Six Impossible Things

February 12, 2018

Companies are worth what the market is willing to pay! If the market is strapped for cash, the government can just print more and fix all our problems! Prices will continue making new highs! This time is different!

Do you believe the impossible? You have to in order to have faith in this market.

"Alice laughed: "There's no use trying," she said; "one can't believe impossible things."

"I daresay you haven't had much practice," said the Queen. "When I was younger, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast."

~ Lewis Carroll, Through The Looking Glass

Chris Martenson of Peak Prosperity takes a cue from Lewis Carroll and details 6 impossible things you must believe about markets and money to feel totally comfortable with all your assets in paper markets right now.

Thing 1: Fundamentals don’t matter

A simple search reveals 236 companies with a market cap of over $2B and a P/E ratio in excess of 50x. Amazon, Netflix, Halliburton and Yelp all fall into this category. Nothing to see here, folks!

Thing 2: You Can Print Prosperity

It’s the knee-jerk reaction of central banks in the face of a weak economy, but money printing can only ever do one thing: take from one group while giving to another. It's wealth redistributive, not additive.

If it were possible to create true prosperity by printing money, the Romans would have succeeded long ago and we’d all be speaking Latin.

Thing 3: Currency, Stocks and Bonds are “Wealth”

Real wealth is real things. Land, food, cars, houses and other tangible and/or productive assets that we can use or consume.

We use markers to make claims on real wealth. Those claims are always, by definition, in the future.

Thing 4: The World is Infinite

We can easily see that credit has been increasing much faster than GDP. This is an impossible, unsustainable condition -- mathematically certain to end in tears. Yet everyone is pretending as if we'll be able to continue this way perpetually, with no consequences.

Thing 5: History Doesn’t Matter

In every single case throughout history when claims on wealth have badly exceeded the real wealth itself, the claims have devalued. Usually quite painfully so.

But this time we're supposed to believe that the lessons of history and scientific data don't apply to our unique situation in time. Our moment is special; magically so. This time is different.

It’s never different.

Thing 6: They Know What They’re Doing

A central theme of the dominant narrative is faith in authority. Our leaders have everything under full control.

Well, after watching the central banks get things wrong over and over again for decades, it’s quite impossible to believe that they suddenly have everything right.

They famously claim to not be able to spot bubbles in advance. They also firmly assert we are not experiencing an asset bubble now. Of course, they said the same thing right before the housing bubble burst in 2007.

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