Wall Street for Dummies Jan 31, 2025

I have been a devotee of the Wall Street Journal for over five decades. Back in the day, there was only one section, and it was devoted to things economic and financial. They avoided politics and hyped the notion that investing was Wall Street’s exclusive domain and amateurs need not apply. ?

That was then, and this is now. Today, the WSJ is political, but not radically so. And their financial reporting has opened the door for articles that in the old days would have bordered on sedition. ?

In what follows, I cite three articles that demonstrate the WSJ’s willingness to expose Wall Street’s soft underbelly.

The first article documents Wall Street's fixation with annual stock market predictions. Each December, Wall Street market strategists huddle together like fortune tellers at a séance and forecast how the market will perform during the upcoming year. Then in the following January, the WSJ documents their failures. ?

At the beginning of 2024, the average Wall Street analysts forecast was for a 7.4% market gain. At the end of the year the S&P 500, including dividends, was up 25.2%. However, the article goes on to say that the purpose of these predictions isn't to be accurate???? It's so that brokers can tell their clients, this is what we think the market's going to do. Therefore, you need to do this, which generates income for their firm.

The second article is titled, “The Year That Hedge Funds Got Their Mojo Back.” Hedge funds are the crème de la crème of the money management gurus. They have the biggest computers, massive staffs of Ph.D. math wizards and operate out of reach of the regulators. Last year, the average return for the hedge fund industries 1,123 firms was 10.7%, after fees. This was the best year for the industry in a long time. Before that, the last time they saw double digit gains was 2013.

The third and final article chronicles the performance of the actively managed mutual funds most commonly used by individual investors. The WSJ surveyed 1,215 funds with assets under management of over $800 million and at least a 10-year track record and found that their average return was 16.7%. Sixty funds showed negative returns. Among the top 25 in this year’s listing, only one had appeared there before.

The one article that the WSJ didn’t write, was a documentation that last year 60 million American investors held $4.5 trillion worth of S&P 500 index funds in their discount brokerage accounts and gained 25.2%!!!!

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