Students have surely noted my fascination with markets, and markets are the reflection of the psychology of the population. The stock market picks up on the longer term feelings in monthly and weekly charts, or even the moment to moment feelings in charts from one to sixty minutes. Real estate holders can kid themselves, this past weekend I saw some houses that have been on the market for months and months with only a high ask price, no bids.l The owners are kidding themselves, this would not be the case in a continuous bid and ask market like the stock market. This is why sooner rather than later all these new unsold homes will no doubt go up for a literal auction, the banks will demand payment as the regulators pressure them to get old loans current.
Perhaps you have seen the video of a large school of fish, encountering a possible danger, a shark for example, the entire school will appear to turn on a dime and go the other way. Did the school of fish all turn at once, or did they follow the lead fish? Believe me, it makes a big difference!
Right now the school of stock market fish sense danger. They have sent prices down to levels that would haver been incredibly attractive just a few months ago, many fine companies now pay dividends of 7-9%, others routinely are paying better than bank interest at say 4%. Yet the psychology of the school of fish has radically changed. The buyers at Dow 14,000 just months ago, now recoil in horror at the chance to buy what they own at a 30% discount or more. Have the fundamentals changes that much?
The psychology of the stock and other investing markets swings from greed to hope to fear, reflecting the socionomic POV I have explained. At Dow 14,000 investors were greedy, like the guys running Lehman. At Dow 12,000 they had hope, that prices would come back. At Dow 10,850 just above the 50% level of the entire move from the post 9/11 low, they are gripped with fear, fear that we fall over that abyss in the movie The Deep, falling helplessly into a dark unknown black hole. Let a solution appear, and greed returns running prices back up. Fear grows on uncertainty, markets abhor uncertainty. Prices went nowhere Wednesday, why, no one is buying or selling, no one knows what will happen. Uncertainty reigns,Congress has managed to stop trading in stocks, real estate, cars, and even at the retail level, check out the chart of Home Depot, Target or any other publicly traded retailer. Way to go guys and gals, no leadership there, no wonder public confidence is at an all time low for Congress.
Now, who Willl be the lead fish? The accounting textbooks routinely tell us that accounting pronouncements are political, everyone wants some outcome and lobbies for it. Today we Will see who assumes the mantle of the lead fish. Obama, McCain and Bush are to meet. Obama has said he is going back on the campaign trail, McCain says he is going back to work. Bush Willl be gone in four months no matter what. This will probably be the most important four or five days in the campaign, who will emerge as the lead fish to bring the school of fish, the stock market, out of danger?
As I write calmer voices like Dave Ramsey are suggesting that there are alternatives to a $700 B bailout, particularly with the same clowns in charge that got us in this mess. The more a plan can be crafted away from this knee jerk reaction, the better. Americans are recoiling horror at the idea all these mistakes would be rescued. Ramsey mentions that auctions, changing tax provisions, changing mark to market rules, could all be used as an alternative to a big bond issuing bailout, let's hope such sanguine thinking prevails.
Stay tuned.
e is this laboratory more on display than in the stock market. The stock market, unlike real estate for example. continually displays bid and ask prices, for everything. So it picks up on the longer term feelings in monthly and weekly charts, or even the moment to moment feelings in charts from one to sixty minutes. Real estate holders can kid themselves, this past weekend I saw some houses that have been on the market for months and months with only a high ask price, no bids.l The owners are kidding themselves, this would not be the case in a continuous bid and ask market like the stock market. This is why sooner rather than later all these new unsold homes will no doubt go up for a literal auction, the banks will demand payment as the regulators pressure them to get old loans current.
Perhaps you have seen the video of a large school of fish, encountering a possible danger, a shark for example, the entire school will appear to turn on a dime and go the other way. Did the school of fish all turn at once, or did they follow the lead fish? Believe me, it makes a big difference!
Right now the school of stock market fish sense danger. They have sent prices down to levels that would haver been incredibly attractive just a few months ago, many fine companies now pay dividends of 7-9%, others routinely are paying better than bank interest at say 4%. Yet the psychology of the school of fish has radically changed. The buyers at Dow 14,000 just months ago, now recoil in horror at the chance to buy what they own at a 30% discount or more. Have the fundamentals changes that much?
The psychology of the stock and other investing markets swings from greed to hope to fear, reflecting the socionomic POV I have explained. At Dow 14,000 investors were greedy, like the guys running Lehman. At Dow 12,000 they had hope, that prices would come back. At Dow 10,850 just above the 50% level of the entire move from the post 9/11 low, they are gripped with fear, fear that we fall over that abyss in the movie The Deep, falling helplessly into a dark unknown black hole. Let a solution appear, and greed returns running prices back up. Fear grows on uncertainty, markets abhor uncertainty. Prices went nowhere Wednesday, why, no one is buying or selling, no one knows what will happen. Uncertainty reigns,Congress has managed to stop trading in stocks, real estate, cars, and even at the retail level, check out the chart of Home Depot, Target or any other publicly traded retailer. Way to go guys and gals, no leadership there, no wonder public confidence is at an all time low for Congress.
Now, who Willl be the lead fish? The accounting textbooks routinely tell us that accounting pronouncements are political, everyone wants some outcome and lobbies for it. Today we Will see who assumes the mantle of the lead fish. Obama, McCain and Bush are to meet. Obama has said he is going back on the campaign trail, McCain says he is going back to work. Bush Willl be gone in four months no matter what. This will probably be the most important four or five days in the campaign, who will emerge as the lead fish to bring the school of fish, the stock market, out of danger?
As I write calmer voices like Dave Ramsey are suggesting that there are alternatives to a $700 B bailout, particularly with the same clowns in charge that got us in this mess. The more a plan can be crafted away from this knee jerk reaction, the better. Americans are recoiling horror at the idea all these mistakes would be rescued. Ramsey mentions that auctions, changing tax provisions, changing mark to market rules, could all be used as an alternative to a big bond issuing bailout, let's hope such sanguine thinking prevails.
Stay tuned.
