Almost All Wall Street Got 2012 Wrong

English: Morgan Stanley Building
English: Morgan Stanley Building (Photo credit: Wikipedia)

All of us are looking to avoid pain and that pain includes investment losses. Unfortunately investment risk is unavoidable, we just have to live with it. If you can think long term and ignore the short term volatility you will succeed in reaching your long term financial goals. Don’t empower the Wall Street bullies, hire an investor coach.

From John Paulson’s call for a collapse in Europe to Morgan Stanley’s warning that U.S. stocks would decline, Wall Street got little right in its prognosis for the year just ended.Paulson, who manages $19 billion in hedge funds, said the euro would fall apart and bet against the region’s debt. Morgan Stanley predicted the Standard & Poor’s 500 Index would lose 7 percent and Credit Suisse Group AG foresaw wider swings in equity prices. All of them proved wrong last year and investors would have done better listening to Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein, who said the real risk was being too pessimistic.The ill-timed advice shows that even the largest banks and most-successful investors failed to anticipate how government actions would influence markets. Unprecedented central bank stimulus in the U.S. and Europe sparked a 16 percent gain in the S&P 500 including dividends, led to a 23 percent drop in the Chicago Board Options Exchange Volatility Index, paid investors in Greek debt 78 percent and gave Treasuries a 2.2 percent return even after Warren Buffett called bonds “dangerous.”

“They paid too much attention to the fear du jour,” Jeffrey Saut, who helps oversee about $350 billion as the chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said by phone on Jan. 2. “They were worrying about a dysfunctional government in the U.S. They were worried about the euro quake and the implosion of Greece and Portugal. Instead of looking at what’s going on around them, they were letting these macro events cause fear to creep into the equation.”

The Wall Street bullies understand that the investing public have very short memories. This is why they continue to make predictions and why investors continue to look for predictions. NO ONE can consistently predict the future.

Please comment or call to discuss how this affects you and your investment goals.

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