market-ticker.org / By Karl Denninger / March 12, 2013, 09:34
It would be easy to chuckle at this and just “go along”, but doing so would be a mistake.
This is the lesson we should all be taking as the Dow Jones Industrial average closes at yet another record. It’s the lesson of how Wall Street traversed the Great Recession, after it survived (and thrived) past Washington-ameliorated crises such as the collapse of Long Term Capital Management and the Savings & Loan imbroglio. You could — should — shake your fist at all the bailouts; the record bank profits that are once again accruing to shareholders and executives; the asymmetry of rescuing now impossibly large institutions when so many individuals had to mail back the keys to their homes. But, in 20/20 hindsight, it was also smart to hedge that runaway cynicism with confidence that the system would take care of itself.
In a word, bullcrap.
Ask Bernie Madoff’s (or Stanford’s) clients how that worked out for them, because it will work out the same for you if you stick around too long, and you will.
It would be nice if this was not true, but it always is. You are never privvy to the real inside information — only the fake stuff. Madoff’s clients assumed that he was trading on inside information, which is how he managed to beat everyone else. Stanford’s clients assumed he had figured out how to game tax and investment laws via various offshore entities – they couldn’t figure out how he was doing it, and assumed he was simply smarter than them.
Neither, of course, were doing what their investors assumed was the reason for their success.