Wall Street’s Biggest Blunders in 2011

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tdp2664 InvestorPlace We all know that bailing out Wall Street has cost U.S. taxpayers hundreds of billions of dollars. But the collateral damage caused by Wall Street propaganda is much higher. How much did investors lose during this summer’s meltdown and why did Wall Street recommend buying before stocks tumbled? More importantly, how can you use Wall Street’s predictions to make money in 2012? The Real Damage Caused by Wall Street “Five Wall Street heavyweights say it’s time for individual investors to shun the perceived safety of bonds and get over their fear of the U.S. stock market so they can take advantage of what they predict will be a third straight year of solid gains for stocks in 2011.” Before you go out and buy stocks, beware that you just read the 2011 outlook printed on the front page of USA TODAY ‘s Dec. 17, 2010, edition. USA TODAY wasn’t the only one distributing Wall Street’s Kool-Aid: “Outlook 2011 — 10 strategists see the S&P 500 finishing next year at 1,373″ — Barrons , Dec. 18, 2010 “Long way from dog days: 2011 might see record Dow” — AP, Dec. 17, 2011 “Greenspan says U.S. economy is gaining momentum, may expend 3.5% next year” — Bloomberg, Dec. 17, 2010 2011 Casualty Report Wall Street’s bullish outlook paid off for the first 34 trading days of 2011, but starting in mid-February, the major U.S. indices — a la Dow Jones, S&P 500, Nasdaq and Russell 2000 — suffered a series of set backs. As the chart of the S&P 500 below shows, there was one major high and one major low along with a number of minor highs and lows within a general trading range. What was Wall Street’s advice right before the May high and the October low? Buckle up, enjoy the ride and get ready to make a brand-new New Year’s resolution. Guilty on All Counts The S&P 500 topped on May 2 at 1,370.58. Ironically, that was the same day Osama bin Laden’s death hit the wire (so much for news driving the market). Here are some headlines found right before the May high: “World revs up U.S. profits” — Wall Street Journal “GE CEO Immelt says global economy is improving” — AP “The S&P 500 breaks out” — Yahoo Breakout “The Dow’s going to 20,000″ — Yahoo “Sales growth the big surprise on Wall Street” — AP “Buffett says odds of another U.S. banking crisis low” — AP Quite to the contrary, the May 1 ETF Profit Strategy Newsletter recommended to go short at 1,369 with a tight stop-loss. This trade was in line with the outlook provided in the April 3 ETF Profit Strategy update: “In terms of resistance levels, the 1,369-1,382 range is a strong candidate for a reversal of potentially historic proportions.” During the next few weeks, the newsletter recommended to lock in profits a couple of times, but most importantly reaffirmed its recommendation to go short before the summer meltdown occurred.