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The Great Wall Street Marketing Machine: How To Protect Yourself From The Hype

Wall Street firms, Research analysts, CNBC, Ratings agencies, and Brokerages have one job: Sell you, John / Jane Q public, overpriced stock just before its "best before" date.

Sales efforts always intensify near major market inflection points, both to sell you stock, and keep you from selling your existing hyped stocks (before they do).

The more they promote a stock as being "world changing", "unlimited potential", "new paradigm" and such terms, the faster you should run from investment.

The later in an investment cycle we are (like today I believe), the more cautious you should be about all high valuation / beta / "future potential" stocks.

Watching a group of high-beta leaders can provide an early window into future, broader "risk on" appetite. Canaries in the coal mine.

"Those who tell; don't know, those who know, don't tell"

Or maybe those who tell... are being purely deceptive.

This article is a follow-up to my May Article, "What Wall Street Doesn't Want You To Know: The Foolishness Of Chasing The Most Popular Themes".

I strongly encourage a review of that article at this time.

In that article, I led with the following points:

  • As Warren Buffett opines, in the short run, the market is a voting machine, and in the long run, it is a weighing machine.
  • The analyst community and many investors who follow it are so often late to the party regarding a popular stock, and so are doomed to long-term underperformance.
  • Wall Street is not a friend of the individual investor. Early-stage investors and insiders use aggressive Wall Street buy ratings to offload positions bought at an earlier stage.
  • The best way to outperform - focus less on the popular theme and more on the next sector rotation in the market.

Remember this Core Value: Wall Street firms, Research analysts, CNBC, Ratings agencies, and Brokerages; including the vast, vast majority of Financial Advisors have one job: Sell you, John / Jane Q public, overpriced stock, IPO's, "special products", and leveraged loans and debt offerings, all just before their "best before" date.

They are not your friend and ally! Accept this fact and take personal responsibility for self-education, and you will avoid future large losses, accompanied by those infamous words

"No one could have seen this coming".

Yeah, right.

In this article, we will examine case studies of various high-potential stocks, and how their story and performance have evolved, from the peak period of excitement to today.

It is my goal to raise awareness of how the Wall Street marketing machine works, and how one can defend themselves against being swept up in the hype, through a skeptical eye, close focus on the integrity of management, and thorough, common-sense research.

Note: Y Charts are not working. I'll attempt to add later.