We've learned a lot about what happens when some of the people/institutions at the very top are able to make huge profits by betting on the failure of various sectors – hindsight on 2008 is coming into focus. It would seem that there could potentially be a similar opportunity for people to place large bets on failure again (Greece, etc). What have we learned since 2008 and how can we prepare/protect ourselves from the people betting on failure right now?
Pull the string.
Last edited by andersonnd; June 16th, 2011 at 10:41 PM.
A) Equity and value always fall harder, faster and more extensive than it ever increases.
B) We (collectively) didn't learn a GD thing from the last 2 bubbles and we're simply replicating it by pumping tons of cash and low interest into the system.
C) Until the quasi-socialist and socialist governments around the world figure out that redistribution of wealth is bankrupting the civilized world, I'd say that it's much more likely to crash again in the (i.e. several times your money on a short position) next decade than it is likely to double or triple in growth.
D) We've also learned that we are a debt/credit based modern economy, which means the entire system is predicated on supposition (that some schlub is going to pay his debts) and requires a constant growth rate of 3+ percent, JUST to remain healthy. Albert Einstein said the most powerful phenomenon in the universe is exponential compounding.
So you do the math, if we grow at a rate of 3.5 percent for the next 20 years, how much MORE production, how much MORE resources will that require? The answer will shock and scare you. We cannot sustain that type of perpetual growth.
The bulls always get pissed at the bears. But in reality, given our economic system, our political state of affairs and the concept that confidence is much easier shaken than established, it's a much smarter bet to take a long term bearish position.
Again, you tell me, what's more likely, that the Dow goes to 20,000 in the next 10 years, or that falls to 6,000?
at 3.5% annual growth (which matches the generally accepted long term inflation rate)...
We have to double our economy every 20 years.
So essentially, for us to BREAK EVEN from 2000 to 2100 (over this century), we have to expand our economy to 31 times the size it was in the year 2000.
Imagine that. 31 times as many cars being produced. 31 times as many homes. 31 times as many schools. 31 times as many roads. 31 times as many airline flights. 31 times as much trash generated. 31 times as much water consumed. 31 times as much beef and corn and cotton and wheat and coffee and cocoa and steel and....well, you get the idea.
It's unsustainable. We cannot continue our socialist policies. Combined with our debt based economic system, it's a double knockout punch.