01-16-2020, 09:05 AM
** 16-Jan-2020 World View: Financial speed bumps
I left the false panic of 1987 out of my summary in my last message.
To use your phrase, there have been three "speed bumps" since 1929:
Each of those three "speed bumps" was worse than the previous one, but
still not severe enough to require fundamental changes -- in
particular, reduction in public debt, with government debt alone now
well above $20 trillion.
It's been a very, very long time since the last "speed bump," and
investors are assuming that speed bump #4 won't be as bad as #3
because new laws have been passed, and because the Fed has become so
much more clever. It's a major delusional fantasy, We still don't
know when speed bump #4 will occur, but we can be absolutely certain
that it will be much worse than #3.
Higgenbotham Wrote:> Say, like Trump, you've been in the real estate business, and you
> recognize it's a bubble and has been for along time. It's logical
> to say, well, it's been a bubble for a long time and the way to
> address it has been to buy the dip and then wait for some
> excesses, trim holdings, wait for the next dip, etc. The practical
> way to be successful in navigating the bubble has been to take on
> debt and assume the general trajectory is onward and upward to
> bigger and bigger bubbles with speed bumps along the road. People
> who have the constitution to operate in that manner are the only
> ones who have amassed fortunes since the 1987 crash (Hendricks
> Holdings, for example) and among that class of people a certain
> groupthink has developed and a level of genius is inappropriately
> attributed to that kind of thinking (another more widely known
> example, the cult of Warren Buffet which would never have existed
> absent the bubble environment since 1987).
I left the false panic of 1987 out of my summary in my last message.
To use your phrase, there have been three "speed bumps" since 1929:
- The false panic of 1987 = 1929+58. This is related to the
58-Year Hypothesis in generational theory, which says that 58 years
after a massive public catastrophe, the last cohort of people with
personal memory of the catastrophe retires, resulting in a (false)
panic.
- The Nasdaq crash of 2000, the last year of Clinton administration.
This was the collapse of the "tech bubble" brought about by the
Silents/Boomers who saw that the 1987 panic really wasn't so bad after
all. In the 1980s, companies like Lotus, Ashton-Tate, IBM, Compaq and
Microsoft made a lot of money, and the Silents/Boomers wanted to do
the same with their own companies and made reckless investments. By
the way, the 1990s bubble was not "caused" by the internet. It was
"caused" by the false panic of 1987 combined with the PC explosion of
the 1980s, combined with the retirement of the last people with
remaining memory of the Great Depression. This is actually another
illustration of the 58-Year Hypothesis.
- The subprime crash of 2008, and the collapse of the real estate
bubble. The "cause" of the real estate bubble was the rise of
Generation-X, who were furious that they were personally swindled by
the Silents/Boomers in the Nasdaq crash. This tied into their fury at
their fathers over the high divorce rate. They decided to get revenge
by creating tens of trillions of dollars in fraudulent subprime
mortgage backed synthetic securities, and then selling then to their
fathers' generation to screw them and swindle them. Unfortunately,
they created millions of bankrupt and homeless families in all
generations.
Each of those three "speed bumps" was worse than the previous one, but
still not severe enough to require fundamental changes -- in
particular, reduction in public debt, with government debt alone now
well above $20 trillion.
It's been a very, very long time since the last "speed bump," and
investors are assuming that speed bump #4 won't be as bad as #3
because new laws have been passed, and because the Fed has become so
much more clever. It's a major delusional fantasy, We still don't
know when speed bump #4 will occur, but we can be absolutely certain
that it will be much worse than #3.
