Submitted by Mark J. Grant, author of Out of the Box,
"In Vegas, everybody's gotta watch everybody else. Since the players are looking to beat the casino, the dealers are watching the players. The box men are watching the dealers. The floor men are watching the box men. The pit bosses are watching the floor men. The shift bosses are watching the pit bosses. The casino manager is watching the shift bosses. I'm watching the casino manager. And the eye-in-the-sky is watching us all."
-Casino
I do not speak of Armageddon or Apocalypse or the ending of the world. I leave that for others trying to aggrandize their social if not financial position. I have always found such a path to be full of folly and a reckless use of one's intellectual abilities. In fact the use of this ploy may possibly grab one's imagination but rarely anyone's rational facilities. There will be enough squalor for all when the roulette ball lands on double zero.
Yes, I have been predicting red to come up for some time now. The odds of it have increased, the furor at the craps table has grown markedly and the connection between the worlds' economies and the market's behavior have been frayed to the point now that the chance of a roll onto red has increased to almost one hundred percent. In the end it is almost always leverage that touches off the rush to the exit door and I would say that the financial markets are now levered past what we have ever known before.
The central banks, in their mad campaign to keep the world afloat as the governments in America and Europe have abdicated their elected obligations, have stepped in and done the only thing that they know how to do really well which is to print money. The world is now awash with the stuff and while the end is sometimes discussed; there is no let-up in sight. Allow me to give you this historically proven postulate:
Liquidity leads to Leverage which inevitably leads you to the land of the inept, the insane and viciously horrible mistakes.
I fear we have once again entered this God forsaken territory.
Sixteen trillion dollars of liquidity has been provided by the worlds' central banks that we can find. My guess is double this amount in various schemes and artifices approved by no elected party but heaped upon everyone none-the-less. This, money from nothing, has multiplied though and has not been sitting idle.
The cash has been procreating!
April's margin debt in America now stands at an all-time record of $384 billion. Forget the summer of 2007, sub-prime mortgages are but a forgotten and distant memory. We are here. We made it. This is the biggest casino ever built!
This isn't Vegas. This is not Macau. Those are both small arcades by comparison. Open your eyes. We are in the really big show now. We have finally built the "Casino at the End of the Universe."
What makes it even more fascinating is the data that can be found at the Player's Club. The boys in the backroom, the NYSE to be exact, reports that investor net worth just hit an all-time low of $106 billion. This is while the big boys, the hedge funds, according to Form PF, have an exposure of $1.3 trillion which indicates another pocket of massive leverage as they continue to roll the dice.
Economies in recession or flat lining. Unemployment high and in some nations at record highs. Leverage at new world-beating records. Net worth's at all-time lows. The prescription has been written and it has DISASTER printed clearly on the label.
Let me explain this to you. Between the actions of the world's central banks and the use of leverage we have built the biggest casino ever built in the history of the world. It is no longer possible to invest. A casino does not have an investment window or an investment game and there is nothing around us but a giant building holding Games of Chance now. You have money and there is now nothing than can be done except to gamble and that is exactly what we are all doing. It will take just one or two rolls on Red when money is lost, more credit demanded and then denied by the House, to cause a seizure in this giant casino.
"Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then you are the sucker."
-Rounders