Newspaper article The Evening Standard (London, England)

Brokers Are Betting Blind and May Leave You Broke

Newspaper article The Evening Standard (London, England)

Brokers Are Betting Blind and May Leave You Broke

Article excerpt


CITY stockbrokers offer three categories of advice on shares: Buy, Sell or Hold. They employ the first far more than the second, the last when they aren't sure (often). The snootier brokers instil their recommendations with jargon such as Long-Term Accumulate, which seems to be a way of preparing investors for the strong possibility of the share falling before it rises, in which case a more honest stance would be "we've absolutely no idea".

This industry that was so shamed in the fallout from the dot-com boom has once again been exposed as a pusher of shares banking and otherwise all the way down a miserable bear market.

The share-tip columns of the daily papers are at least as bad, partly because they tend to take their cue from broker notes in the first place, seeking comfort in conformity. City scribblers rely for their views largely on each other and on research that tends to come from places with such a vested interest that its value is highly dubious.

My own share recommendations won't make you rich, but at least they are easy to understand. Back in March I offered: Sell Everything. In a slight concession to optimism, in June I upgraded this to the less gloomy Buy Nothing. That's still my position.

The City has been trying to shake off the notion that it's a casino for some time, but at the moment that's exactly what it feels like. Casinos and betting shops do lose sometimes, of course, when good gamblers work out that the odds have been mispriced. But the point is that they understand the risk they are taking. Skilled card-players know to within fractions of a percentage point what the chances are of their hand winning, so they can gauge whether it is worth having a punt.

At present, it is near-impossible to assess the risks associated with even the most mundane share of even the blandest company. …

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