Thursday, November 11, 2010

What Investors Learn from Bubbles

Over on Pro Publica and in The New York Times, my friend Jesse Eisinger writes about new bubbles in the world of investing. With changes in Fed policy to bring down interest rates by buying long term assets. I'm not going to pretend I can comment on this. I will instead just share the kicker, which is actually a kicker:

"...It’s commonplace to lament Wall Street’s lack of a historical memory. But there is something different at work. Professional investors have learned the lessons of the financial markets’ serial bubbles and learned them well.

The lesson is: When the next one comes, I’m going to get mine. I’ll just get out early this time."

Which means that a very few people will still make most of the money and the rest of us will have to hope against hope that their mistakes don't make the market collapse when our kids are going to college, or when we retire, or when we need money for long term care for our parents or (good god) ourselves. Of course, it's a foolish hope because if Jesse is right, sooner or later most of the people will have to pay so a few of the people can keep all the money.

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