Next crash? Sorry, you'll never hear it coming

asr: this is 2000 article ..

SUPERSTAR FUNDS
Next crash? Sorry, you'll never hear it coming
By Dr. Paul B. Farrell
Last update: 3:37 p.m. EDT March 20, 2000
LOS ANGELES (CBS.MW) -- Remember those disaster movies "Deep Impact" and "Armageddon"? In the movies, our planet's early-warning system works. You know the meteor's coming. But when Wall Street crashes, you won't know what hit you -- until it's too late.
No warning. A bear market, a recession dropped from a stealth bomber.
"In many respects, a culture of gamesmanship has taken root in the financial community, making it difficult to tell salesmanship from honest advice." Arthur Levitt SEC chairman Wall Street's 'conspiracy of silence'
Wall Street has an awful lot of securities analysts writing about markets, stocks, funds and miscellaneous other securities. Individual Investor magazine notes that, as of the end of 1998, there were 1,595 analysts employed by the top 25 brokerage houses.
These research analysts make a great living "selling" you securities. For example, several months ago, near the end of 1999, The Wall Street Journal speculated that Mary Meeker, Morgan Stanley Dean Witter's top Internet analyst, received a bonus in the range of $15 million.
Are they paid to offer you "objective" research? Analysis? Advice? No. You heard me right. Wall Street's securities analysts are employed to "sell" you securities -- not to offer you "objective" advice.
Only 1% 'sell' signals -- a conflict of interest
Oh, you really thought securities analysts were "objective?" Forget it. Of course, Wall Street still wants you to believe they are "objective." But that's part of the Eternal Bull Market conspiracy. Often deceptive. Often dishonest. Often unethical. And often illegal.Listen to the mounting criticism of this open conspiracy that's deluding and defrauding America's investing public:
"The news is always good. Roughly two-thirds of all analyst recommendations are 'buys' or 'strong buys' and less that 1% are 'sells.' " Money magazine No integrity -- and no defense
Greed has left America's Main Street investors vulnerable to attack in a way that we would never tolerate from NASA or the Strategic Air Command if we were dealing with threats from enemies on Earth or from outer space. Yet somehow we tolerate this conspiracy of Wall Street analysts that includes virtually every respected investment banker.
· Business Week.Quoting SEC Chairman Arthur Levitt: "In many respects, a culture of gamesmanship has taken root in the financial community, making it difficult to tell salesmanship from honest advice." And why the continued "buy" ratings of financial-services firms in spite of their poor performance? "Simple: 'I keep on the "buy" rating' to appease the company, said one credit-card analyst who spoke on condition of anonymity, 'but I told my favorite investors to sell' to maintain credibility." Get it? Insiders get the truth. Main Street is fed lies.
"Securities analysis is now show business, with analysts the circus dogs jumping through hoops of fire." Martin Sosnoff Wall Street, Hollywood, Vegas
In recent years, Forbes columnists have been particularly harsh on analysts. Asset manager Martin Sosnoff went so far as to say "the solid and necessary profession of security analysis has become a farce. It has moved investors' focus from long-term (reward) to instant gratification -- and done so amid the noise level of a busy crap table. Part of the problem these days is that too many analysts thirst for the instant stardom that an outrageous projection delivers. ... Securities analysis is now show business, with analysts the circus dogs jumping through hoops of fire."
Money manager and Forbes columnist David Dreman remarked that "The average analyst forecast was wrong by 40 percent between 1982 and 1990 (and) didn't get any better in the '90s -- in fact, they got worse. The average analysts' consensus forecast was off 48.7 percent. ... The inaccuracy of these forecasts shows how dangerous it is to buy or hold stocks on the basis of what analysts predict." Other journalists make the same point:
· Business Week. "Wall Street researchreports are more sales documents than disinterested analyses. Most professional investors understand this and treat research accordingly. But do newer investors, who arrive on Wall Street via cyberspace, grasp it?"
· Wall Street Journal. To the sophisticated investor, "it is no longer news that analysts' recommendations may lack 'objectivity. ... Here's what isn't as widely known: The pressure that negative analysts feel is often from their own clients, institutional investors, yes, the very people who would seem to benefit most from such objective market calls." And one analyst who did issue a "sell" signal and wound up in "the doghouse" said, "You make a lot of friends when you say buy a stock, but not when you put out a 'sell.' "
"By the time a story is making the cover of the national periodicals, the trend is probably near the end." Jack Schwager The New Market Wizards
· Forbes.Investment adviser Gary Shilling warns that "Wall Street analysts, often appearing on TV business shows, have spurred you to buy stocks for years, and correctly so in this long bull market. But what will their advice be worth if we head into a full-blown bear market? Less than zero; they're paid to be bulls 24 hours a day, 365 days a year."
· Newsweek. "How much research do Wall Street analysts actually do? You (should) not take Wall Street 'research' too seriously. ... (R)emember to laugh the next time someone tells you that the stock market is a rational place and that big-money investors know what they're doing."
A call to action
Unfortunately, this is no longer a laughing matter. We could be facing a catastrophe -- and not know it. Yet we do need a built-in defense system against another crash.
Wall Street's greed has dulled its ability to self-regulate here. It has become blind to the realities facing us. Nor can Wall Street defend itself by arguing that Main Street investors are just greedy, willing accomplices. On the contrary, Main Street is being subtly misled by this paradoxical Wall Street conspiracy that hypes the Eternal Bull Market, while at the same time rendering us totally defenseless against the bear.
Let's hope Alan and Arthur will get more serious about this problem soon. Otherwise, America's stock markets could wind up like the dinosaurs 65 million years ago, only a lot sooner than we think.
In fact, you could be caught off guard in 2001. Or even 2000. Instead of 2008. By the crash you'll never hear. Until it's too late! End of Story