As the Credit Cycle Turns, by MN Gordon

Keep blowing up a debt bubble up and it will eventually burst. When the current one explodes, it will be one for the ages. From MN Gordon at economicprism.com:

A rising stock market has the illusory effect of masking the economy’s warts and blemishes.  Who cares if incomes are stagnant when everyone’s getting rich off stocks?  Certainly, winning wealth via the stock market beats working for it.

Without question, the pleasure that comes when opening an inflated quarterly brokerage statement is much more satisfying than a lackluster biweekly paycheck.  But not only does paper wealth grow when the stock market rises, implied intelligence grows too.  The quarterly statements, with growth lines moving up and to the right, prove it.

Why grumble over a labor participation rate that’s at a 40 year low when Netflix is up over 6,000 percent?  The abundance of cheap, frivolous, and on demand content, more than makes up for the lack of well-paying jobs.  Indeed, there’s never been a better time in the history of the world to be a couch potato – particularly when 75 inch flat screen televisions can be bought on credit.

On Wednesday, with much celebration, a generally meaningless milestone was notched.  U.S. stocks, as measured by the S&P 500, marked their longest bull market run in history.  They’ve gone 3,453 days without a 20 percent decline…though there have been several close calls (i.e. mini bear markets) along the way.

Those who profited most over the course of this bull market, were those who ignored the many potential disaster scenarios that presented themselves, and blindly bought an S&P 500 Index Fund or shares of Facebook and Amazon.  Buy and hold.  Dollar cost average.  Buy the dip.  These were the strategies that delivered big over this bull market.

What to make of it…

One of the higher callings to aspire to in life is that of finding meaning in the meaningless.  Hence, we’ll take the stock market’s historic, yet meaningless, achievement and use it as a source for meditation and reflection.  Where to begin…

“The bigger they come, the harder they fall one and all,” observed Jimmy Cliff during the bear market of the early 1970s.  Taking this simple insight, what follows is a scratch for perspective on one of the suspicious cornerstones of this bull market.

To continue reading: As the Credit Cycle Turns

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