Gloomy Bear

Wall Street wona € ™ t Tell You Ita € ™ sa Bear Market

Author: href = "http://www.articlesbase.com/authors/stephen-t.-mcclellan, -cfa/58817.htm "> Stephen T. McClellan, CFA

We are in a bear market, Wall Street, but not recognize it. It is as categorical in a bull market, but is reluctant to tackle the bad times. I know that the market is only 10-15% of its peak in October 2007 but wait. I spent 32 years as a securities analyst on Wall Street and, unlike the younger generation of analysts, I experienced the decline of several cycles. The current economic and financial context is probably the worst since the Great Depression of the 1930s. But doesn € ™ It seems that if you listen to the commentary on the stock market, television or the government.

Is difficult to track all the bubbles, especially those not yet quite burst, such as oil and commodities, commercial real estate consumer credit and stocks. BUSTED bubbles are more obvious, but the degree and duration of the injury is still unknown â € "mortgages residential real estate subprime and CDOs, debt derivatives, banking and brokerage system, U.S. dollar, the federal budget deficit and expenditure obligations for insurers, employment, GDP growth, the official CPI inflation reading, in March was 4%, but the reality with all the convoluted restatement Government figures, is about 7-11%. And worse. Future inflation will be exacerbated by the massive federal bank, brokerage and other quasi – (Fannie Mae, etc) bail-outs.

The economy runs in cycles every few years of recession. The last drop was true in 1990, one in 2002 was incomplete. Recession and stock market plunges have a cleaning effect, paving the way for renewal and the next phase of expansion. The Fed can not keep the weapons forever. Ball is short of money. Lower interest rates do not stimulate the economy. It is built on a huge pyramid of debt leverage.

Are derived to enter the iceberg Titanic: No one knows the size of the surface. We know that credit default swaps stood at $ 62 trillion (with a T) and derived type interest of $ 382 billion (again, with a T!) At the end of 2007. Amazing! Warren Buffet, when it acquired the insurance company General Re, he wound € ™ s resulting entity for a period of five years, the loss of 400 million dollars in the process. It was then when the markets are normal before the freeze credit. The elimination of billions in derivatives, an extension of 30 years in multi-currency, in May take a generation.

Appearance worrying about it is that there are so many things that donates € ™ t know. Are more things that can go wrong, and every month there seems to be unforeseen financial problems. The Most of this stems from too much debt and leverage. Brokerage firms in the 1970s are not allowed to have debt of more than 12 times the capital. These days A report of over 30 is the norm. Mortgage, consumer, hedge funds and most other types of debt have multiplied several times over the last decade or two.

It took a decade in the 1930s to take account of the excesses of the 1920s and the economic slowdown to play. During Depression, the government first raised the taxes on trade and protectionism pushed, exacerbating economic problems. We hear again during these issues of political campaigns. In early 1970, which lasted three years and a budget of 50% of the stock markets have adjusted to the extreme before. I on Wall Street during this period and lived through it. This time is worse, given the excesses in the 1990s and more recently, during 2004-â € ™ 07. Therefore, it could take more than three years, even.

Even during periods of normal market collapse causes. From 1926-2007 the S & P 500 has dropped three in ten years. During bear markets there are many false more than 5%, ten for example, during the 2000-2002 bear market.

Despite this gloomy scenario, wona € ™ t hear its main brokerage firm or TV inventory of homes on the market in one of these issues. Are enthusiastic and promoters. Wall Street is still in denial, eternally optimistic with a positive systematic bias. A car dealer sells cars. Broker-dealers to sell securities. The two income-generating operations. Bias is an inherent aspect of the company.

In my book, full of Bull, I spend several chapters of the decoding of all the misleading and harmful, rue des directives that are against a good investment strategy: Never take Wall Street literally. Professional people know better. The propaganda is evident in the nomenclature. A declining market is a correction. But a bull market is not called an error. The fall in GDP and employment growth is negative. A recession is a contraction.

Stock Investment The views are so skewed in favor. Even in today € ™ s bad market fewer than 10% of qualifying sales over 90% buying or neutral. Sometimes exceeded indicates a population that is expected to fall, but not as much as other names in the industry. Notice of passage is neutral to buy a very negative signal to download the population, the street code. Agents rarely have the courage to use the dark â € € OESA (Sale) word. Results of the estimates are no different, almost always too optimistic. On the street where most of the benefits of the estimates of analysts projection published by the advocacy, leadership boiling.

Targets stock price, which is published in research reports are still overly positive bias. How many times did you see the negative, the worst case, the potential share price is highlighted in a report? Ever. The street is an issue much money as you can, to increase, not how much you can lose.

Wall Street was never at risk. It is still a stock price appreciation, and not the protection of capital, caution â € "how to maintain. Even in the midst of a population-precipitated lower prices, as the funding the construction and home in the last 12 months, the street is focused on a lower security œcatching € â € is to guess the contents of the recommendation purchase, rather than evasion. Brokerage lists all the attention is purchased, never sell ideas.

Not negative to the question of how the current conditions market or how uncertain the outlook, you can not trust Wall Street for advice on the risks. Given the tens of billions of dollars in losses through the streets with bad subprime loans and other debt instruments, it is not a credible position to address the risks. Wall Street did not manage its own risk, do not expect to focus on their own.

About the author:

Stephen T. McClellan Merrill Lynch first vice president and eight years as Vice President of Salomon Brothers. McClellan has ranked in Institutional Investor's All-American team 19 years of research and the Wall Street Journal survey of seven years. It is in the Journal of Fame analysts.

McClellan is the former chairman of the computer industry analysts and Software / Services Group Analyst. He was invited by CBS, CNN, CNBC and Wall $ TREET week and introduced to many technology companies including IBM, Apple, ADP, and EDS. He is the author of the bestseller The Coming Industry reorganization winners, losers and survivors, and his work has also been published in The New York Times, the Financial Times, Forbes and other publications.

He holds a MBA in Finance from George Washington University and lives in San Francisco with his wife, Elizabeth Barlow, an artist.

McClellan is the website of the stephenmcclellan. com

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Gloomy Bear