“I have sworn on the altar of God eternal hostility against every form of tyranny over the mind of man.”–Thomas Jefferson
The markets may reach the moon in their gravity-defying surge but Main Street American consumers aren’t participating. In fact, Americans are pulling their money from the marketplace at record levels–$19 billion in December, another $2 billion in January. This has the “experts” puzzled and has left them groping for answers while offering up total miscalculations to prove Americans wrong.
“There’s a sense of doom,” proclaimed Psychiatrist Richard Peterson, employed by Wall Street banks and investment firms. “Fear is still with us,” states Meir Statman, Santa Clara University professor. “People keep telling me to cash out even when I warn them they are going to lose more money,” said Starmont Asset Management chief investment officer Harvey Rowen. This very bafflement expressed by the experts means they are missing the point.
The financial crisis, that left Wall Street on the surface and never hit Washington, is still ruling the streets and alleys of Main Street. The experts just cannot understand that from their ivory towers. Look at the market volumes (shares traded). A week’s worth of trades at 2012′s average level would not make up a decent day at 2007 levels so each trade today carries the weight of a hundred trades from before.
Americans are leery of the market because they see it not as a manifestation of what is right in America today but as another tool of a lying, cheating, deceitful government. Americans lack faith in their government. When you have something they see as a tool used to perpetrate the lies that they can either opt in on or opt out of, they are opting out in record numbers. But most specifically they are opting out because they simply don’t have the excess income to squander on a bet.
The gurus overlook the fact America is struggling to keep roofs over its head, energy to cool or warm itself and food in the stomach. Until those fears subside or until the problem is rectified, Americans are holding up a big red stop sign.
What is particularly galling is the fact the gurus continue to lean on “past experience” but seem not to realize that current events play a much larger role.
Statman noted the confirmation basis is at work. “When you see a report that confirms what you believe, you digest it. If the reports differ from your belief, you dismiss it.” Great. Fantastic. But wrong analysis doc. Maybe you should come out of your classroom and take a real look at America.
Those students filing dutifully into your lecture hall are going into debt–a debt that is becoming increasingly burdensome and history is teaching likely will never be repaid. Where will they have the money–beyond that needed to survive–to invest?
Oh, that’s right, the jobs market is exploding–per a biased government. The Labor Department routinely adds 50,000 jobs to each month’s report (AP story from February 17, 2012). So Americans take the jobs report and stick it where the sun don’t shine or a pet can use it as the toilet which is all that it is good for. All they know is there are four Americans looking for a job for every one that comes open or is created. Explain how this is not continuing the sense of fear?
All Americans know is when they put gasoline into their vehicles the cost goes up week after week yet the EPA continues to hamper drilling efforts even while other government hacks are touting a resurgence in exploration and the President nixes a pipeline. They ask themselves: Is the government helping or hurting me and mine? Why would they invest is something as nebulous as the stock market?
America knows the Federal Reserve estimates of inflation are wildly inaccurate because all it has to do is wander through a grocery store picking up a loaf of bread, a gallon of milk, a dozen eggs, a pound of beef, a pound of potatoes, a sack of flour and a sack of sugar. It costs almost 50% more today for those items than it did a year ago but Ben Bernanke has the audacity to say “Inflation is not a problem.”
America views government, the stench-filled politics that surround it and the worthless, lack of direction qualifying statements from the bureaucrats, elected officials and the ever-popular “anonymous source” with a proper amount of disgust and loathing.
When the hustle and bustle of a solid economy returns to Main Street, when they can walk into a bank and get more than a quarter of a percent annually on their savings, when the average American can get a job to provide for his dependents, and when America has complete confidence its government is working for it, then maybe America will look to its stock markets again. Until then, they are on their own and no amount of psycho-babble from those still in the la-la land of academia nor all the urgings of politicians will get them to put a toe into the water.
From the OWS crowd to the Tea Party patrons, America is saying the same thing. But those at the top claim we don’t want any news that conflicts with our views when they are the ones with the hearing problem.
Michael McCune spent 16 years as a government tax auditor and then operated a consulting/accounting business for 14 years. For 11 years he wrote a biweekly opinion column for the local paper (1981-1992).