Paul Farrell's 10 Reasons Not To Buy Stocks Until After The Next Market Crash

Tyler Durden's picture

Paul Farrell lights it up in his latest market commentary, which puts even some of the more hard-core realists out there to shame: "Wall Street is a loser. Stocks are Wall Street’s ultimate sucker bet.
And it’ll sucker you again. You’ll lose, worse than in the last decade.
Wake up before Wall Street banks trigger the next meltdown, igniting
mass bankruptcy.
" Um, wow. And seeing how we have been saying that only absolutely immaculate top tickers should be in this market, we agree wholeheartedly with Farrel.

And here are his 10 reasons to stay away until after the next crash, via Market Watch.

1. American stocks are a high-risk sucker bet

That’s the view of Peter Morici, the former chief economist at the International Trade Commission: that U.S. stocks are a sucker bet. Is Main Street waking up to Wall Street’s con? Maybe. “With corporate profits breaking records, Wall Street anxiously anticipates the return of the individual investors to the stock market. It may be a long wait, because the little guy may have concluded investing in stocks is a sucker bet.”

America’s divided into two stock markets: one for Wall Street’s rich insiders, another for Main Street’s suckers: “Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.”

From 1998 to 2010, profits rose 203%. But the S&P 500 was up just 7%. And still, naive investors buy into Wall Street’s sucker bet.

Who’s pocketing the huge profits? Rich insiders. “Because most of the increased value created by higher profits,” says Morici, “has been captured by hedge funds, electronic traders, private equity funds, and aggressive M&A shops, free standing and at major investment banks, which have multiplied over the last two decades.”

Warning: With the resurrection of the GOP and Reaganomics, Wall Street will skim more from Main Street, get even richer. And yes, you’ll lose more.

2. New ‘big short’ dead ahead: Derivatives con game will crash again

In a Bloomberg story, “Big Short” author Michael Lewis asks: “Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary-trading groups, without so much as a whimper?”

The answer’s simple: Wall Street’s sneaky and will do anything to keep the derivatives casino running hot. Insiders “have no intention of ceasing their prop trading,” according to Lewis. “They are merely disguising the activity, by giving it some other name.”

3. Hedge funds shorting China: Warning — U.S. faces collateral damage

Get it? China may well crash first. Fortune’s Bill Powell interviewed hedge-fund kingpin Jim Chanos of Kynikos Associates, who’s “betting that China’s economy is about to implode in a spectacular real estate bust.” China is “an economy on steroids.” In a Charlie Rose interview, Chanos said “China’s on an economic treadmill to hell.” If so, then all of Wall Street’s highly promoted emerging markets are also sucker bets.

Another hedge-fund player warned: Chanos “is shorting the entire country,” including a company “Goldman Sachs recommended as a buy … the listing for the Hong Kong Stock Exchange … China’s Merchants Bank, one of Beijing’s largest.”

Back in the 1980s, Japan “grew largely on the back of capital investment” and then turned into “a capital-destruction machine, and that’s what China is now. You have an economy that’s 60% fixed-asset investment, and not even in the developing world is that sustainable.”

Chanos won’t pinpoint the timing or the trigger: “He just believes it’s coming,” and he is betting on it. Reminds us of Henry Paulson shorting Goldman Sachs’ crooked deals before the 2008 crash.

4. New insider-trading indictments killing Main Street confidence

Investor distrust of Wall Street’s casino will skyrocket in 2011. Before the elections in November, an AP-CNBC poll found 61% of investors had already lost confidence in the market, thanks to extreme volatility; 55% believe the market’s rigged to favor insiders.

It’ll get much worse as the FBI/DOJ investigations of insider trading add indictments and perp walks. As more facts surface, this could get bigger than Enron and the SEC mutual-fund fraud suits combined: more proof of Wall Street’s rigged game.

5. Banksters’ perfect gambling record proves stocks a rigged game

Last year we reported that Goldman Sachs made more than $100 million in profit a day for 23 days in one month. This year the con game has gotten bolder.

Morici says “J.P. Morgan and Bank of America went through the entire third quarter without a negative trading day, no losing days on proprietary trades. Unless you believe in perfection, something stinks about the information they are using. If someone is winning all the time, then someone else is losing. That’s the ordinary investor. Stocks have become a rigged game.”

Yes, America’s 95 million average investors are suckers in a rigged game.

6. Wall Street is socially worthless, existing only to make insiders rich

In the New Yorker, John Cassidy writes: “Much of what investment bankers do is socially worthless.” Wall Street exists solely “to make itself very, very rich.”

Yes “worthless,” but “for a long time, economists and policy makers have accepted the financial industry’s appraisal of its own worth, ignoring the market failures and other pathologies that plague it.”

Worse, continues Cassidy, “even after all that has happened, there is a tendency in Congress and the White House to defer to Wall Street.” Why? Wall Street’s huge lobbying war chest. Soon all this will come to a disastrous climax, Wall Street will implode on blind greed.

7. The Fed is America’s worst nightmare, a $3.3 trillion moral hazard

Moral hazard simply means no consequences for Wall Street’s complicity in triggering the 2008 catastrophe. As a result, Wall Street insiders came away believing they can take bigger and riskier bets in the future because they will get away with it next time, too.

Why? Because America’s suckers will be dumb enough to bail them out the next time, too, with no consequences when they fail miserably again.

Last week the Fed made the moral-hazard risks more obvious by releasing 21,000 documents showing how an arrogant Ben Bernanke approved $3.3 trillion in cheap-money taxpayer bailouts to incompetent Wall Street banks, blue chips and even banks in Switzerland, France, etc. Bernanke’s making fiscal policy, and he’s a tragic disaster. When President Obama reappointed him last year, we echoed author Nassim Nicholas Taleb, calling it Obama’s worst domestic-policy blunder.

But it can get worse: Caving in to the GOP on Bush tax cuts to the rich will funnel billions more of our tax dollars into the rigged game. Final proof Obama is Wall Street’s co-conspirator in the class war against 300 million average Americans.

8. Wake up to a new normal: no growth, deflation

In his latest newsletter, economist Gary Shilling, a longtime Forbes columnist, warns: “Real economic growth rates of 2% or less are likely through 2011.” But we need 3.3% just to keep up with population growth.

So “high unemployment remains a political problem … with weak economic growth, looming deflation, and the dollar and Treasurys remaining the safe havens in a sea of global trouble.”

Warning: America’s new era, featuring no growth, deflation and a jobless recovery, will continue for years, resembling Japan over the past two decades. Worse, brutal deficit cuts will trigger riots, as in England, France.

9. Privatize Social Security: New GOP Congress loves dumb ideas

Here’s political Reaganomics at its numbest. Alan Sloan writes in Fortune: “Privatizing Social Security: Still a Dumb Idea.” The idea was “slaughtered when George W. Bush proposed it.” Yet many GOP millionaires in the new Congress campaigned on privatization.

“You’d think,” Sloan posits, “that the stock market’s stomach-churning gyrations — two 50%-plus drops in just over a decade — would have shown conclusively the folly of retirees having to bet their eating money on the market. But you’d be wrong.” They’re about to resurrect it. Why? Simple. Because the GOP is the party of the rich.

Yes, it’s that simple: Wall Street’s casino would love to get their hands on another $20 trillion of your retirement money, to gamble in their derivatives casino.

“Why is privatizing Social Security such a turkey?” asks Sloan. “Because retirees shouldn’t have to depend on the market’s vagaries for survival money. More than half of married couples over 65 and 72% of singles get more than half their income from Social Security.” And “for 20% of 65-and-up couples and 41% of singles, Social Security is 90% or more of their income.”

Imagine if our Social Security had been privatized in the 2008 meltdown: It would have done more damage than nuclear warheads, totally wiping out the American economy.

10. Warning: Wall Street will lose another 20% of your money by 2020

We have been making these same arguments for a long time: Wall Street has lost trillions in the stock market since 2000, a year in which the Dow Jones Industrial Average peaked at 11,722. It’s barely at 11,000 today. Adjusted for inflation, Wall Street has lost 20% of your money in the past decade.

Wall Street’s a loser. And, worse, Wall Street will do it again by 2020. That’s right: It will lose another 20% of your retirement money.

Warning: Stocks are a sucker bet at Wall Street’s rigged casino. Buy stocks and lose. In fact, you’ll probably lose more that 20% when the third meltdown of the 21st century explodes. Bigger losses than in 2000 and 2008 combined. When Wall Street’s too-greedy-to-fail banks finally collapse. When they cannot push the second Great Depression downhill one more time. When taxpayers revolt, refusing to bail out our corrupt banking system. When the American people force Congress to return to tough 1930s regulation.

Folks, Wall Street is suicidal. It’s kamikaze. A deadly game of Russian roulette with America’s future. Wall Street’s self-destructive greed is driving America to the edge of total failure. Yet Wall Street’s behavior is so predictable — like a blind addict trapped in denial, unable to see the deadly consequences of his behavior.

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Clapham Junction's picture

Good read, I agreee with it 100%.

I'm 100% sure it's true.


Get it?  BTW, 20% is too low a figure, it will be more like 85%.

masterinchancery's picture

The notion that privatizing SS is dumb is....stupid. Privatizing doesn't, and probably shouldn't, involve equity investments, but it does involve controlling your own funds, which ultimately will be the only way you get the money you earned from a desperate Ruling Class.

trav7777's picture

privatizing SS would deprive the government of its biggest cash cow.  It's not as if they haven't SPENT every dollar in surplus.  Other nations have SWFs, we have pork and diversity.

Voluntary Exchange's picture

Entirely agree (along with 95%+ of population) for no bailout for wall street.  But letting an organized crime syndicate (government) tax anybody is a recipe for slavery.  What you send out you will receive in time. Why can't people who want to "stick it to the rich" learn this basic lesson of reality? Let "voluntary
exchange" be your motto!

chopper read's picture

because, people want to help the poor by giving them more company. 


no debt-based money, no bond market.  no bond market, no front-running.

Fred G Sanford's picture

How about they give me back all the money I have paid into Social Security and I will privatize it?

redpill's picture

They can keep every penny I've already paid in if they would agree not to ever tax me for it again.

Oh regional Indian's picture

How about they me back all the money I paid into SS knowing full well I will never be a recipient of it?

Many folks do not know that most legal immigrants (like I was), pay into the exact same deduction set that a citizen pays.

And by the way, in classic dog follow master style, India's pension funds were given to three large, corrupt finance con-glomerates,to invest for "greater prosperity for your golden years".


Every time I speak to people here, I try to point out the play by play, how it resembles exactly what happened and is happening in the US in particular and the west in general, and all I get is mostly glazed stares and stupid statements like "well, poor people have TV now, isn't that amazing?".

Everything said in this newsletter is true for India, with probably far worse consequences because the populace at large is currently drunk on consumption.

The hangover is going to be U-g-l-y!


Frankie Carbone's picture

Will they skip the country or will we have a chance to get medieval on their asses?

JonNadler's picture

privatize Social Security?

They're trying to nationalize private pensions, it's the other way around?


And yes you can't eat gold or silver, they're going down to 200 and 1.57 respectively. Sell now!

firstdivision's picture

So how did this make it onto  I didn't read anything that said to be bullish in the near-term.

Randall Cabot's picture

He's their token doom-and-gloomer.

chopper read's picture

nothing lifts my spirits like a good doom-and-gloom report!  

Shameful's picture

Hmm I prefer a smile from a lovely young lady, but to each their own :)

chopper read's picture

wish i knew what you were talking about. 

Voluntary Exchange's picture

Yep, that does it for me too!

RockyRacoon's picture

So how did this make it onto

You are obviously not well-read.  Farrell has been a regular for years.

Expand your horizons!

duo's picture

“Much of what investment bankers do is socially worthless.”

That is being too nice. 

1.  Selling something that doesn't exist.

2. Selling the same thing to multiple people at the same time.

3. Misrepresenting something (risk) to misprice it.

4. Insuring a third party's property then burning it down.

I have more respect for the guy with 3 cups, a ball, and a card table on the street corner.

markmotive's picture

Agreed. Financial intermediaries have transformed from facilitators of commerce to commerce itself, leaving a very warped US economy.

Ripped Chunk's picture

"socially worthless"

There is a big jump from this "term" to what they actually do which is destroy society.  Time to put these folks down in the name of progress. Christmas Eve when they are leaving "church" services sounds like good timing to me.

Cheesy Bastard's picture

Or the guy with 3 balls and one extra large cup.

TruthInSunshine's picture

Now on ABC World News Nightly's Money Segment (sponsored by Charles Schwab):

Lester Holt: Stocks lost a little momentum today, and bonds sold off, too. For more on this, we're bringing in our resident Wall Street & Financial expert, James Cramer, to help us understand what is going on.

Thanks for joing us, Jim.

James Cramer: Good to be on, Lester. Thank you.

Lester Holt: What is happening out there, Jim?

James Cramer: Basically, this is a non-event. The economy is firing on all cylinders now, and Bernanke totally nailed it with his '60 Minutes' appearance, where he totally like convinced everyone, and for good reason given his track record of total success, that he is going to make sure we grow GDP at about 63% this year, and we'll have a budget surplus within 6 months, on top of all that.

Lester Holt:  So today's selling was a little pre year end profit taking?

James Cramer: Exactly, Lester. Just buy the fuc...err...I think everyone agrees that there's some tax planning and other dynamics that were the theme today, but this is one strong market, set to explode higher, based on the most solid economic fundamentals that we've ever seen, or have seen in at least 18 days.

Lester Holt: That's great news! So maybe I should think about picking up some cheap Apple or Netflix stock tomorrow? Haha!!

James Cramer:  Exactly, Lester. Or Amazon. Or Crocs. Or Seagate. These are the stocks you want to be in. Just buy the fucking dip, okay?

Lester Holt:  Pardon me, and I apologize to the viewers, but we seem to be having some audio and technical problems...thanks for being on, Jim Cramer.

James Cramer: (in a still very audible, non-technically impaired voice): Look man, strong hands to weak hands. Sheeple shearing time, okay? There is no way these shitbag stocks on this fucking infected festering udder of a cow's tit market are remotely justified at even half these valuations, okay? I got mistresses and shit, and I got a bad nose candy habit..I got kids in private school, and baby needs a new pair of shoes, and New York is fucking expensive, you know what I mean, and in fact, I'm jonesing for some blow right now becau....{screen fades to black}

Lester Holt: Okay everyone, that was James Cramer, and we're obviously having some technical problems. Now a message from TD Waterhouse.

Ripped Chunk's picture

Lester Holt: "Jim, it has taken me a long time to get the courage to say this, but could you let me give you a blow job in the green room? It would really mean allot to me. You must understand the courage it took to reveal my feelings"

Ted K's picture

+1000 and one free ticket all you can eat buffet at CNBC's 1st annual "Butt Buddy Symposium for Hucksters".

QQQBall's picture

The 2011 buffet will be sponsored by Uncle Warren and Berkshire.  Charlie Munger says bring your own dessert sucker. 

malusDiaz's picture

(1) James Cramer reads Zero Hedge and says {Angry Sounds}

merehuman's picture

i love sunshine. ha ha lol i sure got a good laugh out of that. still chuckling. many thanks.

DoChenRollingBearing's picture

I ain´t buying nothin´til I´m back in ´merika.  And not stocks neither.

Maybe a little gold & silver.

velobabe's picture

hey dochen, you should check into WB7 latest article on McCarthyism.

he has a document by:

The Timken Roller Bearing Company

Canton 6, O hi O

don't know date, probably 50's

Roller Bearing business apparently was big back then, and profitability.

HST = McCarthy long live

B A N Z A I....... seven

DoChenRollingBearing's picture

MUCHAS GRACIAS velobabe, I´ll go track it down.

CORRECT that the bearing business is not like it was.  Now it´s practically an oligopoly.

HungrySeagull's picture

I have a google book going back to about 1914 that showed Ball Bearings in particular and the Industry in General. It was BIG. REAL Big!

So big that the Germans were able to buy the tooling and necessary learning to make thier own ball bearing works which were by necessity bombed into oblivion and still they kept making the stuff.

There was a Richmond works where I used to run bearings out of and those things were mighty purty.


Tis a shame that we cannot employ 1000 in a Bearing works, just write a work order to India for a few containers of the stuff for March Delivery. That only takes a few workers.

Oh regional Indian's picture

hey Hungry,

Funny thing is that the bearing order to India will be routed to a Chinese manufacturer, duly stOmped Made and India and trans-shipped via India to your port of call.

I'm here, on ground and can tell you that china makes most of the "stuff" for India too.

Heard of Ali Baba and the 40 Thieves?

Then try alibaba.con

It's quite sad actually.


Bearster's picture

While this article was larded up with some facts, the piece as a whole reads as a screed for government controls.  It pushes the real agenda of "the banksters", Congress, and other ne-er do wells: increase, always increase, the power, size, and scope of the State.

For the record, today's system of regulation, fiat currency, central banks, high-profile Congressional inquiries, lobbying for more protections, etc. is *fascism*.  Mussolini would be proud.

The antidote is not yet more regulation, more enforcement actions, and more litigation.  It is to repeal all of the insane policies, regulations, court precedents, central bank mandates, etc. that make this crooked game even possible.

Parasites cannot exist in a free market.  In order to earn a profit where the counterparty has a choice to do business, or not, or to work with your competitor, you have to *add* value.

Mad Max's picture

No, the real antidote is to hurry up and get on with the collapse that we all know is coming.  The US is far too big and works only for the benefit of a tiny number of elites.  This is how most empires and in fact most societies run to their natural end stage.

The US is collapsing all around us.  The only questions are how fast the collapse will proceed and how.  The long drawn-out collapse benefits the elites while doing only more harm to the rest of us.

Herd Redirection Committee's picture

Well, in an ideal world the regulations would be repealed, but clearly in the world we live it it will take collapse for all the regulations to be annulled.  And then the economy will start to recover, and maybe America will be re-industrialized.

I read a news story they stopped kids selling lemonade on the side of the street.  'Nuff said.  What did those kids learn from that?  Do what the gov't says, be dependent on the gov't, and don't get any 'bright ideas' about entrepreneurship or self sufficiency!

PsychoNews: Exposing the Oligarchy, one Psycho at a time.

cxl9's picture

The antidote is not yet more regulation, more enforcement actions, and more litigation.  It is to repeal all of the insane policies, regulations, court precedents, central bank mandates, etc. that make this crooked game even possible.

Agreed. The problem, of course, is to distinguish "bad laws" from "good laws" since every law benefits some people to the detriment of others. Easiest solution is to just start repealing laws one by one, working backwards from the most recent one passed. Stop when you get to the year 1912 or 4% unemployment, whichever comes first. And close the law schools for a generation just for good measure. We got enough lawyers. Better yet, convert all the law schools to free institutions teaching only Chinese law. Let's ship a few million lawyers over there to wreck their country.

PuppetRepubl1c's picture

"The antidote is not yet more regulation, more enforcement actions, and more litigation.  It is to repeal all of the insane policies, regulations, court precedents, central bank mandates, etc. that make this crooked game even possible."

"Easiest solution is to just start repealing laws one by one, working backwards from the most recent one passed. Stop when you get to the year 1912 or 4% unemployment, whichever comes first."

I agree with your sentiment but laws (as in court precedence) don't just get "repealed".  The only way this has happened historically was with a complete dissolution of the government, as in revolution.

chopper read's picture

too funny!  too perfect!!

Violetta's picture
Violetta (not verified) Bearster Dec 7, 2010 11:10 PM

No, fascism was when they rounded up millions of innocent people and gassed them.

This is different.  We need to invent a new name.

Flakmeister's picture

No that was nazism... Mussolini and Franco were fascists, though admittedly Mussolini was a toadie to Hitler..

The name you are looking for is Corporatism, i.e. a weaker form of fascism

UncleFester's picture

You will have to define weaker in that statement.

Teaser's picture
Paul Farrell's 10 Reasons Not To Buy Stocks Until After The Next Market Crash


Wait, I thought we bought now, and sold after the crash.  Now I am fully confused.

cosmictrainwreck's picture

no, dude, you're in the wrong thread....go over to GS site