Today's market is flying high! Investors are realizing unprecedented returns. Virtual money that can be wiped away just as quick. I watched a lot of friends suffer such a decline in 2008. I watched from the sidelines back then,, so now I am telling anybody who will listen that "THE SKY IS FALLING!" - again.
As any other farmer must do in harsh climates, we supplement our chickens to help them through difficult times. The expected pay back for the supplements is more eggs in the future. But what happens if the supplements continue?
The supplements given to the chickens are mostly low priced grains. They are historically low priced at the moment, but that situation can change. So it should be viewed as a reality that low priced supplements are finite in supply.
The farmer happily supplies the low cost supplements and most of the chickens survive the tough winter. A few chickens keep laying so there is some return realized. When spring arrives the chickens are still struggling to produce. No problem, the grain is still cheap so the farmer keeps supplementing.
It isn't much longer before production improves. To the casual observer, eggs are plentiful and easy to come by. But when you sharpen the pencil and look a little closer, things are not quite as advantageous as they appear. The returns are high, but so are the supplements (debt).
It turns out that the high earnings are being propped up by cheap debt! When the supplements and low interest loans run out, the initial negative shift will not be too alarming, but things will get worse.
The farmers gets impatient waiting for the return that he provided the supplements for and starts gathering more eggs. When the chickens notice the fewer eggs in the nest boxes, they start hiding eggs. Other chickens follow and the hidden egg stashes attract unsavory foreign entities. Racoons, skunks, feral cats, and other shady characters show up to take eggs from the once productive coop.
Propping up earnings with debt is a bad deal for farmers and investors alike.