Nearly every investor or prospective investor I meet with, talks about the Wall Street bullies ability to beat the market. They believe these bullies have a special talent. They believe that these bullies know ahead of time what will happen to the equity markets. They believe that these bullies make money because of a superior intelligence. “They know something the rest of us don’t know’.
The study below tells us there is another story. These bullies DO NOT have the ability to predict the market or an individual stock or asset class with any consistency. If they do make a ‘right’ call they will market the heck out of it.
These are the bullies that you see on the financial networks or quoted in the financial magazines. Everyone wants their next ‘right’ call. Sadly, these successful bullies rarely if ever repeat the past successes.
Headline from a financial blog: ThinkAdvisor:
“On Wall Street, if You Earn More You Cheat More, Study Finds
Across the industry, about one-third of financial professionals say comp and bonus plans compromise ethical standards”
“The past several years have been filled with headline-grabbing legal settlements by financial services firms — $11 billion here, $5 billion there. Most of them involved conduct that took place before the 2008 crisis. Virtually every major Wall Street firm has pledged to redouble its efforts to instill an ethical culture. And virtually all the large firms said that if there was bad behavior, it is behind them.
Well, it isn’t.”
“Rather than indicating that Wall Street has cleaned itself up, it suggests that many of the lessons of the crisis still haven’t been learned. And the mind-boggling settlement numbers, as well as stringent new rules, like the of Dodd-Frank regulatory overhaul in 2010, appear to have had little deterrent effect.”
“Nearly one in five respondents feel financial service professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment.”
One in 10 said they had directly felt pressure “to compromise ethical standards or violate the law.”
“The pattern of bad behavior did not end with the financial crisis, but continued despite the considerable public sector intervention that was necessary to stabilize the financial system,” William C. Dudley, the president of the Federal Reserve Bank of New York, said in a speech late last year on Wall Street culture. “I reject the narrative that the current state of affairs is simply the result of the actions of isolated rogue traders or a few bad actors within these firms.”
These are the main points of the article.
Investors need to stop empowering the Wall Street bullies. Stop looking for the next ‘great’ investment. Stop looking for the next ‘great’ predictor. Stop looking for the next ‘great’ stock picker. Stop trying to time the market. Stop being in touch with your broker daily.
These bullies do not have your best interest in mind. Remember in the USA one in 25 people is a sociopath. On Wall Street the number is one in ten.
Start following the research of the academics. Start using evidence based investing. Start following a prudent process. Start working with an investor coach/fiduciary adviser.
Side note can anyone tell me what is the number one pastime of
executives in Northeast Wisconsin? The answer may surprise you.