Analyst Ratings are Worthless

Buy, Hold, Sell, Upgrades, Down Grades, market perform, price targets… it’s all pointless.  Something changed over time, analyst ratings used to come out well before a company reported earnings.  After the turn of the century, that started to change.  An analyst trying to make a call on a stock and being wrong was not worth the risk to damaging their reputation or the reputation of the firm.  You still occasionally get an analyst rating prior to an earnings call, however it’s becoming few and far between.  You most likely see stupid things like “AAPL upgraded on expectations for high demand for the new iPhone” (no seriously, you should see at least one analyst opinion like this over the summer, hell it might even be exactly written like this).  One of my favorites was about a year ago, MSFT upgraded to buy with a price target of $35.  This came out the day after MSFT reported earnings and jumped into the low $60s.  That info seemed to be behind quite a few years  Talk about useless info.

The Machines have Already Taken Over

The Terminator movies were way ahead of their time.  Program trading has taken over long ago.  Fancy software that can trade faster and scan through tons of data faster than you and me.  This is good and bad.  Good, because it makes the markets more efficient.  Bad in that it can cause a downward spiral like in 2010 with the PG fat finger trade error (man made error-made worse by the machines).  Worse is the replacement of investment advice with software simply using Monte Carlo simulation to project retirement expectations for an individual- but hey that’s probably something your investment advisor doesn’t want you to know.

Want a Good Paying Wall Street Job…Don’t Major in Finance

Sure, majoring in finance was fun and I actually learned some cool shit I can use for myself.  But want to land a good paying Wall Street job these days…it’s all about computer programming and math.  Major and minor in math and computer programming.  See the above about the machines taking over as to the reason why.

Low Risk, High Return Doesn’t Exist

The holy grail of investing, yet it doesn’t really exist.  Conversations normally center around standard deviation, alpha, efficient alpha, or beta.  It’s not just individuals falling for this crap.  Large and small pensions alike get crap dumped on them from the slick investment banks that are low risk/high return products.  Worse case scenario the pension collapses.  It happens.

Wall Street Always Wins

Even when the big Wall Street firms lose, they make money.  2008 was the ultimate fuck you to every other person on the outside. All of the troubled investment banks should have been left to fail, instead tax payers bailed them out, the fat cats sitting at the top took huge bonuses from tax payers wallets and got nothing but a slap on the wrist.  In the instance when a firm is fined for improper practices, the fines are a fraction of the fees and profits they collected.  They simply can’t lose.

Fees, Fees, Fees

You’ll never actually know what you’re paying in fees.  Transparency doesn’t really exist.  The best you can get is a rough estimate.

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