Don't Listen to Wall Street Stock Recommendations
Wall Street is not trying to give honest advice on which companies to buy
Over the last 20 years, the way Wall Street gives stock recommendations has changed for the worse.
What used to be a trusted source of smart insights about companies has turned into something that’s often biased and full of conflicts.
It’s All About Keeping Companies Happy
Analyst recommendations are not designed to help investors outperform. They’re designed to maintain banking relationships, avoid upsetting corporate clients, and keep the deal pipeline flowing.
The numbers show this bias clearly. For big stocks in the S&P 500, about 50% get “buy” ratings, 45% are “hold,” and only 5% are “sell.”
That’s weird because in reality, half of stocks do worse than the market average, and about 30% lose money. Even in tough times like market crashes, “sell” ratings barely go up.
Wall Street is not trying to give honest advice on which companies to buy. They are using their stock recommendations more like a tool to keep companies happy and bring in business.
They want to keep good relationships with companies that might hire their bank for deals.
It’s like they’re cheering for teams that pay their bills, which isn’t fair to everyday investors.
Scandals that Exposed Wallstreet Corruption
Back in the dot-com boom of the late 1990s, things got really bad. Analysts were pushing stocks they knew were junk just to help their banks. For example:
Henry Blodget at Merrill Lynch hyped internet companies in public but called them “junk” in private emails. He got banned for life and had to pay $4 million.
Jack Grubman at Salomon Smith Barney earned $25 million a year and kept saying “buy” on failing telecom stocks. He even changed a rating to help get his kids into a fancy preschool!
The Enron disaster in 2001 was a huge wake-up call. This energy company faked $74 billion in assets through shady accounting, but analysts didn’t spot it. They just repeated what Enron said without digging deeper, partly because their banks wanted Enron’s business. Investors lost billions.
Then there was WorldCom in 2002, with $11 billion in fake accounting. Analysts ignored warning signs like weird “prepaid capacity” tricks, leading to $180 billion in losses when the company went bankrupt. No one asked the tough questions.
These stories show how money and pressure can make smart people ignore the truth.
Beyond the big picture, this puts individual analysts in tough spots. Even if they want to do good work, they face pressure to play nice, which can hurt their careers.
At CI Volatility
If you want real edges, you need signals that come from market behavior itself, not from conflicted opinions.
That’s exactly what CI Volatility focuses on.
Instead of trusting analysts who are incentivized, CI Volatility uses data-driven volatility signals and real-time indicators to profit from how markets actually move.