Wednesday, February 10, 2016

All Ponzi Schemes Collapse Suddenly And Violently

This one will be no exception.

Ponzi schemes collapse when investors demand return of capital over return on capital, kind of like support is 10% lower:

Imagine if they let Bernie Madoff out of jail, he started a new fund, and all of his old investors gave him what was left of their money to invest.

That's what happened after 2008. The Idiocracy gave their money back to Wall Street.

A Ponzi scheme is a liability without an asset. Insolvency is papered over with inbound liquidity compliments of the marginal fool. When the last fool is found, the scheme collapses.

Generation Madoff doesn't know a Ponzi Scheme when they see one..the last fool has been found...
Price / volume:

In 1929, stocks fell 90% over three years, because profits collapsed along with the economy. This time, stocks will fall far faster. Since 2008 (long before, really), Wall Street and corporate liquidators have been selling the economy for special dividends, all obscured with stock buybacks to maintain the notional value of the indices . In other words today's multinational corporations are hollow marketing shells that buy product in one locale and sell it in another locale, marked up 10x. They don't "make" anything, they're middlemen with no tangible assets other than an overvalued "brand".  

Stock buybacks prop up stock prices while market capitalizations are going DOWN. At its peak in 1999, Microsoft was worth over $600 billion. Today's it's worth $400 billion. Why? Because share count has been reduced for 15 years straight. 

Looking at this chart, 99 out of 100 people would say that the company was worth more today than in 1999... 

The people who invested with Bernie Madoff never asked how he made 12% per year every single year for over two decades straight.

Why? Because they didn't want to know. Ponzi schemes are predicated upon willful ignorance...

"I'm sure it will be different this time"
S&P with GAAP profits: