Economist: "Major Disconnect Between Wall Street and Main St - KTVN Channel 2 - Reno Tahoe News Weather, Video -

Economist: "Major Disconnect Between Wall Street and Main Street"

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So far this year, the Dow Jones Industrial Average is up about 6%

However, even with decent gains for the stock market, the overall economy is still seeing a slow recovery.

Dr. Robert Barone is a local economist with Universal Value Advisors. He said it all comes down to banks.

"They have new capital requirements coming down on them between now and 2019."

Barone said those regulations are making banks reluctant to lend.

"They can access the capital markets and dilute their shareholders and pay for it by having the shareholders vote them out of office or they can decide to not make bans and have their reserves build up by profits,"said Baron. "So, if they don't make loans, their assets stay the same and their capital ratios go up. That's what's happening and that's why we have this disconnect between the financial sector and Main Street."

I also spoke with John Luers, a former analyst for Wall Street.

He said the market does not like uncertainty and with a 'fiscal cliff' looming December 31st and the argument over tax cuts heating up, that's exactly where we are.

Luers said that is why we saw the Stock Market drop 313 points the day after the election, marking the fifth worst drop off for a post-election day since 1900.

I asked him if we would have see the same kind of sell off if Mitt Romney had been elected.

"I think so. I think it's the old adage on Wall Street, buy the rumor, sell the news. The market was poised to make a move either way."

To watch the entire interview, tune into Face the State here on Channel 2 this Saturday at 4:30am and 4:30pm. It also airs Sunday at 6:30am.

Written by Chris Ciarlo

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