What Money Can’t Buy

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I keep reading in various blogs and newsletters how any weakness in the market will be answered by Uncle Ben and his Printing Press. In other words, now that the government has proved it can simply pour Monopoly money into the marketplace by way of Goldman Sachs and prop up the markets, it will just keep doing so in perpetuity. No more bear markets – ever!

There is one thing about which I am certain in this very uncertain world in which we live: at some point, this little game of creating trillions of dollars for the sole purpose of creating an artificial demand for financial instruments is going to fail. It might not fail tomorrow It might not fail next month. But one day, it will fail. And when it does fail, the Dot-Gov bubble is going to make the Dot-Com bubble and the Housing bubble look like pathetic jokes in comparison.

The reason capitalism – real capitalism – not fraud and artifice – has always appealed to me is because it most closely resembled the natural order of things; that is: the truth. And I've got a familiarity with the truth that some people find disquieting. I'm kind of a big fan of it.

And truthful capitalism is about things like quality products, satisfied customers, an inspired and creative workforce, and earnings growth. It is also, in turn, about a mindful board of directors, a satisfied (and yet vigilant) body of shareholders and an earnest track record of truthful accountancy and reporting.

I'm not interested in shorting AAPL or GOOG, not only because their charts simply aren't that opportune (even in the face of a severe leg down), but also because, by and large, these companies represent capitalism at its best. That's also probably why they charts don't look like good shorts.

But what's going on now with the market in general – superb companies like the above notwithstanding – is fakery. If you've got a dead tree………but you hire someone to spray paint the leaves green and trim off some of the more obvious diseased branches………you're going to convince most people for a given period of time that the tree is OK. But you've still got a dead tree. And one day when a storm blows the whole thing over, people are going to realize you've been lying to them for however long the charade has been going on.

My point is that government money, funneled through Goldman Sachs, can – and has – created artificial demand for equities that have sent them soaring. The government's printing presses are big enough to "buy" the market. But even the government can't fake widespread corporate prosperity, and for that reason, sooner or later, this game is going to reach its ugly conclusion.

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