State Plan 14.25

There were a couple of items that caught my eye today that may seem unrelated, but they fired a few synapses in my brain and I thought that I would relate them here.

First, Bloomberg ran a couple of stories on the ever-inflating asset bubble.  Of course, they don’t outright call it this, but they reported on a home on offer in Los Angeles by a spec builder for $500 million. In the story no one is screaming “top of the market,” because the market has been so stupid for so long that things like this are becoming normal.

The second story that they reported on was the torrid returns being generated in Chinese stocks. Today, in just a single trading session, 250 companies listed on the Shenzhen Exchange were limit up 10%.

The third item that caught my eye was an obscure swimming story where Hungarian swimming sensation Katinka Hosszu was implicated in a doping scandal by Swimming World Magazine.

Of course, I have no knowledge of Hosszu’s guilt or innocence other than to say that her performance over the past two years has been so superlative that it has people wondering.

If she is innocent, I hope that she is allowed to compete. She has passed all her drug tests, but there gas been enough smoke in terms of incredible athletic performances in past years being drug fueled that questions are bound to be raised.

So, instead of talking about Ms. Hosszu, let us turn our attention to East German State Plan 14.25. This was the directive issued by the East German government to utilize steroids on their international athletes during the 1970s and 1980s.

The introduction of systemic doping made the tiny GDR a world athletic powerhouse, and nowhere was this power more visible than in women’s swimming.

Starting in 1973, East Germany’s women swimmers became the best in the world, surpassing their chief opponent, the U.S. By the time the 1976 Olympics rolled around, there remained a bright hope for U.S. women’s swimming in Californian Shirley Babashoff. It was hoped that Babashoff would be the new Mark Spitz, but it was not to be. The East Germans thoroughly dominated the 1976 Olympic swimming competition and Babashoff left with four silver medals and one gold. In each instance where she finished second, Babashoff lost to an East German.

Babashoff, then a teenager, did not go quietly into the night, however, as she openly accused the East Germans of cheating, citing their masculine voices and incredible musculature. Without any proof other than the startlingly obvious physical make-up of those East German women and their coming from nowhere to dominate the sport in just three years, the press mercilessly laid into Babashoff, nicknaming her “Surly Shirley” and a sore loser.

Babashoff was correct, however. The doping scandal involved at least 10,000 East German athletes and all of their female swimmers. Of course, this information all came out decades after the damage was done to Babashoff’s career, a career that should have her remembered as one of the greatest female swimmers in history. Instead, she is largely an afterthought, an asterisk. 

What I love about her story is that she had the courage to speak the truth, to call a spade a spade. Yes, she paid a terrible personal price for her integrity, but her integrity remains intact. Sometimes, having the courage to simply state the obvious truth, the one staring you in face, is all that is required to maintain your integrity, and Shirley Babashoff had it!

The East German athletes, it appears, were largely unaware that they were being fed massive doses of steroids and many have seen their lives destroyed as a result. The physical damage for those athletes of such massive, long-term steroid use has been terrible: Leukemia, sterilization and birth defects were just some of the consequences.

Now, back to our $500 million house and 250 Chinese stocks on a single exchange surging more than 10% in a day. As easily as Shirley Babashoff could just look at her 1976 Olympic opponents and understand that something was not right about the appearance of those East German “women,” so too should we be able to look at the increasingly obvious distortions in the financial markets and understand that something is seriously wrong.

Babashoff could rightly have asked, “Do these women look normal to you?”

Today, we should we be asking, “Does a $500 million spec house and 250 companies in a single market going up 10% in a day look normal to you?”

Sometimes, all you have to do is open your eyes and accept the truth. The markets everywhere are loaded up on central bank administered steroids and the consequences will be, over time, as disastrous for market participants as they were for East German athletes.

Just open your eyes people. You can’t miss it.

 Disclaimer: Nothing on this site should be construed as investment advice. It is all merely the opinion of the author.