A Letter To Bulls: Please Stop Cheerleading Our Destruction
Dear Stock Market Bulls,
Please stop cheerleading our destruction. I realize you are getting really excited right now. You can almost taste it. The market is about to go parabolic and you are in position - champagne ready to pop. Better yet, in a world where we all feel compelled (by whom?) to pick sides, you can't wait to stick it to the Bears. Those crummy Bears just hate capitalism and Amurrrica.
You are cheerleading our destruction. Before this market hits 15,000 let me tell you something you know to be true, but don't want to admit. Long term increases in the general price level of the stock market (what Bulls seek) can only come about through dollar devaluation. Notice that I didn't say dollar devaluation relative to the Euro, or the Yen, or the Yuan. It is regardless of what other governments do.
This does not mean that excellent stock pickers should stay away from the market. On the contrary, individual stocks will always go up and down (unless overzealous government stooges known as regulators haphazardly decide that some stocks shouldn't go down - which is as manageable as repealing the law of gravity.) It does mean however, that some of you are going to ride the coattails of a Federal Reserve induced rally, declare yourselves genuises (which fine, I can't stop you from your own stupidity), declare Bears vanquished (which is fine also, they can take it), when reality will be that the general wealth of America will be reduced.
I say that again, in case you missed it in the run-on rant: the general wealth of America will be reduced. Oh sure, GDP will go up. As the Soviets learned, if you print enough funny money, GDP can go up every year for decades even when your country is Bangladesh with tanks.
But the question every economist that doesn't get on his knees and shill for authority should ask is "in comparison to what?" GDP is up in comparison to what? The stock market is up in comparison to what? The people are wealthier in comparison to what?
I don't blame Bulls for attempting to ride the wave of inflation carrying the market to new highs. I know they will delude themselves with talk of passing off to the greater fool before the bubble bursts. But without the printing press, two things would happen: 1) stockpickers would actually have to understand company fundamentals and prospects to make money and 2) The rest of America, the non-investors, wouldn't be robbed blind of their purchasing power while you cheer the market rise.
Not only is the general wealth of America reduced, the seeds are sown for the eventual bust. It is during the boom that Americans should become concerned, for the boom is the problem.
Let me say that again: the boom is the problem. The boom lays the seeds for the eventual socialization of credit, growth of government power, growth of Federal Reserve power, destruction of small business, growth of big businesses, growth of talking heads' egos as they get on TV and tell us how terrible the world would be without an insurance giant and a couple large banks. Oh no! We know from Austrian Business Cycle Theory that boom created on cheap credit directs resources to investments that can't possibly be sustained by the amount of real savings available. We know there will be another crash, another group of government hacks and suck-up economists taken by surprise. We know that everyone will blame capitalism, that system you say you love, and that government and the banks will further strangle competition and individual liberty.
In conclusion Bulls, I hope you don't get the wrong impression. I'm not rooting against you either. I hope you make some money. I am not a jealous man. I wish the best in health, love, and finances for everyone on CAPS, even though I know that some will win and some will lose.
Just do me a favor. Don't cheerlead America's destruction.
David in Qatar