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Politics : BuSab
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To: grusum who wrote (5346)11/15/2010 4:33:13 PM
From: Jorj X Mckie  Read Replies (2) of 23934
 
my theory is a little less complex. When people have extra money, they put it in the stockmarket and the market goes up. When they run out of money they stop putting money in the market and it goes down. The condition of the economy has something to do with the overall equation, but its contribution is overstated.

My belief is that the stockmarket can't go very far for a couple of years, even if the economy is in full recovery mode.

Why you ask? Let's come up with a little hypothetical. Let's say that you have Joe Sixer who did great in the 90s, but then got laid off in the 2000s. To keep the family fed and sheltered he uses his credit cards and refinances the house to pull some money out based on the increased equity from the housing boom.

So Joe Sixer increases his debtload significantly. And even with a decent job he is mostly just servicing the interest obligation on his credit cards. Until he wipes out the short term debt, Joe Sixer isn't going to put a dime in the stock market. He's not going to be putting anything into his 401K or IRAs.

And there are the makings of a Japanese style recovery. The economy does fine, but the equity markets can't move because the investing public is stilly trying to get out of debt.

I don't believe that increasing the value of our labor will help the stockmarket. Only the decrease/elimination of debt.
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