The average investor just doesn’t trust the market, it seems, Cramer said Monday.
In the first seven months of the year alone, The New York Times reported, small investors pulled more than $33 billion out of stock mutual funds. Instead of looking for opportunities in the stock market, they are buying bonds: $185 billion flowed into bond funds over the same time period, even though returns from the Treasurys are nearing historic lows.
The exodus of the common man, who Cramer refers to as the fan base for the investing game, from the stock market is troubling to him for several reasons. He acknowledged that the stock market can seem dangerous, but said it’s the best way to supplement your paycheck. Bonds give you a feeling of safety, but their meager returns aren’t enough to help pay for your kid’s college or save for retirement.
At the same time, he thinks capital markets simply can’t work without participation from the "individual investor." He said there simply won’t be enough depth, interest or money to make the markets work properly.
A few things need to happen to get investors back into equities:
First, he wants the machines that caused the “flash crash” on May 6, when the Dow plummeted nearly 1,000 points in a matter of minutes, to be shut down.
Second, President Obama needs to announce that taxes on capital gains and dividends will remain low.
Third, 401(k)s need to be self-directed, so that people can pick and choose their own stocks, so their portfolio can be filled with dividend-paying names.
Fourth, Cramer wants the Securities and Exchange Commission to be outfitted with 50,000 new employees, who would “ferret out white collar crime [and] make sure that your money’s safe when you put it in the market.”
Fifth, he said the exchanges should have more power, so that they can immediately stop trading if they think something has gone wrong.
Sixth, the government should opt for a public initial public offering of General Motors, so that the taxpayers who made the bailout of the auto company possible can benefit from its successes.
“We need to bring the fan base back,” Cramer said, “because you can’t have healthy markets without the little guy.”
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