Why Analysts Keep Telling Investors to Buy and why Americans keep looking for a Daddy to tell them what to do
Chester Higgins Jr./The New York Times“Analysts completely missed the boat again with the subprime and credit crises,” said Jacob Zamansky, a securities lawyer.
There’s an understatement!
The New York Times today asks why Analysts are biased to BUY/HOLD and cannot for the life of themselves change their advice to SELL, SELL, SELL, QUICKLY BEFORE YOU LOSE EVERYTHING!
Even now, with the recession deepening and markets on edge, Wall Street analysts say it is a good time to buy.
Still.
At the top of the market, they urged investors to buy or hold onto stocks about 95 percent of the time. When stocks stumbled, they stayed optimistic. Even in November, when credit froze, the economy stalled and financial markets tumbled to their lowest levels in a decade, analysts as a group rarely said sell.
And last month, as the Dow and Standard & Poor’s 500-stock index suffered their worst January ever, analysts put a sell rating on a mere 5.9 percent of stocks, according to Bloomberg data. Many companies have taken such a beating in the downturn, analysts argue, that their shares are bound to bounce back.
Maybe. But after so many bad calls on so many companies, why should investors believe them this time?
When Internet stocks imploded in 2000 and 2001, Wall Street analysts were widely scorned for fanning a frenzy that had inflated dot-com shares to unsustainable heights. But this time around, credit rating agencies, mortgage companies and Wall Street bankers have shouldered much of the blame for the Crash of 2008, and few have publicly questioned the analysts who urged investors to buy all the way down.
“Analysts completely missed the boat again with the subprime and credit crises,” said Jacob Zamansky, a securities lawyer who represents investors. “They should’ve given some early warning signs to investors to bail out, or at least lighten up their portfolios. That warning never came.”
Instead, many recommendations urged investors to hold on to their shares, or double down, as the bloodletting worsened.
On Oct. 8, as Congress and the Treasury Department frantically tried to calm the plummeting markets, a Citigroup analyst upgraded Bank of America to buy. Since then, Bank of America shares have fallen 77 percent.
What is it about Americans that we give all our power to supposed ‘experts’? Why do we trust the institutions that so relentlessly prove to be our weakest links?
I think its because our world is too complex. There’s pork everywhere, untrustworthy people are loading pork into every aspect of our lives because they see these moments as their best chance to further their own agenda.
Barry Ritholtz points out:
Why is any of this still a surprise? Given the inherent conflict of interest between underwriting/syndicate and investing, it shouldn’t be.
The iBanks do not want to risk offending potential banking deals, M&A clients, or other corporate advisory.
We do not have a country-wide agenda. We give our money up to banks and investment companies and, like Bernie Madoff’s clients, are happy when they make us feel ‘special’. But ‘special’ we are not. We are hard working, tax paying, community involved citizens who are not getting our dollars worth in terms of advice and protection from those to whom we pass our power.
Obama was voted in on a nationwide desire for real, deep change. Not ‘a new face’, but real change. Yet we continue to hear stories like this one, that analysts only say ‘SELL’ 5.9% of the time, even when confronted with the worst percentage slide ever in asset value, and looking straight into another few years of writeoffs.
Change will come, and it needs to be the kind that purifies, burns out the old, broken systems that we trust but are not trust-worthy.
The trial is currently scheduled to begin March 21, 2011.
Their is no injured third party.
So why don’t they just leave him alone.
Barry Lamar Bonds (born July 24, 1964) is an former Major League Baseball outfielder.
He debuted in the Major Leagues with the Pittsburgh Pirates in 1986 and joined the San Francisco Giants in 1993, where he stayed through 2007.Bonds has led an controversial career,notably as an central figure in baseball’s steroids scandal. Bonds played from 1986 to 2007,for the Pittsburgh Pirates and San Francisco Giants.He is the son of former major league All-Star Bobby Bonds.Bonds’ accomplishments during his baseball career place him among the greatest baseball players of all-time. In 2007, he was indicted on charges of perjury and obstruction of justice for allegedly lying to the grand jury during the government’s investigation of BALCO, by testifying that he never knowingly took any illegal steroids.
In common law you must have an injured third party. I think that this whole thing is BS.
– Peter Smith