"We participate in tragedy. At comedy we only look." -- Aldous Huxley

Dear Shrink Rap: I am reluctant to buy stocks because the bombs will be falling on Baghdad shortly. What do you think it will all mean? I'm sure that when the first bomb drops, so will the markets, and the nascent economic recovery may be halted. War may be good for some, but for the majority it isn't. Everyone will be glued to the television watching apocalyptic images. I can't seem to understand how so many consumers feel so confident. Denial, I guess?
-- D.M.

Shrink Rap:

Don't confuse consumer confidence with market confidence. Consumers like the current situation of low interest rates, improving economic conditions and a growing sense of job security. They are bolstered by the realization that the value of their primary asset -- their home -- is going through the roof. And don't underestimate the "think positive, spring means new life" hopefulness after one of the most horrid winters of our psychic discontent.

Since your response is to my column on

revisiting the wounded investor, you know I believe that the walking wounded are nowhere near ready to come back to the market with any degree of confidence. Last week, we ended a frustrating string of nine days in which the market reversed course, sometimes sharply, every day. This clearly isn't a recipe for establishing a trend or instilling investor confidence.

Although this kind of daily reversal pattern may be profitable for nimble traders who are lucky enough to guess correctly on the direction of the market from day to day, the only effect it has on the wounded investor is to remind him in bold relief

not

to get sucked back in again.

The Wounded Grow More Weary

Over the past month, since writing the revisiting column, I think things have gotten even uglier in terms of mounting investor revulsion with the market. Add a dash of doomsday thinking to the revulsion, and it's easy for the wounded to imagine the whole system beginning to unravel at the seams. The wounded grow more weary and disgusted as they watch each new segment of the market complex being brought forward for scrutiny by the government and the media.

Beyond the short-term outrage and investigative flurry, will substantive changes be made? If so, this may be what the complex needs to purge itself of the multiple layers of greed-driven corruption and duplicity. At the same time, I view this spotlighting of the sins of the complex as working to reinforce the repulsion of the individual investor, rather than to placate him.

This psychological arousal has not been altogether overlooked by the media. They use this danger of further turning off the wounded investor to argue that perhaps we should let sleeping dogs lie when it comes to the relationship between major brokerages and their nonobjective and self-serving research departments.

The bitterness of investors' losses combined with their intensified disgust and hatred of the broker/analyst/investment banking/accounting/media-cheerleading/market maker complex has been just too much to stomach. Their disgust can no longer be

tempered.

Growing numbers of investors have simply given up on the market, no longer seeing it as a place to invest their savings. And I'm not talking about "giving up" as a temporary state until things get better. I mean in some cases giving up on the market

for the rest of their lives.

.

Those who feel this way believe the chances of the complex ever being cleaned up enough to make the playing field even remotely level for the small investor are about as good as the chances of cleaning up the illegal drug trade, street gangs or organized crime.

Compared with the market, at least these groups do not continually remind the wounded how much money they have lost. But some corrupt CEO and/or board of directors enriching themselves by millions of dollars without ever paying the price is never very far from their awareness. Even with organized crime, once in a while a boss is arrested and goes to jail. Should it be any different for white collar crime in the boardrooms?

Consider this: The longer small investors are on the sidelines, the more they are getting used to living without the stock market. The media loves to talk about all the money that is sitting on the sidelines, just waiting to come back into the market. But what if much of that money simply leaves the arena, content to safely watch the comedy after participating in the tragedy?

Bombs Over Baghdad

You ask what I think the bombs over Baghdad will mean. What do you think is going to happen to the market when terrorists within this country use our bombing of Iraq as their flashpoint to unleash a suicide-bombing brigade here? We struggle to comprehend the crazed mentality of idealistic young people who will give up their own lives through suicide bombing. And that is their disturbing edge.

Frankly, what alarms me about this is that we may be subject to what happens when institutionalized craziness goes out to fight a war. And it isn't going to be pretty -- because craziness never is. Throughout history, craziness combined with ideological righteousness has always been a lethal combination. Is there any good reason to believe that this time it's going to be any different?

Steven J. Hendlin, Ph.D. is a clinical psychologist in Irvine, Calif. He has been in private practice for the last 25 years, investing for the last 20 years, and actively trading online as a swing trader and long-term investor since 1996. He is the author of

The Disciplined Online Investor

recently translated into Spanish. He is pleased to receive your comments and questions for publication in his public forum columns at

steven.hendlin@thestreet.com, but please remember that he is unable to provide personal counseling or psychotherapy through the mail.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.