A Bear Market For The Ages, With Inflation As Bonus

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The Wall Street Journal was good enough to point out that the stock market now trades where it did in 1999. This puts investors in a similar place to where they were in the 1970s and 1930s when the markets had similar slumps.

Analytic wizards are quick to point out that stocks now under-perform bonds, gold, Treasuries, and baseball trading cards. But, that is not the worst of it.

The term "perfect storm" was coined by underpaid weathermen and Hollywood screen writers. There is no such meteorological phenomenon, but it must be starting to feel that way to the consumer. With oil prices and the commodities used in food and manufacturing moving up sharply, the average citizen can no longer turn to his home for capital. That leaves his mutual funds, stocks, and IRA. The value appreciation there is probably not much better than it is for his house.

But, bear begats bear. If a person needs cash and cannot sell his house that leaves his stock portfolio. The value of that is down, but it is probably not at zero. As consumers get panicky, fearing for their jobs and unable to make ends meet because they are so far into debt, they will sell stocks, even at a loss.

Fear fuels a falling market, and there is plenty to go around.

Douglas A. McIntyre