Investors Are Drowning In Recession Worries
Friday, February 27, 2009SUSIE GHARIB: The problems in the banking sector weren't the only issues weighing on investors today. General Electric surprised shareholders by slashing its dividend by two-thirds to $0.10 a share. The recession appears to be worse than originally thought after the Commerce Department reported that the U.S. economy contracted by 6.2 percent in the final three months of 2008 and consumer sentiment fell sharply in February. Scott Gurvey takes a look at the toll all that bad news is taking on investors.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: More taxpayer money for Citi, a dividend cut for GE, a bad GDP becoming even worse and another decline in consumer sentiment. It's enough to send the market to the psychiatrist's couch. Denise Shull of Trader Psyches says investors are wilting under the bombardment of bad news.
DENISE SHULL, PRESIDENT, TRADER PSYCHES: The average investor who works outside of the market, has their 401(k), there comes a point where they can't just take the pain any more. And they hear all this negative news so the natural thing to expect is, gee the economy is getting worse. The market is going to get worse. I can't take any more pain. I'm selling. And it feeds on itself.
GURVEY: As hard as the news is on market professionals, experts say it is harder on those who are not. Psychologist Herbert Pardus says the pressure could lead to an increase in suicides.
DR. HERBERT PARDES, PSYCHIATRIST & CEO, NY-PRESBYTERIAN HOSPITAL: If somebody who is in their seventies and eighties and retired, all of a sudden lost 80 percent of their funding, their monies to Madoff and can see no prospect of recovering the money, that's a ominous situation. So we haven't seen it yet, but I wouldn't be surprised that you might see it over the next as I said six to 12 months if this thing doesn't start turning around.
GURVEY: One thing investors have been waiting for is a big explosive bear market blow-out typical of a bottom, although some believe we will see signs of an economic revival first. In any event, Shull says once the sign comes, a rebound in sentiment could quickly follow.
SHULL: One thing we see, I see all the time, that drives investors and traders of all types is actually the fear of missing out. And there are a lot of people who want to know, are we at the bottom and they're ready to jump in. They keep jumping in and then we go lower and they get out. But there will be a lot of people ready to jump in and they'll know it very quickly.
GURVEY: For now, the idea of a turnaround seems more of a distant dream. Following today's revision to the GDP report, many economists forecast the longest and deepest recession since the second world war. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
