Major Indices Have Seen Highs for 2009 By Michael Markowski

Major stock market indices have likely seen their highs for 2009.

The major indices including the Dow 30 Industrials and the S&P 500 have likely seen their highs for the year since a viable economic recovery is currently not on the horizon.  The biggest reason why is because of the damage that has been done to the psyche of the consumer who has bailed the economy out on many different occasions over the last 30 plus years.  My argument is that the consumer is unlikely to bail out the economy this time and that consumer behavior will likely resemble the behavior that was the result of the crash of 1929 instead of the behavior that followed all of the other economic downturns since then.

I have little confidence in those who predict anything about the economy and when it will recover and the pace of the recovery.   Why?  There are few that have ever lived in or experienced such a crash and economic meltdown, which occurred in fall of 2008.  Thus, there are few who really understand the consequences of an economic crash and the toll that it could take on the psyche of the consumer.  The youngest of those twenty year olds who experienced the full brunt of the Great Depression of 1929 are now approximately 100 years old.  My late grandfather and grandmother were two of them. 

My grandfather, who was in his early twenties, and my grandmother who was a teenager in 1929, both experienced the full brute force of the Great Depression.  They grew up in an era where jobs were hard to come by and the prices of goods and services continuously declined.  The shock of the depression of 1929 left them with a passion for discounts that lasted a lifetime.  I vividly remember my grandmother’s passion for clipping coupons every time I visited her in Chicago.  She always had a pair of scissors in her hand, which she used to cut grocery coupons out of Chicago’s daily newspapers.  Coupons in her hand and with me in tow, she would head out in her car to as many as five different grocery stores to do her grocery shopping.  She was steadfast in refusing to buy anything unless it was on sale.  I remember thinking to myself that she was a little nutty for wasting much of her time to shop at five different stores to purchase five different items.  My grandfather refused to take his car to a mechanic or even to a body shop after he had a routine traffic accident.  He fixed everything that he owned.  He also refused to throw out anything and kept thousands of items in small jars in his basement.  He even cut his own hair so that he would not have to pay a barber.  I can-not remember even one occasion or a time in when my grandparents took me out to eat a restaurant in Chicago and my grandfather lived for 102 years.

The current economic indicators include a significant surge in savings rates and the largest declines in the Consumer Price Index (CPI) and the Producer Price Index (PPI) in 30 years.  They also support an overall decline in consumer spending which supports my argument that things have drastically changed for the U.S. economy.  All said the announced changes for the statistical data on consumer behavior are the most significant since the Great Depression of 1929.  Given that these indicators suggest that the U.S. economy will likely experience consumer behavior, which resembles that of the Great Depression investors should remain extremely cautious.  My recommendation is that investors continue to maintain an 80% cash position and that they should invest 20% of their liquidity into the shares of the companies that I am recommending which are members of the online financial sector.  For more information on my recommendations go to www.bearmarketnavigator.com.