Borrowing to Consume
As I have discussed previously, if you borrow cash then it’s not income. This is why no one in his right mind borrows to buy consumer goods. Those who try cannot sustain it for long. What if someone else borrows? Suppose someone else—let’s call her Jordyn—buys your house from you, at a higher price than you originally paid for it. You can spend some of the gain.
Photo credit: Robert Clark
An Absurd Idea
Take the notion of the efficient market. What does that mean? Today, hordes of people are coming out of economics and finance majors believing an absurdity. Yes, I said absurdity. They think that, if the market is efficient, it’s impossible to beat the average investor. This is based on the premise that stock prices (or commodity prices, bond prices, etc.) always incorporate all relevant information.
Horse Racing and the Monetary Metals
Consider the sport of betting on the sport of horse racing. It’s actually similar to the analysis of the gold and silver markets. How’s that?
First, there is the manic-depressive crowd. Sometimes (as we are told—we don’t hang out at race tracks) the bettors sometimes get overly excited about a horse with slim chances to win, or get totally unexcited about a strong horse. The track responds by lowering or raising the payout for winning, respectively. The more betting on a horse, the lower the payout.
Horse race in Las Vegas
Photo via myracing.com
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