Remember Wall Street analysts? Those are the people who go on tout TV and tell you to buy stocks regardless of what is happening to stock prices. The reason you should ignore them is that they get paid to make you buy stocks which generates commissions for their employer. If they issue 'sell' recommendations, they will scare people away from the market. And then there won't be any commissions to pay them.
I'm not sure whether anybody actually acts on analysts' recommendations. But if you are one of the people who buy when analysts urge you to do so, just remember that you are not the one who pays them for their analysis -- their employer is paying them. And those brokerages need stock trading commissions to have enough money to pay the analysts.
The reality is that nobody -- except perhaps Warren Buffett -- can predict what will happen to stock prices and he is not an analyst -- he works for himself. If you're going to invest in individual stocks, you should make up your own mind and not rely on the analysts.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.
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Reader Comments (Page 1 of 1)
2-09-2009 @ 10:19AM
Chris said...
I agree with this 100%. It's a lot of the Analysts that are always wrong. Moody's and S&P should be closed. Why keep something if it does not even work?
The wave of more individuals either going back to school or now paying attention is school is rising as fast as people are getting laid off.
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The website http://tradewithpros.com
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2-09-2009 @ 10:43AM
sonnype said...
your right on the money.Analysts want you to buy so they can generate income for their employeer.Ater the debacle that took place in the banking industry and credit rating agencies the analysts have lost all credibility and anyone investing on their advcive needs to understand the consequences
2-09-2009 @ 1:07PM
Iridium said...
It's all just a scam within a scam.
Eventually you get fixed inflation. Which is driving a price up to a certain point for so long that when the price drops down again it looks like a bargain. However it remains higher than the original price which end up giving you market fixed inflation.
That is what has been going on in the oil market. Driving the price of oil to $147 gives the net effect of making $40 oil seem cheap. In reality the price is double the price of just a few years ago. The price is not based on demand but on pure greed. People think $40 oil is a bargain but in realilty the price should be $20. We end up with 100% inflation after a few short years.
The same thing has happened with food.