Juggling Dynamite

Nomi Prins talked about her book, All the Presidents’ Bankers: The Hidden Alliances that Drive American Power, in which she explores the multi-generational marital and protégé relationships in the financial and political worlds that she argues are the basis of power and influence in the U.S. She spoke with “In Bed with Wall Street” author and blogger Larry Doyle.  Here is a direct video link.

The rest of us and our democracy itself, continue to pay a heavy cost for revering bankers and allowing them to operate above the Rule of Law.

Suckled on the public purse through a decade of excessive government-backed student loans, education costs in America have formed a grotesque bubble. When your customers no longer have the means to purchase your service, fresh more affordable business models and solutions take over.

The cost of higher education has jumped more than 13-fold in records dating to 1978, illustrating bloated tuition costs even as enrollment slows and graduates struggle to land jobs.

The CHART OF THE DAY shows that tuition expenses have ballooned 1,225 percent in the 36-year period, compared with a 634 percent rise in medical costs and a 279 percent increase in the consumer price index.

…“Some schools are effectively limiting cost increases by bigger tuition discounting, but on the whole college presidents have not adjusted to a fundamental shift in attitudes toward the value of a high-cost education,” said Richard Vedder, director of the Center for College Affordability and Productivity in Washington. “Colleges are too slow to reinvent themselves,” particularly as enrollments are waning…”  See: College Tuition costs soar

As the most reckless players are today taking “genius” laps on the back of stock prices which have once more reclaimed the rare distinction of being the most most leveraged and over-valued in history next to 1929 and 2000, it is helpful to consider a little reminder on how speculative markets break: suddenly and all at once. Even the few participants today that feel confident that they have downside protection by using stop loss limits are likely to learn that once prices gap down, stops are often impotent.

This chart of the NASDAQ in its blow off top from October 1999 to March 2000, shows the incredible ramp and then rapid plunge that evaporated 60% of the prior ‘gains’ in 2 weeks (red box).

“…it is the nature of a speculative boom that almost anything can collapse it. Any serious shock to confidence can cause sales by those speculators who have always hoped to get out before the final collapse, but after all possible gains from rising prices have been reaped. Their pessimism will infect the simpler souls who had thought the market might go up forever but who now will change their minds and sell. Soon there will be margin calls, and still others will be forced to sell. So the bubble breaks.”  –John Kenneth Galbraith, (1954) The Great Crash 1929