Nexxus Business Alliance Asks: A Market Crash In 2011expect It

The optimistic forecasts are dangerously incorrect. Psychologically, it's hard for investors to ignore the cheery talk and pull back from the marketplace, but they will do so soon.
Politicians lie. Bankers lie. Yes, they're liars. But they're not bad; it's in their genes, inherited. Their brains are wired that way, say scientists. Like addicts, they can't help themselves. They want to sell stuff, get rich. We wish to believe they're revealing the truth. Silly, huh? We're ensnared in this eternal "dance of death," controlled by programs hidden deep in our brains, telling us what to do, telling us to pay no attention to contrary facts -- until it's too late, until a new catastrophe crushes us. Psychology offers a influential example: Our collective human brain is destined to set off a crash before Christmas 2011. Why? We're gullible. We continue probing for truth-tellers in a world of liars. We tend to let them manipulate us into acting against our best interests.
In truth, behavioural science tells us that bankers and politicians are dishonest with us 93% of the time. It's 13 times more likely that Wall Street is lying to you than telling you the truth. That's why they come first, and why we lose. Our brains are programmed to cooperate in their con game. One of America's behavioural finance experts, Richard Thaler of the University of Chicago, explained it this way: "Think of the human brain as a individual computer with a very sluggish processor and a memory system that is small and unreliable."
Thaler is a quant who speaks mostly in cryptic algorithms. So if you actually wish to know how Wall Street's con works, listen to Barry Ritholtz, the financial genius who wrote the book "Bailout Nation." Ritholtz summarized things in a Feb. 6 in The Washington Post. "We humans make all the same mistakes, over and over again," he wrote. "It's how we are wired, the net result of evolution. That flight-or-fight response might have helped your ancestors deal with hungry saber-toothed tigers and territorial Cro Magnons, but it drives investors to make costly emotional decisions."
Humans have something "akin to brain damage," Ritholtz continued. "To neurophysiologists, who research cognitive functions, the emotionally determined emerge to suffer from cognitive deficits that mimic certain types of brain injuries. . . . Anyone with an extreme emotional interest in a focus loses the ability to observe it objectively. You selectively perceive events. You pay no attention to information and particulars that deviate with your main thinking. Even your memory works to fool you, as you selectively hang on to what you believe in, and subtly masks any memories that might conflict." Worse, there's no cure.
Examples: USA Today headline: "Average bull is 3.8 years: We're not at 2 yet." More upside. Wall Street loves it. And from The Wall Street Journal: "Stock recovery in high gear . . . S&P 500 now speeding toward its next landmark."
Other lies: Inflation and rising interest rates won't push China and America over the edge and into a new bear recession. That one is popular in Wall Street's echo chamber. Wall Street also cheers every time cable TV pundits and journalists repeat this favorite statistic: Stocks rally in the third year of a presidency, often more than 20%.
The biggest lie? Perennial bull Jeremy Siegel of "Stocks for the Long Run " fame recently told a TD Ameritrade conference, "There's nothing but upside to come (and) the next several years are going to be good for stocks."