U.S. Investor Confidence Experiences a Drop-off for the First Time

Confidence is not absolute, according to Andy Cross, the Motley Fool Income Investor. To gain trust boards and CEOs will need to be held accountable.

Trust in publicly-traded U.S. companies decreased by 5% leaving investor confidence at 70% according to The Annual Center for Audit Quality's (CAQ) Main Street Investor Survey.

The lack of trust investors have with corporations stems from the current economic crisis and too much government spending and interference.

The results, released last week, polled over 1000 respondents with $10,000 or more investments. This is the first time since the CAQ has asked this question the percentage has changed.

History repeats itself and it is no different when it comes to the problems with the U.S. economy. "Most financial crises have origins in too much borrowing either by too much government borrowing or too much lending by banks," said Liaquat Ahamed, author of Lords of Finance.

Ahamed said the current crisis resembles one in the 1920, where a financial crisis began in the U.S. followed by one in Europe, which leads to a banking crisis in the U.S.

The question remains how to correct this problem. "You dont get out of it [financial crisis] just by government tinkering with monetary and fiscal policy," said Ahamed.

Maya MacGuineas, president of The Committee for a Responsible Federal Budget said, "both parties need to work together to make some hard decisions for true change to occur."

But until government comes up with viable plans to show Americans change is on the horizon, investors remain weary every time it is reported another business has had record profits or CEOs have earned big bonuses yet they are doing very little hiring which will strengthen the economy.

Investor confidence is not absolute, said Cross. To gain trust boards and CEOs will need to be held accountable.

Capital Markets Outside the U.S.

The CAQ Survey shows only 43% of investors have confidence in markets outside the U. S., which is attributed to the economic issues European countries are facing.

"U.S. will invest in what they know -- U. S. [markets]," said Andy Cross, the Motley Fool Income Investor.

Other Economic Concerns

When participants were asked whether any other financial concern keeps them up at night, over 59% said not having enough money for retirement followed by 54% having concerns about not being able to afford health care in case of serious illness or injury.

Fifty years ago people retired just before 65 years old and lived, on average, to 79. Today, the average person retires at about the same age but now they live, on average, to 84, said Joshua Gotbaum, executive associate director of the Office of Management and Budget. That means the average person will need more in retirement because they will be retired for a longer period of time. Reducing pensions and entitlements such as Social Security and Medicare should not be the only goal when we need to devote more resources to retirement and figure out how to do it in a way thats fair, said Gotbaum.

Very few people understand the importance of investing, when to start and how to ensure then money will be there when you retirement. The solution starts with investor education and investing in 401(k) plans and IRAs for many people who don't have pensions because it is just not being done, said Cross.

It is clear this problem is not going away. It will take concise changes to control the nation's debt, economy and further discussion for proper management of entitlements before investor confidence returns.

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