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Thread: The market can stay irrational longer than you can stay solvent.

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    Default The market can stay irrational longer than you can stay solvent.

    “The market can stay irrational longer than you can stay solvent.”

    The above quote attributed to John Maynard Keynes had always intrigued me, mostly because I had the opportunity to live a somewhat “privileged” childhood due to the work and fortune of one of my grandfathers.

    As a child, witnessing the extreme poverty of many in contrast to the privilege of my family, these questions arose and lingered in my mind: Why are they living like that that? What makes them different from us? It was with the passage of time and from the pain of personal experience that I would find the answers.

    Not yet a teenager, due to a war my family and I had to emigrate. Some went to South America, others to North America. My life was radically changed; my family lost most of its fortune. Soon, I had to learn new skills to adapt and survive in a new way of life. Unfortunately or fortunately for me, depends on how you look at it, I had not been taught or learned the secrets of the family’s ability to make or achieve wealth.

    Life, in my preadolescent view became very difficult. The years of my early childhood became to resemble nothing more than a sweet dream or fairy tale. I was not the only one who had a difficult time coping, the rest of my previous generation did not seem to adapt too well or worse, not at all.

    As time passed on, I discovered I had the keen ability to make deals, some which were lucrative and others which were not. One day, after a very exhaustive and consuming effort, I was faced with what could have been a disastrous deal; thankfully it turned out to be just barren. After that day, I decided I was going to find out the secret of making and keeping a great fortune.

    It turns out, there are many ways to make and keep a fortune. One of them I discovered at the age of twenty-two; that is, you need to have more people indebted to you than you are to them.

    That knowledge enabled me to have a comfortable living, yet there seemed to be something more to it. At twenty-seven, while on a visit to the Philippines and witnessing the throngs of people living in extreme poverty, I asked my friend in an unconscious slip of the tongue. “Why are they so poor?!” My friend without a second thought easily replied, “Because there are so many of them.” For some reason, his answer did not make any sense to me, yet I stayed silent and just nodded my head.

    Time passed. At thirty-one I discovered the banker’s secret of fractional reserve banking.[1] I used it to my fullest advantage, yet there seemed to be something more. While on a trip to Singapore to resolve a dispute I had with a supplier, I discovered the lawyer’s secret; that is, that fallible human judges decide what the law is among men that have erected their own laws.[2] For some reason, that experience enabled me to clearly see and comprehend the difference between man-made-law and Natural law.[3] Most of all, I understood that:

    “No human being can assert a claim of authority by right over any other human being; and, ‘No one can claim rights superior in quantity or quality to those of anyone else.’”[4]

    Now, any quant from any financial derivatives shop will tell you that the right models point out you can end up owning the whole world. Granted, you will have to coax, entice or coerce all other human beings to see it your way.

    So, yet again, there had to be something more. For now let’s go back to Keynes.

    “The market can stay irrational longer than you can stay solvent.”

    Why? Well, two things; in the dealings between human beings there are two fundamental unknowns, Nature and volition. Nature is unbiased, while human volition is uncertain, that is to say, you have the power to end your own life. In other words, you can hope or expect to do the logical and rational thing according to you, yet it may appear totally illogical and irrational to others. Yet the answer to Keynes’ quote is that the will of Men, regardless of how it may appear to other men, rational or irrational, it is still subject to the Laws of Nature.

    Discover the Laws of Nature and you will stay solvent longer than the market can stay irrational. And in consequence, you will come to find out that the throngs of poor don’t have to be poor, better yet, you will know they are not poor, for they have Life and with Life anything can be accomplished.

    -Sapiens



    1. Jesus Huerta de Soto; Money, Bank Credit, and Economic Cycles, 2006.
    2. FRED RODELL, WOE UNTO YOU, LAWYERS! (2d ed. 1957).
    3. Dr. Frederick Graves, The Search for Natural Law. (2002)
    4. Peter Eric Hendrickson, Cracking the Code, page 34; 6th Printing 2005.
    Last edited by Sapiens; 02-11-07 at 01:45 PM.

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