In season two of the television show South Park there is an episode where underpants gnomes employ an absurd business model involving the theft of people's underpants, leading them to massive profits. The business plan is as follows:
- Collect underpants
- ?
- Profit
Considering the rise of the Dow over the last year from the lows in March of 2009, it seems like whoever it is that's punting this market is operating off of a similarly flimsy business plan, witness:
- Entire banking system insolvent; unofficial unemployment at nearly 20%; massive government spending and intervention
- ?
- Dow 11,000
Robert Wadlow was the tallest man in the world. From his birth in 1918 to his death in 1940, Wadlow grew to a height of 8ft, 11.1in. Like most people of extreme height, Wadlow's was not natural. He suffered from a hypertrophied pituitary gland which resulted in an overabundance of growth hormone within his body.
Sadly, it was Wadlow's very unabated growth that was ultimately the source of his undoing. Wadlow's body developed irregularly over the course of his life and he was unable to walk without braces around his legs which added support to his massive frame. Although he was heralded and cheered everywhere he went for his massive size, the braces he had to wear as a result one day injured his ankle, wearing through his flesh and leaving a sore that became infected. The infection spread throughout his body and Wadlow was hospitalized, sadly succumbing to death following an emergency blood transfusion and an attempt at surgery.
It seems the markets will follow the path of the world's tallest man, who, it is said, was still growing even when he died. Like Wadlow, this market requires massive braces simply to stand up. These braces come explicitly in the form of numerous government bailouts, subsidies and indirect and direct supports to share and asset prices from the likes of Treasury and the Federal Reserve. Some skeptics (and I am one of them) also question whether the Fed's various currency swaps with foreign central banks is leading to covert manipulation of the stock futures markets, as well.
And like Wadlow, it is the very braces of the market that will be the proximate cause of its undoing, while like Wadlow it will be the markets massive, unnatural and inflated size that will be the indirect cause of its own death.
The important question that remains, however is this:
Will investors be able to discern that the body-economy has in fact died even as, like Wadlow, the stock market that represents it continues to grow thanks to the hypertrophied pituitary-like effect of a Federal Reserve bent on mass inflation?
