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Stock Market Hierarchies: What We Need
Linda Goin
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Last week, Cora and I were devouring popcorn and watching fluffy movies. It was our way of coping with our fears of recent market activities and the media response. During one of our breaks, Cora asked an interesting question. She wanted to know if we could buy stock in popcorn and rental movies or cable TV. As that question was posed, a thought occurred to me about the revival of book sales after the Great Depression. People want to be diverted during times of stress. Where do they go for diversion, and why?
After we shook off a few stray kernels, we pursued some numbers based on the following formula:
Consumer confidence is down > no major purchases > companies lose money > job losses > more people don't spend money > stock market suffers.
This cycle can be vicious, and it takes times to recover from losses. After the 9/11 disaster, President Bush urged us to go out and spend. This edict sounded decadent, but the philosophy is sound. If we don't spend our money, we're contributing to the cycle above.
With the current lack of confidence in many sectors of the market, how do we invest our limited funds? At this point, Cora and I referred to the famous psychologist, Abraham Maslow. In the late 1960s, Maslow created pyramids similar to the food pyramid that indicates daily nutritional needs. Maslow's pyramids refer to human needs and information based on human potential. These pyramids begin with the lowest levels of what we need to survive and cope and they escalate to the tip, where we reach what Maslow calls "self-actualization."
This is how we applied Malow's Hierarchy of Needs to the stock market:
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Biological / Physiological Needs: This is the largest and lowest 1/5 of the pyramid. These needs are for oxygen, food, water, and a relatively constant body temperature. If we don't have these essentials, we would die. Stock Market: During times of fulfilling basic needs, people will spend money on food and clothing, but not on large ticket items. The focus here would be on equities in grocers, water suppliers, clothing manufacturers, clothing stores. Hint: If people are squeezing budgets, don't look at high-end suppliers.
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Security / Safety Needs: After food, water, and basic shelter, we're most concerned about our security and safety. Most people don't experience this level except in times of emergency or in periods of disorganization in the social structure. Children display signs of insecurity more than adults, but adults are known to act irrationally in times of distress. Bingo. Stock Market: Of course, we already know stocks in defense contractors have recently shown an upside. If this isn't your cup of tea, consider stocks in alternative energies.
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Social (Love, Affection and Belongingness) Needs: After we take care of basic needs and safety, we turn to love and belongingness. We have biological and emotional needs to escape loneliness. We crave validation that we're not alone in how we act or think or believe. Stock Market: This level is multi-faceted. It's summer, and people still want to get out of the house, but they may want to stay closer to home. Think entertainment, like movies (rental, cable, theater), casinos, and even mini-golf courses. Look into Fortune 500 companies in areas close to you through the BUYandHOLD state search. The other alternative to this need is to join an investment club. You can either join an existing club or create one of your own at BUYandHOLD.
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Ego / Esteem Needs: We're getting near the peak here. After we meet all our basic needs, we begin to seek ways to become leaders for our self-respect factor. We can be role models for our children throughout this whole process, and we can become confident advisors to our family and friends with our gained knowledge. If this need isn't met, people will begin to feel inferior, weak, helpless and worthless. We can't have that! Stock Market: Unfortunately for our society, many of our "feel-good" esteem needs come from drugs. Although many of these drugs are beneficial for people who need them, many are also marketed for ailments that might benefit from another recourse. If we want to teach our children how to cope without drugs - prescribed or otherwise - we can look in other directions. Sports, health products that don't promote zoning out, educational products, you name it. Anything that appeals to your own sense of self-worth might bear investigation in the stock market.
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Self-actualization: This is the upper level, the top banana, the cream of the crop. Maslow describes this level as an ongoing process. Most people who pursue this level are usually involved in a cause that is beyond their own need fulfillment. This level contains people who have met fulfillment of all previous levels (pretty difficult to help others when you need help yourself!), and are in pursuit of creativity, caring for others, and envisioning the future. It might not be totally altruistic, as the feelings attained with work for others often brings a sense of self-satisfaction. Stock Market: Don't let people tell you the market is for capitalists. The market is for everyone, and wonderful deeds can be accomplished with diligent investigation and with a purpose higher than turning a profit. Find forward-thinking companies who are concerned about the environment, and that work to keep the world safe for ALL children. Invest in these companies, and then tell your friends about them. Make this your mission, and who knows what changes we'll make in our world. Maslow died from a fatal heart attack on June 8, 1970. Fortunately, he managed to leave us the legacy above, plus his Hierarchy of Information. We'll tackle that list next week.
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Until then,
Linda Goin
Information gathered from Maslow's own book, Toward a Psychology of Being. This is a great book for all parents!
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