View Invitation to Merrill Lynch Event.
Merrill Lynch tells us:
- What happened? What next?
- Forecast for 2002.
- When will the recession end?
- What do I do now?
- What are the factors of a good stock market?
- How did this bear market compare to others?
- Seating is limited.
Merrill will now offer, “What to do now?” What did Merrill offer to do before?
How big was the financial settlement Merrill Lynch just paid out?
What was it for? Selling ‘dog’ IPOs and other analyst type nonsense?
They flat out ripped people off.
The link above is one amazing piece of promotional literature. Merrill Lynch seems to assume most investors are brain-dead simpletons with short-term memory loss. If Merrill had no clue for the last 5 years, why would they assume anyone would believe their 2002 forecast?
Everybody gets what they want.
Note: The TurtleTrader site will continue to offer a well-rounded slate of positive reinforcement articles along with critique articles. The combination of the two styles helps the learning process. MORE.
What the Invitation Actually Says
The seven bullet points on the Merrill invitation are seven questions that cannot be reliably answered. “When will the recession end?” has no known answer at the time the question is asked. “Forecast for 2002” requires the ability to predict the future, which no analyst at Merrill or anywhere else possesses. “What are the factors of a good stock market?” is so vague as to be meaningless as investment guidance. The invitation presents unknowable questions as if they are questions with knowable answers, and presents Merrill Lynch as the institution capable of providing those answers.
The question that exposes the invitation most completely is the simplest one: “What did Merrill offer to do before?” Merrill had been offering guidance, forecasts, and recommendations throughout the five years of the bubble and its collapse. Their analysts were among the most prominent promoters of the very stocks that subsequently collapsed. The settlement referenced in the original page was the result of those recommendations. After five years of being materially wrong in ways that cost their clients significant money, the same institution is presenting a seminar on “what to do now” with “seating limited” to create urgency.
The closing observation, “everybody gets what they want,” is a precise statement of the dynamic. Merrill gets continued advisory relationships and the commission revenue that flows from clients who believe the next forecast will be more accurate than the last. Clients who prefer confident answers to uncertain questions get the appearance of guidance. Both parties get what they wanted. The transaction satisfies the emotional need for certainty without providing the actual certainty being sold. The clients who lose money in the process paid the price for their preference for comfortable illusions over honest uncertainty.
Trend following offers honest uncertainty: no forecasts, no predictions, no “what next” promises. It offers a process for responding to what markets actually do rather than what they are predicted to do. That process is less comfortable to sell as a seminar invitation. It produces more reliable long-run outcomes.
Frequently Asked Questions
What was the Merrill Lynch settlement referenced on this page?
Merrill Lynch paid a $100 million settlement in 2002 as part of an investigation by New York Attorney General Eliot Spitzer into conflicts of interest between its research analysts and investment banking divisions. The investigation found that analysts had issued positive research recommendations on stocks while privately describing them negatively, in order to maintain investment banking relationships with the companies being rated. The settlement was one of the first major regulatory actions addressing the systematic conflicts of interest in Wall Street research.
Why is Merrill’s 2002 forecast invitation described as assuming investors have short-term memory loss?
Because the same institution that had been materially wrong about markets throughout the bubble and collapse was presenting a new seminar on forecasting without acknowledging its previous track record. The invitation implied that Merrill’s 2002 forecast would be more reliable than its previous guidance, without providing any basis for that improvement. Investors who remembered what Merrill had been saying for the previous five years would have no rational basis for trusting the new forecast.
What does “everybody gets what they want” mean in this context?
It means the relationship persists because both parties receive something they value: Merrill gets ongoing advisory relationships and commission revenue, and clients who prefer confident guidance to honest uncertainty get the appearance of expert direction. The transaction satisfies emotional needs on both sides. The financial cost is paid by clients whose portfolio outcomes reflect the quality of the guidance they received rather than the confidence with which it was delivered.
Trend Following Systems
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