What Does Main Street Know That Wall Street Doesn't?

Last Updated Apr 26, 2011 9:28 PM EDT

Wall Street is on a roll. The stock market finally crossed back into the black for 2010, with a spectacular rise of 7.5 percent last week. Goldman's profit might have declined by 82 percent, and BP's down some $17 billion, but stock market analysts say overall, profits look better than expected, so buy, buy, buy!

Not so much on Main Street, where those living in the yawning chasm that's just below the new federal definition of rich (about $250,000 adjusted gross income), are having a fairly rough summer.

Indeed, consumer confidence continues to tumble. The Conference Board reported today that its Consumer Confidence Index fell to 50.4 from June's revised reading of 54.3. The market had expected the index to come in at 51, but stocks are trading about even on the day.

Why are consumers so glum? Could it be that there are still five people looking for every job that's posted?

Congress fought tooth and nail before granting President Obama the unemployment benefits extension he was seeking. Many of those who are employed seem to be burning up (and not just from the hottest weather on record, in many parts of the world) over the idea that folks would just rather stay unemployed and collect their weekly "paycheck" than go out and take a lower-paying job.

"The jobs are out there," one of my radio show callers told me. "They just don't want to take them."


With so many Americans unemployed for a long period of time, I'm sure you know someone - perhaps even someone in your closest circle of family and friends - who's out of work, down on their luck, or watched as some or most of their income has vanished.

It doesn't feel as bad as last year, when even the wealthy didn't want to spend money for fear of offending anyone, but clearly Americans are taking a second look at what they own and are, by and large, making do as much as possible. (Two hot new websites are SixItemsOrLess and The Great American Apparel Diet.) Why spend when you don't have confidence in what the near-term future holds?

Over the past decade, America financed a great part of its "growth" by tapping the equity they thought was building up in their homes. You walked into any bank and walked out with a $30,000 to $50,000 home equity line of credit, and then used that cash as though it grew on a tree in the backyard.

We bought big-screen televisions, and $500 purses, and $700 shoes. We paid for college tuition, new cars, vacations in Mexico, and other stuff.

Now, it's virtually impossible to get a home equity line of credit, or a second mortgage, or do a cash-out refinance. Americans' home equity has vanished and 25 percent of homeowners are underwater with their mortgages.

Main Street knows the easy money is gone. Walls Street hasn't quite figured it out yet.

Does that mean we're heading for a double-dip recession? By at least one measure, the answer is yes.

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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.