...amazing, kinda like an old economy - new economy thing. They essentially took out all the stocks we're bullish on and replaced them with stocks that shouldn't be owned at this point in time.
Regards,
Frank P.
BTW: check this out - in yesterdays DR:
DOOMSDAY FOR WALL STREET?
by Martin Weiss
As early as 1999 - with the greatest stock mania in
history in full swing - subtle, but deeply disturbing,
changes began to occur in corporate America and on Wall
Street. The earnings reports issued by up to one-third
of US companies just didn't add up.
To me, it was plain as day that huge expenses were
being buried...mock sales were being pawned off as real
revenues...and earnings were being grossly exaggerated.
Many companies reporting minor losses were really
bleeding like so many stuck pigs...and some companies
reporting big profits were actually drowning in red
ink.
When I analyzed their balance sheets, I realized debt
levels were off the scale. They were up to their
eyeballs in debts they never had a prayer of paying,
and merrily borrowing still more every day.
Wall Street ratings on these companies totally ignored
these "minor details" and hyped the stocks as
"quintessential investment opportunities." Analysts
must have known what I knew - and yet they awarded many
of the most egregious, most questionable companies the
most highly touted "buy" ratings, with the greatest
hoopla and fanfare.
I could only assume that the analysts must have an
ulterior motive for recommending these dogs. Every
single one of the brokerage firms hyping these rickety
companies had collected massive investment banking and
consulting fees from them; had loaned them millions of
dollars; or were vying for their future business.
It was the most massive breach of trust I had ever seen
in my three decades as an investment analyst.
Unsuspecting investors were being betrayed, bilked, and
bamboozled. They thought they were buying the stock of
great companies with great earnings. They thought
brokerage analysts genuinely believed these companies
had great potential.
But investors were really getting something VERY
different: Lousy, high-debt, low-earnings stocks that
greedy and amoral brokerage firms needed to sell to
pump up their own investment banking revenues.
That meant trillions of dollars - the life savings and
retirement plans of millions of Americans - were in
extreme danger. And with the high-profile scandals and
bankruptcy now plaguing Wall Street's most "reputable"
firms, we're only just beginning to see the damage that
has been wrought.
But there is still time to save yourself...
* With the startling revelations about investor
swindles at Wall Street mainstays like Merrill Lynch,
Morgan Stanley, Salomon, and others...
* With a never-ending flow of massive, newly
discovered, accounting lies by the likes of WorldCom (a
$4.0 billion profit overstatement), Merck ($14 billion
revenue overstatement), Global Crossing (losses of $55
billion), and Tyco (probably around $30 billion)...
* And with the very real threat of a new wave of
surprise bankruptcies like those at Williams, Kmart,
and Adelphia, the trust millions of investors once had
in our financial markets is rapidly vanishing. Investor
confidence has plunged to 9/11 levels. Foreign
investors are pulling out in droves. A wholesale,
unbridled, uncontrollable panic is brewing.
This is not just a crash. It's a threat to our entire
future - as investors, as citizens.
Maybe, if the crooked companies and brokers who have
been exposed thus far were the only ones, the shock and
bewilderment in the market would eventually subside.
Or maybe, if the companies recently filing for Chapter
11 were among the last of the "bad apples," we could
see a light at the end of the tunnel. But no.
* So far, authorities have only released damning
evidence against ONE major broker - Merrill Lynch. But
they are conducting new investigations of widespread
ratings fraud at a dozen major Wall Street Brokerages.
And I have data indicating that at least 47 firms may
be guilty.
* So far, we've only heard about accounting
regularities at a handful of major corporations. But
our surveys indicate that thousands may have engaged in
similar practices.
* So far this year, we've seen bankruptcies at 104
publicly traded companies, a new record. But according
to my numbers, 1,359 are now at risk of failure.
It will take months for all the accounting crimes to be
exposed and for the companies battling bankruptcy to
finally throw in the towel.
In the meantime, day by day, every new disclosure and
failure will deepen the crisis of confidence.
But there's a limit to how much investors can take - an
invisible psychological barrier that once violated,
cannot be restored. This generation's trust in Wall
Street - and its willingness to play the stock market
game - will have been destroyed forever.
Who's going to help avert this dismal future?
I wish I could tell you that politicians in Washington
are going to step in and stop the madness on Wall
Street. But too many are afraid to be blamed for
accelerating the coming crash or to lose their super-
fat Wall Street campaign contributions.
I wish I could affirm that the major Wall Street firms
will voluntarily mend themselves. Instead, even as they
promise "never to do it again," they are deploying
scores of high-powered lobbyists to squash any
legislation that might force them to keep those
promises. Case in point: Philip J. Purcell, CEO of
Morgan Stanley Dean Witter, who has been lobbying
feverishly to block attorney generals, like New York's
Elliott Spitzer, from exposing the dirt at companies
like his, Merrill Lynch, or others.
I wish I could tell you that the SEC is likely to
expose and punish the wrongdoers, or institute harsh
new regulations that guarantee your safety and fair
treatment.
The sorry truth is that the SEC knew about the
conflicts of interest for many years and did next to
nothing. Indeed, as far back as 1992, a front-page Wall
Street Journal article presented a clear description of
wrongdoing on Wall Street, especially highlighting the
shenanigans at none other than Morgan Stanley - the
very same firm that's trying to squash anti-Wall Street
actions today.
I wish I could tell you that even one, single, solitary
brokerage firm would have the courage to step up to the
plate and say, "You're right. We lied, cheated, and
stole billions of dollars from unsuspecting investors.
We all did it. Now let's throw the guilty behind bars."
But nobody's talking - even when they've been caught
red-handed. Merrill Lynch CEO David Komansky, for
example, fresh out of his settlement with Elliot
Spitzer, pooh-poohed the entire scandal by blaming it
all on "a few bad apple analysts."
Throughout Washington and Wall Street, no one seems to
care that, with each denial, each obfuscation, and each
lobbying attempt to derail ongoing investigations,
they're convincing more and more investors that Wall
Street is nothing more than a shell game.
Wall Street will never clean up its mess, the crisis of
confidence will never end, and no one will ever be safe
again until and unless investors like you take matters
into your own hands and take action.
Here's what I recommend: We've identified some of the
worst offending brokerage firms... firms whose names
may even surprise you: Prudential, for example, ranked
worst in terms of number of legal actions against the
firm, compared to 17 other large retail firms in 1997-
2001 and failed to downgrade 2 failing companies to
"sell" in 2002. And Ameritrade ranked second worst in
terms of number of legal actions and according to the
Weiss ratings system rated a "C-" for safety. But there
are many more...
In fact, we call it the Brokerage Hall of Shame.
If you have even one, lonely, solitary dollar invested
with any of the brokerages, I believe you should run -
not walk - to the nearest phone or computer and close
your account NOW! That one act - multiplied a million-
fold - will be their ultimate punishment.
By getting your money out of brokerages that have the
worst record of investor abuse, your money will be safe
if they are slammed with massive arbitration claims and
settlements.
That's important: More brokers go out of business
because of judgments and settlements than for any other
reason. And if you have an account with a failed
broker, it may be frozen - and your money locked in
losing positions - while the regulators and SIPC sort
things out.
Plus, you'll be sending these brokerages a clear
message: Clean up your act or else!
Where should your money go? Move your accounts to one
of the brokers listed in our BROKERAGE HALL OF FAME.
Fidelity, for example, ranked best in terms of fewest
legal actions; rated B+ for safety. They've got low
commissions and did not recommend failing companies.
Again, not all brokerages are bad...
By moving your money immediately, you'll be rewarding
firms that refused to trick you into junk stocks to
earn investment banking fees - and you will help give
them competitive power over dishonest firms.
Position yourself now to profit from the market's
inevitable decline. No action you or I can ever take
will stop the stock market from falling. That's already
written in stone. Instead, make sure you have
investments firmly in place that will help you profit
from the decline. That way, when the market does hit
rock bottom, you will join a powerful minority of
investors with the wealth to buy up the best companies
at the best time for the lowest prices.
Let me put this as bluntly as possible: The clock is
ticking. Every day, more investors are becoming
convinced - and rightly so - that Wall Street is a
rigged game.
Unless faith is restored, this crisis of confidence
will not only continue to spiral out of control, but it
will doom the chances for an eventual market recovery.
It's probably too late to prevent the downward spiral.
No one has that power. But if we don't act immediately,
it may also be too late to prevent a more permanent
destruction of confidence.
Never forget: The biggest profit opportunity we will
have is to buy good companies at the right time for a
fraction of their peak value. But how can we do that
safely if the entire market is still a cesspool of
corruption and deception?
Regards,
Martin Weiss,
for The Daily Reckoning |
