Thursday, October 09, 2008

Sympathetic Detonations

A sympathetic detonation occurs when an explosive charge ignites another nearby explosive. This example from WWII shows that they have a productive use in neutralizing explosive sources that can't be safely disarmed.

Asian markets have opened by selling off on Oct. 10 in response to the Dow's downward move on Oct. 9. The Dow's plunge was the initial charge, and other equity markets are just as pregnant with danger. The difference here is that these explosions are not being set intentionally to reduce harm. They are instead the result of decades of accumulation of DEBT, a supercharged force that is dangerous when stretched, overconcentrated, or otherwise mishandled.

There may be a lesson here for investors.

When you see unexploded ordnance, call your local bomb squad or demolition expert. Just don't go near it.

When you see a debt-laden corporation or national economy, call an expert in international finance and get them to defuse the situation. Just don't go near it.

(And some of you were wondering when I'd throw a military analogy into my blog.)

Nota bene: Anthony J. Alfidi is completely debt-free, unlike many Americans.