At this point everyone has weighed in with theories on how to turn the stock market around. Even president Bush has come through with his three reasons the market is in reverse. As Ive said before his insistence that the market is down in part to the treat of terrorism is a big mistake. It actually gives the Osamas of the world more power and the ability to achieve their goals without implementing actual transgressions.

I'm going to outline a series of events listed in order that they have to occur that may have to happen before the market can sustain a rally. They are trust, accountability, economy, new thinking and earnings.

Trust: A Matter of Mea Culpa, Hara-kiri, and Open Kimonos

Mea Culpa

I think the biggest problem with the misdeeds of corporate titans that have been caught in the cookie jar is that none have come clean. It would be very refreshing if one would step forward and say he/she just let it get out of hand. However, the mea culpa isnt just the necessary from those facing criminal conviction. To a certain degree we all played a role in the markets demise. The individual investor will have to come to grips with the fact they threw caution, common sense and discipline to the wind. Most investors are blaming their brokers, but at the end of the day free will plays a role.

Then Id love the media to admit they played a role. CNBC in particular has spent the last year and half acting like they werent part of the hype. They dont want to admit they were the carnival barker, not just reporting on the events inside the tent.

Next there are the brokerage firms themselves that already were working in a Catch-22, as they had to answer to two masters; the individual client and the corporate client. Now they had to fend off the threat of the Internet, which became a Borg-like creature that changed the rules of Wall Street. In effect, it became the great California Gold Rush.

It isnt about getting preachy, but we all say we messed up, I think well all be back on track mentally. The dream of quick riches has been wiped out, but the dream of making money in the stock market is still intact.

Hara-kiri

In addition to coming clean some folks are going to have to go an extra step. I would say that not all of the CEOs that have failed shareholders did so with selfish greed and malicious intent.

The bottom line is that they probably have to be replaced. Not because they cant learn from their mistakes, but because the underlying share prices will never recover, as question marks and doubt will always haunt them.

This brings up another dilemma, the thin talent pool. As the public rightfully screams for the beheading of CEOs and dismantling of too friendly boards few are considering their replacements. If you think baseball has been yielding too many homers in part to a thin talent pool, just imagine trying to field a thousand of so publicly traded companies? Developing a big-time CEO is harder than finding a person that can pitch a 100-miles an hour, plus steroids really dont do much for the decision-making process of a corporate executive.

Open Kimonos

Obviously transparency is necessary going forward. Still this can be yet another tricky situation. From a broad perspective the greater the transparency of corporate America the better the quality of all things associated with the economic system. Not just the honesty of reporting but also of the end products. Consumers have been demanding such quality for a long time and they have been answered. Now shareholders will demand the same transparency that a car buyer wants to avoid buying lemons.

Accountability

Someone has to pay. America has always had a strange relationship with its would-be criminals. They love Bonnie and Clyde, Machine Gun Kelly and more recently John Gotti. Yet seem to loathe Ivan Bosky, Michael Milken and Gordon Gecko. This really goes back to a Robin Hood mentality that its okay for the underdog to take from the rich but not okay for the rich to take from the people. This is a lesson that Martha Stewart is learning the hard way (not to say shes guilty of anything, but if she is) with her current stock sale imbroglio. At the end of the day it really only becomes an inconvenience for those staying at Club Fed. The key is that the average person on the street needs to feel like there is some fairness in this world. Before getting back into the stock market those whose lives are marked with rules, regulations and spending time in traffic court to fight a ticket must see an equal distribution of justice.

Economy

The economy has to continue to grow. It is unreasonable to think that a transition from a recession to a would-be expansion could happen without a few bumps in the road. Of course with so many things going against the economy that have nothing to do with fundamentals it is hard to figure when the coast will be clear. A company like WorldCom says it may have fibbed to the tune of $4 billion dollars and the confidence in America suffers. That puts additional pressure on the dollar, a greater focus on the rating agencies to be even more aggressive in their downgrading binge. It causes net outflows in funds. It lowers the wealth effect and hampers the economy. Yet the American economy has an iron will. It will be dinked a few more times, but that is what will make the move into expansion that much impressive.

New Thinking

The mindset of the quick payoff has to be eliminated. I dont think one can be a passive investor anymore. In fact, the same decisiveness that investors are demanding from the system, ratings agencies, brokerage firms, governing bodies and corporations themselves they should apply to their approach at the stock market. In a recent Business Week article it was noted that the turnover in NYSE issue in 1960 was just 12%, last year it was 94%. That means there isnt always a lot of time to peruse or hesitate. In some ways it is unfortunate that companies arent allowed to evolve or reach their goals over a longer period of time. Yet this is the world we now live in and investors have to adjust.

Earnings

Much is made about the market still being over valued based on historic price to earnings ratios. This is because companies have no pricing power and are afraid to force the issue. Moreover there is still the inventory overhang and the fact that some industries are too crowed back to the modern day baseball theory. Creative destruction and an improving economy are the only things that can make this situation improve. There are other ways to measure the worth of a company beyond the P/E ratio. However, in order to feed into the economy earnings have to be a tributary allow for job creation, research and development spending and an improvement in the wealth effect. The most compelling aspect of better earnings is that investors have to believe in the sincerity of the numbers.