Don't Exceed Your Personal Speed Limit

The inflation of the early '80s made a lot of people look pretty smart. Our homes were worth more. So were farms and other real estate. Many segments of our economy came to believe they could borrow, borrow, borrow, and leverage, leverage, leverage. The rooster has come home. 

Merv Griffin couldn't make payments on Resorts International, and it went into bankruptcy. Bill Farley acquired West Point-Pepperell at a price too high and defaulted. Robert Campeau paid too much for the Federated and Allied department store operations. And even The Donald (Trump) got fooled. The big boys aren't exempt. They are tumbling like dominos in a hurricane. 

They all made the same mistake. They violated their personal speed limit. It happened when they convinced themselves that financial speed limits were for other people. Once again we're reminded capitalism has no favorites. We may have different size playing fields but we all use the same rule book. And it also shows the value of remembering one of my favorite adages: Strength, when applied in excess, becomes a weakness. 

Just when we are certain that the stock market can only go up it tumbles. Just when resort homes are so much in demand they can't fall in value . . . they plummet. Just when the bank thinks it's a good time in the business cycle to make a loan ... they find they made the loan near the cyclical top. And just when world peace is a given. . . war breaks out. 

Keep a wary eye on your speedometer. No one is exempt from the penalties for financial speeding. A hairpin corner is likely to appear just when you become certain the road ahead is flat and straight.