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Ben Davies On Variant Perceptions, Betting Against The Grain, And Debunking Prevailing Myths

Tyler Durden's picture




 

A few weeks ago, Hinde Capital's Ben Davies delivered a terrific speech to the The Committee for Monetary Research & Education in which the asset manager presented his insight on not only the futility of linear forecasting, on the flawed assumptions of economists, and on the very errors in the current monetary system, but went on to suggest several "Variant Themes" which put him at odds with the consensus, chief among them being of course his views on the monetary system and gold (both discussed repeatedly before on Zero Hedge), but also on specific socio-political and economic catalysts when looking at the future. Among these are : 1) "Japanese stocks are the most unloved in the world. Small-cap stocks in Japan will skyrocket in years to come, but then they would, as I see hyperinflation there in the next five years", 2) "The Swiss Franc as a bastion of safety is a fallacy. They too are debasing their currency", 3) "Turkey: the Ottoman Empire will return. Great enduring demographics and entrepreneurial spirit", and 4) "Mongolia will surpass Japan in GDP on a PPP basis." Aside from his recommendations, which may well be right or wrong, the epistemological basis of Davies view is a must read for any participant in what is becoming an increasingly chaotic, full of noise and reflexive market, in order to get a grasp of what may truly be relevant for creating, and influencing, correct opinions.

Full speech (pdf link)

The Federal Reserve Chairman has said “…the economic outlook remains unusually uncertain.” But economic predictions are not uncertain, they portend serious woes. CMRE looks at problems, solutions, markets and deflation.

Fall Dinner Meeting – Thursday, October 21, 2010

The Union League Club 38 E. 37th St. New York City

 

Good evening, ladies and gentlemen. My name is Ben Davies and I co-founded Hinde Capital, a UK-based investment manager, with a gentleman called Mark Mahaffey.

They say you get invited to speak only twice in your career at the CMRE -- once on the way up and once on the way down. It's good to be back.

I've been invited here tonight primarily to convey my experiences in the markets. I see this section of the program is titled "The Essentials." I have taken that to mean I am here to talk about my experiences at the "coal face." For me the coal face is the marketplace -- the culmination of buyers and sellers. I would like to share my relationship and experiences with the coal face -- in particular the "gold face."

Undoubtedly, though, there is one other ingredient -- experience. My work partner once said to me, "Never trust with managing your money anyone under the age of 30, because they ain't seen nothing." I tend to agree with him. He expanded on this: "Markets go only two ways -- up or down -- so you've got a 50-50 shot."

A young man or woman could get lucky for five years and they and everyone will think he or she is good. Then they never make another dime.

I am not George Soros or Louis Bacon, nor do I want to be. I learned early on: Be your own man. I am also not under 30 years of age so I probably qualify to pass on some of my thoughts and experiences.

I want to address the title of the night because it's much more thought-provoking than one would assume on first glance.

The Federal Reserve chairman has said: "The economic outlook remains unusually uncertain." But economic predictions are not uncertain; they portend serious woes.

For once I agree with my namesake Ben -- the outlook remains unusually uncertain. A quite stunning observation, no less. But I would not just agree with the assertion that economic predictions are not uncertain. Note the double negative there.

Economics has sought to blend epistemology, physics, mathematics, and behavioral science to try to measure uncertainty. They aim to try to predict when we might have an economic collapse, but no model has been created that manages this with much confidence, if any at all. How do you measure a risk that is unmeasurable?

No, there is nothing certain about economic predictions. Donald Rumsfeld, the former U.S. defense secretary, unwittingly declared it so at a NATO press conference in 2002, when he responded to a question on intelligence gathering:

"It's not the certainties that make life interesting; it's the uncertainties. There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things we know we don't know. But there are also unknown unknowns -- the things we don't know we don't know."

"Unknown unknowns" -- at the time this was ridiculed as a piece of deliberate and meaningless obfuscation. Rumsfeld even won an award from the British Plain English Campaign for the most nonsensical remark made by a public figure. I would add that he narrowly pipped California Gov. Arnold Schwarzenegger, who commented, "I think that gay marriage is something that should be between a man and a woman."

Another stunning revelation. It's OK; we are clearly in safe hands with illustrious leaders like this.

Ridicule aside, I do think it was brilliant piece of polemic, irrespective of one's political persuasion. Without knowing it, Rumsfeld could actually be the poster child for a new line of economic thought that tries to draw parallels from physics -- the Heisenberg Uncertainty Principle.
In quantum physics this principle states that certain pairs of physical properties, such as position and momentum, cannot be simultaneously known to arbitrarily high accuracy.

The physical example Heisenberg used was the following. The more precisely you try to determine an electron's position, the less likely can you determine its momentum. A forecast of the electron's trajectory is therefore subject to unavoidable inaccuracy. And herein lies the issue with macroeconomics. One cannot be deterministic. Events are not causally determined by previous events alone. A known event does not predict a known outcome.

Although much can be learned from this theory, this is where the analogy ends. The act of experimenting with the electron and measuring position did not alter the outcome. In a human system the very act of forecasting or predicting an outcome actually influences that very outcome. This we call the feedback mechanism. It is encompassed in a theory many will know as "reflexivity."

Reflexivity refers to the circular relationships between cause and effect, what the philosopher Karl Popper referred to as the Oedipal effect (mothers, beware) -- an act of self-reference where examination or action bends back on itself.

Take the interaction between beliefs and observations in a marketplace. If traders believe that prices will fall, they will sell, thus driving down prices, whereas if they believe prices will rise, they will buy, thereby driving prices up. "Self-fulfilling prophecy" is another term you could ascribe this to.

If only markets were so simple.

Karl Popper believed that even scientific knowledge does not qualify as the ultimate truth. Rather, scientific theories should be accepted as provisionally true as no amount of corroborating evidence can rule out the possibility that some contradictory evidence will turn up in the future.

We are all capable of acquiring knowledge but we can never have enough knowledge to allow us to base all our decisions on knowledge. It follows that if a piece of knowledge has proved useful, we are liable to overexploit it and extend it to areas where it no longer applies so that it becomes a fallacy. One known fact today is that even in the age of information technology no society can have perfect information. No one person can likely understand everything. And even if they could, it would influence their interaction inside and outside the marketplace.
Maybe there is a predictive market model but we just don't know it. After all, we have imperfect knowledge.

I believe that George Soros -- him again -- coined the phrase a 'fertile fallacy' -- meaning that imperfect knowledge creates first a self-reinforcing cycle and then a self-defeating cycle. It is how bubbles are believed to manifest.

Market prices always distort the underlying fundamentals; mistakes can become "fertile fallacies" and change reality in a feedback loop, causing bubbles.

Cyclical behavior of boom-bust is understood by most now. Rational behavior becomes irrational in the thickening of the maddening crowd until the crash wakes us from the insanity. We understand it but we still can't predict when the cycle collapses. The very reality that we get it alters our fertile fallacy. It invalidates it.

Now if I haven't lost you all, I would like to say I believe that markets move in and out of balance on varying temporal horizons naturally. They overshoot and undershoot but become excessive in nature in a systemic way only when they are deliberately distorted.

Intervention in or manipulation of markets by the state is such a distortion. Its acts postpone the day of reckoning for years or even decades. It creates false sense of equilibrium that ultimately gives way to disequilibrium and heightened instability. We have not experienced free markets -- that is, the invisible hand -- for decades. The recent failure of markets to predict uncertainty was not a failure of free markets but a failure of fiat money and socialism.

Niall Ferguson, the monetary historian, eloquently wrote: "Financial markets are like the mirror of mankind, revealing every hour of every working day, the way we value ourselves and the resources of the world around us."

What he should have said is that financial markets are the mirror of state intervention, revealing our every hour of labor confiscated, our lack of personal ownership for our decisions, and the resources the state absolves us of.

I sound disillusioned. Well, I am. I still love the marketplace but one has to understand the beast. I would like to share with you some of the facets that I think make a great trader.

By the way, I am not there yet, and maybe it's inappropriate of me to muse on this topic, but I think it could be provide you with a useful insight into market behavior.

The most profound comment I ever read about markets was this: "Everyone ultimately gets what he wants from the market." This absolutely leapt out at me. I will repeat this: "Everyone ultimately gets what he wants from the market."

Ed Seykota was the name of the trader who made that comment in a famous trading book called "Market Wizards."

Ask any trader what he wants out of the market and the resounding answer would be "money," materialist heathens that we are. It's the product of our trade, so success is measured by how much money we make. It shouldn't be; it should be the return adjusted for least volatility. But Seykota was spot-on.

At a subconscious level every trader gets his just wants, and it usually isn't money. I have sat next to traders who love to trade feverishly. They like the excitement. They make lots of money really quickly, and then become inured to the rush of making it and then they lose it. I would say they lose it deliberately, but at a subconscious level. They need the thrill and angst of making it back. Others like to make it and lose it and then wallow in pity because they receive more attention. Then they repeat the process. What they crave is excitement and attention, not the money.

My Achilles' heel, among many, is that I am ambivalent about money. I know that for me nature, friends, and family are ultimately worth more. I constantly juggle this conflict. But if I didn't enjoy it I would stop.

To be a great trader, at a generic level, the truth is: Do what works for you and not what anyone else does and thinks. Take responsibility for all your actions, good and bad.

Specifically, four points that work for me:

  • Patience. Patience to wait for the right trade and then stay in the trend.
  • Impatience. Cut your losers early.
  • Intuition. Know if you have it (listen to your inner self) and trust it.
  • Flexibility.

I helped develop a system model we employ at Hinde, and, if truth be told, it's not perfect for me as it's not my model alone, but what it has done is help generate good money management. Survive to live another day is the key.

I believe that trading takes a peculiar mixture of conviction and flexibility. Conviction to know you are right and flexibility to say no, I am wrong. Bear in mind most traders' win-loss ratios are 55-45. That is a lot of wrongs you have to deal with. It illustrates how risk management is key.

Like all human endeavous it taps into the creative element, which is why I want to mention Michael Steinhardt. I have never met him but he is considered a legendary investor, again immortalised in the book "Market Wizards."

He returned more than 24 percent annualised over some three decades, with, I assume, low volatility of returns. He developed the concept of "variant perception." I want to share his concept of "variant perception" and his ability to challenge the status quo.

The theory of variant perception is best explained when I recount Steinhardt's own words. He said:

"A summer intern reminded me years later of the advice I had given him on his first day at work. I told him that ideally he should be able to tell me, in two minutes, four things:

  1. The idea.
  2. The consensus view.
  3. His variant perception (a well-rounded view that is meaningfully different from consensus view).
  4. A trigger event.

"No mean feat. In those instances where there was no variant perception I generally had no interest and would discourage investing."

Financial markets are truly beguiling and as I have mentioned they have an equally beguiling end product -- money, which affects us all. It shapes our lives, for many of us our every waking thought. If asked, most people will always say, "I want more money." Even popular music today captures the wishes of the masses. Travie McCoy's opening line to his song "Billionaire" says it all:

I wanna be a billionaire so fricking bad, Buy all of the things I never had. Uh, I wanna be on the cover of Forbes magazine, Smiling next to Oprah and the Queen.

Twenty years ago, according to the Forbes Rich List, there were 140 billionaires. Three years ago there were almost 500. This year there are close to 800, each with an average net worth of $3.3 billion. Why the surge? The "invisible hand"? No. Animal spirits? I doubt it. Did the world just get eight times more get-up-and-go? Hardly. So what then?

Money -- that's what.

Globally, living standards and wealth have been on the rise even for the poor, primarily based on "cheap" or "easy" money. Debt has been offered at low interest rates. All this debt is money -- money that has funded an illusion. No wonder people are buying gold.

And what should you make of the recent stampede to own gold? A detached observer might be puzzled by the obsession to own the yellow, shiny stuff. Warren Buffett once wryly observed, "It gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Buffett's response is too smart by half. A Martian would be equally puzzled to see humans cut down a hundred-dollar tree in order to pulp it, turn it into paper, print numbers on the paper, and pass it off as bills worth $1 billion.

Gold's antagonists claim that gold is a Ponzi scheme. Its value continuing to rise, they say, depends on people willing to buy it at higher prices from previous buyers.

This is to misunderstand the nature of gold. It is not just another commodity. Gold was once money and no doubt will be again. The last four decades are the blip in time when money has not been backed by gold.

All this you know, but now you know I know. We're back to those "unknown knowns," aren't we now?

People always say to me gold has gone up a lot and so it's too high. I always reply that gold has a price and a value. These two constructs are not interchangeable. Price is a level at which you make an exchange, and value is whether it is worth it. Right now gold is at a high price, but when examined in the context of other assets, it remains undervalued -- primarily against paper money.

As gold's value rises -- or, more accurately -- as paper money's value falls, what we are seeing is an incremental return of gold to a monetary asset. The fact remains that the subtle confiscation of your day's labour by issuing printed money has only begun to dawn on the populace. They are only just waking up to gold as money.

Governments today are struggling with thumping budget deficits and unfunded liabilities, so the risk of further money printing looms large. With gold already undervalued, its outperformance will only accelerate.

A German banker once said that gold normally trades like a commodity. But he also said that when investors lose confidence in currencies, because the pool of gold is so much smaller than the pool of currencies, demand for gold can effectively become unlimited.

He is spot-on. When individuals obsess about the validity of money, they lose faith in government. Their discarding of money in such a situation is akin to an increase in the money supply, which is an inflationary event. Hyperinflations such as these are thus a political event, not only as government will be deficit-financing but because people have made a statement about government. After all, fiat money is by decree of government, not free markets.

I am also often asked how high I think gold will go -- as if I had answered the riddle to the uncertainty model. My prediction is: How low can money go? How many zeros can you put on a piece of paper -- that is how high gold can go. In Hungary the pengo was denominated in 100 quintillion. That's a lot of noughts per ounce of gold.

My personal framework is that we are experiencing the invisible signs of inflation, which manifests from the issuance of global sovereign debt. Professional pundits like to polarize the world between deflationists and inflationists Richard Cantillon noted that the supply of credit and money does not work its way uniformly into the economy. Government cannot control where the money flows.

I predict with uncertainty that encumbered asset classes such as housing will in real terms go nowhere. In nominal terms they may even rise. But areas with a small float of stock -- certain commodities -- such as silver, gold, small-cap emerging-market stocks -- will rise in nominal terms tremendously. My only concern is that the market is embracing this concept, but far from me taking a contrarian position here, I believe that the feedback loop will self-fulfill this eventuality.

On that note: On the way over I read a great little book by Gustav Le Bon called "The Crowd" where he observes the behaviour of the masses. He introduced the Law of Mass Action or Mentality: When it comes to the effect of social behaviour on the intelligence of individuals, 1 + 1 is often less than 2 and sometimes considerably less than zero. People are unpredictable.

Nonetheless I want to give you my variant themes:

-- Japanese stocks are the most unloved in the world. Small-cap stocks in Japan will skyrocket in years to come, but then they would, as I see hyperinflation there in the next five years. Question: What was the best-performing stock market in 2008? It was the Zim Industrials in Zimbabwe -- up more than 30,000 percent in nominal terms, initially far outstripping inflation.

-- The Swiss Franc as a bastion of safety is a fallacy. They too are debasing their currency.

-- Turkey: the Ottoman Empire will return. Great enduring demographics and entrepreneurial spirit.

-- Mongolia will surpass Japan in GDP on a PPP basis.

Not since the arrival of the Gutenberg printing press has humanity been so challenged by the printing of notes. Oh, the irony -- Gutenberg was himself a goldsmith by training. I am sure that he could never have envisaged the abuse the financial printing presses would have on mankind's development.

Ex scientia pecuniae libertas. "Out of knowledge of money comes freedom." I echo these sentiments but it is the duty of all of us to create more awareness of monetary theory and with it of markets. The CMRE and GATA are wonderful forums for truth and action, but they both will need to broaden their audience. I hope I can help.

Remember: Just because the sun rises in the east and sets in the west doesn't mean it always will. That, I know, is unknown.

 

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Thu, 11/11/2010 - 14:32 | 719880 trav7777
trav7777's picture

This idiot thinks that this whole thing is a cyclical hiccup.

The notion that the Heisenberg Principle is as he says is absurd and he should be slapped for describing it like a matter of "likeliness" and attempting to relate it to some broader principle about economics.  This is just rubbish.  Leave the science to scientists.

Thu, 11/11/2010 - 15:15 | 719918 andy55
andy55's picture

You seem to have Davies pegged wrong. Did you read the full text?

In any case, don't miss his King World interview from a couple months ago (linked below) -- Davies is WAY out ahead of the curve and is intensely macro-analytical.   His views/models are impressively cohesive, robust, and highly consistent with facts, human behavioral dynamics, and history. Also note he is a literary, historical, and philosophy enthusiast, which serves one in many ways more than modern numerical/TA approaches in the long run.

Ben Davies and Jim Rickards really have things figured out imho.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/29_Ben_D...

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/10/4_Ben_D...

 

Fri, 11/12/2010 - 11:30 | 721948 sandorgb
sandorgb's picture

thank you very much for the videos, andy55. much appreciated

Thu, 11/11/2010 - 14:35 | 719882 Spalding_Smailes
Spalding_Smailes's picture

-- Turkey: the Ottoman Empire will return. Great enduring demographics and entrepreneurial spirit.

 

 

 

Really ? Whats going to drive up the GDP ? Tech ?

 

This guy is a moron, next ....

Thu, 11/11/2010 - 14:53 | 719921 Fraud-Esq
Fraud-Esq's picture

Their geopolitical status! (and their tremendous U.S. lobby)

Thu, 11/11/2010 - 14:53 | 719922 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Geography.

Thu, 11/11/2010 - 15:01 | 719949 Spalding_Smailes
Spalding_Smailes's picture

Really ?

So the ottoman empire is about to .... really. Hmmmmmmm.

Thu, 11/11/2010 - 15:28 | 720024 Lets Hang Parliament
Lets Hang Parliament's picture

SS - you should travel more - out of the county for a start..

Thu, 11/11/2010 - 23:16 | 721122 i-dog
i-dog's picture

Indeed. You can spot those on here who have never been out of the country from a mile off! All epithets and no reasoning ... all hat, no cattle.

Thu, 11/11/2010 - 23:04 | 721101 PeterSchump
PeterSchump's picture

The Ottomans almost conquered Europe plenty of times.  This time, they will.

Thu, 11/11/2010 - 14:34 | 719884 Oh regional Indian
Oh regional Indian's picture


:

"A summer intern reminded me years later of the advice I had given him on his first day at work. I told him that ideally he should be able to tell me, in two minutes, four things:

  1. The idea.
  2. The consensus view.
  3. His variant perception (a well-rounded view that is meaningfully different from consensus view).
  4. A trigger event.

"No mean feat. In those instances where there was no variant perception I generally had no interest and would discourage investing

Brilliant.

Overall, brilliant. Wise old men are a rarity. Wise young men too actually.

Always a warm fuzzy feeling when you feel you learn something!

ORI

http://aadivaahan.wordpress.com

Thu, 11/11/2010 - 14:38 | 719888 HarryWanger
HarryWanger's picture

Here comes the ramp. I reiterate from last night, open solidly lower than ramp up throughout the day to flat/green. That sets up a huge tomorrow.

Even with CSCO getting the shit beat out of it, the rest of the market shrugs and off it goes.

Thu, 11/11/2010 - 14:42 | 719901 slaughterer
slaughterer's picture

I would go along with that.  As long as the PMs lead the rally in PM terms.

Thu, 11/11/2010 - 14:48 | 719915 SheepDog-One
SheepDog-One's picture

Who cares about stocks? Theyre dead. Even the ramp job from DOW 6,500 to 11,400 resulted in a loss of purchasing power for the entire move. Its all BS Harry, wise up.

Thu, 11/11/2010 - 14:49 | 719919 HarryWanger
HarryWanger's picture

So let me get this straight - you say it's better to have made no dollars than to have made a lot? Even with purchasing power down, only a moron would say it's better to have made none than a lot. I don't get that line of thinking at all.

Thu, 11/11/2010 - 14:53 | 719923 SheepDog-One
SheepDog-One's picture

A Dollar-Devaluation Adjusted Market Has Barely Moved Above Its 2009 Lows | zero hedge

Read it and weep Harry. You can keep jabbering about bullshit stocks all day, but I dont care if you get 100 points up in the DOW daily you havent made shit, and won't going forward. Youre spinning your tires while the tach reads 8,000 RPM's youre sitting still.

Thu, 11/11/2010 - 14:58 | 719941 Spalding_Smailes
Spalding_Smailes's picture

Talk about spreading rumors.( like robo-)

 

If you bought CROX 2 years ago at 1 or 2 bucks and sell today for $16.00, how much of a gain is that ?????

 

What if someone uses options ???  Or moves in and out after 5% breakout up or down.... ???

 

I'm up 7-8% in US Steel over the last week or so & the dollar is up !!!!

Thu, 11/11/2010 - 15:05 | 719957 SheepDog-One
SheepDog-One's picture

Best case scenario always works great! Just keep the Windex handy for the rear view mirrors mounted on your monitors.

Thu, 11/11/2010 - 15:11 | 719969 Spalding_Smailes
Spalding_Smailes's picture

I did not have much in the market myself I am just pointing out many people made a killing off the lows around 6-7 grand.

My bud got a call from a friend at a hedgefund and bought crox under a dollar, he spent $4,000. That stock is now $16.00 hes up $60,000 ...

Thu, 11/11/2010 - 15:16 | 719989 SheepDog-One
SheepDog-One's picture

Many people made a killing huh? You cite 1 example of some guy who bought Crox, but overall the market rise has yielded a negative buying power result. Notice I didnt say 'no one at all made any money', just in a real world case if you bought the DOW at 6,500 and held till 11,400 youve made zilch.

Thu, 11/11/2010 - 15:22 | 720005 Spalding_Smailes
Spalding_Smailes's picture

If you look many stocks hit rock bottom. They are up hundreds of percent over the last 2 years. And what is the dollar down over that span ......?

LasVegasSands had dropped below $2.00 it over $50 now.

Ford was $1.50-2.00 now its 15 ....

CAT was under $25 now over $80 ...

ect .....

Thu, 11/11/2010 - 15:28 | 720026 HarryWanger
HarryWanger's picture

Spalding, his argument about this never makes any sense. It's obvious that he sat on money afraid to buy stocks and missed the entire run. It's a silly argument. There are hundreds of stocks that fit this bill.

Just the logic of saying you would be better off without MORE devalued dollars than LESS is ludicrous.

Thu, 11/11/2010 - 15:34 | 720049 Spalding_Smailes
Spalding_Smailes's picture

And the second uncle ben even utters the words " rate hike " whats going to happen ?..... The safe haven is back !!! Gold not so much ....

Thu, 11/11/2010 - 16:44 | 720274 chinaguy
chinaguy's picture

.

Thu, 11/11/2010 - 14:38 | 719892 slaughterer
slaughterer's picture

Can anyone intuit exactly WHICH Japanese small-caps will be "skyrocketing" in years to come, according to Ben?  This is a theme I think we should all follow up on in non-ironic tones, as this "value in Japan" tip has been whispered more and more in the best hotel lounges of the West.

Fri, 11/12/2010 - 08:28 | 721570 anvILL
anvILL's picture

Okano Valves, Kitz, DOWA, Sumitomo Metals, Organo, SUNX.........
There are some that's not exactly small cap but I still feel these manufacturings are nice in the long run and looks pretty cheap right now to me, although I'm buying gold, silver and mining shares instead despite the extensive costs and hassle to join that trade here in Japan.
I just don't see any event that could trigger people rushing into these stocks today.
I would rather wait untill I see some clear break out of the Nikkei and/or the breakdown of the yen.
Until then, the trend is is my friend.

By the way, I don't see those stocks skyrocketing like 15,000 gold as Ben predicts.
#Disclosure:Well below 30 years of age, trading experience in Japanese manufacturing stocks about 8 years.

Thu, 11/11/2010 - 14:41 | 719897 SheepDog-One
SheepDog-One's picture

I notice in this guys speech the underlying tone that it will soon be time for 'the great entrepreneurial spirit' to pick up their decimated corpses and begin going out to bust ass and rebuild from the elites economic terror reign and get busy paying back $220,000 debt stolen from each person in america?

Nah, Im not going to do it, they can kiss my ass.

Thu, 11/11/2010 - 14:41 | 719898 Spalding_Smailes
Spalding_Smailes's picture

Double speak from Rumsfeld ...

 

No, there is nothing certain about economic predictions. Donald Rumsfeld, the former U.S. defense secretary, unwittingly declared it so at a NATO press conference in 2002, when he responded to a question on intelligence gathering:

"It's not the certainties that make life interesting; it's the uncertainties. There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things we know we don't know. But there are also unknown unknowns -- the things we don't know we don't know."

Thu, 11/11/2010 - 14:55 | 719928 Fraud-Esq
Fraud-Esq's picture

ha!

Thu, 11/11/2010 - 15:13 | 719933 RobD
RobD's picture

Are you sure that is not a Yogi Berra quote? LOL

Thu, 11/11/2010 - 16:22 | 720221 Troublehoff
Troublehoff's picture

I hate Donald as much as the next man but that statement was pretty profound.

He knew exactly what he was saying.

Thu, 11/11/2010 - 14:47 | 719911 mrdenis
mrdenis's picture

I'm a trader ....your a fuckin' gambler ......http://www.xtranormal.com/watch/7107529/

Thu, 11/11/2010 - 15:12 | 719977 SheepDog-One
SheepDog-One's picture

LOL good stuff!

Thu, 11/11/2010 - 14:49 | 719917 wiskeyrunner
wiskeyrunner's picture

Is it time for the stock indexs to rise, they have been im a tight range for the last 4 hours. I suspect we will rally up from here, just can't have a down market, that would make Ben Bernake look like a failure.

Thu, 11/11/2010 - 14:55 | 719927 the not so migh...
the not so mighty maximiza's picture

All those PHd's become worthless if Ben fails.

Thu, 11/11/2010 - 14:58 | 719940 Fraud-Esq
Fraud-Esq's picture

They're already worthless...

"The Federal Reserve has more PHD's per square foot than any institution in the world" - Alan Greenspan, 2006.

 

Thu, 11/11/2010 - 15:06 | 719958 SheepDog-One
SheepDog-One's picture

Notice since the 'airplane contrail' theres been very little market pumping!

Thu, 11/11/2010 - 15:10 | 719966 johny2
johny2's picture

according to schedule i have, next POMO is tomorow.

Thu, 11/11/2010 - 15:12 | 719970 SheepDog-One
SheepDog-One's picture

So? How many Chinese ICBM launches off the CA coast do you think it will take to make their point stick?

Thu, 11/11/2010 - 15:15 | 719990 johny2
johny2's picture

seriously, i dont believe China launched ICBM, but if they did, one would be more than enough.

Thu, 11/11/2010 - 14:51 | 719920 johny2
johny2's picture

Enjoyed reading that. And i dont know about Mongolia and rest of it, but i can see his point about gold going up ( although cant see how it does not support swiss currency )

maybe between the lines he meant to say Swiss does not have strong enough army to keep their gold? Maybe thats what he means about turkeys entrepreneurial spirit.

Thu, 11/11/2010 - 14:56 | 719931 Turd Ferguson
Turd Ferguson's picture

Getting back to the "LA Missile" story, Michael Savage was discussing this last night.

http://www.dailymail.co.uk/news/article-492804/The-uninvited-guest-Chine...

Almost exactly 3 years ago, a Chinese sub surfaced right next to the USS Kitty Hawk. We had no idea it was there until it was too late. A very, very quiet sub. Hmmm. Did a quiet, Chinese sub slip through our sonar nets earlier this week and fire off a missile?

Certainly seems plausible.

Thu, 11/11/2010 - 15:06 | 719950 RobD
RobD's picture

I'm leaning towards an accidental Trident launch. An accidental launch of a Trident with a bunch of MERVS on board would make us look really, really bad I would think.

 

Edit: Look for the retirement of a boomer driver in the near future for confirmation. The captain always takes the fall.

Thu, 11/11/2010 - 15:10 | 719967 SheepDog-One
SheepDog-One's picture

Thats virtually impossible, 1,000,000,000:1 odds on an 'accidental' ICBM launch.

Thu, 11/11/2010 - 15:14 | 719980 Spalding_Smailes
Spalding_Smailes's picture

I totally agree. The fat finger holds more water ....

an 'accidental' ICBM launch.... Nope ... Not even possible.

 

 

Thu, 11/11/2010 - 15:19 | 719997 SheepDog-One
SheepDog-One's picture

As someone who was a Mk 41 Vertical Launch system technician for years, I can state with confidence an accidental launch is near impossible, if not totaly impossible. It takes about 20 purposeful steps to launch a missile, Capt safeties have to be engaged, etc. Sure its not the same system, but a nuclear subs launch systems if anything are even more fail safe.

Thu, 11/11/2010 - 15:26 | 720021 Spalding_Smailes
Spalding_Smailes's picture

Thanks for serving !! I love the U.S.A.

Thu, 11/11/2010 - 15:33 | 720039 RobD
RobD's picture

You see I was in the brown shoe Navy and it only took a couple of switch flips and a button push to launch so I will bow to your greater knowledge and have to go along with the shot accross the bow theory. US Navy 82-88 by the way.

Thu, 11/11/2010 - 15:18 | 719996 RobD
RobD's picture

You may be right SheepDog, I was never on a Boomer so I don't know what the safeguards are but anything designed by man can fail, Murphys' law could have come into play.

Thu, 11/11/2010 - 15:04 | 719955 Fraud-Esq
Fraud-Esq's picture

Perhaps they're testing a theory that 80% of the DoD budget is fraud and the U.S. defenses, outside of gross purchases of aircraft and carriers is uncoordinated and lax.

9/11 would tend to prove the theory, that what we believe about our own defenses and the reality may be quite different. 

My personal belief is we can do a job when it's planned, but if by surprise, our reactions is time is dangerously bad. I can' go to Best Buy without appearing on 15 cameras. A plane hit the Pentagon without one camera capturing it.  

Thu, 11/11/2010 - 15:14 | 719984 delacroix
delacroix's picture

a small missile, hit the pentagon

Thu, 11/11/2010 - 15:29 | 720029 Fraud-Esq
Fraud-Esq's picture

could be. The gov proved nothing to me and just the notion they couldn't capture it on film AT THE PENTAGON is a definite adverse inference against the gov under any logic. 

Thu, 11/11/2010 - 15:06 | 719959 johny2
johny2's picture

than they have made real mess of it, as pentagon believes it is just a contrail...next time they will have to blow up something ...

Thu, 11/11/2010 - 15:09 | 719964 SheepDog-One
SheepDog-One's picture

The next 'airplane contrail' will not be heading out to sea, but heading towards Manhattan to make the point clearer.

Thu, 11/11/2010 - 15:08 | 719961 SheepDog-One
SheepDog-One's picture

Turd, I was present in a carrier battle group for a surprise surfacing of a Chinese sub right in the middle of it.

Thu, 11/11/2010 - 15:10 | 719968 Hubbs
Hubbs's picture

This is almost as confusing as the economic witch's brew that we are being thrown into.

 

How about this? It was a Chinese sub that the Navy had deliberately let slip by, knowing they would never, at least at this time, fire a pre emptive strike on the US. The Chinese could be left thinking they had pulled a fast one on us, when in fact we knew that sub was there all along, and we are just playing dumb.

 

 

Thu, 11/11/2010 - 15:09 | 719963 hugolp
hugolp's picture

Absolutely brilliant.

One of the best I read here. Thanks Tyler.

Thu, 11/11/2010 - 15:13 | 719976 Fraud-Esq
Fraud-Esq's picture

Myth: The United States is a strong nationalist country. 

Truth: The United States is the primary tool of an entity (banks, WTO) who's main purpose is to destroy nationalism in order to free capital from all restraint.

Nationalist leader: Putin.

Anti-Nationalist: Obama 

Thu, 11/11/2010 - 17:53 | 720434 strannick
strannick's picture

Exactly. Putin's realpolotic bareknuckle diplomacy v. Obamas poco Ivory Tower knucklehead diplomacy.

Thu, 11/11/2010 - 17:48 | 720420 strannick
strannick's picture

Ben Davies is betting against the grain?
I would have thought that as someone predicting hyperinflation, he would be all for agricultural commodities..

Fri, 11/12/2010 - 08:32 | 721564 anvILL
anvILL's picture

> Japanese stocks are the most unloved in the world. Small-cap stocks in Japan will skyrocket in years to come

Although I see some seriously undervalued large cap blue chip manufacturings as well, I'm not so sure about this...
If Japanese were American, of course it would skyrocket.
It could as a matter of fact skyrocket tomorrow. 
But Japanese are so Japanese. Thats what make us Japanese. Things doesn't make sense for a long period of time.

I remember a permabear(ish) guy wearing bow tie who had a similar idea in the 1990's discussing about this matter on a video. Well worth a watch.
(the guy with a big bear and a sinking titanic in his room...I can't get his name out...)

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