Is The Stock Market Heading For a ‘Crack-Up Boom?’

Is the US stock market headed for what Austrian School economist Ludwig von Mises called a ‘crack-up boom’?


A crack-up boom is exciting. Stocks head for the moon. But it’s a flawed moonshot. The rocket ship blows up because there are no real earnings or revenue growth to justify the high prices.

Eventually, investors flee into tangible goods – what von Mises called Flucht in die Sachwerte…

What do you do in a crack-up boom? You hold onto your hat! And hard assets.

It’s like walking through an inner-city alley in a high wind. Everything gets picked up by the breeze – plastic bags, old newspapers, sandwich wrappers and Styrofoam cups. And when the wind stops, the whole lot of it falls again to the ground…messier than ever.

We’re not predicting anything, mind you.

We’re down here in Nicaragua with members of our family wealth investment advisory service, Bonner & Partners Family Office. The weather is warm and sunny. The waves crash upon the beach, as about 20 surfers try to catch a wave in front of our house. The wide, flat ocean is like the surface of a mirror; we see the clouds and the setting sun reflected in it.

The beaches here are very different from those of the East Coast. They are more like California, but prettier and much warmer. Our beach is about a mile wide, shaped in a crescent…with hills rising on each side and flat lands, flushed by two small rivers, in between. In the morning, we walk from one end to the other and back, and then jump in for a little swim. It takes about an hour.

Then we are ready for breakfast. After we have eaten, we retire to the porch to take up our work, via the internet.

Not a bad place to hang out? Yes, we’re considering ‘retiring’ here. Why not? The living is easy. The views are stunning.

When we first came here – about 10 years ago – the beach was deserted. Except for a shack with a guard, his dog and a pig, we had it all to ourselves. Now, at any time of the day, there are 20 to 30 people…most of them surfers…out in the waves.

There are about 15 private houses along the beach, along with two condo complexes of about 10 units each. Since we’ve been here, the houses have become more elaborate, bigger and fancier.

Some of them are well-designed…some with a colonial Nicaraguan touch…and some more like Malibu houses, sleek and white, with lots of glass facing the ocean. Others show a lack of foresight or lack of aesthetic sense, with clunky columns and balconies that seem to have been pasted on with no regard for the overall effect.

People should pay more attention to architecture. The cost of building a new house is about the same, whether it is well-designed or not. And when it sits on a public beach, we all have to suffer it.

Bad architecture can blemish the landscape for generations. We have no solution for this problem, but occasionally an architect should be hung in front of his monstrosity…as a warning to the others.

Prices have gone up, too. Ten years ago, these were ‘cheap beachfront lots’. Now they sell for $400,000 to $500,000. Still cheap by California standards, but a lot more than the $130,000 or so that sellers expected a decade ago.

At first, we worried that development would make the place less attractive to us. So far, it hasn’t been a problem. People say hello to one another on the beach. Otherwise, we are still mostly on our own.

This is the tail end of the rainy season. Everything is green…jungly…lush. Very different from the dry season, when the leaves have fallen off the trees and all you see are brown and yellow.

Nicaragua – not a bad place to hang out.


Bill Bonner
for Markets and Money

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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