Battered investors tired of hearing recession over
BY TERRY SAVAGE Sun-Times Columnist Nov 2, 2009
A specialist looks watches as a graph takes a plunge Oct. 21 on the New York Stock Exchange.
Updated: May 3, 2013 12:15PM
The American public is starting to get more than mildly annoyed at those who tell them the economy is bouncing back.
For every economist or politician who tells you the recession is over, there are a dozen people who think we're in the midst of a depression.
For every administration official who points to the success of the stimulus plan in creating jobs, there are many thousands of ordinary citizens in line at the unemployment office.
For every market analyst who debates whether this is a tradeable correction in a bull market rally, there are hundreds of retirees wondering how they will survive on their shrunken IRAs.
And for every pundit who proclaims that things are getting better, there is a University of Michigan or Conference Board survey of consumer sentiment that tells us people are growing more worried.
It's hard to blame the public. They feel they were suckered into buying the stocks that sent their hard-earned money down the drain. They feel anger at those who took the rewards, while they, the American taxpayer, took all the risks. And they are bewildered that the market could rebound as it has, while they are still suffering.
The stock market
It's ironic that the stock market seems to be faltering just when the numbers like GDP start turning up. The stock market always leads the real economy. It did so back in the gloom of March -- telling us that the global financial system really wasn't going down the drain. Lately, the stock market is showing its skepticism toward the economic statistics that point toward growth and recovery.
If you're an investor, it's small comfort to note that you've lived through the worst decade in stock market history -- quite a reversal from recent memory. The decade starting Jan. 1, 1980, produced a 399.5 percent total return. The decade starting on Jan. 1, 1990, produced a 430.8 percent return.
But the decade starting Jan.1, 2000, has so far produced a loss approaching 15 percent! That is astoundingly worse than the 1.7 percent loss posted for the decade starting in 1930! (Statistics courtesy of Jim Stack at Investech.com.)
What's next? Opinion is about equally divided here -- as you see the tug-of war between the bulls and the bears. By the time the market moves definitively, the fear factor (or greed factor) will make it difficult to act. But this is the time -- this week -- to reassess your investment portfolio. Yes, there has been a huge rally. But the S&P 500 still must gain 45 percent to reach its high point of two years ago.
Now, with third-quarter stock and mutual fund statements firmly in hand, it's time to again ask that most important question: Will you feel worse if you sell, and the market moves higher -- or will you feel worse if you don't sell, and the market declines?
This is not an "all-or-nothing" question. You may want to make slight adjustments in the amount of "chicken money" vs. capital you're willing to risk. It's just a reminder that investing blindly leaves you in the dark!
The wide divide
But investment results are not the only gauge of the economy these days. Many people are simply worried about survival. Unfortunately for our future, that has created a wider divide in our society -- and more calls for immediate action on the part of the government. We should be careful what we wish for.
The public antipathy is understandable. People are understandably angry that banks are posting profits on the wallets of consumers who now pay 29.9 percent interest on their credit card balances. And they're angry that those improving corporate profit reports are made possible because companies have shaved costs by cutting their jobs.
Americans can't cheer a stock market rally that grows out of their misery. And they're starting to applaud the comeuppance that Washington is giving to business executives.
Ordinary citizens are getting fed up with the free enterprise system that seems to leave them behind to pay the tax bill, while the bosses get bonuses.
That is the greatest loss of this recession -- the loss of respect for business -- the only engine of growth that can bring us back to lasting prosperity. Sorry to say, Wall Street has only itself to blame. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.