The giant casino in the sky

March 27, 2008

It’s not really in the sky, it’s actually in New York, but for those of us who only interact with the casino through computers or brokers, it might as well be on the moon.

Equity investing is not supposed to be the equivalent of gambling, but here we are nonetheless. People do not seek profitable or plausible business models, they seek trends and insider knowledge of major transactions from those who move markets with the stroke of a pen. Too many profitable corporations are not paying dividends. The media is controlled. We never know from month to month how much money will potentially flood the market from unscrupulous central bankers trying to further inflate already unjustifiable prices.

The game is rigged, and the end result of our multi-decade gambling addiction, oblivious to these obvious inconsistencies, is a hopelessly bloated financial system accustomed to unsustainable returns and destined to implode upon itself. They got too comfortable screwing us for too long. It reminds me of the high-tech collapse. After the bubble popped, it was so obvious to every insider that astronomical returns could not be sustained forever, it was just another unfortunate case of “irrational exuberance” of course. Silly investors. Cough.

The emperor has no clothes.

But unfortunately, with this casino as with any other, the house always wins. Translated into Wall Street speak — don’t fight the Fed. They will inflate, oh they will inflate. If you hold US dollars you’ve got a target on your back and Bernanke is on the hunt.