Bank of America published a list of stocks to buy before earnings. They promise upside. They did not specify how much upside or when that upside might arrive or whether the upside would exceed the downside that inevitably follows when you take stock tips from a bank that needed a government bailout.
The report exists. Someone at BofA got paid to write it. Someone else got paid to approve it. A third person got paid to distribute it to clients who will now buy these stocks at prices that are higher than they were before Bank of America told everyone to buy them. This is called alpha generation in the financial services industry.
Earnings reports are scheduled to come out soon. Bank of America believes this is relevant information. They have determined that knowing a company will report earnings gives you an edge in the market. Revolutionary stuff. Next quarter they will probably recommend buying stocks before the quarter after that.
The shareholders who snap up these stocks will do so because a bank told them to. The same bank that charges you twelve dollars when you overdraft by thirty cents. The same bank that has compliance departments larger than most state governments. The same bank that somehow still manages to get fined for misconduct every eighteen months like clockwork.
Retail traders will read this headline and think they have been given insider information. They will buy at the top. They will watch the stocks drop after earnings because guidance was soft or margins compressed or some analyst asked a difficult question on the call. Then they will go on Reddit and blame short sellers and market makers and anyone except themselves for listening to Bank of America.
The upside is plenty. Bank of America said so. They would never lie about plenty.
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