Members of the U.S. Congress persecuted employees of Goldman Sachs today on matters related to the company’s traders for selling short certain securities related to the collapse of the housing market at the same time that Goldman’s brokers and sell-side analysts advised their clients to buy stocks of housing-related and financial companies.
The supposedly “concerned” members of Congress acted as if they didn’t know that investment banking and securities brokerage firm’s regularly engage in that type of behavior. Meanwhile, none of those “concerned” members of Congress bothered to mention that several of their brethren were largely responsible for the housing collapse, having forced banks to make loans to borrowers who should never have qualified for a home loan.
One Congressman went so far as to ask how much money Goldman made from selling short securities — as if the answer to that question had anything to do with Goldman’s purported fraud.
I’ve always been bothered by the fact that Wall Street “analysts” and so-called “financial advisors” — that is, salespeople — at brokerage firms tend to tout securities that they know little about or that they wouldn’t purchase for their own accounts. But, that’s the way that Wall Street has always operated.
For example, “financial advisors” at most securities brokerage firms are often limited to advising their clients to purchase only those securities that are listed on their firm's "recommended list."
Meanwhile, the vast majority of investment recommendations made by Wall Street analysts are, and always have been, either “buy” or “hold” recommendations. For example, only 1 percent of the investment recommendations made by analysts at full-service securities brokerage firms during the year 2000 were "sell" recommendations, even though an overwhelming amount of evidence during that year indicated that stock prices would likely fall sharply during the ensuing year.
So, rather than getting caught up in the Congress’ apparent objective of trying to use Goldman Sachs as a scapegoat for the housing debacle, I suggest that you stop listening to Wall Street analysts and financial advisors at brokerage firms.
Instead, I urge you to try a free trial subscription to my investment advisory service, The ETF Strategist. Unlike the Wall Street “experts,” I warned subscribers to my service to get out of stocks during September 2007 — just three weeks before the S&P 500 Index peaked and then fell 37 percent during the ensuing months. I told them to get back into stocks during early 2009.
Since the inception of The ETF Strategist on Sept. 17, 2007 through Tuesday’s close, my Aggressive Portfolio recommendations had outperformed the S&P 500 Index by 49.7 percentage points while my Conservative Portfolio recommendations had outperformed the S&P 500 by 25.3 percentage points.
About the Author: David Frazier
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