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

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.

Continue reading→

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.