The Little Market That Could!
August 25, 2009
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An early version of the moralistic children's story written sometime in the late 1800s went like this:
A little railroad engine was employed about a station yard for such work as it was built for, pulling a few cars on and off the switches. One morning it was waiting for the next call when a long train of freight-cars asked a large engine in the roundhouse to take it over the hill "I can't; that is too much a pull for me," said the great engine built for hard work. Then the train asked another engine, and another, only to hear excuses and be refused. In desperation, the train asked the little switch engine to draw it up the grade and down on the other side. "I think I can," puffed the little locomotive, and put itself in front of the great heavy train. As it went on the little engine kept bravely puffing faster and faster, "I think I can, I think I can, I think I can."
As it neared the top of the grade, which had so discouraged the larger engines, it went more slowly. However, it still kept saying, "I--think--I--can, I--think--I--can." It reached the top by drawing on bravery and then went on down the grade, congratulating itself by saying, "I thought I could, I thought I could."
A great moral story about the power of positive thinking. I was read this story when I was child and I loved it. It fit right in with the worldview I was taught that you can be anything you want to be and you can do anything you put your mind to...
And to a certain extent I still believe that. Of course there are exceptions to every rule. My little brother was once asked what he wanted to be when he grew up? His answer?
A CARTOON CHARACTER!
At first you're probably a little like me thinking: Wow! Wouldn't that be cool? Do crazy stunts and make people laugh and be able to briefly walk on air or to survive falling from a massive cliff would be so sweet! But then you remember, people can't really be cartoons...and maybe you could settle for being a voice actor (like the brother of my High School teacher who plays Brack on Space Ghost Coast to Coast), but that's not really what my brother meant.
And of course there are other things I can't do no matter how positive I think I can. Like jump off a building, flap my arms and fly. And while I have the ultimate respect for anyone who was brave enough to try (never give up on your dreams and all that...), most of them didn't survive the landing...
Which brings me to the stock market. We talk about "green shoots" and "jobless recoveries" and "stimulus is working" and "Helicopter Ben avoided a depression...," and the market goes up and up and up! I can hear it chugging along: I Think I Can. I Think I Can. I Think I CAN!
And positive thinking is extraordinarily powerful. But there is another moral to the story. The little engine that could, could NOT have gone up forever. He had a goal, and that was goal was the top of a moutain, and he defied the odds and reached the summit. What he did was amazing, but it wasn't impossible. He didn't fly. He didn't visit the moon. He didn't turn into the train from Back to the Future III...
And once he reached the top. He only had one place to go. Down the mountain. For him it was a great relief. But for the stock market his final words will take on a whole new meaning. Because eventually fundamentals DO matter. Eventually, Gold and The Stock Market will not rise in tandum, or we will see massive inflation/stagflation. Eventually, debts come due. Our Chinese bookie will want to collect (one way or another...).
And the more of our GDP that becomes the G factor (government spending) the more wealth that is destroyed. Because the government doesn't own anything. They have to take it. One of these days (and I don't claim to know when because right now the people are all on Barak's Heroin Hope...), but one of these days we will have to go down the other side of this hill we climbed on nothing more than positive thinking...
I can hear Mr. Market now...
I THOUGHT I COULD, I THOUGHT I COULD...I (sob) thought...I (tear) could...
Enjoy the insanity (err...positive thinking) while it lasts,
Dare
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