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Showing posts from February, 2017

Short-Termism Rearing Its Ugly Head - Again

In 2008 the world nearly ended as we know it.  At the root, the global financial system nearly collapsed.  Cutting through all the BS, it was extreme leverage that nearly brought the world to its knees.  In layman’s terms, “leverage” just means too much borrowing.  It all began with the banks who had borrowed way too much, which is another way of saying that they were operating on too little equity, or true net worth, and were thus in a very vulnerable place.  Then they pushed their excessive capital onto the public in the form of very enticing loan funds that proved hard to resist.  Many bought homes they could not afford to buy, which inspired homebuilders to build homes that should not have ever been built.  Companies were inspired to borrow to grow, or to be created, thus creating jobs rooted in speculative activity – many of which probably had little justification for existence and would in time be lost. Financial buyers, including those who bought stocks of companies – in the pu…