THE STOCK ANALYSTS ARE ALSO CROOKED

(via The Big Picture)

The stock analysts are still afraid to use the word "Sell" despite compelling evidence that they should do so much more often. If you add in the crooked accountants and rating agencies, results from behavioral finance and the unreality of some of GAAP, you can understand why I am so skeptical of the Free Market Fairy.

Merrill Tries to Temper the Pollyannas in Its Ranks
By JENNY ANDERSON and VIKAS BAJAJ
Published: May 15, 2008
NY Times

Even in bad times, the Street’s army of analysts rarely shout “sell.” In fact, they rarely utter the S word at all.

But Merrill Lynch, the nation’s largest brokerage firm, unveiled a new system on Tuesday for rating stocks that suggests Wall Street finally may be mustering up its courage to say “sell” more often. Starting in June, Merrill will require that its analysts assign “underperform” ratings to 1 out of every 5 stocks they cover. About 12 percent fall into that category now.

Today, after the Nasdaq bust and the outbreak of the deepest financial crisis since the Depression, only about 5 percent of all stock recommendations on Wall Street advise investors to sell, according to Bloomberg. That is up from less than 2 percent back in the heady days of the dot-com boom.

The bank analyzed stock performance over a decade and determined that from 1997 through 2007, on average, 37 percent of stocks in the MSCI world index and 40 percent of stocks in the Standard and Poor’s 500-stock index declined each year.