Nine of the Dumbest Statements Ever Made on Wall Street
A list of particularly dumb remarks made by Wall Street insiders and prognosticators shows how dangerous it can be to rely on these sometimes self-appointed and self-interested "experts." You may want to take any of their future comments with a grain (or pile) of salt.
1) "There is no reason anyone would want a computer in their home." (1977)
"There is no reason anyone would want a computer in their home."
-- Ken Olson, founder, Digital Equipment Corp. (DEC), speaking in 1977 about the burgeoning personal computer industry and the ascendancy of its stocks.
Though upstarts like Apple (Nasdaq: AAPL) revolutionized society and eventually made billions of dollars, Olson never was able to re-position his once-mighty company, which made “minicomputers” for businesses. Over the years the floundering company’s assets were sold off to competitors like Compaq. DEC merged with Hewlett Packard (NYSE: HPQ) in 2002, and HP promptly scrapped the DEC name.
2) "Some fear a burst Internet bubble, but our analysis shows that Internet companies... carry expected long-term growth rates twice those of other rapidly growing segments..." (1999)
"Some fear a burst Internet bubble, but our analysis shows that Internet companies account for only 7% of the overall Nasdaq market cap but carry expected long-term growth rates twice those of other rapidly growing segments within tech."
-- Joseph Battipaglia, market strategist with Gruntal & Co., December 1999
Three months later, in March 2000, the high-tech bubble burst and the Internet Index lost two-thirds of its value. All told, the Nasdaq lost 50% in 2000. The companies that Battipagia cited as having those “expected long-term growth rates” were actually just stocks trading at extremely high P/Es, and the companies themselves often weren’t making any money. Many of these companies disappeared, like spit on a griddle, taking investors’ money with them.
3) "Over the next year or two [the stock market] will be higher..." (2000)
"Over the next year or two [the stock market] will be higher, and I know over the next five to 10 years it will be higher."
-- Louis Rukeyser, on CNN, 2000
The S&P 500 Index bounced around the 1400 to 1500 range from March to August of 2000. But in September, it started a slide that would carve off over 44% in two years as the global economy sank. Two years after Rukeyser's statement, the Nasdaq had lost about 70% of its worth. Ten years later, the economy is still fighting its way through the Great Recession, and stocks are still over 24% below their 2000 highs.
4) "...before the end of the year, the Nasdaq and Dow will be at new record highs." (April 2000)
"The bottom line is, before the end of the year, the Nasdaq and Dow will be at new record highs."
-- Myron Kandel, CNN, April 2000
The Dot.com/Nasdaq bubble burst with a vengeance in March 2000, and the declines continued all year. The Nasdaq rose +86% in 1999 and was up another +24% for the year in early March 2000. So, why shouldn’t the good times continue indefinitely? But “experts” like Kandel forgot an immutable rule of investing: prior returns are no guarantee of future performance.
5) "...expectations, should they persist, bode well for continued capital deepening and sustained growth." (December 2000)
"The three- to five-year earnings projections of more than a thousand analysts, though exhibiting some signs of flattening in recent months, have generally held firm. Such expectations, should they persist, bode well for continued capital deepening and sustained growth."
-- Fed Chairman Alan Greenspan, December 2000
Greenspan put a lot more credence in the accuracy of analyst projections than was justified. Instead of going up and up and up, as the usually cryptic Greenspan predicted, the market fell and fell and fell. And then fell some more. In fact, his expectations turned out to be so wrong, he later admitted that his essential beliefs about the market, patterned after the laissez-faire philosophies of Ayn Rand and Adam Smith, were shaken to the core. It was a startling admission for a powerful man once seen as virtually infallible.
6) "The individual out there is actually not throwing money at things that they do not understand..." (March 2001)
"The individual out there is actually not throwing money at things that they do not understand, and is actually using the news and using the information out there to make smart decisions."
-- Maria Bartiromo, CNBC anchor, March 2001
At the time, Maria was talking about the millions of investors piling into tech stocks. But if you cover up the date, her remark could have come from 2007, when investors large and small were buying sub-prime mortgage-backed securities and selling synthetic credit default swaps by the billions.
7) "Let me make it very clear... I am a bull." (August 2001)
"Let me make it very clear. I'm a bull, on the market, on the economy. And let me repeat, I am a bull."
-- Lou Dobbs, CNN, August 2001
Within a year, the Dow lost another -24% in value. In Lou's defense, he couldn't have known that September 11th was just around the corner, which only compounded the economic problems the country was already facing. Today, we still sit hover right around the Dow's August 6, 2001 close of 10,416.
8) "...the company [Enron] is making progress at getting back on track." (October 2001)
"We believe all this bodes well for improved earnings visibility and performance assessment, suggesting that the company is making progress at getting back on track."
-- Ronald Barone, analyst at UBS Warburg, October 2001, commenting on energy giant Enron, after the company reported third-quarter earnings.
The Enron scandal broke that month, eventually leading to the company’s ignominious downfall, wiping out investors and landing its key executives in prison. Instead of being “back on track,” Enron was found to have perpetrated a host of crimes, including hidden partnerships, masked debt and manipulation of energy markets. To see a chart that shows Enron's alarming quick collapse, click here to read Four Stocks That Only Took Days to Crash.
9) "...decisive war will elevate the stock market by a couple thousand points." (June 2002)
"The shock therapy of decisive war will elevate the stock market by a couple thousand points."
-- Larry Kudlow, CNBC, June 2002
Mr. Kudlow also made the sterling prediction that the Dow would reach 35,000 by 2010. History shows otherwise. The Iraq war, which started in the spring of 2003, eventually proved disastrous and a drag on the nation’s economy and stock market. Instead of an elevated stock market, the country faced war-fueled deficits and battered consumer confidence.