How China Broke the World’s “Bubble Machine”
Magical Money System
U.S. stocks still going up. What does Mr. Market know that we don’t know? Plenty. He knows everything. Millions of facts. Millions of opinions. Millions of guesses. A damned know-it-all. Mr. Market is always right; there is no higher authority except God Himself So, if Mr. Market says stocks should go up, who are we to argue?
“Don’t fight the tape,” is another old-timer expression on Wall Street. When stocks are going up, you don’t want to be short. When they are going down, you don’t want to be long. As simple as that sounds, it doesn’t help you much. Because you never know which side the tape is on.
DJIA, daily. At some point, the “tape” is going to mislead those “millions of well-informed investors” – click to enlarge.
Mr. Market is a cunning, wily, and tricky fellow. He’s perfectly capable of leading investors up and up… only to knock them down from a higher place. Also, he’s known to give out the word that it’s “all clear” in the stock market… while brewing up the storm of a century.
Or you may hear him singing the blues about how awful everything is… and then discover that he’s been buying the entire time. So, even though the Dow has been trending upward… we’d be careful about drawing any conclusions. Mr. Market could be up to his old tricks; the tape could reverse at any time. And we kinda think it will.
Friend and economist Richard Duncan points out that the booms and bubbles of the last 35 years had a particular cause. They weren’t the product of Mr. Market’s caprice or of investors’ shrewd judgments. Instead, an almost magical money system drove consumption, production, and asset prices to new highs all over the world. What a hoot! Wages rose 10 times in China. Stocks rose 16 times in the U.S. But now the party is over…
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