The Gods Of The Marketplace

by Mark J. Grant, author of Out of the Box,
"It's the lure of easy money. It has a very strong appeal."

                 -Glenn Frey, Smuggler's Blues

 

Investors borrowed $384.4 billion in April, a 1.3% gain from the previous month and a 29% rise from the same month last year. This is an all-time record for margin debt and it exceeds the previous high mark set in June 2007. Some may see this as an increased sign of investor confidence but I am not one of them. To me this is a giant red warning flag blowing in the financial breeze indicating the leveraging of dumb money making very risky bets.

"Every swindle is driven by a desire for easy money; it's the one thing the swindler and the swindled have in common."

                     -Mitchell Zuckoff

Substances based upon some sort of white powder are quite dangerous. They can overcome your good sense and then they it can be quite difficult to extricate yourself from them. The Great Depression was caused, in large part, by massive leverage utilized in the equity markets. This was the white powder of 1929. It took a decade and a World War before America was able to loosen the grip of the stuff.


The white powder of 2008/2009 was easy money provided by the American banks. It wasn't the subprime mortgages that caused the problem but the leverage that was used to buy them and then various securities that were appended to them. It took the coordinated efforts of the world's central banks to stop the carnage. Money for nothing, money from nothing and checks for free.

Chicks were still expensive but at least we could afford them once again.

"I came to a stark realization: chronic surpluses could be almost as destabilizing as chronic deficits."

              -Alan Greenspan

The economies of Europe are in recession by any definition that you would like to use.
America is sputtering and barely above the red line.
Japan is now on steroids and the recent volatility in their equity and bond markets is astounding if not scary.
All over the globe the white powder is being dispensed once again but this time there is far more of it than ever in history. It is being made by the central banks and so people think it is sanitized but let me tell you; there is no such thing! We are once again in the crack house of substance abuse!

In each age the gods of the marketplace show up once more. The packaging may be different but the powder is the same. Each dealer uses the same line, "Nothing addictive here."

"With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market who promised these beautiful things."

           -Rudyard Kipling