From his Of Two Minds blog, April 25:
A Rising (Central Bank) Tide Turns Everyone into a Genius
Until the system implodes--you're a genius.
So you've ridden the markets higher--stocks, housing, commercial real estate, bat guano, quatloos, you name it--everything you touch turns to gold. What can we say, bucko, other than you're a genius!
It's a market truism that rising tides lift all boats. But that's not the really important effect; what really matters is rising tides turn everyone into a genius--at least in their own minds.
Those of us who have been seduced by the Sirens' songs of hubris know from bitter experience how easy it is to confuse a rising tide with speculative genius. When everything you touch keeps going higher, the only possible cause is.... your hot hand, of course!
Stocks--I'm a genius! Housing--I'm a genius! Commercial real estate--yes, well, I suppose the evidence is overwhelming--it does seem I'm a genius.
The only thing better than buy and hold is buy the dips and hold--and use margin or whatever leverage you have to buy more before the price goes even higher.
What can we say other than: this is the strategy of geniuses. The proof is in the charts:
The S&P 500: margin to the hilt and buy every dip: genius!
Housing in Sweden, Toronto, Brooklyn, West L.A., San Francisco, Seattle, Portland, Shanghai and every other blazing-hot market: borrow more from the shadow banking system, mortgage your house to the hilt, do whatever you have to do to get the down payment and buy another flat: pure genius!
I'm guessing we'll be coming back to this as well as last week's "The Coming Opportunity From The Shift To Passive Investment Management" and a few others somewhere down the line.