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Don't be fooled! Save U.S.A.!


Don't buy Wall Street's latest con
Here are 15 reminders of how happy talk misled us a decade ago

By Paul B. Farrell, MarketWatch
Last update: 7:14 p.m. EST Jan. 5, 2009
ARROYO GRANDE, Calif. (MarketWatch) -- "Recession-Plagued Nation Demands New Bubble to Invest In:" Yes, and that gets my vote as the best faux news story, from The Onion last summer.

We all know humorists turn out to be better prognosticators than all of Wall Street's self-interested happy-talking hustlers. Why? Because comedians, satirists and jesters just tell the truth; they're painfully funny and they're usually right. That was mid-July -- before the big crash, before Washington's mega-billion-dollar bailout giveaways to their screw-up buddies on Wall Street.


The Onion added, rather prophetically we must warn you: "Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act." Of course the White House incidentally changed the name from "Bubble Act" to TARP, but the faux prophecy clearly exposes a classic truth:

"The U.S. economy cannot survive on sound investments alone ... Perhaps the new bubble could have something to do with watching movies on cell phones ... Or, say, medicine or shipping. Or clouds." But note, the "manner of bubble isn't important, just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."

In short, no matter how destructive to America, Wall Street wants, needs, demands and, yes, has a passionate love affair with blowing bubbles. It's in their blood. Wall Street is the ultimate bubble-blower, will be for all eternity, in bear markets and bulls, world without end.

Flash forward: Today Wall Street is desperately hyping a new bubble

A recent USA Today report headlined: "5 Stock Experts Foresee 2009 Rebound" proves this fundamental principle: "Nearly all expect double-digit percentage gains, despite another year of sharp swings. The most bullish projections call for a 24% gain from current levels." Yes, a 24% rally for 2009. Yikes, sounds more like another report in The Onion, not something in USA Today.

But look closely at who's hyping those "predictions." You guessed it: Economists, pundits and strategists on the payrolls of the same Wall Street banks (J.P. Morgan Chase, Citigroup and my old firm, Morgan Stanley) that our clueless Washington politicos gave tens of billions of our taxpayers dollars after those banks failed America's investors with their excessive greed, arrogance and incompetence.

Worse yet, last January those same banks "were also bullish heading into 2008." Folks, you'd be a fool to believe them. Yet they keep conning us because they know many Americans will buy into the scam again.
USA Today even added a quote from S&P's highly respected chief investment strategist, Sam Stovall: "When this bear market ends, be prepared for a fast and furious partial recovery ... Historically, the S&P 500 has recouped, on average, 33% of its bear-market losses 40 days after a bottom." Fortunately, USA Today was also quick to remind us that "the S&P 500 fell 15.2% in 1932 after its record 1931 decline."
Flashback: Wall Street sang the old bubble song back in 2000-2002

All this nonsense reminded me of the earlier media happy-talk back during the 2000-2002 bear-recession. For 30 months the best and brightest minds on Wall Street were all over the media hustling us: "Market's hit bottom," "recovery's started," "jump back in now!" Meanwhile "Mr. Market" sank deeper, laughing at their absurd hype, while Wall Street lost $8 trillion of investors' capitalization.

So before you let Wall Street con you again, quickly peruse the following 15 bullish "predictions" made during the last bear-recession. They're an amazing bit of financial history from a 2003 bestseller: "Bull! 144 Stupid Statements from the Market's Fallen Prophets."

The specific facts are different today, but the motivation driving Wall Street is the same as when the Dow peaked at 11,722 in January 2000 and took 30 agonizing months to hit bottom in October 2002 at 7,286.
We selected 15 of the best quotes out of the 144 put together by Greg Eckler and L.M. Mac Donald, the authors of "Bull!" So listen closely for the consistent leitmotif that drives Wall Street's bubble-blowing greed. Listen especially for the echoes that make today's markets just like all prior historic cycles, just another sequel to an old song that's again being hyped in the media.
Why? Because nothing even really changes in Wall Street's bubble-blowing brain:


1.
October 1999: James Glassman, author "Dow 36,000." "What is dangerous is for Americans not to be in the market. We're going to reach a point where stocks are correctly priced, and we think that's 36,000 ... It's not a bubble. Far from it. The stock market is undervalued." (Fact: dot-com PE's were astronomical, most over 40)

2.
December 1999: Joseph Battipaglia, market analyst. "Some fear a burst Internet bubble, but our analysis shows that Internet companies account for only 7% of the overall Nasdaq market cap but carry expected long-term growth rates twice those of other rapidly growing segments within tech." (Fact: Internet Index lost two-thirds within six months.)

3.
December 1999: Larry Wachtel, Prudential. "Most of these stocks are reasonably priced. There's no reason for them to correct violently in the year 2000." (Fact: Nasdaq lost 50% in 2000.)

4.
December 1999: Ralph Acampora, Prudential Securities. "I'm not saying this is a straight line up. I'm not saying you can't have pauses. I'm saying any kind of declines, buy them!" (Fact: He also predicted a 14,000 Dow by year-end 2000, and an 11-year bull.)


5.
February 2000: Larry Kudlow, CNBC host. "This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy." (Fact: This faux economist is still hosting a cable show.)

6.
April 2000: Myron Kandel, CNN. "The bottom line is, before the end of the year, the Nasdaq and Dow will be at new record highs." (Fact: In September he even predicted a rally to 12,000 by election day 2000.)

7.
September 2000: Jim Cramer, Mad Money host. "SUNW probably has the best near-term outlook of any company I know." (Fact: Within four months Sun Microsystems dropped from $60 to $30. Down to $10 in a year. Below $3 in two years.)

8.
November 2000: Louis Rukeyser on CNN. "Over the next year or two" the stock market "will be higher, and I know over the next five to 10 years it will be higher." (Fact: The market continued sinking, we fell into a recession, and tech lost 70% within two years.)

9.
December 2000: Jeffrey Applegate, Lehman Strategist. "The bulk of the correction is behind us, so now is the time to be offensive, not defensive." (Fact: A sucker's rally.)

10.
December 2000: Alan Greenspan. "The three- to five-year earnings projections of more than a thousand analysts, though exhibiting some signs of flattening in recent months, have generally held firm. Such expectations, should they persist, bode well for continued capital deepening and sustained growth." (Fact: In 2008 he admitted he misled America.)

11.
January 2001: Suze Orman, financial guru. "In the low 60s here, I think the QQQ, they're a buy. They may go down, but if you dollar-cost average, where you put money every single month into them, I think, in the long run, it's the way to play the Nasdaq." (Fact: You lose -- the QQQ lost 60% more by October 2002.)

12.
March 2001: Maria Bartiromo, CNBC anchor. "The individual out there is actually not throwing money at things that they do not understand, and is actually using the news and using the information out there to make smart decisions." (Fact: Maria sounds more like a writer for The Onion.)

13.

April 2001: Abby Joseph Cohen, Goldman Sachs. "The time to be nervous was a year ago. The S&P then was overvalued, it's now undervalued." (Fact: The markets continued down for another 18 months.).
14.
August 2001: Lou Dobbs, CNN. "Let me make it very clear. I'm a bull, on the market, on the economy. And let me repeat, I am a bull." (Fact: The market was actually in bear territory for another year as the Dow and Nasdaq lost another third.).

15.
June 2002: Larry Kudlow, CNBC host. "The shock therapy of a decisive war will elevate the stock market by a couple thousand points." (Fact: For Larry, war is just another "economic stimulus program." He also said the Dow would hit 35,000 by 2010.)

Yes folks, in spite of all this happy-talk nonsense (laced with enticing yet lethal rhetoric about "Climbing a Wall-of-Worry," "Suckers Rallies," "Dead-Cat Bounces," "Bottom-Feeding" and "Buy-on-Dips" opportunities) please be patient. Remember, it took 30 months to hit the last bottom as the Dow fell about 40% from 11,722 in early 2000 to 7,286 in October 2002.

Expect more of the same today, because "BS" is still Wall Street's official language. In both bear and bull markets the lure is the same, to get you to drink the Kool-Aid, to feed a new bubble and to make them (not you) rich.