As we all know, the public has really not participated in the stock market since the 2008 credit and banking crisis. Since that point in time, the public has developed even more of a sour taste for Wall Street. Events such as the flash clash, LIBOR manipulation by the banks, high frequency trading manipulation, the MF Global bankruptcy, and of course all of the home mortgage scandals have caused protests, and almost a hatred for Wall Street by many in the public.
Mutual fund outflows have been occurring by the public investor for the past four years. Most hard working people now believe that the stock market is rigged by the large banks. Writers such as Matt Taibbi and others have demonized many of these large financial institutions for their antics and abuses that occur in the stock market all of the time. There are now many websites, bloggers, and publications that follow and track rules that are being broken by the large Wall Street firms all the time. Usually, these big firms just get a slap on wrist and continue with business as usual.
The bank bailouts since 2007 have caused outrage in the streets. The Occupy Wall Street movement started to take on a life of its own last year. Prior to the Occupy Wall Street movement was the Tea Party which stood up as a fighter of government bailouts. Texas congressman Ron Paul has been outspoken on the Federal Reserve Bank and other central banks around the world. Many people in the public are now wondering how printing money out of thin air can continue to prop up asset prices and help the economy. The Federal Reserve claims that its monetary policy will help create jobs and boost the economy. Others believe that the central bank is simply a way to help prop up the banks, which still have a lot of problems.
Here is another problem with these large banks which give Wall Street a black eye. It is the upgrading of stocks and indexes at extreme highs. Here are some examples, Goldman Sachs Group Inc (NYSE:GS) upgrades light sweet crude to $200.00 a barrel when it was trading around the $145.00 level in July 2008. A few days later oil tops out at $147.00 a barrel and plunges down to $33.00 a barrel in January 2009. Perhaps this upgrade was just an honest mistake. In August 2011, J.P. Morgan Chase & Co (NYSE:JPM) upgraded the price of gold to $2500.00 an ounce. Gold tops out in September 2011 at $1923.00 an ounce and falls as low as $1523.00 an ounce in December 2011. Perhaps this upgrade at a high was simply just another error by the so-called smartest people on the street. However, I sincerely doubt that. In November 2007, almost every major Wall Street firm was upgrading Google Inc (NASDAQ:GOOG) when the stock was trading over $700.00 a share. The projected price targets were over $1000.00 or more for Google stock. That stock dropped more than $300.00 points in just four months from that peak and even further throughout 2008. It seems that these Wall Street firms are really good at picking tops in leading stocks and commodities – sarcasm. Another recent example just occurred in Apple Inc (NASDAQ:AAPL) when the stock was trading around the $700.00 level in late September 2012. As many of you already know, the stock declined by $200.00 points in less that two months from that high. If you were following along with our analysis over the past five years, you would have been on the right side of the calls mentioned above. The most notable of which, the real estate and market bubble burst of 2007; we are well documented for alerting our viewers of this event well before it happened.
So the moral of the story is, learn how to use the charts and don’t listen to anyone. The charts are the only reliable way to have a chance when it comes to trading these markets. Obviously, all of these large institutions need to have someone to sell to when it comes to these upgrades at extreme highs, otherwise it would make no sense to buy when everyone is already in the market. Who is left to push the stock or commodity higher? Why don’t they ever seem to upgrade these equities at the lows? That is the million dollar question, we can only guess it is because it makes the big Wall Street firms millions and steals money from the uninformed individual investor.