I’ve posted Entry #53 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called Who Is Dow Jones?
Juicy Excerpt: Unjust outcomes are unprofitable outcomes. One of Rand’s most important insights is that capitalism is in a deep sense the most moral system.
Stock prices are units of information. It is through changes in stock prices that we reward business owners who should be rewarded for being responsive to consumer needs and desires and punish business owners who should be punished for being non-responsive to consumer needs and desires. In a bull market, all the prices assigned are wildly incorrect ones. That is, we are sending the wrong information signals. We are rewarding the looters and punishing the producers.
When a bull market is raging, our economic system becomes a cartoon version of capitalism. It is those who know how to work the angles rather than those who create goods and services of value to others who profit. During the 1990s, we lived not under Rand’s vision of capitalism but under a system more properly referred to as Crony Capitalism. Federal Reserve CHairman Alan Greenspan (who betrayed his old hero Ayn Rand when he failed to rein in the bull market) and other politicalfigures made out great, those who take pride in their accomplishments rather than in the size of their rolodexes did less well.
Capitalism is the moral economic system because capitalism is the honest economic system. Bull markets are liar markets. When we grow to love capitalism as much as we should given the life enhancements it has delivered to us, we will hate bull markets.