Monday, July 16, 2007

It Works Until It Doesn't

It Works Until It Doesn't

If I had a dime for every time I've seen perma-bears, conspiracy theorists, and severely mentally depressed gloom-and-doomers (that's right, they are all the same, at least they all seem to hang together) say "It Works Until It Doesn't," I'd probably have more money than all the bears out there poo-pooing the current state of the market.

"It works until it doesn't" is their fav explanation for just about everything. When asked why the market keeps going up in the face of the CDO blow-ups, when asked why global liquidity is any different than U.S. liquidity, when asked why the American consumer still has money even though the housing market needs bed sheets, all of these guys like to say, "It works until it doesn't."

What the hell? What kind of asinine response is that?

Let's examine the true value of the aphorism.

Some common items that we use daily, that will work, until they do not work, are cell phones, cars, marriages, and airplanes. Obviously, when a cell phone quits working, its an inconvenience. When your car breaks down on you, typically it can cost you some time and money. What about a marriage? A bad breakup may cost you time, money, and emotional stress. However, when your plane quits working, assuming mid-flight, the cost may be more than can be weathered by a mortal soul.

Looking at the saying "It works until it doesn't work," in terms of the hypothetical situations described above, it becomes very clear that it is absurd and ridiculous to rely on this phrase to flesh out an argument or challenge a thesis about a market conundrum.

How many of these same people are married? How many fly regularly to their business meetings? How many jump in a cab and use their cell phone on the way to a hotel? Does the fact that any of these items are working, but may suddenly stop working, keep them from taking a cab, or getting married in the first place? Or do they take a boat to their honeymoon?

Likely, when one encounters this aphorism, the true meaning of the insidious phrase is "I really have no clue what is happening in the market, but I need to always be right, so I'll say something that can not be proven wrong."

Please, when you find someone using the "It works until it doesn't" routine, refer them to this post.

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