You’re a sucker to believe Wall Street

Commentary: What were advisers saying five years ago?

 

Bloomberg News/Landov

CHAPEL HILL, N.C. (MarketWatch) — You’re a sucker to believe Wall Street’s current mantra that another Lehman Brothers-like collapse is not in the cards.

I say that not because I think such a collapse is imminent, though I am less sanguine than many right now. The reason I say we shouldn’t believe Wall Street is that they were also telling us not to worry five years ago, right before Lehman declared bankruptcy. 

Lehman Brothers filed for bankruptcy on Sept. 15, 2008. That, in turn, triggered the near collapse of the entire financial system: The stock market quickly entered into one of its worst two-month stretches in U.S. history.

If ever there were a time for Wall Street’s gurus to warn us of the impending doom, that would have been the time.

Click to Play

Hulbert: Be choosy when investing in emerging markets

Marketwatch columnist Mark Hulbert explains that when investing in emerging market stocks, it pays to be choosy.

But that’s not what I found upon reviewing what the several hundred advisers I track were saying in those crucial weeks prior to that financial tsunami. On the contrary, with very few exceptions, they were remarkably complacent at that time — if not downright upbeat.

Consider the following sampling of comments from late August and early September of 2008:

• “I am ready to be a bull again! ... [T]he exact time is still difficult to tell, and we will in all likelihood be early to the game, but three crucial elements necessary for a new bull market are getting our attention. The housing market is beginning to show serious signs of a bottom… Quietly, the financial sector has been slowly healing.”
  
• “The stock market and the economy continue to battle the same demons. They are not going away easily, though one would have to think the sub-prime mess is largely behind us… I think a 75% invested posture is about right at this juncture.”
  
• “For the next few weeks at least, the sun seems destined to shine on the stock market.”
  
• “With oil and gas and ag commodity prices coming down, consumers are eventually going to get some much needed breathing room. This will also allow the economy to regain its footing and begin a recovery, especially once the 6-year cycle bottoms in September. The bear market in crude oil will help to improve consumer spending and should also bolster the stock market from here.”
  

I could go on and on, but you get the point.

(And, to be clear, I selected these quotations to make that point; I’m sure I could have found other quotations from at least many of them that don’t make them, in retrospect, look so foolish.)

Clearly, Warren Buffett was right when he famously said that one of the primary purposes of stock market forecasters is to make fortune tellers look good.