I AM NOT BUY STOCKS IN THIS SLOWING ECONOMY
It is now September and I have noticed an increase in the number of negative articles about the economy. Here are a handful I have noticed:
1) This article is about how a record number of people are taking hardship withdrawals from their 401K’s just to get buy. This shows just how bad it is out there all over the country. Taking a hardship withdrawal from your retirement account should never be done because you have to pay income tax on the money AND a 10% penalty.
2) This article details how President Obama’s fiscal decisions and policies are not creating the jobs we desperately need.
3) This article is about Fed Chairman Ben Bernanke saying we need to be ready to start shutting down banks instead of bailing them out if they are going to be hurting the system. Isn’t this the first time we have heard those in charge recommending we shut things down. What happened to bailing them out because they are “too large to fail” or for the good of the country?
4) This article is the one that really tells you how bad things are. It describes how many Democrats in Congress are actually starting to join Republicans in opposing Obama who wants to let the tax cuts expire. When Democrats start voting against raising taxes, you know something is really wrong. These Democrats are starting to understand just how bad it is out there and the economy might spell the end of their careers if they vote to raise taxes.
Why do I bring all these stories up on a blog about how to buy stocks? The reason is because as I have always said, stock prices depend an awful lot on people perceptions and the way they are feeling at the moment.
Yes, most of the time stock prices move the most on concrete news about the economy and the financial conditions of the individual companies. Most of the time, if company XYZ is doing great and making money, the stock price will go up. Conversely if that company is having hard times, the price will go down most of the time.
However, the stock market (and individual stocks) also move on people’s perceptions of how things are going and whether they feel in a buying mood. Right now is one of those times when I feel that people are being bombarded with bad news about the economy where ever they turn. They hear stories on talk radio, on television, and they read in the paper about how jobs are so hard to find and how people are desperately holding on for their lives financially.
Sooner or later, all these stories are going to become overwhelming and it will decrease people’s willingness to buy stocks. In tough times, the best thing is cash and people are going to become much less willing to part with it for a risky stock purchase.
I hope I am wrong but the feeling I have (and have had for months now) is that the stock market is going to go down below 9000 before it goes up. I think people are soon going to realize that the economy is not turning around and the stimulus bill has done nothing but put us further in debt as a country. I am not buying stocks now and I am waiting to see what develops in the coming months.
