Friday, October 08, 2010

What's it going to take to get out of our economic funk? It's contrary to what you think!

We are all concerned about the economy and the stock market. The talking heads on CNBC and other networks like Bloomberg are asking questions like these: Will the Fed's Quantitative Easing work this time when it didn't seem to work last time? What's it going to take to get more confidence back to Consumers? Will the individual investor return to the stock market or have we lost a generation of investors? I have given these questions some serious thought and with my background of understanding people and the psychology that drives them, there are answers which will seem contrary to what the experts in the Fed and the markets are currently providing. Here are some of my answers to these questions.

For confidence to come back, the stock market must go down and have a retest of the lows! It is the only way where people will be convinced that the market is reflecting the economy. Without the drop, which by the way had been predicted by me incorrectly for the past 6-9 months, people believe the markets are being manipulated (which they are) and therefore an unsafe place to invest or to make money. It is the very avoidance of market turmoil, which has driven the lack of confidence in the connection of Wall St. to Main St. I am not saying it won't scare people, but they will feel relieved if there were a successful test of the lows and that there is the all clear sign with respect to investing in the market and the economy. The economy needs a spark right now and the Fed can't provide it. It has shot its wad already and it failed. The government isn't responsible for creating jobs, it's the Private sector. The Private sector won't until the mood of the Consumer is more optimistic and they are spending somewhat more than they have been.

I am afraid without the market drop, hordes of people will stay in a funk, things will remain depressed and many will feel there is no hope of recovering. The world needs the boldness and courage of the American people to lead the world out of this mess. The answer is NOT to try and protect the stock market but to allow it to reflect reality. We need the stock market to fall and retest the lows successfully so that we can reset the psychology of the public.

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Anonymous Anonymous said...

Excellent view. I totally agree with your thoughts because you are describing reality. This is the actuality that make up the charts of the past. A GREAT wave must flush out the undecisivness of our markets that will then be able to show an opportunity of growth of our future to occur.

8:00 AM  
Anonymous Anonymous said...

Here is an added feature to my post above:
I wonder that with the ability for a very large group of heavy duty financiers to manipulate this market Up and DOWN which to actually make large amounts of money in both directions it is going to take a long time for this situation to actually play out before the BIG wave does hit. Comparing today with a past depression are there not many many more big money players actually playing this game than there were back in the depression era?

12:10 PM  
Blogger Charles Amico said...

One would expect there are more Big players now that back in the Great Depression, but that is a guess and the reality is that I don't know. What I do know is that the individual investor has pulled back. Just look at the difference in Volume today versus a year ago or longer. Also just listen to the folks like Charles Schwab and the CEO of Ameritrade who was on CNBC today. He said retail investor has retreated and he doesn't think they will be returning for a while.

12:47 PM  

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