28 words tell all you need to know about Wall Street’s addictive brain

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Feb. 13, 2013, 12:01 a.m. EST

Dow 17,000? Main Street lambs led to the slaughter

Commentary: Bullish predictions drive Wall Street's casino

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Wharton School economist    Jeremy Siegel, author of two classics, "Stocks For the Long Run" and "The Future for Investors," is one of America's most respected financial minds. He recently told cable channel CNBC that Dow 15,000 was "definite," with 50-50 odds of Dow 17,000 by year-end 2013.

He even doubled down in Kiplinger's: "My Dow 17,000 projection may turn out to be too timid." Now that's real bull, a 20%-plus gain for 2013.

Dow 15,000? Dow 17,000? Irrational exuberance? DNA flaw? Delusional? Or are these predictions just typical marketing hype calculated to drive Main Street's 95 million investors into Wall Street casinos for another end-of-a-bull-market slaughter?

Whoa, stop, take a deep breath before we dissect Siegel's over-the-top Dow 17,000 prediction. First, a refresher course in basic market psychology. Let's remind ourselves: There's a profound difference between the DNA, brains and biases of bulls versus bears.  

A bull brain has a massive blind spot. They can't see the light-at-the-end-of-a-tunnel. Only short-term profits. Wall Street makes money on the action, on volatility. Whether up and down generates opportunities and profits. Bulls blindly hang on till the profitable last drop. Bears do see the light. But once lured into the game, they're blinded by the light. Trapped as both ride over the cliff.

One more time, Wall Street will push everyone to the edge ... and over

Here's a great summary looking inside a bull's brain:

"While the end-of-the-world scenario will be rife with unimaginable horrors," predicts the CEO of a leading Wall Street bank, "we believe that the pre-end period will be filled with unprecedented opportunities for profit."

Profits, profits, profits ... get it? Bulls may see the end of a rally, end of a bull cycle ... but till the very last unpredictable minute, they'll squeeze every last ounce of profits out of the casino ... and into their pockets.

And they honestly believe they can get out well ahead of all the little investors who are always left holding the bag ... America's 95 million average investors who naively believe predictions like Siegel's Dow 17,000 for 2013 ... who get stuck with heavy losses in the next recession ... till Wall Street starts hyping a new bull market.

Can you guess which bank CEO concluded, "We believe that the pre-end period will be filled with unprecedented opportunities for profit?" It was a CEO in the Cartoon Bank. Actually, that prediction was made by the New Yorker magazine's Robert Mankoff who brilliantly captured the behavioral science problems with Wall Street's brain.

28 words tell all you need to know about Wall Street's addictive brain

Read it, commit it to memory ... those 28 words are everything you will ever need to know about behavioral economics ... everything about what a neuroscientist sees in the brain scans of high-frequency derivative traders ... about the all-consuming addiction driving Wall Street bank CEOs ... about the obsessions that drive financial lobbyists to block all regulation reforms ... even the fierce war against the environment waged by corporate CEOs ... everything you can ever imagine about the stock market's ever-increasing volatility, wild disastrous swings ... everything you need to know about why, inevitably, Wall Street's profits addiction and $100 million trading days will drive America over a new 1929-style cliff and into a new Great Depression II.

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The house always wins at the Wall Street casino.

Behavioral economics isn't complicated. The DNA in Wall Street's brain is simple: Markets go up. Markets go down. Wall Street knows how to get rich in up and down markets. Their casino makes money skimming a third off the top. On the way up or down. And when the end comes, Wall Street bulls are always several steps ahead of Main Street's 95 million naive investors. So the house always wins at the Wall Street casino.

No, we're not predicting the end of the world. That's not the point of our behavioral economics lesson. Rather we want you to visualize Wall Street's brain in action, see what their brains are doing every microsecond, every minute, of every day. Throughout 2013. For all eternity.

Their brains are your worst enemy, plotting their next move in the stock market, to take maximum advantage of your naivete, smiling as they say: "While the end-of-the-world scenario will be rife with unimaginable horrors, we believe that the pre-end period will be filled with unprecedented opportunities for profit." So you trust, invest in their money-losing casinos.
11 reasons Dow 17,000 prediction creates a "sucker's rally" in our minds

A long 10 months ago USA Today's mutual fund guru John Waggoner said in his column "the bull market was now in its fourth year." That reminded us of something Bill O'Neil, the publisher of Investors Business Daily, said in the first edition of his classic, "How to Make Money in Stocks": "During the last 50 years, we have had 12 bull markets and 11 bear markets ... The bull markets averaged going up about 100% and the bear markets, on the average, declined 25% to 30%,"And "the typical bull market lasted 3.75 years and the classic bear market lingered only nine months."

Get it? This aging bull is now way past retirement age, ripe for a lengthy bear. And yet bulls like Jeremy Siegel want us to believe the rally in stocks (which rocketed over 100% since March 2009) can go up another 20%, at least to 15,000.

More likely, that will lure you into a suckers rally, where the bulls just keep hyping the good times so every naive investor left will finally pile in, fearful they're missing the race to 17,000 ... forgetting the dot-com disaster in 2000, forgetting the huge losses after the subprime mortgage disaster of 2008.

http://www.marketwatch.com/story/dow-17 ... 2013-02-13