The Invisible Hand Strikes Back

thedailybell.com / By Anthony Wile / December 29, 2012

Bloomberg has posted an article entitled “Americans Miss $200 Billion [by] Abandoning Stocks” that is presumably supposed to illustrate the folly of avoiding equities but in my view merely illustrates the difficulty of sustaining this meme.

And make no mistake, it IS a meme.

The idea that one can simply buy and hold equities like family heirlooms was always suspect and is more-so now. That’s because people simply cannot internalize the reality of a failing economy and a booming stock market. The cognitive dissonance makes them wary.

Thanks to what we call the Internet Reformation, many people are much savvier about how the market works and the way the economy behaves. Such individuals are not apt to assume that the US recession is over just because the mainstream media proclaims it is so. They are nervous and not easily willing to dump large amounts of cash into the stock market.

Who can blame them?

This doesn’t stop Bloomberg from launching articles like this one. The idea of course – the dominant social theme if you will – is that investing is frightening but those with a strong stomach can become wealthy if they just “stay the course.” Here’s more:

Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis …

Assets in equity mutual, exchange-traded and closed-end funds increased about 85 percent to $5.6 trillion since the bull market began in March 2009, trailing the Standard & Poor’s 500 Index’s 94 percent advance.

The retreat shows that even the biggest gain since 1998 failed to heal investor confidence after the financial collapse that wiped out $11 trillion in U.S. equity value was followed by record price swings in equities, a market breakdown that briefly erased $862 billion in share value and the slowest recovery from a recession since World War II. Individuals are withdrawing money as political leaders struggle to avert budget cuts that threaten to throw the economy into a new slump.

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