Leanne Chase poses for a portrait at her home in Boston, Massachusetts November 18, 2010.
Credit: Reuters/Brian Snyder
NEW YORK | Fri Nov 19, 2010 1:08pm EST
NEW YORK (Reuters) - Leanne Chase took her money out of stocks in early June 2008 before the collapse of Lehman Brothers sparked a near-panic. She said she and her husband had the same feeling they had during the dot-com bubble: The market had become just "weird."
Though the couple had been in and out of the market before, Chase, a 42-year-old part-time consultant and self-described conservative investor, said she has no intention of getting back in again.
"It makes me nuts when I get out early and there's more money to be made, or I get out late when I could have made more if I'd gotten out early," she said. "The stock market's not an investment, it's gambling."
The faith -- and money -- individual investors once held in the stock market has severely eroded. Two painful major stock market crashes over the last decade combined with the advent of arcane, complicated trading practices has created widespread suspicion of Wall Street, which many people now regard as no better than a roulette table.
The last crash wiped out all of the gains made during the 2000s after the dot-com wipeout. The worry now is that a Lost Decade will create a Lost Generation of investors who avoid the market in a way not seen since the Great Depression.
If that happens, smaller investors could end up safe -- and sorry. Experts fear people will be unprepared for retirement as a result of their exit from equities. By shunning stocks they may also be helping to create precisely the kind of stock market that ordinary investors rightly detest: one driven by day traders with low volume and prone to sudden reversals in direction.
What's clear is that whatever love affair many Americans may have had with stocks is over, at least for the moment.
By the end of 2008, $234 billion fled equity mutual funds as the stock market spiraled, according to data from the Investment Company Institute (ICI). The last quarter of 2008 was characterized by late-day market drops as a run of client redemptions forced mutual funds to sell their holdings in order to raise cash.
Last year, investors continued to leave even as the market stabilized. At the time, the worst seemed over, with just $9 billion coming out of equities overall and money starting to flow back into international stock funds again.
But losses intensified again in 2010. ICI estimates $19 billion has left mutual funds for the year so far as of the end of August. In September, equity funds recorded their fifth consecutive month of outflows. That sort of thing tends to happen only after a major event: there was a seven-month run of outflows in 2008, smack in the middle of the financial crisis, and an eight-month streak starting October 1987 after Black Monday. This time around, the flash crash may be to blame.
For the most part, investors are eschewing stocks for the perceived safety of bonds and other fixed income assets, trading the possibility of high returns for stability. Bond funds took in an unprecedented $376 billion in 2009 and another estimated $216 billion in 2010 as of the end of August.
WALK ON BY
Although 90 percent of the stock market is owned by 20 percent of the top income earners, according to Citigroup, the perception of public capital markets as the place where capitalism became a democracy has been a cornerstone of America's promise.
Now, as in the wake of the Great Depression, a generation of investors may have become alienated from the stock market.
Sol Malkiel, a costume jewelry wholesaler from Boston, lost what little money he had in the crash of 1929, an experience that was to instill in him a life-long aversion to stocks. Nearly half a century later his son, an economist at Princeton, would publish a book that would rank him as one of the great 20th-century proponents of stock market investing and make him an intellectual light to a generation of America's small investors.
Wall Street has turned a market designed to invest in companies and jobs, and created a huge financial Casino … A Casino that does not create any jobs, and is just a parasite living off the real economy. This article does not mention Credit Default Swaps, Derivatives, or all the other “Wall Street games” available for “investors”. Until Wall Street cleans up the Stock Market, many people will do their gambling in Las Vegas. The Wall Street execs that caused the financial failure in 2007-2008 did not go to jail, or pay back their loot. Instead they gave each other huge bonuses, and just continued business as usual. If Wall Street expects respect from the ordinary investor, Wall Street has to first earn back the people’s respect that it lost.
Wall Street has turned a market designed to invest in companies and jobs, and created a huge financial Casino … A Casino that does not create any jobs, and is just a parasite living off the real economy. This article does not mention Credit Default Swaps, Derivatives, or all the other “Wall Street games” available for “investors”. Until Wall Street cleans up the Stock Market, many people will do their gambling in Las Vegas. The Wall Street execs that caused the financial failure in 2007-2008 did not go to jail, or pay back their loot. Instead they gave each other huge bonuses, and just continued business as usual. If Wall Street expects respect from the ordinary investor, Wall Street has to first earn back the people’s respect that it lost.
“the perception of public capital markets as the place where capitalism became a democracy has been a cornerstone of America’s promise”
Yeah, they’ve been brainwashing us with this capitalism=democracy b.s. since the cradle. Capitalism is perfectly at home in Russia, China, Saudi Arabia, etc. It doesn’t need democracy to thrive. In fact, anything it touches, turns into $$it – music, education, healthcare, food, etc., and causes misery for the many and untold riches for the few, because it inevitably tends toward monopoly models. Just as Karl Marx predicted. You should all pray to J.M. Keynes for suggesting ways of saving capitalism from itself and benefitting societies in the process. Only a strong and vigorous govt. regulatory and enforcement action can make capitalism and democracy work in concert. Keep it small, keep innovative and competitive, and keep a short leash and a muzzle nearby.
I have been an active retail investor since the mid 90s, believe in capital markets when operating correctly and realize that our wealth in this nation is due to hard work and those willing to take risks and build a business and be rewarded for it. Building a successful business couldn’t happen if we didn’t have capital markets to invest in those ideas. That being said, the stock market does not represent that idea. It has become a big gaming system to those that seek to gain wealth at the expense of others, those that flip stocks looking at it as a piece of paper and could care less about the businesses that is involved. The real capital markets are hidden from retail investors as it has moved into the venture capital space and has left the stock market a shell of what it should be. The flash crash was the final straw for me. I lost money as they were stopped out only to see the value return within the same day. I work for a living and do not monitor my investments on a daily basis. When I look at it from a distance what I see is that they basically stole my money that day. Until the day trading shenanigans are reigned in the market has lost the trust of this investor.
I agree the stock market is NOTHING more than a government supported Casino.. but than the government has many of them.. Social Security, Medicare.. both of which you are MANDATED to pay into and are told there won’t be any money for you.. while welfare is a SAFE investment.. you get on and just procreate to collect and get a raise..and MORE benefits.. kinda like the pensions for our Politicians..
Wall Street has become too much of layering, risk and speculation – they may want to consider moving to Las Vegas and merging with the speculators there.
Remove black box trading systems and go back to fractions. Decimalization has had the opposite effect of what they wanted.
Wall Street proved who they were in 2008 when over 80% voted for Obama. So why would investors trust them or the markets today. That’s number one and secondly Obama destroyed the markets when he took over private institutions with his Union thugs. Who in their right mind would trust a Marxist with their money"¦only someone who has complete control of said Marxist? And that’s not the average American.
The market and oil: markets up, oils up, markets down oils down, why support this crap? Oil prices have sucked trillions out of our economy and has a stranglehold on any recovery "¦ market does well, the oil margin increases "¦ say hello to obamaville.
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