May 15 - Stocks keep hitting new highs, but U.S. investors won't buy equities because they distrust the market. Fred Katayama reports.
Investors just hate this big bull run. They're on strike. Only 52 percent of Americans owned stocks last month, a record low, according to Gallup. Causing this lack of market trust: the Great Recession. Duke psychologist Dan Ariely says people interpreted the 2008 crash differently from the 2000 dotcom bust. SOUNDBITE: DAN ARIELY, PSYCHOLOGY PROFESSOR, DUKE UNIVERSITY (ENGLISH) SAYING: "If you think about the dotcom bubble, I think people could've looked at it and said, 'I should've known better. There were signals, there was information. I should've known better.' I think the 2008 market crash is very, very different. In the 2008 situation, we can't say to ourselves we should have known. Nobody knew what was going on. Nobody understood what was going on. It surprised everybody." Never mind that stocks have shot up 144 percent since bottoming in the first quarter of 2009. Santa Clara University Finance Professor Meir Statman, who studies investor behavior, says what keeps people on the sidelines is the sense of regret. SOUNDBITE: MEIR STATMAN, PROFESSOR OF FINANCE, SANTA CLARA UNIVERSITY (ENGLISH) SAYING: "Many people perhaps who bailed out of the market sometime in 2008 or early 2009, they'll be damned if they get in now because they're going to feel regret. They're going to feel like idiots. And so they're still waiting for the market to go down to the level that existed in 2008 and 2009 and then they'll come in." By staying out, investors take comfort in thinking that at least they're not losing money. But Ariely says that's wrong-headed. They're actually losing money because inflation eats up the measly half percent interest they earn at the bank. To get over the psychological hump and start investing, investors can do two things: convince themselves that keeping money in the bank is a sure losing bet. And consider dollar-cost averaging, investing a set amount regularly, over say 2 years, so that they buy more shares when stocks are cheaper and less as they get pricier.