Quick fixes won't revive stock market
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By John Cunniff
Associated Press
NEW YORK — So why, you might ask, are so many investors relying on a one-half point cut in interest rates and a measly $1.6 trillion tax cut spread over 10 years to bail them out of the great market collapse?
Associated Press
It might take a lot more than that, because something like $4 trillion has disappeared from investor pocketbooks, and not in five years or 10, but in just the one year since the stock market began its lamentable descent.
Brokers use a phone post on the floor of the New York Stock Exchange. The stock market stabilized Thursday but the sell-off continued Friday.
Ask the question and inevitably you are told it will raise confidence, and that might be true. But it will hardly lift it to the irrationally exuberant levels that created those easy trillions. Billions at best.
Investor confidence alone isn't likely to reunite the love affair with stocks. Distrust has been sown, and when it enters any relationship, things are seldom the same. There won't be any irrational exuberance for a while.
For one thing, millions of baby boomers were known to have taken what they felt was their last shot at becoming wealthy.
Now, chagrined, older and nearer retirement, they're not likely to take such risks again. More likely, their confidence will be expressed in slow, steady increments.
U.S. consumer confidence, no matter how its recovers, isn't likely to impress foreign investors. Their nerves frayed in foreign financial wars, they can't be blamed if they call their money home to watch over it.
Institutions such as mutual funds aren't likely to act with the same abandon, bordering on recklessness, that they exhibited during the past few years. Not, that is, if they want to continue handling people's pensions.
No matter what the Federal Reserve does, it shouldn't surprise anyone to see small investors biding their time, disdaining risk, waiting for proof before acting, rather than acting and then seeking justification.
You just don't lose $4 trillion one year and risk everything in an attempt to make it back the next. Maybe it can be accomplished in a few years, but maybe not until a new and fearless generation takes over.
A tax cut and help from the Federal Reserve might bring some color back to the economy and maybe the securities markets. But while the assistance might seem substantial, it seems pale against the challenge.
