Emotions & the Market

Market analysts and more highfalutin economists who have been baffled in their efforts to explain the ups and downs of the stock market may have been looking in the wrong place. Booms and busts, says Psychoanalyst Henry Krystal of Michigan's Wayne State University, are not born in carloading reports or steel-output figures but in the unconscious minds of mortal men. If the economists want to understand better why the market acts the way it does, they had better start examining the customers' egos and keep digging until they hit pay dirt in the id.

Only recently, Dr. Krystal told the American Psychoanalytic Association, have economists recognized that the market curves reflect psychological swings, but they are still making the mistake of looking for psychological explanations in the realm of the rational.

As Dr. Krystal sees it: out of his unconscious needs, the investor wishfully attaches "magical feelings of omnipotence and omniscience" to the government, big corporations, and even the stock exchange itself. "The anxieties of the consumer" drive him to periodically reendow his salesman or broker with an aura of authority and safety that was shattered as recently as the last time his stocks took a tumble.

The U.S. says Dr. Krystal. feels guilty about making too much money too easily. "In June 1962 many people were expecting a depression to set in and were preparing to 'tighten the belt' with some eagerness and relief. The Peace Corps, admirable in purpose as it was. represented a form of asceticism resembling a St. Augustine-like renunciation of riches and vows of poverty. There seemed to be a growing feeling that we had had it 'too good too long,' and that the time had come to pay the price." To the analytic-minded psychiatrist, there seems to have been a "mild but ubiquitous emotional depression, resulting from a feeling of guilt prevalent in the consumption-minded middle class, which had profited most from the postwar income revolution."

There were. Dr. Krystal admits, some reasons for the market's slump that at first sight appear purely financial. But these realities, he insists, came into play only in a way dictated by the emotional needs of the investors. Many speculators, says Dr. Krystal. use the stock market as an outlet for their aggressive impulses. It is one place where they can make "killings" without conscious guilt. But at the deeper, unconscious level, he argues, the guilt builds up along with the wealth, and every boom must inevitably be followed by its reaction of widespread emotional depression that leads to a "fall in the level of confidence" and a market depression.

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