So a bullish outlook for housing would seemingly augur a long-awaited recovery to Main Street. But the more you look into it, the clearer it becomes that it’s not being driven by the typical American families who lost their homes in the economic crash. In fact, it’s being fueled by the banks and hedge funds whose speculation caused that crash in the first place.
Category: Finance
Credit Supernova!
Credit is now funneled increasingly into market speculation as opposed to productive innovation. Asset price appreciation as opposed to simple yield or “carry” is now critical to maintain the system’s momentum and longevity. Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance Minsky once warned against.
Big Money Bets on a Housing Rebound
But, it turns out, sometimes when the system breaks down, there is money to be made.
Apple – After The Thrill Is Gone
As such, the thrill and excitement of extraordinary returns is simply not there anymore. And when the thrill of extraordinary returns is gone, then there is not a whole lot of reasons to hold onto the Apple. In which case, you are more prone to sell it than to hold on to it. In other words, you become trigger sell happy. I think that as more and more investors realize this, more and more will chose to sell.
Strawberry Fields – Forever?
As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will “take you down” and lower your expectation of future asset returns. It may not last “forever” but it will be with us for a long, long time.
Abnormal Capitalist 