The market doesn't like the stimulus plan, the bank reorganization plan or the prospective tax plan.
It could be worse. Every month some large share of the 92 percent of Americans who still have jobs put money automatically into their 401(K) and IRA investment instruments. Unless they specify that their money will be held back and saved in Treasury notes or CDs (as many do specify), it is available for fund managers to invest. This is a huge hidden asset for upward momentum in the economy. Without thinking about it much, some people are still voting with their wallets to support growth. Brokers are in the business of assisting them.
Yet it is not enough to save the day, is it?
The reason is as plain as your own motivation, dear reader. Are you investing now? Or are you holding your money back?
If you really believe in the new economic team you should be in the market with all you've got, right? But are you?
Talk to relatives and friends. Are they "in cash" or are they investing? If not, what is the collective result? Is it not the market's seemingly bottomless downturn?
The Administration seems strangely oblivious. Congress has barely enacted a nearly unexamined stimulus plan of unprecedented size and now is talking about needing another. The Congress and the president talk about cutting the deficit by taxing the rich. That, of course, is what Herbert Hoover and FDR did and we had a whole decade of depression. Of course, there were other factors involved in the 30s. But demonizing the people who instead should be wooed--the people who have money to invest and who are too frightened to invest it now--is a very poor economic strategy.
Big government spending cannot turn the economy around, either. Having big business lining up for handouts and promising to accept whatever industrial policy and regulations are thrown at them by sage, experienced businesspeople like Nancy Pelosi and Barney Frank and Chris Dodd will not turn things around. The private economy has to be induced to function, to lend and take reasonable risks (with commensurate rewards clearly possible), to invest in expansions, new ventures and jobs.
A few months ago, for the first time, a majority of rich people, along with (as usual) most media and academics, voted for the Democratic presidential ticket. When these people connect what is happening to their savings, their retirement nest eggs, their funds for children's education, and their charitable dollars, and then start talking turkey to the White House, maybe the message will get through.
But first they need to ponder the question, why am I not investing now?
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