Ponzi Psychology

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investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Ponzi Psychology

Ponzi Scheme; definition:  "investment swindle in which early investors are paid with sums obtained from later ones in order to create the illusion of profitability"

In this article I postulate that the one governing rule of Ponzis will allow severe selling of assets, or a "P[3] event".

It is broken into various parts to attempt to present some kind of coherent package:

1. First Rule of Ponzi schemes
2. The Financial Markets are Largely a Ponzi Scheme
3. The National Debt Problem
4. Mass Recognition of the Ponzi Scheme
5. Triggering the collapse.
6. Ponzi Sentiment In the Market

http://danericselliottwaves.blogspot.com/

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: Ponzi Psychology

1. First Rule of Ponzi schemes
2. The Financial Markets are Largely a Ponzi Scheme
3. The National Debt Problem
4. Mass Recognition of the Ponzi Scheme
5. Triggering the collapse.
6. Ponzi Sentiment In the Market

1 - Nothing to add.

2 - Somewhat true - take any major corporation and there is value there.  They have plant and facilities.  They have cash flow.  They have products that people want.  They have brand recognition.  They have a work force trained to make it all happen.  As a result, their equities and debt obligations do have some value.  What that value is may be open to interpretation.

3 - The national debt problem is extremely serious.  I try to be optimistic but when I focus in on this topic I tend to lose my optimism.  I am not sure what is going to happen with this.  It is not clear that America, and the politicians that represent America, have to intestinal fortitude necessary to effectively address this issue.

4 - I am convinced that the vast majority of people in America have no idea what is going on.  When I am at work (Wall Street Company) people are very knowledgeable about what is going on.  When I hang with friends I am always surprised at how little they know about the current financial situation.  One of the reasons the current financial situation exists is because the vast majority do not have a clue.  If they thought about this stuff and understood at least some of it then Obama would never have been elected and many other politicians who occupy positions of power would not be there - both republican and democrat.

5 - I do not know exactly what would trigger a collapse or if there will even be one.  It may be a slow painful slide down to a lower standard of living or it might take a day or two for an immediate reduction in standard of living.  I hope it is a slow slide.  People in America are spoiled.  They would not do well with a two day reduction in the standard of living.  That would result in violence and chaos.  Cities in particular would experience difficulties.

6 - There are two pictures of the world being presented by the media to the people.  One is the rosy outlook of green shoots, higher equities prices, and it is all going to be OK in a few years.  The other is an examination of the facts with a critical eye.  This activity results in a bearish outlook and stock piling food in the basement.

 

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