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Paul B. Farrell
Dec. 7, 2010, 12:01 a.m. EST
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By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) "” Do not buy stocks. Not for retirement. Not in the coming decade. Don't. Huge risks.
Wall Street is a loser. Stocks are their ultimate sucker bet. And they'll sucker you again. You'll lose again, bigger than the last decade. Wake up before Wall Street banks trigger the next meltdown, igniting mass bankruptcies.
Here are 10 more reasons not to bet at Wall Street's casino "¦ wait till after they implode:
That's Peter Morici former chief economist at the International Trade Commission. Is Main Street waking up to Wall Street's con? Maybe: "With corporate profits breaking records, Wall Street anxiously anticipates the return of the individual investors to the stock market. It may be a long wait, because the little guy may have concluded investing in stocks is a sucker bet."
Federal officials, including Attorney General Eric Holder, announce the results to date of "Operation Broken Trust," a three-and-a-half month investigation targeting investment fraud.
America's divided into two stock markets: One for Wall Street's rich insiders, another for Main Street's suckers: "Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened."
From 1998 to 2010 profits rose 203%. But the S&P 500 was up just 7%. Still, naive investors buy Wall Street's sucker bet.
Who's pocketing huge profits? Rich insiders: "Because most of the increased value created by higher profits has been captured by hedge funds, electronic traders, private equity funds, and aggressive M&A shops, free standing and at major investment banks, which have multiplied over the last two decades."
Warning: With the resurrection of the GOP and Reaganomics, Wall Street will skim more from Main Street, get even richer. And yes, you'll lose more.
In a Bloomberg story, "Big Short" author Michael Lewis asks: "Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary trading groups, without so much as a whimper?"
The answer's simple: Wall Street's sneaky, will do anything to keep their derivatives casino running hot: Insiders "have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name."
Get it? China may well crash first. Fortune's Bill Powell interviewed hedge fund kingpin Jim Chanos of Kynikos Associates: He's "betting that China's economy is about to implode in a spectacular real estate bust." China is "an economy on steroids." In a Charlie Rose interview he said "China's on an economic treadmill to hell." If so, then all of Wall Street's highly promoted emerging markets are also sucker bets.
Another hedge fund player warned: Chanos "is shorting the entire country," including a company "Goldman Sachs recommended as a buy "¦ the listing for the Hong Kong Stock Exchange "¦ China's Merchants Bank, one of Beijing's largest."
Back in the 1980s Japan "grew largely on the back of capital investment" then turned into "a capital-destruction machine, and that's what China is now. You have an economy that's 60% fixed-asset investment, and not even in the developing world is that sustainable."
Chanos won't pinpoint the timing or the trigger: "He just believes it's coming" and he is betting on it. Reminds us of Henry Paulson shorting Goldman Sachs' crooked deals before the 2008 crash.
Investor distrust of Wall Street's rigged casino will skyrocket in 2011. Before the elections an AP-CNBC poll found 61% of investors had already lost confidence in the market, thanks to the extreme volatility; 55% believe the market's rigged to favor insiders.
It'll get much worse as the FBI/DOJ investigations of insider trading add more indictments and perp-walks. As more facts surface, this could get bigger than Enron and the SEC mutual fund fraud suits combined: More proof of Wall Street's rigged game.
Last year we reported that Goldman Sachs made over $100 million profits a day for 23 days in one month. This year the con game has gotten even bolder.
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology.
AT&T is the worst carrier among consumers, according to Consumer Reports, its debt is slightly downgraded, and iPhone moving to Verizon looms next year.
5:58 p.m. Dec. 6, 2010
"10 reasons to shun stocks till banks crash http://on.mktw.net/hahEQk" 12:03 a.m. EST, Dec. 7, 2010 from MKTWFarrell
"Bombshell bras, hot lovers and gift sales http://on.mktw.net/fcXekR" 1:00 a.m. EST, Nov. 30, 2010 from MKTWFarrell
"Kamikaze Capitalism: GOP out to destroy http://on.mktw.net/emR4Vn" 12:14 a.m. EST, Nov. 23, 2010 from MKTWFarrell
"10 buys, 12 sells for a slow-growth decade http://on.mktw.net/9nbhot" 12:03 a.m. EST, Nov. 16, 2010 from MKTWFarrell
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