We bear market, but Wall Street will never admit it. He is so strongly in the bull market, but want to speak bad times. I know the market is only leave 10-15% from its October 2007 peak, but just wait. I spent 32 years as a securities analyst at Wall Street, and unlike the current generation of young analysts, I have experienced several major downward cycle. Current economic and financial conditions, probably the worst depression in 1930. But this does not necessarily think that, if you listen to stock broker comment, TV media or the government.

It was difficult to keep track of all the characters, especially those who have not quite an explosion, such as oil and commodities, commercial real estate, consumer loans and stocks. Busted bubbles are more obvious, but the extent and duration of damage is still unknown - residential real estate, sub-prime mortgages and CDOs, debt derivatives, banking and brokerage system, the U.S. dollar, the federal budget deficit and costs of bond insurers, employment, Growth GDP, etc. The official CPI inflation reading in March, 4%, but with all reality, with adjustments for government twisted numbers, is in the range of 7-11%. And it will be worse. Future inflation will be exacerbated by an ongoing massive federal banking, brokerage and other quasi-Agency (Fannie Mae, etc.) bail-outs.

The economy operates in cycles; full recession every few years. The latter was a real recession in early 1990, one in 2002, was incomplete. The recession and stock market plunges have a cleansing effect, creating conditions for the resumption and the next phase of expansion. Fed can not keep the system propped up forever. It is made of silver bullet. The decline in interest rates do not stimulate the economy. There pyramid built on a huge debt leverage.


Derivatives, such as iceberg ahead "Titanic": No one knows the size under the surface. We know that the loan default in repayment of debt amounted to $ 62 trillion (with T!) And interest rates derivatives to $ 382 trillion (again with T!) At the end of 2007. Damaging! When Warren Buffett bought General Re insurance company, he wound that derivatives unit for five years, losing $ 400 million in the process. That was when the markets were normal, to freeze loans. The elimination of trillions in derivatives, some expansion of 30 years in several currencies and exchanges, may take generations to complete.

The terrible aspect of all this is that there is only so much we do not know. There are more things that can go wrong, and every month there seems to be having unforeseen financial problems. Much of this stems from too much debt and leverage. Brokerage firms in 1970 was not allowed to have debt of more than 12 times equity. Nowadays, the ratio of over 30 is the norm. Mortgage, consumer, hedge funds and almost any other kind of debt multiplied several times over the last decade or two.

It took a decade in 1930 to adapt to the excesses of 1920 and for the economic downturn to play. During the Depression, the government hiked taxes and initially pushed trade protectionism, aggravating economic problems. We are hearing these themes again in the current political campaign. In early 1970 he received three years and 50% of the total market shares fall to adjust to an earlier extremes. I was on Wall Street during this period and lived through it. At this time it is even worse, given the excesses in late 1990 and most recently during the 2004-'07. So it may take more than three years to equalize.

Even during normal periods of stock market bears regular slumps. From 1926-2007 S and P 500 index dropped three out of every ten years. During the bear market, there are numerous false rallies by more than 5%, a dozen or so for example during the 2000-2002 bear market.

Despite this sobering scenario, you can not hear your brokerage firm or a large housing stock market TV shows on any of these issues. They are cheerleaders and promoters. Wall Street is always denial, eternally optimistic with the system a positive bias. Auto shop sells cars. Brokerage firms sell securities. How to obtain profits from the transaction. Favorable deviation is an integral aspect of business.

In my book, full of Bull, I spend several chapters decoding array of misleading and harmful Street directives that are inconsistent with sound investment strategy: Never take Wall Street literally. Professional insiders know better. Propaganda is reflected in the nomenclature. The drop in market correction. However, market growth is not called a mistake. The drop in GDP or employment is called negative growth. Is the slowdown of activity.

Stock investment ratings also favorably distorted. Even in today's market, there are less bad than 10% Buy ratings, more than 90% of purchase or Neutral. Sometimes the best points in the warehouse is expected to decline, just not quite as other names in the sector. The transition from the views Buy in neutral is a strong negative signal for unloading stock in street code. Brokers rarely have the courage to use grim "S" (Sell) words. Revenue estimates are no different, almost always too optimistic. In most cases, take their Street analysts forecast a profit forecast, published advertisements, ebullient corporate executives.

Shares targets, published in the scientific reports are another overly positive bias. How many times do you see recession, the worst stock price opportunities highlighted in the report? Never. Street is all about how much money you can make up, rather than how much you can lose.

Wall Street has never focused on risk. She is always on the stock-price appreciation prospects, rather than on the protection of capital, conservative - How much can be saved. Even against the backdrop of a sharp stock-price declines, for example, financial and home builders in the past 12 months, focusing on the street "to catch the fall safe", that is, guessing the bottom recommendation to buy, rather than avoidance. Brokerage emphasis buying lists of all, never sell ideas.

Regardless of how the current negative market conditions or how uncertain prospects, you can not count on Wall Street for objective advice on risk. Given the tens of billions of dollars in losses suffered by street with poor south-prime loans and other debt instruments, is hardly in a position of trust and address the risk. Wall Street have been unable to own risk, so do not expect it to concentrate on your.