The affects of a credit market on an investor

In this short essay, I present the thesis that our current credit market increases the desire for short term capital gains over gains from income derived of the assets purchased.

What do I mean by this?

I mean that the availability of credit increases the desire for leverage, which further increases the desire to "do deals" and acquire gains from thoses deals. This incentive to 'do deals', I believe, trumps or greatly truncates the desire to purchase an investment and receive gains from the productivity of that asset (i.e. purchasing retail stores and receiving quarterly sales profits).

A credit market increases the highs and the lows of the natural business/economic cycle. In a credit market, there are more eligible buyers. Hence, that means there is more demand. If the supply is constant, and the demand increases, the price increases. This means that the seller receives more gain on the asset they're selling.

Without a credit market, the buyers have to pay cash, or find another manner of exchange. (Note--there is never a total absence of credit...the seller, in this case, could always issue seller financing) If this is the case, without credit, then buyers are fewer and prices are lower...and subject to fewer fluctuations.

Given the above, in a credit market, with more eligible buyers; the more increasing the supply of credit is, the more increasing the buyers (and price) are. That being said, that gives the buyers more of an incentive to "flip" the assets by purchasing it, reconfiguring the furniture, and then selling it again on the open market.

If the buyer purchases the asset in an expanding credit market, there is a solid chance that he doesn't have to do anything to the asset but simply hold on to it while the credit expands. As long as credit expands, buyers expand, and the price rises; this increases his short term capital gains. (This assumes many aspects about the business remain constant, routine maintenance on the asset is done, etc.)

This, therefore, I believe, incents 'doing deals'. There is not the incentive to buy an asset and hold on to it, while receiving income from the productivity of that asset.

As a result, dealmakers arise by the number. Middlemen emerge. Note the abundance of people hopping into the realtor, mortgage broker, title & escrow market during the housing boom in recent years. Now note the absence of such people as delinquincies rise, fears mount, and people look elsewhere for work.

If one were to understand these cycles in credit markets, they would be able to benefit from an expanding credit policy as well as a contracting one. In the expanding policy, they would acquire cash, and in the contracting one, they could just as easily buyback their old assets for likely a price less than they bought it for in the first, with part of the cash acquired from selling those assets to the ones they sold it to in the first place...and they would have cash leftover for other acquisitions depending on whether credit is contracting or expanding.

I know it's not that simple, but it is a simple paradigm.