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| Friday, December 19, 2014 | Issue #2441 | |
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Another Sordid Revelation About Your "Friends"
on Wall Street Alexander Green, Chief Investment Strategist, The Oxford Club
Editorial Note: Earlier this week, Chief Income Strategist Marc Lichtenfeld wrote an article called "Why You Shouldn't Listen to Analysts." There's been a bit of a theme this week: Who not to listen to when it comes to investing. So who should you listen to? We've collected the most effective ideas and strategies from the most trusted and successful investing masters. Click here to learn their secrets.
 I scoffed when the "Occupy Wall Street" movement emerged a few years ago.
It wasn't Wall Street greed that caused the financial crisis of 2007-2009. It was government stupidity: - In a misguided effort to promote homeownership - even for people who could in no way afford a home - both Republican and Democratic legislators passed laws effectively criminalizing the failure to loan to subprime borrowers.
- Greenspan took rates too low for too long, making mortgage loans artificially cheap and priming the real estate bubble.
- The federal government showed complete ineptitude in the regulation of banks, mortgage companies and rating agencies. And it didn't really require much. After all, Canada largely avoided the housing collapse with one simple requirement: down payments. Homeowners don't mail their keys back to the bank when they have skin in the game.
- Uncle Sam sponsored Fannie and Freddie - or, as I prefer, "Phoney and Fraudie" - to warehouse the crummy mortgage loans.
- The U.S. Commodities Futures Trading Commission and the Securities and Exchange Commission - two federal agencies - decided that the $615 trillion market for credit default swaps did not need be traded through central clearinghouses to provide transparency.
- And I might add that it was Congress that decided taxpayers should pick up the tab for the mess they created.
Of course, some politicians - I won't mention Barack Obama or Elizabeth Warren - have made a career of demonizing Wall Street. And their minions dutifully took to the streets a few years ago to rail against "corporate greed."
Don't mistake me for an ally of Wall Street, however. The big wire houses may not have caused the financial crisis. But, unless you need to raise investment capital, they aren't your friends either. Most of these firms service their retail clients the way Bonnie and Clyde serviced banks.
And last week they got busted again.
How This Rural "Carolina Boy" Got Rich
At only 34 years old, Lee Baker - a former fishing guide from rural North Carolina - made an investment decision that'd change his life forever... This single decision allowed him to turn his $25,000 life savings into a multimillion-dollar hedge fund. Click here to find out what he did.. | |
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Goldman Sachs Group (NYSE: GS), Citigroup (NYSE: C) and eight other securities firms were fined a total of $43.5 million by regulators who said the companies offered favorable stock research to win underwriting business in the initial public offering of Toys "R" Us.
Just how low did they go?
One analyst at Needham & Co. wrote in an email: "I would crawl on broken glass dragging my exposed junk to get this deal... My whole life is about posturing for the Toys 'R' Us IPO."
What do investment banks generally do to get a piece of lucrative stock and bond offerings? First, they talk up the company's prospects. Then they increase their earnings projections. Most importantly, they tell their trusted clients that the company is a "Strong Buy."
The very nature of this business is an inherent conflict of interest. On the one hand, these firms purport to give investors objective research on the companies they follow. On the other, they are down on bended knee trying to earn underwriting business from the same companies.
A word to the wise is sufficient: If you swim with these sharks, expect to get eaten alive.
Last week's overall fines were the biggest in a single case since 2003. But that doesn't mean their tainted research will change.
These guys didn't cause the financial crisis. But they can easily create one in your personal account.
Good investing,
Alex | |
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THIS TECH COMPANY IS "IN THE MIDDLE" OF A $6.2 TRILLION BOOM
Google... Bosch... Apple... Qualcomm... AT&T... Right now, all of these firms are getting involved in a new, far-reaching tech trend. A trend Gartner predicts will add $3.8 trillion to the economy in 2014. But that's only the start. Because according to the McKinsey Global Institute, this sector will soon generate as much as $6.2 trillion per year.
And one under-the-radar company stands to profit more than any of the companies listed above. Click here to learn more. | |
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Despite Wall Street nearly causing a housing collapse, the homebuilding industry is beginning to recover. And that has one homebuilder sitting especially pretty. Readers of Investment U's premium edition are learning about it today. Learn how to join them by clicking here. | |
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By now you've probably heard about the White House's decision to normalize relations with Cuba. President Obama announced plans to open an embassy in Havana for the first time since 1961. Obviously there are huge implications for Cuba, its people and its economy. But what about investors? Read On... | |
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After 18 years in the business, you'd think nothing could amaze me. But every time some clown upgrades or downgrades a stock or puts out a research note that moves the share price, I'm surprised. Read On... | |
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