Ask yourself something: Which of the following scenarios is more likely true?
A. After decades of trying, Central Bankers have suddenly, simultaneously, found the ability to turn paper into gold. The business cycle has ceased to exist, and debt will be able to expand indefinitely. Corporations, after fighting competitively for centuries, always driving returns on equity to levels marginally above the risk-free rate of return, suddenly quit competing and manage far higher ROE. Technology companies - after decades of bringing new technologies to market, watching the markets grow and then saturate, watching profit margins vanish in a competitive flurry - have suddenly decided to quit fighting for market share by lowering prices. Individual investors, after centuries of regularly buying at the top and selling at the bottom, suddenly discover more hidden talent than seasoned professionals, thanks to instant access to information.
-OR-
B. This is just the latest mania in a history littered with manias (Emerging markets, Japan, Biotech, Computers, Nifty Fifty, the Twenties, Rail, etc.). People are being driven yet again by greed and crowd psychology to ignore the obvious. They have all had their excuses - our Internet excuse is certainly no better than trains, the automobile, electricity, automation, or the airplane. And like all prior manias, once everyone has borrowed as much money as they possibly can - satisfied every material demand for years - and no one can foster money creation any more, it will collapse upon itself in deflation.
(I'd point out that the bit about individual investors suddenly morphing into geniuses is already unravelling. They were supposedly scholars for dumping their life savings into the I-nutz at the peak. Now look at them - net withdrawls at the Nut funds. Buy high, sell low, as it has always been.
SSDD - Same Sheep, Different Delirium.)
BC |
