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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (55290)	11/1/2004 5:28:17 AM
From: Elroy Jetson	Respond to of 74559

From your perspective, capital gains spend like money - but from the standpoint of an economy or an economist they don't. This is the very essence of a financial bubble. As the founder of General Motors said in May 1929: "Everything will be fine as long as we continue to believe. Confidence, not half-way confidence, but 100% confidence is the real basis for our prosperity." De-constructed, this quote points out that capital gains are a confidence game. If the increase in asset prices comes from a permanent increase in wealth, then these prices are stable. If the increase in asset prices arise from an increase in leverage, then these asset prices are ultimately not stable. The more leverage that is applied, the less stable asset prices become. Ultimately the de-leveraging occurs and usually in a catastrophic manner. The debt generated capital gains vanish as magically as they arose. Incidentally, I can assure you that Larry Kudlow has never understood most aspects of economics at any time. No one could possibly have forgotten so much as to arrive at their current condition, even taking into consideration his long term cocaine abuse. .

To: energyplay who wrote (55290)	11/1/2004 5:55:13 AM
From: Elroy Jetson	Respond to of 74559

Just as a reminder that this foolishness has consequences. The immensely wealthy founder of General Motors, William C. Durant, who made this absurd Kudlow-esque comment in May 1929 . . . "Everything will be fine as long as we continue to believe. Confidence, not half-way confidence, but 100% confidence is the real basis for our prosperity." . . . spent the remaining 20 odd years of his life managing a bowling alley and trying to sell a quack medicine to remedy baldness, having lost everything. .