Why Isn’t 0% Working?

It’s only 9AM on the west coast where I am at the moment, with my wife’s due date a couple of weeks off, I might be writing from a hospital soon.

This morning multiple thoughts swirl in my head. Here’s a sampling of my eclectic thoughts:

  1. Why isn’t the 0% policy of central banks (with Europe taking the most extreme step) pushing more people into stocks?
  2. Maybe the consumer is being held up because we have more women working with higher paying jobs than ever before.
  3. betting both ways might be one of the least heartburn-producing ways to be involved in stocks
  4. California needs some rain
  5. Why do average people punish the truth (or truth talker) and its corollary, why do people put up with really dumb ideas coming from politicians

Let’s take them one at a time.

1. People are scared. Bottom line – the only way laymen investors/savers would put all of their money at 0% is if they were scared and confused. Pros might be in cash because they are waiting for certain “set ups” to appear, but laymen are often all in or not (fear/greed phenomenon) and I get the most comments from clients when we are not 100% invested when markets are shooting up. And right now, they’re scare and selling out of mutual funds as they have been doing for many months now.

2. Many stats I have read over the years -women are responsible for 70-90% of household purchasing decisions. Perhaps women have kept up their spending whereas men would tend to go “into the bunker” during financially shaky times. If this were 1958 and men were working and women were at home, consumer spending might be much lower. But since women are still working, and men are the ones getting laid off, and since from work experience I know, women will still spend money if needed (whereas men might deal with a leaky roof until there’s a waterfall in the kitchen) or if wanted (my mom got a pool recently!).

3. With the market seemingly on a precipice of moving in one direction or the other in a MAJOR way (I can see a weekly chart showing a large head & shoulders top chart pattern going back to 2010 in many emerging markets indices), an investor could consider buying intermediate or long-dated options going both ways. This is known in financial language as a “straddle” (or strangle) which profits whether the market or stock or whatever moves up or down. A can’t lose decision you say? The downside is if the market doesn’t move much – if it doesn’t move, you will lose what you paid for the options and earn no money on the lack of a move. But if you think there will be a big move, but aren’t sure of the direction, it may be an “option” for you.

4. It is dry here in California. Especially here north of San Francisco. I’m not sure about the rest of the state, and it is dry season, but this place needs some water. Ponds, lakes and streams are all dramatically low and the grass-fields where cows feed aren’t looking healthy either. I do like the sun but if we could get one of those 4 hour New England torrential downpours immediately followed by the sun, I’d be happy.

5. I think most of Simpson and Bowles, the bipartisan combination of two experienced politicians and their recommendations to balance the budget. Of course this would mean some pain but no one wants any of that. Therefore, the average person will continue to vote in their subpar and cowardly representatives – the ones who won’t tell it straight to the people that you can’t have everything. And we will have a few more municipal bankruptcies and who knows, maybe a Federal financial crisis which will, as is always the case, discipline us by the rod, and not the carrot.

In fairness to people though – our politicians, since they are paid so much, feel the need to justify that. And their way of showing they are working is to “do something” and that something is often mindless legislation. Average citizens don’t have the time to review all of the spew from DC (and their statehouse) and their reps, instead of being filters of all of this tend to be creators of this mess. A fancy soundbite here or there fills the nightly news, distracts the average Joe and they move on. There seems to be no end to this. And none of that legislation is the tough kind – it’s usually the easy kind: spending on this or that. Spending money you don’t have to make voters happy requires ZERO imagination. But for some reason, it’s lauded.