Why is the government, Wall Street, and the media all reporting the economy will get better soon?
The concept of cheerleaders is one of the most important issues we try to talk about in the book. In fact, I get hit with it all the time. What's the first question you can imagine I get hit with at a presentation? When is the economy turning around? When is the economy going back up? That's what I really want to know. Well, you've already biased a question, right? You already said you know the economy is coming up. It's just a matter of when, correct? That's all an economist should talk about is just when is everything going to go back up. Cheerleaders are critical to keeping the bubble mentality alive. Sometimes it's being done for the wrong personal reasons, meaning they might be stockbrokers or so forth. But even economists and financial analysts and people from the government that are otherwise theoretical, more unbiased, or at least not driven by a direct profit motive, they fall into the cheerleading too, because everybody is effected.
We saw it in housing. Obviously, when housing prices are going up and everybody is involved in it, people love to buy homes. When housing prices are going down, they're sort of all getting together and leaving homes, which is kind of counter intuitive because as price go up, you'd think, fewer people should buy and as price goes down, you'd think, more people should buy, but it doesn’t. It's a group psychology that is very important and effecting some of these bubbles. We have to always look at that. Just like stock market. Part of what's affecting it is a group psychology within money managers. They all want it to go up. They all need it to go up, because that's really the base of their livelihood. So if they don't have stocks to manage, there's not a lot of need for money managers. We call it, "The Hamptons effect." These money managers really need to see that market go up, if they want to keep their Hamptons mansions, if they want to keep those high incomes going. Because if it's just a matter of managing cash, let's face it, we don't need a whole lot of high paid money managers to do that. You need money managers to manage stocks and that group mentality upon money managers is what's pushing up the stock market as well.