APPLE COMPUTER: WHY FUNDAMENTAL ANALYSIS DOESN'T WORK
Remember the story of the Emperor With No Clothes. As long as everyone believes the king is wearing clothes, then the king IS wearing clothes. However, once the illusion is broken, then everyone sees the king is naked, defenseless. And the believe in the King and his picture of the world is no longer shared -- thus, it evaporates.
I'm not suggesting the financial empire and its so-called 'rational' system will evaporate. The financial empire the world has built up around the illusion that marketplaces are rational and can be trusted to act rationally is being tested today. The idea that we can all trust 'rational' fundamental analysis of company health through numbers is....well...is a king parading through the street, admired by all the public. Or WAS. It is not so clear now if this is still the case, or will remain the case for very long. The Financial Collapse of 2008 is testing belief in the very foundation of capitalism, the Western Creed that has replaced Christianity as its religion.
What caused the Financial Collapse of 2008? That is a complicated question -- or at least has complicated answers. My view is that 'time' caused the collapse, that the world moves through a 36-year cycle with 18 years of inflation (expansion) followed ALWAYS (no matter what we do) by 18 years of deflation (contraction). The political left says it was greed on Wall Street that caused the collapse -- some say greed on Wall Street and on Main Street -- and others may add that the banking system's unwillingness to terminate a huge debt bubble that has been building since 1983 caused the crisis. The political right says it is Washington's fault -- that Big Government and Big Government's debt of deficit caused the collapse. Of course, some people may point out that Wall Street engineered a deregulation of the banking community through purchasing political power, capturing both parties with campaign contributions, to get their way -- to steal massive amounts of money from the public after an engineered banking collapse brought fear and loathing to America's streets and capitol. Who can forget Hank Paulson begging and cajoling Congress for trillions of dollars to bailout his old friends on Wall Street, many of whom claimed they did not need it?
Debt is a continuing problem in America and in the world -- both Private debt (consumer and corporate) and Public or government debt. There is much blame to go around for this. Republicans and Democrats are both to blame. Republicans have their pet bubbles they like to protect: corporate wealth is the basis of their religion; and military might to protect capitalist markets and to spread the religion of Capitalism around the world. Politically, support of the military is a very easy call: who does not want to have the strongest military in the world? Of course, our deficit grows and grows.
READ REST OF INSTABLOG: