4th Post - My views on Stocks continued

I want to make a couple other points about stocks that I want to continue from my last point.

• Timing. Another point I want to make about picking stocks is that you may know that a stock is going up, but you don't know when. A lot of people knew that housing and banks would crash, but the problem is they did not know when. There were a lot of hedge funds who shorted the market in 2006 and 2007. They foresaw the crash but instead the market went up to an all time high in Oct 2007 and the shorts got killed. Of course, it crashed after that. Another variable that makes it hard to predict stocks.
• Wall Street likes to sell. I read an article (see link below) that made remember that even when times are bad, wall street needs trades to happen in order to survive. That is why you should be very weary of analysts saying there is a 2nd half recovery. They need money back in the market in order to survive. They could be right, but you should remember that nobody knows what is going to happen. Take a look at the quotes in this article.
• Fraud. Another reason why it is dangerous to pick stocks. Just now, Satyam Computer Systems got caught for fraud. I don't know how this got past the PWC, a big 4 accounting firm. The company added $1Billion dollars to their financial statements. Now, auditing cash is very easy, you look at the bank statement and you see if they match. How that got past the auditors I do not know. Now, from an investment point of view, say you did your analysis and looked at their financial statements, and picked Satyam. Now, if you cannot trust a company's financial statements, especially something as simple as cash, I am not sure how you can invest in any stock. Now, this also goes against my argument for bonds, since fraud can also affect bonds. This is true, you could lose your money investing in bonds in the case of fraud, but you do have a chance of getting some money back, unlike stocks which you will probably lose all your money. Now, for bonds you can also invest in high yield bond ETFs or funds, that way you can diversify your risk. Here's an article that makes some suggestions.