Hey moron, buy stocks now! They're cheap.

So now that the economy has turned to shit, we're being told by way of consolation that "stocks are cheap." Bargains galore. Don't be depressed—go shopping! Even our prime minister (I'm from Canada), the always tender and nurturing Stephen Harper has told Canadians to look on the bright side and snap up those equity bargoons. The enlightened homeless will soon be leveraging their shopping carts and sleeping bags to buy Intel and Teck Cominco, and then parlay the profits into buying those foreclosed homes in the US (also bargains I assume). 

Yeah, right.

A week or so ago, I caught an interview on CNN (yes, I know how dreadful CNN is, and, yes, I was watching) where one business commentator finally told a simple truth, namely, that stocks, like everything else are worth only what someone else is willing to pay for them. Talk all you want about P/E ratios, NAVs, ROE, and whatever other measures brighter minds want to throw at us, but the truth is that the shares I'm holding are worth only what someone else will pay to take them off my hands. And if a year from now, that person is willing to pay even less, then guess what: my shares are worth less. It doesn't matter what prices were "historically," or what I paid, or how much I protest. The "market" isn't independent of psychology; it is psychology. 

Ever notice those butt ugly sweaters that regularly go on sale? They come in colours that look like baby shit, for example. Like other sweaters, they keep you warm, hide your physique, or whatever. But nobody wants them. That's why they're cheap.