Tom, Some thoughts.
Tom, First of all, thanks for your post and and the
accompanying charts and stuff.
While your charts show this is one of the lowest risk
entry point for stocks in years, I think the the two
things one has to ask is why, and then what is it that
is going to turn things around.
Low risk correlates to periods when investors avoid
risk, (right now in spades)...and periods of high risk
occur when investors embrace risk.
Why are investors avoiding the risk of investing in stocks
as your charts so clearly show? One big answer is Loss of
Investor Trust and Confidence.
1) the game is rigged: From dishonest stock analysts, to
distribution of IPOs to favored clients
2) widespread greed at the corporate level: CEO's and senior
management appropriating the lion's share of corporate
wealth to themselves.
3) fraudulent accounting on a widespread scale: Enron,
Worldcom, Arthur Andersen, etc.
4) dishonest representation: pro-forma earnings, and the
refusal to expense stock options.
I could go on but I'm sure everyone gets the picture.
In fact, the fact that there's more stuff that I could add
to the above list just shows how deep the problems run.
Bush and Cheney assert that the problems on the street are
just the products of a few bad apples. Leaving aside
whether they are right or wrong, all you have to do is
look at what the reaction of Wall St has been, the
reaction of the banking sector, the reaction of Moody's
and S&P, and Fitch's and the bond market, at the reaction
of foreign investors and institutions, at the massive loss
of $7 trillion in wealth and you will know that that is NOT
the perception of those who have big, big money at stake.
What will turn this around?
Getting rid of Harvey Pitt was a good start. Clean up
Wall St. Throw white collar crooks in jail. Tell CEOs to
screw themselves when they go grubbing for obscene pay
packages. Clean up the accounting firms.
Until the above happens, investors overall are actually
behaving rationally when they avoid buying stocks.
Will the above happen? Probably just enough to make a
show of things, and then everything else will get swept
under the proverbial rug.
Will that give the majority of small investors the confidence
to come back into the market? I dunno. You tell me.
Continued..... |
