Why Investors Should Avoid the Advise of Investment Firms, Pundits and Analysts
Herein, we could refer to more than one thousand reasons to avoid the misleading advise of investment firms, stock market gurus, pundits and stock analysts. We could go back more than one hundred years in stock market data to corroborate our study. We name it the famous FACT SHEET.
Our study includes factual data for the past one hundred years. There is a very well know pattern, a very profitable one which has remained always valid.
Every time an investment firm, stock market guru, pundit or analyst has made a public call calling a strong move in one given direction, markets have always moved on the opposite direction.
Herein, we're going to refer to three famous episodes in the past decade.
History Repeats Itself 2007 Ahead of the Crash
Firstly, going back to 2007, the fact that ahead of a stock market crash none of them have actually predicted it. Not only they did not predict it as they remained bullish stocks ahead of the crash posting massive downgrades on the media after the crash occurred.
For the sake of simplicity I refer here to a quite famous event - Goldman Sachs downgraded American Express (AXP) to Sell near single digits when we were actually upgrading it to Strong Buy.
History repeats itself - Every time an investment firm, stock market guru, pundit or analyst has made a public call calling a strong move in one given direction, markets have always moved on the opposite direction.
Instead of focusing our attention in stocks, let's make this exercise using a different financial instrument - oil.
Once Goldman Sachs and Citigroup made a bold call predicting that oil would eventually reach $20, oil actually bottomed up rallying from that same day.
And again, during the most difficult times for investors, the world's greatest trader marked his presence telling that oil was actually at a bottom recommending to cover and buy!
Later on, Mr. Vieira made a public live call selling oil at new highs as soon as Goldman Sachs changed its view upgrading after the rally!
One day markets will reverse course. Thereafter, once it already happened, you will see these same investment firms, gurus, pundits and analysts who have been always wrong claiming that they actually made the call. Although I could refer to thousands of remarkable examples illustrating how does this process work, investors find on GoPro and Twitter a good example of it.
Despite the obvious facts collected for a long period of time have investors learned the lesson? Data shows that today far more people invest in the markets based on contrarian strategies compared to any other time in history. Therefore, many have actually learned the lesson after being burned by the advise of investment firms, pundits and analysts.
History Repeats Itself 2016 Ahead Best Rally Ever!
Let's move on to the beginning of 2016 when investors were warned about a catastrophe coming in - RBS urges investors to Dump Everything! The End is Coming!
Do you actually know what did happen to investors selling on the media news? They all sold financial assets at a market bottom ahead of the best stock market rally in a century!
As if this fact sheet does not constitute sufficient undeniable evidence even to the most stubborn investor, let's proceed discussing the opinion of Larry Fink, chairman and CEO of BlackRock (BLK), the world's largest asset manager, according to Americans.
I don't think we have enough evidence to justify these levels in the equity market at this moment.
Larry Fink, CNBC, July 14th 2016
I am not criticising Fink's comments. I am pointing to the facts regardless of others' opinion whether you like it or not.
Every time a guru has tried to call a market top stocks rallied to new highs. A fact that has been repeating for years. Gurus opinions have remained a great source of contrarian indicator going back one hundred years data. Stock market fact sheet.
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Everything I learned about the markets I've done it on my own using the example of credible and valuable sources as Grigori Perelman who has actually demonstrated the impossible is not a limitation to the human brain.