Saturday, December 12, 2009

Caveat Emptor

Most of us have no idea how the financial world works or where to invest our money.

As more and more companies move away from defined benefits and pension systems (where

you combine years worked with salary level and know exactly how much you will get when you

retire), they are moving toward 401K plans and various other schemes where your personal

investment choices will determine how much money you will have upon retirement.

Conventional reasoning says that the stock market is the place to invest for the long

term. We were told over a thirty year period that stocks will outperform any other form of

investment. We were told a diversified portfolio, not dependent on any one type of stock or

other investments, was the key to good investing. In the last two years experts now admit

neither of these approaches protected investors from our current economic meltdown. It

would seem we need a new investment model. So, where do we turn?

Every day I watch CNBC for a few minutes. They interview and question and tap

into the top experts in business and economics. Every day they invite analysts to tell us what

the market is doing in order to guide us in making sound investment decisions. I have never

trusted any of them. It seemed to me if anyone really knew how to play the stock market,

if anyone really knew when to buy and when to sell, if they really, really knew; wouldn't they

keep that information secret and rake in the dough for themselves? Why would they share

the secret of unlimited wealth with the whole world? Would you? Yet, every day, CNBC,

CNN, the Wall Street Journal, and an entire industry of "experts" continue to be paid for

telling us how to make money and protect our investments. Is it possible the system is rigged?

Now comes the story of Brian Kennedy. Kennedy worked for a Wall Street firm advising

clients on which stocks to buy and sell. It is also a firm which engages in investment banking.

It needs corporate clients. Kennedy researched a company called Cardionet. According to

the Wall Street Journal, Kennedy concluded the company was about to lose a lot of money, so

he issued a "sell" recommendation on the company's stock. This is what you pay for, right?

If you had hired Kennedy's firm, you would want the best market expertise to protect your

investment. If you were Kennedy's boss, you would want him to analyze the data and make

recommendations, wouldn't you?

When Kennedy issued his "sell" advice, he immediately came under pressure from

his colleagues and the firm's legal department. He was attacked by Cardionet's CEO. He was

attacked in public and even had a complaint filed against him with the SEC; and shortly after

his "sell" recommendation, he quit his job. Oh, did I mention Kennedy was absolutely right?

Had any of his firm's clients listened to Kennedy, they would have avoided big losses as the

stock's value dropped 75%. He was attacked, criticized, investigated, and pressured even

though he was right.

It turns out Wall Street doesn't like to be told to sell anything. Only 7% of analyst's

recommendations in North America were to sell while almost 50% were to buy. The rest of

the recommendations were to do nothing at the moment.

While Kennedy was telling clients to sell, most other analysts were rating the stock

a "buy". Coincidentally, many of those same analysts worked for underwriters of Cardionet's

initial public offering. Kennedy quit his job because he grew tired of defending his "correct"

analysis. He was viewed as a trouble-maker. He wasn't a team player. This is a conflict of

interest; and as of today, Cardionet can no longer function as a stand-alone company.

Every day on CNBC you can watch experts from the trading floor, brokerage houses,

and investment firms. You can turn on CNN or listen to the radio and get even more advice.

You can subscribe to newsletters and monthly updates. You can pay others for "secrets", but

at some point have to ask exactly what it is you are buying.

On the Daily Show, Jon Stewart took on CNBC's Jim Cramer and excoriated him for

being nothing more than a glorified cheerleader who missed the market meltdown. Missed

it completely! In fact, almost all the pundits and experts and analysts missed the largest

economic downturn since the Great Depression. Ironically, Goldman Sachs, who created and

sold the financial instruments which led to the meltdown; actually saw the coming storm

and instead of telling anyone, secretly adjusted their investments and made a killing.

Brian Kennedy, who committed the unspeakable crime of telling the truth, is now

out of a job. But not a single expert, pundit, prognosticator, or analyst on any media outlet

or major Wall Street firm was terminated for being wrong. So, we are left with a series of

questions. If you know a sure-fire way to make money, would you tell everyone about it or

keep it to yourself? Why are the "experts" so eager to share their insights with us? Could

there be conflicts of interest in the financial services industry? Analysts analyze companies

they underwrite. Rating services rate companies who pay them for their services. Media

channels tout stocks and give advice to sell advertising to the same industry they scrutinize

and are owned by corporate masters who never want the markets shaken up. No wonder

Kennedy had to quit. He was a dangerous man.

Right now in Congress our political leaders are trying once again to re-regulate

Wall Street in the hopes of preventing a future disaster. The firms on Wall Street are fighting

them tooth and nail, as usual. Who do you think will win?

I know this is a lot of disturbing information to process all at once, stories of good,

honest people being lied to and their government not caring; so now that I have your attention,

calm down and relax for I have something to share with you. Friend, it seems I've found myself

with unexpected time on my hands, but I haven't been idle. No, not me! It just so happens

that in writing this little article and others, I invested months studying trends and analyzing

financial data; and by sheer providence discovered a truly fool-proof system which will

guarantee every stock you buy will increase in value. All you have to do is subscribe to my

newsletter and for a slight additional fee you will receive a set of recommendations tailored

to your every hope and dream. I'm offering that one chance at financial independence.

Friend, what have you got to lose? Step right up. Trust me. What do you think? I welcome

your comments and rebuttals. Please send them to lionoftheleft@gmail.com


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