The market continues to post impressive gains of late, which has made for some nice day trading opportunities. Just looking at the chat boards, it’s my guess that John Q. Public has sat this one out, though.
And that would be typical.
Individual investors tend to exit the market during a prolonged downturn toward the end of the cycle, especially the one last year. That is baffling to me, too. Once you have lost 50% of your money, really, what do you have to lose? Selling only locks in the loss. But that is a typical investing pattern when small investors are run out of the market, and, they fail to jump in when the market trends upward.
If I were a long term investor, this market is a little scary, and Nouriel Roubini is once again issuing warnings about our economy.
The latest run up has made me grateful I am a day trader and scalper, because being in this market more than 15 minutes just plain scares me. The government has, as usual, pursued a policy of accommodation for the big investment banks, including giving them all billions of dollars to stay afloat. Whenever Wall Street bankers get their firms in trouble, be it junk bonds, credit default swaps, the leaders of our country are quick to dole out cash to bail them out. It’s always been that way, and keeping the Fed Funds interest rate at zero has been a boon to the investment banks community. I would also note that it has done absolutely nothing for Main Street citizens of our country.
Okay, I’ll get off the soap box. Here is the problem, though…
The market has gone up 50%+ since March, and the primary reason for this run up has been a policy of economic accommodation for Wall Street. I see nothing in the economy that is noticeably better since the most recent recession started. Unemployment is at an all time high, foreclosure rates continue to sky-rocket and the consumer has, by most measures, kept his credit card in his/her wallet.
The stock market, though, has continued it’s climb while Main Street suffers through the doldrums of the recession. Now you could argue that the market is pre-cursor of better times, that the market is a leading indicator, so to speak. Then again, you can also make a cogent argument that this run up is nothing more than a bubble of artificial origin. Unfortunately, Nouriel Roubini has made the latter argument, and he had a handle on the original problems last year. I hope he is wrong.
I would feel much better, though, if our government gave up it’s love affair with the banking community and investment bankers in general. These buffoons have a penchant for loading risk on their dinner plate and then come asking for an antacid when they get a stomach ache. If, or when this market collapses, at least the smaller investor won’t be effected so directly. There is some comfort in that.
I would point out that collapse is not imminent, but at some juncture the disconnect between Wall Street and Main St. will bear noxious fruit.
