The Real Crisis: "People Have Lost Trust In The Government And The Market"

Tyler Durden's picture

The death of the 'cult of equities' was a popular topic this year among both fringe blogs and the best-known institutional asset managers and sell-side strategists. As AP discusses in this excellent article, ordinary Americans - defying decades of investment history - are selling stocks for a fifth year in a row. It's the first time ordinary folks have sold during a sustained bull market since relevant records were first kept during World War II. The answer is both complex and simple but summed up best by a former stock analyst's comment that in order to buy stocks "You have to trust your government. You have to trust other governments. You have to trust Wall Street, and I don't trust any of these." With Fed policy trying to force investors back into stocks (at any cost), a former fund manager notes, presciently that, "When this policy fails, as it will, baby boomers will pay the cost in their 401(k)s." Are we the new 'Depression Babies'? We suspect so.


Investors, as you well know, are leaving the equity markets in droves...

Based on AP's calculations, individuals accounted for 40 percent to 50 percent of money going to U.S. stock ETFs in recent years.


If you assume 50 percent, individual investors have put $194 billion into U.S. stock ETFs since April 2007. But they've also pulled out much more from mutual funds - $580 billion. The difference is $386 billion, the amount individuals have pulled out of stock funds in all.


If you include the sale of stocks by individuals from brokerage accounts, which is not included in the fund data, the outflow could be much higher.

But why are investors not buying the propaganda this time and jumping in with both hands and feet...

"You have to trust your government. You have to trust other governments. You have to trust Wall Street," says Neitlich, 47. "And I don't trust any of these."


Defying decades of investment history, ordinary Americans are selling stocks for a fifth year in a row. The selling has not let up despite unprecedented measures by the Federal Reserve to persuade people to buy and the come-hither allure of a levitating market. Stock prices have doubled from March 2009, their low point during the Great Recession.


It's the first time ordinary folks have sold during a sustained bull market since relevant records were first kept during World War II, an examination by The Associated Press has found.


"People don't trust the market anymore," says financial historian Charles Geisst of Manhattan College. He says a "crisis of confidence" similar to one after the Crash of 1929 will keep people away from stocks for a generation or more.

What is at the core of this mistrust or doubt?

People who think the market will snap back to normal are underestimating how much the Great Recession scared investors, says Ulrike Malmendier, an economist who has studied the effect of the Great Depression on attitudes toward stocks.


She says people are ignoring something called the "experience effect," or the tendency to place great weight on what you most recently went through in deciding how much financial risk to take, even if it runs counter to logic. Extrapolating from her research on "Depression Babies," the title of a 2010 paper (embedded below) she co-wrote, she says many young investors won't fully embrace stocks again for another two decades.


"The Great Recession will have a lasting impact beyond what a standard economic model would predict,"

But it's not just ordinary folks, its professional investors too...

Public pension funds have cut stocks from 71 percent of their holdings before the recession to 66 percent last year, breaking at least 40 years of generally rising stock allocations

as old 'lessons' or myths are dismissed...

And old assumptions about stocks are being tested. One investing gospel is that because stocks generally rise in price, companies don't need to raise their quarterly cash dividends much to attract buyers. But companies are increasing them lately.


Dividends in the S&P 500 rose 11 percent in the 12 months through September, and the number of companies choosing to raise them is the highest in at least 20 years, according to FactSet, a financial data provider. Stocks now throw off more cash in dividends than U.S. government bonds do in interest.


Many on Wall Street think this is an unnatural state that cannot last.

As it seems, for once, a positive lesson is being learned...

"People aren't looking to swing for the fences anymore," says Gary Goldstein, an executive recruiter on Wall Street, referring to the bankers and traders he helps get jobs. "They're getting less greedy."


The lack of greed is remarkable given how much official U.S. policy is designed to stoke it.

But the powers that be are not happy about it...

"Fed policy is trying to suck people into risky assets when they shouldn't be there," says Michael Harrington, 58, a former investment fund manager who says he is largely out of stocks. "When this policy fails, as it will, baby boomers will pay the cost in their 401(k)s."

So, what are 'smart' retail investors doing with their money?

Instead of using extra cash to buy stocks, he is buying houses near his home in Sarasota, Fla., and renting them. He says he prefers real estate because it's local and is something he can "control." He says stocks make up 12 percent his $800,000 investment portfolio, down from nearly 100 percent a few years ago.


After the dot-com crash, it seemed as if "things would turn around. Now, I don't know," Neitlich says. "The risks are bigger than before."


Source: AP

Depression Babies paper embedded below:


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Michaelwiseguy's picture

Through a long train of abuses of the people by our Federal Government, there is no doubt now that we have a criminal Federal Government running our country and at war with American civilians.

This is why there will be an armed Insurrection against the Federal Government of the United States, removing and replacing it, by the American people.

We need to form a Star Chamber of individuals and military, to decide who in congress needs to be eliminated by force first, taken out JFK style.

David Wilcock & Drake 2012-03-28 1-3 Mass Arrests

Michaelwiseguy's picture

I've re-introduced the word "Insurrection" into our lexicon. Expect it to be widely used in media next year.

IamtheREALmario's picture

Tell us how your visit from the Feds goes.

shovelhead's picture

Gee thanks.

Glad you're in charge.

aerojet's picture

You're being overly dramatic.  Rebellion would just destroy even more wealth.  A better way to rebel is to just have everyone walk away and tell .gov to go fuck itself.

One World Mafia's picture

They vote them out but that doesn't work anymore cause it's not only rigged at the box, the media polls are rigged.

Zap Powerz's picture

Tim McVeigh acted.  Just sayin.

aerojet's picture

And it was repugnant.  Which is why you don't do things like that until is is completely necessary.

Stuck on Zero's picture

Most investors I know simply say they will never send another dime to Wall Street.  They are buying distressed real estate instead.


Spigot's picture

People are selling to pay their mortgages while they roll off of long term unemployment. This is not about being smart sellers. People are cutting off an arm to save their lives.

aerojet's picture

Buying distressed RE is just as stupid as buying stocks.

lasvegaspersona's picture

If you think this looks like lost trust just wait until Nancy and Diane get done with the attempt gun grab.

Yes what are we to think of the leadership of our great nation?

I cannot fathom the PTB wanting a 'civil war' as Matt Drudge called it (ie the possible response to a gun grab). How would that look to the rest of the world? How long will the currency stay stable if the crazies start car bombs and random shots fired (harmless but disruptive.)

I think the government has lost its way...and no I do not encourage or condone said actions, I mention them because I have a very dull imagination and even I could come up with these.

Some say that we could see 'martial law' but that looks even worse. Unless they (those ole PTB folks again) see some way to keep power when the very dollar they pay their stooges with goes to shit I really don't see the plan, nepharious or otherwise. These thoughts lead me to believe they really are as dumb as they seem and not backed by evil bankers , Illuminati or the Ananuki....of course I could be wrong...but I vote for 'dumb and confused'.

Zap Powerz's picture

Yep, cuz r ledrs r smrt. Dey no gun cntrol werks.  Jist luk at shicago.,0,5456581.story

That is what you get with gun control....bitchez.

aerojet's picture

Based on what has been proposed in the Senate, I'm thinking the gun grab is going exactly nowhere.  I suppose if there is yet another mass shooting at just the right time, they might gain traction, but as it stands right now, what Feinstein wants would immediately cause a civil war if passed.

Nadaclue's picture

People have done more than lost trust...........they are fucking pissed.

Not only are they pissed, they're scared. Scared of what's coming. The sheeple beginning to see the ugly that could occur.  That is what's fueling this gun/ammo/magazine run. No one wants to be unarmed when it hits the fan. Hell, my libtard DMV neighbor vcame over today to ask me about a good gun to buy. I pointed him to a Mossberg shotty which my BFF has a few in stock with some slugs stashed. Otherwise, his gun shop inventory is empty with no firm shipping dates from suppliers. He's taking two weeks off. Should note we are extremely rural here.

I've been reading lots of "purported" insider whistle blower reports lately. Not much different than those I've heard on occasion in the last 10 years but a lot more in quantity.Given all the loss of liberties in the last ten years, it starts to make sense to me. I wish I'd bought more ammo. lol

I cannot say these are valid but I'll give a few of the latest, for fears sake. Take them for what you will. The more knowledge about these reduces in the public the chances they will occur.

BTW, the mass shootings are not over. We will see more of them, especially little kids as they tug at the heartstrings of all of us. Fast and Furious, here in the US, to justify disarming the population. The PTB have no compunction about killin children. Remember that, when they come for you.


prains's picture

guns don't work against tanks

Oldballplayer's picture

I know several tank drivers. Trust me, the guns are not all going to be pointed our way.

Central Bankster's picture

The handful of officers I know, think the same way.

Solarman's picture

Exactly, I am a former Active duty Marine Corps Officer, and I can say unequivocally that these orders will be refused as not lawful.  Most officers come from fly over country, and disdain the elites.  No way they can count on them.  Forget most cops too.  My dad is retired and old school, no way his brothers will shoot their own.


Besides you don't need to fight the elites with bullets, they need food from the farms in fly over country, and working ralroad tracks to get it there.  Do a little Sun Tzu on them.

Nadaclue's picture

Thank you Sir,

unconstitutional orders are not lawful orders and thereby must not be followed.

Semper Fi, Marines

mkkby's picture

Well, congress hasn't declared war since 1941, so every service person in battle since WWII is violating the constitution.

What you don't understand is the elite won't say go shoot your neighbors for mouthing off.  They'll say those people are terrorists or traitors, supported by foreign governments to bring down our society.  And you know what, it will work.  It always has.  Viet Nam protester were shot at, and that was what the troops were lead to believe.

Dr Benway's picture

Exactly. Plus, look at history. Every single tyrannical government in the history of man has had the support of the cops and military. Why on earth would you believe cops and military would behave differently all of a sudden? A miracle? THEY WILL DO WHAT THEY ARE TOLD.

Papasmurf's picture

Some protesters were shot.  That was the tipping point for loss of public support of the war.  When it's discovered that these mass shootings are false flag, there will be backlash.

Freddie's picture

It will be more like the Civil War which was totally absurd.  When it first started, people came to watch and had picnics like it was a social outing.    It turned into a senseless nightmare and a war of northern domination and theft of resources, like most wars.  The difference today is everyone is armed with more effective weapons.

They will try to control the communications so no one will know what is going on.  They do it now with sh*t TV and hollywood plus the rest of the lying media.  They will also try to control the food.  Don't be suprised if they use biologicals and other nasties.  You know they will try to use drones too.

Stuck on Zero's picture

Communists call them "reactionaries."


mvsjcl's picture

Do or die, Marines!


(But only if the orders are lawful.)

lakecity55's picture

If you ever gamed against an OPFOR during FX, you can stop a tank.

But, most of my unit's stuff was CI.

IamtheREALmario's picture

There are rumors that many of them have been sold executive suites in Deep Underground Bunkers. How does that saying go again? "A cave is a grave".

Maybe this IS the transition era from the age of chaos to the new golden age and by collecting a high percentage of schmucks in underground bunkers then destroying them the new age can begin with a fresh start.

By their actions, THEY seem more frightened and desperate than the people.

cranky-old-geezer's picture



I am a former Active duty Marine Corps Officer, and I can say unequivocally that these orders will be refused as not lawful.

Just one little problem with that thinking.  Military will be kept outside the US while 4+ million federalized domestic LE (mercenaries) point their weapons at Americans, as they do every day now.   Most have little or no comprehension of the Constitution, rights, etc.  Just knuckle-dragging moron mercenaries doing whatever they're told.

So carry on, keep fighting banker wars all over, terrorizing other nations.

Your hypocrisy is so obvious.

If you people really cared, you would have put a stop to this criminal govt a long time ago.

aerojet's picture

And that isn't the point at all.  The guns allow you to obtain other supplies.  Do I really need to spell it all out for you?  You storm a warehouse where anti-tank weaposn are stored.  Or just take over the depot where the tanks are stored.  How hard is that to understand? 

The Russians fought off German tanks with molotov cocktails.  And while today's tanks are more sophisticated, they are not invincible, which is why armies use combined arms strategies.

Nadaclue's picture


You really have no idea of the order of battle.Tanks must have infantry support. They are also worth shit against guerrillas.

Go home bud, you know not of what you speak.

exi1ed0ne's picture

They aren't called missle magnets for nothing.  Besides, most modern warfare equipment require a pretty hefty supply line or it breaks down quickly.  You may have a tank, but it won't have fuel to operate.  Have fun with the hand cranks to move that turret. Why do you think the US is unchallenged?  Nobody has been able to take out the supply lines.  Yet.

Rogue Trooper's picture

Haka, you really have no idea do you?  Try recalling what happened in Iraq, IEDs, etc.

Unless you are thinking of the rather blunt Russian way?, For example, in the Chechen War, lacking anything 'precise' the Russian Army used tanks to take out the 'terrorists' one house at a time.  That failed, so they rolled in with the Artillery, and leveled whole fuckin' blocks and everything else.  Collateral damage took on a whole new level.

LOL you really think the US Army and the National Guard Units are all just going to follow 'orders' from these cunts if it comes to that?

Uber Vandal's picture

What exactly is the retirement package for a subject or slave again?

Go Tribe's picture

Random clearing of key politicians will make the rest come to heel.

exi1ed0ne's picture

Why do you think that hasn't already happened?

Go Tribe's picture

Because they haven't come for our retirement accounts, gold and silver. But they will.

exi1ed0ne's picture

They've already got your accounts, so why don't you think they are already gone?  Because they haven't told you yet?  MFG was a dress rehersal on damage control.

Freddie's picture

The Roman Senate was the problem in Rome.  The army was off on chickenshit nonsense to support the empire while the Senate F over Rome and it's citizens.  Totally corrupt.  Sound like another Senate?  Another Senate that wants to disarm you and who wants your retirement accounts, mags, ammo and precious metals?  

Freddie's picture


I do not watch Tv or Hollywood because I loathe those people and they want to disarm us.   I saw on the web that one of them slipped up on MSNBC or CNN and roughly said "we thought after the shooting in Colorado that we could get guns banned but we needed another mass killing for people to finally wake up"   It is like both of therm were engineered - because they were.  A video on youtube on the CO shooting is pretty eye opening. The smirking FBI agent at the newsconference was just one of many disturbing issues.

I agree with you.  These mass shootings will keep happening like clockwork till they get the ban they want.  This was also to change the subject on the Bengazi gun running, ambassador and other CIA agents murdered with our own high tech mortars and our people left to die. They were backing Mo Bro Hood/Al qeada in Egypt, Libya and Syria.  plus the crap economy and rigged election. .

Iordered some ammo a week before the professional hit in CT where the men apprehended outside were released. I was going to order some extra newer gen mags with the ammo but delayed on the mags.  In days, the supply for PMags, Lancers, Troys and others on various (17 to 20) web sites disappeared.   Someone posted here that a small town in the NW central USA with a population of 2,000 sold out of 50 ARs in 2 hours!

Ammo, mags and guns are getting hard to find.  Even hand guns are selling out.  This is after 4 Oba years of an average if 15 million NIC checks or 15 million sales a year for 4 years.  The demand for guns, ammo and mags is still is astronomical and is not letting up.

Zap Powerz's picture


If your neighbor is a statist POS you should have told him to go fuck himself and call his precious police state representative if he needs protection.

Freddie's picture

+1 Alternatively, tell him to buy a real POS like a Jennings or something worse that would blow up in his hand.   This is happening all over by the way.  People who never wanted a gun are buying them.

Omen IV's picture

i dont think people are pissed - i think it is almost universally recognized that the information to move the market up or down is provided to certain people FIRST - and everyone else is last. Paulson sat down with 5 hedge fund managers in 2008 and asked them leading questions to point them in the right direction - they all knew the score and could bet with impunity....... massively

Plus all banking crimes have been recognized  - end to end  - and absolved and deemed to be irrelevant starting with Mozzillo - but the non enforcement creates a fragile system which the public and everyone else knows will be taken down since there is no reason not to cheat everyone all the time - so we all wait for it to break down

nothing is real - no one believes anything - not justice, not romney or the republicans or obama or rules or democracy - its all systemic bulllshit!

mkkby's picture

They may be pissed, but only because gas is expensive and they just bought another big SUV.  Or their favorite beer or cigs went up a buck.

I'll believe something has really happened when people change their stupid habits.  Like no longer getting suckered by holiday gift giving of useless crap at shopping malls.  When xmas sales are down 20% year over year, the elite will have a reason to fix what ails us.

Raymond K Hessel's picture

Lots of mattress stuffing until rates go back up.  

There's no profit in investing right now.  Gains are speculative and expenses are guaranteed.  

Who'd want to participate in that ass-rape?  Isn't TSA gate-rape enough?

kito's picture

Perhaps the selling stems from the baby boom generation and their need for cash as they head towards the latter stages of their twilight years?

fonzannoon's picture

Kito are you still going for fundamental analysis with this broken ass market? You know better. Just buy some stawks already.......

kito's picture

Well my parents are boomers, as are their friends, and they are cashing out with a 25 year time frame. They are the largest and wealthiest demographic group and they are starting to dig into their nest eggs.....thats fact....

fonzannoon's picture

i was just playing around. the math supports you. we just have never seen that math go up against a money printer before. at least i havent.