Chapter 5 - social affect

Chapter 5 - social affect - Chapter 5: Social Affect...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Smiling Muscles Frowning Muscles Chapter 5: Social Affect Chapter 5 Social Affect 5.1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 5: Social Affect Swagger turns to shudder a year after market high SAN FRANCISCO (AP) — Just a year ago, investors were swaggering as the stock market surged to an all-time high. Now, almost everyone on Wall Street and Main Street seems to be shuddering amid a frightening reversal of fortune that has erased $8.3 trillion in shareholder wealth in the past 366 days. "We aren't dealing with a fundamental economic issue any longer," said James Paulsen, chief investment strategist for Wells Capital Management. "We are dealing with fear. And that doesn't respond to economic medicine." That hasn't stopped the U.S. government from trying to find a remedy. In a series of moves aimed at avoiding the mistakes that culminated in the Great Depression nearly 80 years ago, the government already has committed to spend more than $1 trillion to prop up ailing banks and other lenders during the past month of turmoil. But none of it seems to be working, which only seems to be scaring people even more, especially after the nation's leaders spent nearly two weeks painting a gloomy picture of the economic outlook to persuade Congress to approve a $700 billion bailout of the banks. "I think right now there are just some very powerful negative images that are alive in many people's minds — images of the Depression, images of people selling apples," said George Loewenstein, a behavioral economist at Carnegie Mellon University. "The images of the downside are just so salient in people's minds, and nobody has presented an upside image yet." Some investors, like software engineer Sandeep Bhanote, are trying their best not to be spooked. "Fear is the most dangerous emotion. It can really do the market a lot of harm when maybe it is not necessary to be afraid," Bhanote said Thursday at a coffee shop near the New York Stock Exchange. The quarterly 401(k) statements that are starting to arrive in the mail will only serve as another grim reminder of the financial carnage. And it has gotten worse since the quarter 5.2
Background image of page 2
Chapter 5: Social Affect ended in September, with the Dow Jones industrial average tumbling every day so far this month. In this week alone, the Dow Jones has plummeted by 17 percent, bringing the total decline to 39 percent since the stock market's most famous bellwether peaked at 14,164.53 on Oct. 9 a year ago. The downturn translates into a paper loss of $8.3 trillion, based on figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies' stocks and represents almost all stocks traded in America. There are some logical reasons why stocks aren't worth as much as they were a year ago. For starters, the U.S. economy appears to be in a recession for the first time since 2001.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/01/2010 for the course PSYC 341 taught by Professor Cap during the Spring '08 term at Maryland.

Page1 / 37

Chapter 5 - social affect - Chapter 5: Social Affect...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online