overall market, tips from Wall Street turns to speak so low may be near, it is still time to buy tech stocks or financial data, or new home builders, which means that even if you do not hear them, there certainly have the time to sell.

But it would be market-timing you say. And Wall Street says the market can not be timed. Even after two hundred years of the most successful investors in each generation, hedge funds, corporate executives, and mutual funds demonstrating the contrary, too many investors still believe.

There are forces at work that prevent companies from Wall Street to recognize how market timing works, even if the strategy they use for their own money.

For starters, there is no profit for Wall Street firms, the problems, if they tell investors when to sell.

Among the problems, a company issuing a recommendation to sell reap the wrath of the company whose shares they recommend selling. They certainly will not get their share of the company's future investment banking business. In addition, mutual funds that own the stock will be angry, and mutual funds are much bigger customers of brokerage firms that are individual investors. When it comes time to sell a share, or a batch of shares, mutual funds want to quietly unload their portfolios while individual investors are still buying. Otherwise, who would they sell?

It can help investors realize the game Wall Street plays if we remember the late 1990s.

In 1997, Wall Street was pushing the Internet sector disk, which was a good thing that ran until 1999, drawing investors in these stocks, with most of the benefits of good paper. But investors were not told to take their profits in 1999. It was not that investors think for themselves, and noting that those who were recommending Internet stocks, including founders who imagines, the venture capitalists who financed them, and institutions that have been fostered by shares in the IPO, were sold as soon as possible lock-up completed. They do not keep for long-term growth that was promised.

Indeed, the Internet stocks crashed in 1999, without notice of Wall Street, with the exception of their own prior sale. The stock plunged through the Internet 65% in a few months.

Wall Street quickly changed his story. It was high-tech stocks that 'enable internet, those who provide the software, fiber optics, switching networks, etc., which have been the place to be. After all, the Internet is here to stay. So, regardless of whether Internet companies will make a profit or not, the high-tech industry to prosper and grow for decades.

Thus, the high tech sector, already over-valued, flew in a bubble in March the following year, 2000. Then, again without any warning to Wall Street, the bottom dropped out. The Nasdaq plunged 34% in one month, and decreased by 67% twelve months later.

And once again, while Wall Street institutions were still boasting high-tech as the place to invest their money, the institutions themselves have been moving in opposite directions with their own money.

As I indicated in this column in April 2000, "the STA.