Imagine if annual yields on savings accounts fell from the piddly 1 percent or so banks now offer to, say, negative 10 to 20 percent?
How quickly would you speed to the bank to make a withdrawal? My guess is about 10 to 15 m.p.h. (Think: traffic jam.)
I'm not suggesting America is headed toward this Great Depression scenario. But when the stock market is producing miserable returns, will it be long before workers who've stowed money in the market via 401(k)s and other retirement plans say: "No mas!"?
After eight weeks of heavy selling, mostly by day traders and institutional investors, the Dow Jones Industrial Average is near the 8000 mark. The last time it tumbled this way came after Sept. 11. The fear then that business would come to a standstill proved unfounded. The market regained its footing.
Now the ground under investors' feet feels squishy again. This time the issue is ebbing trust, with a growing share of the public saying the word of corporate America is not to be believed, according to a recent Gallup poll. Thank the alleged book-cooking by Enron, WorldCom, Global Crossing, and others for the climate of mistrust.
How many of the more than 14,000 publicly registered companies in the US now improperly hide debt or exaggerate sales? As many as 10 percent, write A. Larry Elliot and Rich Schroth, authors of "How Companies Lie." They say that since regulatory agencies are so understaffed, officials will never know how big the problem is.
One antidote for mistrust is accurate data. For investors tempted to jump on a hot stock, that means doing more research first. For people who want to be sure their employer is ethical, the same holds true, as the story at right explains.