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Market gyrations cause heartache, economic pain

A man sits along Wall Street outside the New York Stock Exchange during afternoon trading on August 4, 2011 in New York City.

Kai Ryssdal: We're obliged on what feels like the umpteenth day of 400- or 500- or 600-point swings in the Dow Jones Industrial Average to begin with some vocabulary.

Here you go.

Volatility

One more time, in case you missed it.

Volatility

A tendency to vary often or widely, as in price. Unpredictability, if you will.

Today's fingers of blame for the market swings point to the French banking sector. But whatever the cause, the stomach-churning ride on Wall Street of late is starting to become a worry in and of itself. Here's our senior business correspondent Bob Moon.


Bob Moon: Everyone can hear the screaming from this Wall Street rollercoaster, and investment manager Hugh Johnson says to some degree, the real economy is taking a back seat to all the noise.

Hugh Johnson: Right now, quite frankly, the level of volatility makes investors take their mind off important fundamentals and think about just preserving their capital. So it's not, in my judgment, this level of volatility, is certainly not a good thing.

Consider this: Transfers in 401(k) accounts monitored by the tracking firm Aon Hewitt were four times the normal amount on Monday -- in excess of $1.6 billion moved out of stock funds and invested primarily in bonds.

That's a worrisome sign for Wall Street historian Charles Geisst, a professor at Manhattan College. He fears investment capital, to grow existing businesses and start new ones, could dry up the way it did during the Great Depression, preventing the hiring of new workers.

Charles Geisst: I think that if investors are too badly scared by this, maybe to the point where some of them are starting to rethink their investment strategies entirely, that lack of capital investment will only become more of a self-fulfilling prophecy. No one will buy these new issues, the capital won't be raised, employment won't be created.

Indeed, so far nine companies have either scaled back or postponed plans for initial public stock offerings this week because of all the uncertainty.

So what can be done to calm these troubled waters? Frank Fantozzi is a wealth manager at Planned Financial Services.

Frank Fantozzi: When you don't have faith in your leadership, it's tough to feel good about everything else.

In fact, all the market experts I spoke to today led off with that same answer: This fear will continue until investors start having faith that the federal government is serious about tackling our economic problems.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.
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The Stock Market had 'bubbled' because Bernanke gave free money to the Banks. Bernanke has to stop now, because Obama-mama needs to get elected, ... and Obama-mama won't get elected if gas is $6/gallon. And if Obama-mama is not elected, Bernanke will get kicked out.

So Bernanke is stopping the printing presses, and the stock market bubble he created is deflating. The Banks are not losing anything, they dumped the stocks on people and are now buying them back cheap.

Economy has nothing to do with this. Ben Bernanke was 'stimulating' his Bank overlords and he has stopped. The Banks are still smiling from all the stimulation Bernanke/Yellen have given them so far.

US Citizens are left with Bernanke's inflation tax.

I'm going to throw my crazy theory out to the wind, and if someone bashes it, that's ok.

I pulled all my stocks about six months ago, but two years ago I realized the "fun" would probably start around August, 2011 (sans debt ceiling debacle)

The theory: the baby boomers are retiring. Go back to the end of WW-II in Sept, 1945. It took two months for all soldiers to return home (Nov 1945). Nine months later babies are born (August, 1946). Add 65 years....August, 2011. Seventeen years of exponentially appreciated stock investments are now being pulled and put into safer investments...aka TREASURIES.

If real-time data from Social Security withdrawals could be observed, they would probably be skyrocketing right about now, as well.

Someone shouted "fire" in the crowded retirement theater, and now the entire herd is heading for the exits (although some are probably coming back and picking up a couple of bargains).

This is a case of the pot calling the kettle black. As wealth manager, I would love to know how many clients Mr. Fantozzi warned about the possibility something like this could happen in the market. Probably about as many as he warned in 2008. Ironically, that is the year I lost faith in all wealth managers and invested in gold.

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