That sounded naughty didn't it? Honestly, I'm talking about the economy here folks. We were having a lovely dinner with friends last night and discussing the psychological side of the current financial crisis. Everyone keeps comparing our current situation to the Great Depression but I think there is a huge a factor in the current situation that wasn't nearly as much of a factor then. Too many people flapping their gums (or their fingers) and too many people listening.
The groupthink, cattle herd, lemming mentality drove so much of the housing bubble and the subsequent bursting, not to mention the run on WaMu, Lehman Brothers and the market as a whole. It seems that very few investors look at fundamentals, earnings, balance sheets or anything really factual - they just react to what they hear.
So instead of fighting this phenomenon, let's work with it. The stimulus is a done deal. We need to it to work. We need the housing market to stabilize. So let's start the new groupthink here. Here's my mantra:
1. The stimulus will take some time, but it will work.
2. The housing market has hit bottom and is showing signs of life.
3. We have learned many good lessons from all of this.
4. The markets will begin a solid, albeit slower paced recovery in late 2009 or early 2010.
5. The slower recovery is a good thing, it will fend off inflation.
OK, now you tell ten friends, and they tell ten friends and we're on our way.
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