This recession has affected the balance sheets

David Darst is Director of Morgan Stanley investment strategy, which he joined fourteen years ago. This former Goldman Sachs believes that individual investors have bad history by the decline in Wall Street for three years and that their sense of unfairness is very strong before the weight made by high-frequency traders.

According to the President of the Securities and Exchange Commission, the May 6 Flash crash resulted in a withdrawal of individual investors in the stock markets. What do you think

This is a perfectly valid hypothesis to analyze. But it must also take into account a much longer sequence. There has been in recent years a series of injuries which have eroded confidence, whether the attacks of September 11, the rescue of AIG, Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, the cause of the practices of the largest development bank investment (Goldman Sachs) and even the black tide of this spring in the Gulf of Mexico. This must be added that the performance of markets shares this past decade has been low. Finally, it should not neglect a generational aspect. The baby boomeurs are older now. They want safe and reliable income and divided their portfolio towards more bonds and cash.

The recession must also have an impact...

This recession has affected the balance sheets. Those of banks, businesses and homes. You need to know that US households allocate their assets between their house at 27, a portfolio of shares for the same order of magnitude, of cash to height of 11 and 7 obligations. The real-estate crisis as declining markets them have therefore strongly affected. The loss of confidence in the markets is that, in late August, retail investors were net sellers of shares to-51 billion. In comparison, the obligations were at 258 billion.

It evokes also increasingly strong resentment against the high-frequency trading

It is clear that the positioning of computers closer to market place plays a role. The SEC will publish a report at the end of the month that will likely identify the different problems that this can be and how to improve things. For an individual investor, the feeling of unfairness is strong. It has no way to play the orders to the millisecond.

Do you think that a rebound is possible on the markets in the United States by the end of the year

This should be that several conditions are met. It must first employment resume, that there be no tax increase and that the value of the homes ceased to decline. Finally, it must be the profits of companies meet. Two out of three have positive results, but their directions are still very cautious speech.

Would it take to put an end to this recession

This is not really a recession it's, but a collapse of the credit associated to a dramatic fall in asset prices. We have no need for further fiscal stimulus but structural reforms. It must be that savings and investment return without that being too dependent on foreign companies. We must also fight against the social disparities: since thirty years, these are the richest 10 who have harvested the bulk of the fruits of growth.

What do you anticipate inflation or deflation in the coming months

We have deflation on the labour market, in the manufacturing sector and technology. The US Federal Reserve fight against this by applying a monetary policy that was not a success until now and later, which can cause inflationary peak. All this is that the individual investor disengages.