Yuppie 911

Just read an interesting article in which folks can buy an emergency beacon that can be activated when they're in danger out in the wilds.  Say if you were camping and you got lost in the forest and need help - you push this little button and the Search and Rescue (SAR) team will come running - honing in on your distress signals.  What's really interesting is that these beacons have led people to become more complacent in their outdoor activities - knowing that they have such failsafe system in place -they're taking on more risk.  If they hadn't had the beacon would they have attempted to summit a mountain without much water or food?  The Search and Rescue Teams hate these distress calls because it puts them in needless danger to help someone who put themselves in harm's way - the SARs call these calls Yuppie 911.

Interestingly -in the finance field we have a similar phenomenon - we call it the Minsky Moment.  It is when investors get lulled into a false sense of security because they know the Government will bail them out or that the Fed will do whatever it takes to protect the economy.  And over time this false sense of security grows and grows while at the same time investors are piling on ever more risks in their portfolio. Folks start to leverage their portfolio to insane heights - even the SEC looked the other way when financial institutions surpassed the leverage limit of 12 to 1 ratio.  Some banks were leveraged 30 to 1!  The Minksy Moment, named after Hyman Minsky, is the point at which the investors incur major cash flow problems because their debt have spiraled out of control due to their leveraging activities. When this happens - a major selloff ensue which leads to a huge drop in market liquidity because no one wants to be the buyer of these bad debts.

Whether it is Yuppie 911 or the Minsky Moment - it highlights one of the flaws of human nature...namely that we are so easily blinded or distracted that we don't see things the way they really are.