Will the market crash in 2011

[zap]

http://money.msn.com/stock-broker-guided/a-market-crash-in-2011-count-on-it-marketwatch.aspx



A market crash in 2011? Count on it
The bullish forecasts are dangerously wrong. Psychologically, it's hard for investors to ignore the happy talk and pull back from the market, but they should do so soon.


Politicians lie. Bankers lie. Yes, they're liars. But they're not bad; it's in their genes, inherited. Their brains are wired that way, say scientists. Like addicts, they can't help themselves. They want to sell stuff, get rich.

We want to believe they're telling the truth. Silly, huh? We're trapped in this eternal "dance of death," controlled by programs hidden deep in our brains, telling us what to do, telling us to ignore contrary facts -- until it's too late, until a new crisis crushes us.

Psychology offers a powerful lesson: Our collective brain is destined to trigger a crash before Christmas 2011. Why? We're gullible. We keep searching for truth-tellers in a world of liars. We let them manipulate us into acting against our best interests.


What is behavioral economics?

In fact, behavioral science tells us that bankers and politicians are lying to us 93% of the time. It's 13 times more likely that Wall Street is lying to you than telling you the truth. That's why they win, and why we lose. Our brains are programmed to cooperate in their con game.

One of America's behavioral finance gurus, Richard Thaler of the University of Chicago, explained it this way: "Think of the human brain as a personal computer with a very slow processor and a memory system that is small and unreliable."

Thaler is a quant who speaks mostly in cryptic algorithms. So if you really want to know how Wall Street's con works, listen to Barry Ritholtz, the financial genius who wrote the book "Bailout Nation."

Ritholtz summarized things in a Feb. 6 column in The Washington Post. "We humans make all the same mistakes, over and over again," he wrote. "It's how we are wired, the net result of evolution. That flight-or-fight response might have helped your ancestors deal with hungry saber-toothed tigers and territorial Cro Magnons, but it drives investors to make costly emotional decisions."


Humans have something "akin to brain damage," Ritholtz continued. "To neurophysiologists, who research cognitive functions, the emotionally driven appear to suffer from cognitive deficits that mimic certain types of brain injuries. . . . Anyone with an intense emotional interest in a subject loses the ability to observe it objectively: You selectively perceive events. You ignore data and facts that disagree with your main philosophy. Even your memory works to fool you, as you selectively retain what you believe in, and subtly mask any memories that might conflict."

Worse, there's no cure.

Examples: USA Today headline: "Average bull is 3.8 years: We're not at 2 yet." More upside. Wall Street loves it. And from The Wall Street Journal: "Stock recovery in high gear . . . S&P 500 now speeding toward its next landmark."

Other lies: Inflation and rising interest rates won't push China and America over the edge and into a new bear recession. That one is popular in Wall Street's echo chamber. Wall Street also cheers every time cable TV pundits and journalists repeat this favorite statistic: Stocks rally in the third year of a presidency, often more than 20%.

The biggest lie? Perennial bull Jeremy Siegel of "Stocks for the Long Run" fame recently told a TD Ameritrade conference, "There's nothing but upside to come (and) the next several years are going to be good for stocks."

Yes, one of Wall Street's favorite co-conspirators is hypnotizing thousands of our best money managers and advisers into believing the lie that this bull market will roar indefinitely. Worse, they in turn will use that message to sell naive investors on whatever junk Wall Street is selling.

Get the picture? A little conspiracy begins in your head, a conspiracy between your gullible brain and Wall Street's con men selling hype, hoopla and happy talk. Listen and lose.

Warning: This little conspiracy is a retirement killer. So listen to some highly respected contrarians. They're short-selling this conspiracy, betting that 2011 will hit headwinds before Christmas, turning a cyclical bull rally into a cyclical bear market.

Remember, we can't help it. Our brains are defective, biased, manipulated by unseen forces. So blame all the lies, lying and liars on our brain wiring. A perfect excuse. Sure, political dogma and insatiable greed factor into our bizarre mental equations.

Go back a few years: The subprime credit meltdown was widely predicted. In 2007, for example, the IMF's chief economist, Raghuram Rajan, warned the world's top bankers that financial markets were headed for doom. But they laughed it off.

[MNeagle]

This too:

2 years after market low, the little guy is back

CHICAGO – As a historic bull market reaches its second birthday, everyday investors are piling back into stocks, finally ready for more risk and hoping the rally has further to go.

The Standard & Poor's 500 index has almost doubled since March 9, 2009, when it hit a 12-year low after the financial crisis. And the Dow Jones industrials are back above 12,000, about 2,000 points shy of their all-time high.

Little-guy investors appear to be on board. Since the beginning of the year, investors have put $24.2 billion into U.S. stock mutual funds, according to the Investment Company Institute. They withdrew $96.7 billion in 2010.

"It didn't feel right to be back in until now," says Richard Dukas, who heads a public relations firm in New York City. "I still don't want to put all my money in the market, but I believe we've come through the worst of it."

After the 2008 financial meltdown, Dukas and his wife converted their 401(k) retirement accounts into cash. They had been burned during the bubble in technology stocks a decade ago, and Dukas says he has been "extremely skittish" ever since.

Now Dukas, 48, says 85 percent of his portfolio is back in mutual funds, although he maintains a small cushion of cash.

More job security, strengthening retirement account balances and improvement in the overall U.S. economy are some of the factors that have brought everyday investors back to the market. A snapshot of what's happened:

• The outlook of investors as measured by stock newsletters and market surveys has been extremely bullish for two or three months, says Mark Arbeter, chief technical strategist for S&P Equity Research.

• Many workers have enjoyed seeing their 401(k) balances return to where they stood at the market's peak because they kept contributing during the down years. Many who have maintained their 401(k) accounts for a decade or longer still have some ground to make up because of their larger starting balances.

• Americans who still have jobs are as secure as they've been in 14 years. That's because the number of planned layoffs has fallen to a low, according to outplacement firm Challenger, Gray & Christmas.

The combination has boosted confidence and brought investors back to a rising market. The Dow closed Tuesday's trading at 12,214, up 87 percent from the 2009 low. It's still 14 percent below its all-time high in October 2007.

While the economy is improving, it will take a lot longer to erase the abject fear that average investors have felt about owning stocks the last two years, says Jason Trennert, chief investment strategist for Strategas Research Partners in New York.

One reason to set aside their reservations: They can't find a better place to stash their money. The bull market in bonds has ended, money-market accounts are returning 1 percent or less, and the average two-year CD earns no more than 1.5 percent.

As a result, many investors returning to the market are tiptoeing back in. They're buying what Trennert calls "stocks that look like bonds" — dividend-paying blue chips that they hope will hedge their risk by guaranteeing at least a dividend payout.

For example, while stocks like Johnson & Johnson and Procter & Gamble haven't gone up much since 2009, their yields — 3.5 percent and 3.1 percent, respectively — mean investors can still pocket something.

"What swayed me is being frustrated having my money parked where it's earning almost nothing," says Debra Condren, a New York business consultant, who has been easing back into the market over the last four months. She still has only 30 percent of her investments in stocks, compared with 80 to 85 percent before the crash.

Besides reinvesting gradually, Condren says she's much more vigilant about her stocks. She says she won't hesitate to sell if she doesn't like what she sees in the market or senses a shift based on world events.

Among professional money managers, the shift back into stocks has been more dramatic. A February survey by Bank of America-Merrill Lynch of 270 top investment managers found them more bullish about stocks than at any time in the past decade.

But history shows experts may not have better insight about what's next. Plus, individual investors notoriously follow the crowd. So is it a worrisome sign that they're flocking back?

"Investors have the tendency to make the wrong decisions behaviorally," says Christopher Geczy, academic director of the Wealth Management Initiative at the University of Pennsylvania's Wharton School.

When they pile in or out of stocks, he says, it often signals that the market is about to turn in the opposite direction. For instance, investors pumped nearly $91 billion into stock funds in 2007, just as the market was reaching its all-time peak.

Yet analysts point to signs that the run could keep going for quite a while, as long as the economy cooperates. Corporations are still sitting on billions of dollars in cash that they may ultimately put to work in the market.

The S&P 500 has an average gain of 17 percent in the third year of a presidential cycle. But the market also tends to grow much more slowly in the third year of a bull run.

Stock prices are still not high by historic standards. The S&P 500 index now trades at 15.6 times the operating earnings of its stocks over the past year, well under the historical average of 19.3.

There are plenty of investors still looking for an opportunity to get back in. Kenneth Kracmer, who owns a marketing firm in Dallas, is restless after cutting his stock allocation by half, to 30 percent.

But he worries about unemployment, state governments in financial distress and a market he sees as artificially high in view of all the challenging economic news.

Other investors are clearly on edge, too. Before Tuesday, the market had fallen nearly 3 percent in two and a half weeks because of concerns about unrest in the Middle East.

"I want to play it smart until there's a little bit of economic certainty," Kracmer says. "I don't want to get in just before another drop."

http://news.yahoo.com/s/ap/20110308/ap_on_bi_ge/us_bull_market_anniversary

[uncletonoose]

This too:

2 years after market low, the little guy is ba

CHICAGO – As a historic bull market reaches its second birthday, everyday investors are piling back into stocks, finally ready for more risk and hoping the rally has further to go.

The Standard & Poor's 500 index has almost doubled since March 9, 2009, when it hit a 12-year low after the financial crisis. And the Dow Jones industrials are back above 12,000, about 2,000 points shy of their all-time high.

Little-guy investors appear to be on board. Since the beginning of the year, investors have put $24.2 billion into U.S. stock mutual funds, according to the Investment Company Institute. They withdrew $96.7 billion in 2010.

"It didn't feel right to be back in until now," says Richard Dukas, who heads a public relations firm in New York City. "I still don't want to put all my money in the market, but I believe we've come through the worst of it."

After the 2008 financial meltdown, Dukas and his wife converted their 401(k) retirement accounts into cash. They had been burned during the bubble in technology stocks a decade ago, and Dukas says he has been "extremely skittish" ever since.

Now Dukas, 48, says 85 percent of his portfolio is back in mutual funds, although he maintains a small cushion of cash.

More job security, strengthening retirement account balances and improvement in the overall U.S. economy are some of the factors that have brought everyday investors back to the market. A snapshot of what's happened:

• The outlook of investors as measured by stock newsletters and market surveys has been extremely bullish for two or three months, says Mark Arbeter, chief technical strategist for S&P Equity Research.

• Many workers have enjoyed seeing their 401(k) balances return to where they stood at the market's peak because they kept contributing during the down years. Many who have maintained their 401(k) accounts for a decade or longer still have some ground to make up because of their larger starting balances.

• Americans who still have jobs are as secure as they've been in 14 years. That's because the number of planned layoffs has fallen to a low, according to outplacement firm Challenger, Gray & Christmas.

The combination has boosted confidence and brought investors back to a rising market. The Dow closed Tuesday's trading at 12,214, up 87 percent from the 2009 low. It's still 14 percent below its all-time high in October 2007.

While the economy is improving, it will take a lot longer to erase the abject fear that average investors have felt about owning stocks the last two years, says Jason Trennert, chief investment strategist for Strategas Research Partners in New York.

One reason to set aside their reservations: They can't find a better place to stash their money. The bull market in bonds has ended, money-market accounts are returning 1 percent or less, and the average two-year CD earns no more than 1.5 percent.

As a result, many investors returning to the market are tiptoeing back in. They're buying what Trennert calls "stocks that look like bonds" — dividend-paying blue chips that they hope will hedge their risk by guaranteeing at least a dividend payout.

For example, while stocks like Johnson & Johnson and Procter & Gamble haven't gone up much since 2009, their yields — 3.5 percent and 3.1 percent, respectively — mean investors can still pocket something.

"What swayed me is being frustrated having my money parked where it's earning almost nothing," says Debra Condren, a New York business consultant, who has been easing back into the market over the last four months. She still has only 30 percent of her investments in stocks, compared with 80 to 85 percent before the crash.

Besides reinvesting gradually, Condren says she's much more vigilant about her stocks. She says she won't hesitate to sell if she doesn't like what she sees in the market or senses a shift based on world events.

Among professional money managers, the shift back into stocks has been more dramatic. A February survey by Bank of America-Merrill Lynch of 270 top investment managers found them more bullish about stocks than at any time in the past decade.

But history shows experts may not have better insight about what's next. Plus, individual investors notoriously follow the crowd. So is it a worrisome sign that they're flocking back?

"Investors have the tendency to make the wrong decisions behaviorally," says Christopher Geczy, academic director of the Wealth Management Initiative at the University of Pennsylvania's Wharton School.

When they pile in or out of stocks, he says, it often signals that the market is about to turn in the opposite direction. For instance, investors pumped nearly $91 billion into stock funds in 2007, just as the market was reaching its all-time peak.

Yet analysts point to signs that the run could keep going for quite a while, as long as the economy cooperates. Corporations are still sitting on billions of dollars in cash that they may ultimately put to work in the market.

The S&P 500 has an average gain of 17 percent in the third year of a presidential cycle. But the market also tends to grow much more slowly in the third year of a bull run.

Stock prices are still not high by historic standards. The S&P 500 index now trades at 15.6 times the operating earnings of its stocks over the past year, well under the historical average of 19.3.

There are plenty of investors still looking for an opportunity to get back in. Kenneth Kracmer, who owns a marketing firm in Dallas, is restless after cutting his stock allocation by half, to 30 percent.

But he worries about unemployment, state governments in financial distress and a market he sees as artificially high in view of all the challenging economic news.

Other investors are clearly on edge, too. Before Tuesday, the market had fallen nearly 3 percent in two and a half weeks because of concerns about unrest in the Middle East.

"I want to play it smart until there's a little bit of economic certainty," Kracmer says. "I don't want to get in just before another drop."

http://news.yahoo.com/s/ap/20110308/ap_on_bi_ge/us_bull_market_anniversary


It will be like taking candy from a baby! The sheeple will never learn!

[osoab]

http://www.youtube.com/watch?v=28I0JK0byLU

[jimswift]

"What swayed me is being frustrated having my money parked where it's earning almost nothing,"

Reckon she doesn't have a metals ticker on her computer.

Mine doesn't "earn" anything either, but I'll be damned if priced in FRN's it keeps going up. :dunno

[mightymanx]

The next herd has matured and are ready for slaughter.