Wednesday, November 22, 2006

Link: The Wall Street Guarantee

Nicely said by The Motley Fool on how not to trust Wall Street [firms and analysts]:

  • They focus on the big money and do whatever they can to support those relationships. Their attention and research is geared toward deep-pocketed institutional clients, not average Americans and their retirement cash.
  • They maximize their own returns at the expense of individual investors. Wall Street firms make enormous profits from their venture-capital departments. So when they invest in a small, high-growth company, they'll often delay the IPO to get in on the action before they actually open the company up to the public.
  • They can make markets. There is a supposed wall between research and investment banking departments at the Wall Street firms, but ... [by] recommending positions in stocks in which they make a market, the Wall Street firms make money -- and analysts get higher bonuses.
I am starting to wonder whether this is the main reason for the rich getting richer in America and in the world. They call it a capitalist society for a reason, don't they? It's the capitalists, not the workers nor the average business owners, who are getting the benefit of global development. The average people get "job opportunities", but the high net-worth people get 15%+ annual return on average off their capital (in millions or billions).

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