It was 1997.
I was working for this DB investment "firm" in Chicago. They all were pursuing their CFA's and MBA's and they all graduated from some top notch Ivy League school or another.
We were sitting around and the topic of conversation came up about the valuation of the stock market at the time.
One Northwestern graduate said, "It should be trading at 10,000."
Another U of Chicago graduate said, "It should be trading where it is."
I said, "It should be trading at 7,000."
They all laughed at me and thought I was nuts. But since I went to a public school and had to put myself through college, I knew I was right. The DJIA should have been trading at 7,000. Not the 9,000 it was trading at, at that time, let alone the 11,000 the moron from Skokie said it should be trading at.
It would only be another short year before the Asian currency crisis took the DJIA back to the level it should have been trading at and proved all my DB ivy league contemporaries wrong.
Of course, my victory would be short lived. The reason why is that within another short year a new phenomenon hit the market. The "Dotcom craze!"
I was no computer engineering major, but I had a hard time trying to understand why the DJIA went up to 11,000 because we sold pet food online. I was told I was a fool and didn't understand the "complexities" with the internet and how B2B, B2C and C2C marketing worked. I was a moron for not seeing how this would result in a mere tripling of our GDP.
Again. I said it wouldn't last, the earnings weren't there, blabbity blah blah blah.
And sure enough, the DJIA dropped back to 7,500 when all those MIT and Ivy league graduates couldn't get it economically up and produce the GD profits required to rationalize their valuations.
You would think this time, the Ole Captain would be proven correct. That sanity had finally placed itself at the helm of the pscyhology of the market. But no, there was a new bubble.
The housing bubble.
I don't have to go into detail about the insanity that occurred there, because I already wrote the freaking book on it. But it was the same damn thing.
"Yea!!! Asset prices are increasing! Why???? Uh...umm....I don't know, but they are...YEA!!!!! Let's borrow more than we can afford out of it!!!! I want an SUV honey even though I have a degree in philosophy and work as a nanny!"
Of course nobody listened to my super awesome economic genius and, consequently, the economy went into it's worst recession since 1929 and ONCE AGAIN the DJIA DROPPED TO 7,000.
The solution, of course, advocated by our dear beloved leaders today is "education." Let's throw a trillion dollars a year into education. But, oh no. Not education where genuine economic production takes place like engineering or computers or physics. Oh, mercy me oh my no. No, let's all major in philosophy or education or sociology or whatever "hobby degree" the trillions of dollars the naive Chinese have lent us to piss away pursuing these worthless degrees.
And jee shucks whillikers howdy.
Where do you think the DJIA is going to end up this time?
I've been saying it for a long time. The DJIA - in short, the prevailing market price or numerical representation of the total economic productive capacity of the United States - should be at 7,000.
And what's great, what is supremely delicious, is that as far as I can tell, Americans have just plain ran out of bubbles to bail them out. How, oh how, are you going to keep that precious DJIA perpetually going upward so you can all afford to "magically" retire at 62?
Understand, my arrogance and bravado aside, I was genuinely the best damn finance and economics major at the U of MN. I put myself through college, I worked full time and went to school full time. I knew the 4 people who graduated with GPA's better than me, and they all had mommy and daddy paying their way and they took 5 years to graduate compared to my 3.5. They didn't even come close to me in terms of intelligence, let alone my intricate and intuitive understanding of economics, finance and accounting, let alone pure drive and determination.
So when every time it looked like FINALLY the economic realities of the global economy would come to roost and deliver a dose of reality to the US economy, and I would be proven right, NO, the Americans were always creative and resourceful in finding new bubbles to constantly bail them out.
First it was the booming 90's, felled by the Asian currency crisis.
Then it was Dotcom Mania, felled by DB Gen X'ers who never had any intention of making genuine economic production.
Then it was a housing bubble, felled by the ineptitude of Gen Xers and Baby Boomers to make their mortgage payments
only to sadly and futilely be bailed out by the (pfa!!!! You ready!??? You sitting down?? This is going to be hilarious!)
The education bubble as worthless Millineals (don't care how it's spelled) pursue their degrees in "Puppetry" and Sociology and whatever worthless touchy feel good crap the preceding generations told them to go and major in.
In short, for the past 2 decades, America has been relying on bubbles to hide the underlying deterioration (ie-read laziness) in its ability to produce genuine economic production. We rely on asset price increases to pay for our retirements, to boost consumer confidence, to boost consumer spending, all while producing nothing of economic value to rationalize these price increases, resulting in not just bubbles and trade deficits, but unfathomable peace-time debts and deficits.
So, I'm just curious, fellow Americans. What faux bubble are we going to pursue now to hopefully fake out the rest of the world that we are a serious country to give us favorable lending terms so we can continue to piss away our creditors' monies?
A "Green Bubble" like the highly successful Solyndra.
A "Grrrrrrrl Power Bubble" like all you girls with your masters in social work and elementary education? Yeah, that'll close the trade gap with China and bring us back to a booming economy.
The "Baby Boomer 401k Bubble." Oh, that's right, you all pissed away:
1. The money you inherited from the WWII generation
2. The little money you worked up during your presupposed "productive years"
3. The money you mortgaged from your children in the form of SS and Medicare.
I'm sure, with the WONDERFUL employment opportunities you've left future generations we'll be able to just keep on contributing to the stock market via our own 401k's plans to keep stock prices artificially high so you can slowly switch out of equities into bonds.
The sad truth is that America has run out of options.
There are going to be no more magic tricks. There is no asset class remaining that hasn't been artificially inflated. There is no government where "Barack and His Magical Keynesian Unicorns" that are going to come to your rescue.
The time is VERY NEAR where the harsh, mean, cold realities of economics are going to beat the ever living crap out of naive, idealistic, lazy, socialist people, and I am here watching with my cigar lit, my Rumpleminze poured, fully intending to savor every second of it. It's already happening.
I love watching Detroit collapse.
I love watching employers cut jobs in socialist states like California and Minnesota.
I love watching OWS protesters with degrees in "peace studies" bitch about not finding jobs.
I absolutely savor the increasing number of stories where the Baby Boomers are so woefully prepared for retirement they have to "GASP" WORK PAST 65!!!!!
All these morons have just plan ran out of scams and charades to postpone the inevitable. You all are relying upon that so precious DJIA to keep going up at the historic 12.8% it has since 1881. Your 401k plans, your 403b plans, your pensions, your retirements, your TIAA CREF's, your teacher unions' pension funds. All of it dependent on stock prices going up, while you so damn ignorantly want to punish and tax the "evil corporations."
No bubble can save you now.
No miracle can overcome your ignorance.
I'm just waiting, at the edge of my seat, to see which new cockamamie bubble you're going to concoct now to bail your pathetic asses out.
Please, humor me.
Because the only thing that will genuinely bail you out is going to be legitimate economic growth. Something no American has the patience or work ethic for.