The Upside of a Stock Market Crash, by Charles Hugh Smith

Stock market crashes aren’t all bad, especially if you’re short. From Charles Hugh Smith at oftwominds.com:

A drought-stricken forest choked with dry brush and deadfall is an apt analogy.

While a stock market crash that stairsteps lower for months or years is generally about as welcome as a trip to the guillotine in Revolutionary France, there is some major upside to a crash. Let’s start by noting how drawn-out crashes reset the dominant ethos of the era from wild debt-funded speculation to long-term investing in productive assets.

(Whatever that means….nobody seems to know what a “productive asset” even is… presumably a call option on a Momentum Stock that expires in two days qualifies….)

In an era where punters expect to turn $4,000 into $400,000 in a few months via a frenzied speculative churn, there is no role or incentive for long-term investing. A 10% return is barely acceptable on a single trade on a single day, so the idea that one invests one’s nestegg in stocks that might (if all goes well) return a total gain of 10% annually… you must be joking, right? Ten percent a year?

An incentive structure that no longer rewards speculation would be a positive for the nation. A market that drifts lower, impoverishing every buy the dipper and draining the capital from every speculator, large and small, would be extremely beneficial as it would lower expectations and re-establish measures of value that have lost all meaning.

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