In markets, suspicious minds prevail
>>Few investors, professional and individual, are benefiting from this month's stock-index rally. As one hardened trader told me, "For the first time in a very long time, I just don't trust my instincts."<<
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:56 AM ET Aug. 22, 2002
In markets, suspicious minds prevail
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:56 AM ET Aug. 22, 2002
SAN FRANCISCO (CBS.MW) -- Who was it who said there are no rewards or punishments in nature, just consequences?
Individuals are more wary of financial consequences in their personal investment decisions that at any time since the early 1990s recession. Refinance the home -- but what if rates keep falling? Sell the retirement portfolio into the summer rally -- but what if stocks keep rising? Buy new stocks -- but what happens if we go to war with Iraq? Switch to a government-bond fund -- but what if rates start rising?
It's not just investments that carry consequences. Should I buy coast-to-coast round trips for the family holiday -- but what if the airline goes bust? Join that new start-up down the road -- but what if they go bust? Put money into a tax-deferred trust for the kids' college expenses, but what to invest it in?
"I have to say, this is the toughest investment environment I have seen in 30 years," says Jim Salhaney, an individual investor in Omaha, Neb.
Few investors, professional and individual, are benefiting from this month's stock-index rally. As one hardened trader told me, "For the first time in a very long time, I just don't trust my instincts."
Overhanging the jumble of conflicting signals about financial markets, and how accurately those stock, bond and currency market signals reflect the global economy, is pervasive gloom on Main Street.
"Ordinary folks are disgusted with government, corporate America and Wall Street," Bob Chapman, editor of International Forecaster newsletter, tells me. "That is reflected at the voting booth where fewer and fewer citizens care to show up to vote. There has been a large outflow of funds by the average investor from the stock market, which continues."
Above all, as the Elvis song goes, there are plenty of suspicious minds about all financial transactions, and the people behind them.
"The big banks and brokerage firms haven't begun to write off the bad loans," says another individual investor, Joe Digeronimo. J.P. Morgan Chase (JPM: news, chart, profile) still carries Enron debts as a receivable. So why are these bank stocks bouncing back so strong? And on big volumes?"
Sentiment is splitting right down the middle between believers and bears, setting us all up for a dramatic autumn.
"Could it be we are just in a see-saw battle between speculators and long term-investors who are looking to accumulate for the future at bargains?" asks Jim Westerheid, an investor with a sensible, but far from guaranteed, game plan. "The real winner will be the long-term investor who diligently follows his plan and harvests losses -- and repositions so gains going forward don't go to the tax man."
At the very least, most of us are agreed on one thing: Use those capital losses to keep the tax man from reaping a share of future profits. That's the one silver lining in the trail of market consequences for Americans this year.
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