This page has been archived and commenting is disabled.
Bob Janjuah: "This Is An Uber Bear Early Warning Alert...Major Risk Asset Sell Off Will See S&P Into 800s...The Fed Will Start New $5Tr QE Program"
From Bob Janjuah of RBS
Bob's World: Maybe Not Such An Idiot
Dear All
I am deeply troubled by the world and markets. THIS IS AN UBER BEAR EARLY WARNING ALERT:...I know its not what folks in general want to hear but hopefully you'll understand that I am trying to do my little bit to help....
First please refer back to my last comment, dd 26th April (Bob's World: What an idiot!)....2 takeaways from this note in particular - 1) my bearish trading call on risk assets, looking for a 10%/10%+ S&P selloff over late Apr and May from the 1220 level, driven by sovereign concerns, was spot on - maybe not bearish enough!, and 2) the point of market and taxpayer revulsion with the horrendous Keynesian/monetarist nightmare forced upon us by policymakers has come to bear. Sovereign limits and sovereign credibility concerns are not now a future risk - they are HERE. The enormous failure here is that the private sector has barely had time to catch a breath, let alone develop any form of self sustaining private sector recovery, before these limits have already begun to hit home.
Before reading on the other item that needs to be highlighted upfront is the whole Inflation/Deflation debate. As I have been saying for many months, the TRUE underlying private sector trend is one of DEFLATION (balance sheet repair thru reduction of nominal debt levels). In my comment of the 26th, I capitulated in that I gave up on the idea of policymakers worldwide shifting to voluntary/pre-emptive tightening, and went with Kevin's long held view - that policymakers would keep pumping and dumping in order to try and create inflation until the point of bond market and/or taxpayer revulsion, or until the point that inflation fears themselves become the major problem. As you will read below we now seem, at the global level, to be at or close to the point of bond market (Europe) and/or taxpayer revulsion (US). Alongside which the UK and China seem to be 'voluntarily'/pre-emptively tightening, although in both these zones one could easily argue that INFLATION concerns are causing this tightening. Either way, the point here is that for now and for the next 6 months or so it looks like deflation will have the Upper Hand in the battle vs. inflation.
I still expect policymakers to come back - not yet, more likely in 6/9 months time - with NEW even more aggressive attempts to INFLATE likely thru fiscal policy (NEW China stimulus package by y/e?) and/or via a massive new Fed QE programme (see below). Thus - and whilst I have admittedly been wavering a little here - the outlook for govvies over the next 6 months IS bullish (USTs in the low 2s), but it is also clear that the Western world is NOT yet ready for multi-yr deflation and therefore the next huge attempt to reflate (around y/e?) could end up in a disastrous outcome for inflation and bond yields. But we can worry about this later - for now the winner seems to be deflation. Now, in no particular order:
A - Quite a few important global markets are now deep in official Bear territory - China is the obvious big bad one, but many other are there/nearly there.
B - Global Growth IS slowing and will slow hard into Y/E as stimuli impacts fade/are reversed...the street/market consensus is 4.5% globally, the reality is that the annualised run rate will be 2.5%ish into next yr and beyond...developed growth will be 1%ish, developing will be 4%ish (too many officials keep talking to me about a target of around 5%ish growth rates for China over the next few yrs but the street/market seems to ignore this)...Btw, China reval? R U joking??? Even a 1%/2% token would be a huge surprise to me.
C - We have policy tightening all over the world - fiscal (UK, Europe), monetary/credit/currency (China, US), regulatory (EVERYWHERE)...the market and taxpayer revulsion with Government recklessness is HERE! Europe in particular has signed off from the growth path and is now firmly placing itself in the Japan style multi-decade deflation/despair path.
D - For the EURO and Europe to regain ANY credibility and hopes for growth, Greece should be put into restructuring asap, maybe others too. The alternative is a black hole whereby wealth is destroyed in Northern Europe as it is sent to bailout unviable countries in the South. This grotesque misallocation of capital is a disastrous move for Europe/European growth. My HOPE is that the error of these ways is addressed asap. My FEAR - as seemingly supported by the political noises out of Europe over the last few days - is that when, come Sept/Oct, once we all realise Greece is badly failing its budget austerity targets, the politicians in Europe again usurp the sane eco based voices and keep pumping money/wealth into a bottomless pit. The UTTER NONSENSE that is now consensus is that the EURO fails if its weakest leg is allowed to fail. I'm sorry but this is RUBBISH. The EURO and Eurozone will fail if the ECB is made a tool of politicians (maybe already too late on this front - all ECB credibility & independence is seemingly LOST). And the EURO and Eurozone will fail if ECB and Eurozone policy is dictated by the weakest link (Greece) rather than the strongest link (Germany). Again, maybe its too late on this front too. Lets see what happens when Greece is seen to be running an annualised deficit/GDP ratio closer to 20% than 10% come Sept/Oct, once we all see little progress on cuts and huge shortfalls of (tourist based) revenues. For now, the Eurozone has joined the club currently only occupied by Japan since the late 80s/early 90s.
E - The political situation in the US is turning/will turn deeply RIGHT - the Tea Party folks will have a huge say on how the US is run post AND into mid-terms. These folks are NOT elitist Republicans, they genuinely want smaller deficits, a weaker Washington, smaller govt. overall, and they want to attack the Fed....
F - Policymakers are (nearly) all in, some have lost all credibility (clearly Europe currently dominates this loss of credibility right now), others are close...
G - Technically, the set up of markets looks VERY BLEAK
Dear All - its seems to me that:
A - Risk markets can stabilise/rally a tad this week, perhaps a little into the week after, but overall there is a decent chance of a VERY SERIOUS risk asset sell-off late May/early June into late June/early Jul....I am talking ANOTHER 10%/10%+ off S&P from here....
OR
B - After more weakness into late May/early Jun, we can then see some stability over JUNE, before a MAJOR 10%/15% PUKE begins in/into Jul
Sorry I can't be more precise, but net net it seems clear to me that the key risk here is of major risk asset sell off, with (eventually) S&P into the 800s, iTraxx Crossover up at 750/750+, a 5/10 big figure EURO Puke vs the USD, a broad USD rally, and 10yr USTs down at mid/low 2% levels. Whether we see a small bounce next week before the big selloff, or whether we see another week of weakness, followed by a month of 'strength' and then the big puke is not I think particularly crucial - the overall trend is the key. And in this respect, whilst following either of the above routes would then lead to a brief multi-month period of consolidation, the overall trend for the rest of 2010 will be weaker with respect to growth & risk assets/markets, and higher with respect to volatility. Key levels are (S&P cash) 1180 to the upside (and then 1220) and, to the downside, the 1020/1040 area. If we close below 1020 S&P, it would be very negative, implying that a mid-to-high 800s S&P is right around the corner...
How can we fix/avoid the nasty double dip in both the global economy and in markets? Well, it seems very difficult and there is no easy route:
A - Globally, the corporate sector would need to go on a huge spending/leverage/capex/hiring binge - this seems extremely unlikely...
B - China goes on a huge fiscal/Credit binge - again this also seems VERY unlikely, at least for now...
C - The US goes on a huge new fiscal binge (Hmmmm....if its going to happen it has to happen NOW, before the Tea Party hijacks Washington), and/or the FED moves to a 3/5trn QE programme... credibility destruction would be huge, the Fed would then be a MAJOR target for the Tea Party folks, and for me this IS the last bullet in the gun. I reckon the Fed would know this and would only use this bullet once we are in serious pain, i.e., the Fed would only go down this route AFTER the USD has rallied another 20%+ vs. the EURO/Others from current levels, AFTER 10yr notes are at low 2% levels and AFTER the S&P has already gotten down to the 800 level (maybe lower...)
SO, the asset allocation decision remains unch'd: QUALITY (driven by balance sheet strength, market position, and the ability to be a PRICE SETTER and NOT a price-taker) should drive all investment (as opposed to pure short-term trading) decisions.
Quality is now key in any investment (as opposed to 'trading') decision. Lets see if Europe sees sense come Sept/Oct. And lets see re the Fed, but please don't forget you heard it here 1st - policymakers will NOT like deflation, and the last real roll of the dice will be (I think) late this yr/early next, when (I think) the Fed goes to a new QE programme in the order of $5trn. But because this IS the last roll, it will happen LATER, rather than sooner, and only when the pain in markets (equities, credit) and the economy is already excruciating. At which point we had better all hope that bond markets don't react BADLY, because by then we will be ALL IN. If bond markets do revolt/react badly (as I fear) we will then very quickly be ALL OUT!!
Cheers, Bob
»
- 35507 reads
- Printer-friendly version
- Send to friend
- advertisements -
I will take issue with your upcoming stuff preemptively.
There is no WE, dude.
There is only YOU.
And you are outnumbered. Never forget that.
Unless you are willing to discuss things so fascist that they would make Attila the Hun blush, there is nothing to talk about.
The simple fact is that there is inadequate aggregate IQ to grasp the problem. I talk about this with smart people all the time, call it denial, call it mediocre intellect; they can't or won't get it.
The only way "out" to this sustainable future you talk about is Brave New World. We are playing out the intersection of biology against finite headroom. There aren't enough "we" that have the intelligence to understand what to do about it. Most are just deer on the island.
It's such a shame I wasted those 60 hours writing this crap. May I please have them back mein fuhrer? :>)
Don't piss him off CD, he will challenge you to a martial arts contest. To the death no doubt.
CD, I look forward to your upcoming series. Thanks for some great info.
I agree as well CD. Look forward to your upcoming piece. Your writing and your "take" has always had value for me.
Well said. I look forward to CD's piece but if I'm right where I think he's going with it, I couldn't agree with your post more.
Biology when confronted with resource limits calls for death.
To wit, for Russia to continue to exist will need to kill at least a billion people or all of the remaining Russians will be exterminated.
That is our future: exterminate or be exterminated. Death on a scale that none of us can comprehend. Gold will only be useful as something to grab from the dead.
I fear that you may be right, but I will continue to hope you are wrong. Because without that hope, what's the point? There is probably nothing I can do to change the outcome of what is coming, but I owe it to my children to try.
I have no power, no money, and no influence. All I can do is try to go to my grave having been an honest hard working man, who lived by his values, and offered some semblance of community to those around me.
Maybe I'll end up just as dead, just as fast, but living in fear and isolation in the frozen Northwoods is no way to live, and you still end up dead in the end.
Most of the replies to your posts miss this point. One only need look at the replies to you on this thread for examples.
My view is it ends at personal responsibility and accountability. There is an ever growing lack of this in our culture. Whether it be involving politics, the workplace, our roles as neighbors, or even our duties to our families.
It is each and every citizens responsibility to maintain an understanding of the very law, the Constitution, that we are governed by. In Dr. James McHenry's official records, one of Maryland’s delegates to the Constitutional Convention of 1787, notes at the close of the convention: “A lady asked Dr. Franklin Well Doctor what have we got a republic or a monarchy. A republic replied the Doctor if you can keep it.” I think it is now clear that we have failed this responsibility.
I have experienced and heard countless tales of individuals scamming worker compensation insurance laws. I hear first hand from union workers complaining of fellow members manipulating the seniority structure to shirk their responsibilities and reduce the overall efficiency of projects, driving up overall costs. From individuals scamming others on Ebay to the CEO of the largest financial institutions fleecing taxpayers of entire countries, there is no accountability or inkling of personal responsibility to those they injure for their greed.
It is not uncommon for people to live for decades in a suburban neighborhood without ever introducing themselves to their next door neighbors. Physical harm is perpetrated against others in plain site of witnesses without anyone stepping forward to defend the victim.
Parents shirk their parental responsibilities, dropping their kids off at daycare at sunrise not picking them up till dinner time. Most will argue that they have to because their work demands leave them no alternative, but how do they defend the lack of parenting when they aren't working? Where is the effort to compensate for what they have failed to give during those work hours? Any effort to "compensate" usually takes the form of some entertainment, a trip to the movies or amusement park, or a fulfillment of a child's want (i.e.; treat, toy, etc.) Then these parents wonder why their kids are so ungrateful for "all the things they've done for them." These kids become adults without first hand experience of personal responsibility and accountability. It is never handed down from the generation before them. They become extremely susceptible to propaganda from TPTB who offer to continue fulfilling their wants, just as their parents once did. Between the federally funded and directed public school system, and the general lack of parenting, these generations are psychologically conditioned to accept a society without personal responsibility nor accountability.
Where does this end? It ends with me, and with you. It ends when we take full responsibility for our roles in our families and in society. It ends when we make ourselves accountable to one another.
Get to know your neighbors.
Stop relying on the public school system to fully educate your children, it has utterly failed them.
Stop making purchases at the big boxes. Buy only at local stores, no matter how inconvenient. When making a purchase ask yourself if you are consolidating wealth outside of your community. If so, is their an alternative? If not, you may have a business opportunity.
Bank only with a locally owned bank.
Instead of investing on Wall St., look for businesses with growth potential in your community and approach the owner. Is there sustainable organic farming in your community? If so, they most likely could use capital to expand. Run an ad seeking local investment opportunities, you might just find and provide the capital for the next Apple, Google, or Tesla. Without local investors entrepreneurs and innovators are forced to go to the very same institutions that are manipulating the underlying structure of our society in their favor, the very same syndicate railed against on a daily basis by the ZH community.
We can complain and speculate all we want, but if we aren't willing to examine our personal part in perpetuating this manipulation (accountability) and change our actions accordingly (responsibility), then we are merely spitting in the wind.
I look forward to your series CD.
+11111!
Excellent comment, and excellent recommendations! Thanks for sharing. A side benefit of investing locally is that you move your money sufficiently far away from Wall Street where they can't steal it from you.
CD, This is just a man on the street perspective. The public learned it could vote itself a raise and it will continue to vote in the politicians that promise them the most. Always bringing future consumption into the present until that future can no longer be put off. We will remain on the same path till it ends. Inflation, deflation I don't know, probably both at the same time till we reach a fait currency disintegration. And not just here. We not only exported our inflation (and jobs) away we also exported our fractional reserve banking system. They will try to shove wars down our throat (N.K.,Iran) It won't work like it did in the past, people communicating over the internet will raise too many questions. When the currencys fail, to me that will be the end of the old and lead to the beginning of the new. No Mad Max. PM's our my transition asset choice. Thanks for asking.
CD, I look forward to your upcoming series. Thanks for some great info.
Can't say where it "ends", but can take a stab at where it's going quick:
Politics goes dramatically to the front burner, beginning with this election cycle. After decades of apathy, fear and anger predominate and force more to participate. Get ready for demonstrations, unresolvable debates and fragmentation. I predict this summer will signal the beginning of the next phase.
The markets will react in fear. Capital will recoil. Funding mini-crises will pop up all over. Blow ups and bankruptcies will rise as the era of gentlemanly elitist support for over-leverage ends (think CRE). It will be eat or get eaten. Hard noses and sharp elbows will prevail.
Post bailout euphoria lasted a week after the latest Trillion dollar Euro-bazooka. Going forward it will last as long as a fireworks display: dazzling lights for a few minutes, then back to darkness and business as usual.
Deeper into the crystal ball I see no alternative to outright nationalization of key corporations and industries, even in the good ole US. They'll sell it under a different brand name, but the result will be the same.
It ends with a world currency. It ends with a revaluation of all currencies. It ends with a new commodity to support the world currency.
It ends with billionaires remaining Billionaires but losing a few to multi-millionaires.
It ends with everyone else getting fucked except the poor who have nothing to lose and the rich who are buffered.
It ends with the floor being pulled out of the Gold market.
Do you really think anyone wants you to be upwardly mobile? They love stratified statistical populations.
Then the whole ball of wax starts rolling agin.
Same as it ever was.
Even if the floor is temporarily pulled out of the gold market, how low could it really even go ? The rock bottom low for gold was around $256 and that was a manipulated price. So lets assume that the real market low was $450. So even if the price dives temporarily to $500, that is still only about a 55%ish drop.
Gold at around these prices is still cheap when you consider that the unmolested low is actually around $450. If gold was $3000 now and it went to $500, that is a different story. That is a loss to be concerned about.
One advantage of the gold standard is that it's functionally a world currency.
Nothing wrong with global currency - it's just the political control that's the issue.
Where does it all end?
CD,
Sovereign default, currency collapse / hyperinflation, general ugliness (especially in cities) and / or false flag terror event (the preference would obviously be one that is blamable on the political resistance), leading to (attempted) martial law. There are no circumstances under which "they" will voluntarily relinquish control, and I seriously doubt their willingness to have control wrested from them by the political process. Wresting control from them will be extremely difficult anyway, but it is what must be done, as the alternative is generations of de facto and de jure slavery of a type much more overt than what we have now.
When we are successful, a new era of frugality and common sense, a rebirth of the nuclear and extended family and an end to narcissism (we won't be able to afford it anymore), greatly reduced divorce rates, a new work ethic, a genuine recognition of human interdependence at the micro level, coupled with the recognition of the need to produce wealth by actually making things. A re-unleashing of the human creative and productive spirit; a contest in this regard, in fact, among the several states. Virginia will win that contest.
Yeah, you "other" states, I'm throwing down!
I hope you are correct when you say, "When" we are successful. Your vision of what will follow, is the outcome I hope for every day. I just hope there are enough people, with enough stones to pull it off.
If I didn't believe it was possible I'd just give up and roll over. It has to be more than hope; it has to be determination and effort. Lots of both.
What are your reasons for Virginia winning that contest? Very curious about that...
Virginia has everything it needs, a diverse economy including domestic energy, is not landlocked, and is already among the more business-friendly and fiscally-conservative. Virginia has a part-time legislature, a major plus.
It ends with the banks buying gold for a global fractional based currency. ( ...crawls back into his box, closes the cardboard cutout door. ).
Lemme take a stab at it, because I've answered this one before.
We go into mathematically inevitable deflation. At some point, the population will beg Christ for money printing. It won't work, because money isn't what causes the economy, it's the converse.
Oil supply becomes constrained. There will be a short WW3, I forecasted 10-15 years out about 5 years ago. But, it will be mercifully short because there simply isn't enough oil supply to be wasting oil fighting over. This isn't 1939. The Pax Americana collapses, the world gets larger. The War will not be "won" by anyone. Everyone will be forced to retreat and go home.
After that, sustained global recession. There simply won't be enough surplus energy to waste on stupid things like power projection. The US's imperial posture is highly reminiscent of Road Warrior...burning insane amounts of fuel to...go acquire more fuel, in order to burn it to...go get even more fuel. It's a hamster/wheel thing.
Recession will not abate until a new, growable energy supply is discovered. Perhaps the WW3 over remaining hydrocarbon supplies will precipitate sustainable fusion. Just have to hope the war doesn't turn atomic. Either way, it'd be better to not be in the US at that time.
In the meantime, more coal will be burnt at higher rates to replace lost oil supply. Might be a bad time for the climate and air pollution. In the end, our imperial network will be a millstone like it was for Britain.
There are solutions but they're very dangerous...
And many street battles will be fought to prevent their implementation...
No doubt there are powerful forces arrayed to remain in power. I don't wish to overcome them. I just wish to stop supporting them. Remove our support and they crumble. Their strategy is clear. Blackmail. Tie our survival directly in with theirs. It's an age old trick that works every time we buy into it.
I'm not saying there won't be strife or pain or even death. The point is that this is coming anyway. We are already on this path. The question is do we accept the outcome that doesn't change the basic dynamic but still is painful? If I'm going to be in pain, I at least want some assurances I've not suffered in vain.
Someone above was talking about the lack of a sufficient collective IQ to change anything. I couldn't disagree more because it's a false question and answer dynamic. It has nothing to do with the Intelligence Quotient or IQ. It is all about the Emotional Quotient or EQ.
+100
Anyone you come across that talks incessantly about IQ and their own intellectual superiority are usually the first exterminated.
For a group of folks to work together effectively, one of the more important things to do is match EQ...
Some solutions may require Machine Intelligence...
When the confidence is gone.
"So where does it end?"
at the beginning...
(apologies for the flippant answer to a most reasonable question, but as to where & when that is, unlike the other soothsayers here & elsewhere, i honestly have no fucking clue. neither does anyone else methinks (yet).)
Simply, I do not think it "ends". I think that by the time the Fed has been deemed an outright farce by the American people, sometime in late 2012, the presses will still be rolling.
Some excellent comments and responses to this practically "open thread" within the usual comments.
Over the next 1-2 years, we will have the politics of division - as TPTB try to maintain power by creating as many divisions in society as they can - economic/class, generational, racial, etc. Hopefully not manifest as a foreign war. It wil still be relatively stable and civil because most folks will still believe that the economic pie is still intact and that if they wait in line and do what they are told, they will get their slice.
3-4 years out, when it becomes clear that the economic pie has hit the floor (auction failure, currency crisis, surging interest rates), and that it is going to take longer than anyone expected to scrounge up new ingredients and bake a new one, things will become a lot less civil. Anger will spill over as folks realize that they are not getting that slice of pie. The search for scapegoats and culprits will begin in earnest. The spin and (mis)information wars will dwarf anything seen to date as TPTB fear not only for their power, but their personal well-being. These will be the times that truly stress the fabric of our society and governmental structure.
If the current political players survive (i.e. the current PTB), we will become a democracy in name only, and maybe not even that, as a temporary imposition of martial law to restore order may not be so temporary.
Democratic survival occurs when the majority of the populace is willing to bring personal responsibility back into the personal freedom equation, and recognize that there is no such thing as a free lunch that lasts forever. The country will be in a rough spot economically, and debt will either be restructured or repudiated, but the basic governing framework of our country holds. People start picking up the pieces, and moving forward, albeit with most at a lower standard of living.
Wildcards - technological breakthroughs that could usher in new, major sources of economic growth, especially energy-related ones that might address the looming, game-changing issue of diminshing EROEI, with midnight on that clock looking to be roughly about 20-25 years out at the current status quo.
completely agree. Market not in touch with political mood in US and its implications for policy response going forward. If we do get 10s into mid to low 2 handle, the Fed's mtg portfolio will paydown (prepay by at least 4-500 bb) ) and they will have some cover to buy assets again.
More drums echoing in the distance...
http://www.msnbc.msn.com/id/37309788/ns/world_news-asiapacific/
Cool. We get to fight the Korean War again.
And just in time for Memorial Day!
Counting bodies like sheep to the rhythm of the war drums
Well the White House could use a diversion from the current economic issues.
Interesting timing tho'...
Allow me to translate for Bob:
GOLD BITCHES!!
I am Chumbawamba.
+79
Just listened to Judd Greg, part of our problem, on C(rap)NBC. He was talking about Fannie & Freddie, and says that the majority of the left will not deal with F&F because they still hold on to the belief that everyone should be homeowners --- credit worthiness be damned. Conclusion: Next wave of QE will come. Answer: Gold.
P.S. Save yourself the trouble. I rarely watch CNBC. I don't need the lecture.
You do know that Fannie and Freddie are privately owned, right?
...and have the complete backing of uncle, as clearly stated by Paulson to the Chinese some time ago. Did you miss that part?
80/20 public/private
Who both keep being bailed out with public money.....
By the Easter Bunny, no less?
"He was talking about Fannie & Freddie, and says that the majority of the left will not deal with F&F because they still hold on to the belief that everyone should be homeowners --- credit worthiness be damned"
It's partly that. But it's also partly the scandal. Fannie and Freddie were very, very lush parking places for out-of-work dems during the Bush administration. Jaime Gorelick (Clinton AG's office, inventor of the Chinese wall), for example, took over 26 million in bonuses. It was an infinite cash generator for the left during the Bush administration and the dems in congress fought every attempt to force it to even tell Congress what was going on. Fannie and Freddie made very large contributions to key senators and one future president to make sure the money machine stayed intact. While taking lots and lots of money for themselves, they created the subprime monster that brought down the house.
Gregg is being far too generous in assessing the left's motives for protecting Freddie and Fannie and for why the folks running it during the Bush years haven't done the perp walk.
love to predict .. especially what has just happened ,, but never the future dumpster
I had a meeting with Bob on Monday 2 July 2007 as I had asked him to come to visit me as I was pretty bearish at the time. It was not fashionable then. I remember clearly the Xover being at around 200. We both agreed it would go to 400, little did we know it would touch 800.
My point is , Bob is not always right, but he is very good and hasn't changed his tune despite what's been happening.
Maybe because I've been in sync with him since that day or because 90% of the time , e's been right but I always listen to what he has to say with the greatest attention
Wonderful job of Monday am pre-opening meltup.
@8:15 S&P futures down 10. Now only down 2.40.
Just some articles from WSJ, I thought were pertinent to this article (I'm in italics):
1) Austerity: "UK Is Set to Detail Cuts to Trim Deficit" The new UK govt is set to announce 6B pounds of cuts (out of 156B budget deficit). Wow!, that fixes everthing.
2) Growth: "Economists See Solid US Growth" Consensus is 3.2% per year as "consumers realize we are out of recession." They aren't smoking "hopium," they are mainlining it!
3) Europe: "Merkel Faces Loss of Political Clout" "If all economies were to pursue the course that Germany advocates--cuts in budgets and real wages--then the euro zone would find itself on a very dangerous course, economically, socially, and politically" "If everyone does that simultaneously, the result will be rampant deflation" Well, that will make the Germans feel much better about giving everthing they have to Southern Europe because otherwise, their (the Germans) savings will get more valuable. It would be stupid to choose that option.
US Politics: "Republican Wins Hawaii Seat", "Colorado Dark Horses Put in Good Showing", "Cuomo Tries Anti-Albany Stance in Race for NY Governor". Respectively: Throw the Bums Out, Throw the Bums Out, WTF?
QE: "Fixing Fannie, Freddie is a Political Hot Potato", "Mortgage Loan Rates Fall Below 5%" Nuff said.
Makes Bob seem a little more prescient to me!
I've been thinking that what we're seeing is the end of an industry: our specific form of capital formation based on securities traded over exchanges. Other, once proud, industries mature and fade, so why not Wall Street (for example, cars in Detroit and whaling in New Bedford, MA).
So, if this happens, over several years or a couple decades, how will people store and grow wealth? How will companies gather capital?
stack wood , carry water , save, division of labor ,
have the IQ to read a text on austrian economics
stop being police to world
gradually reduce the depencency on government
term limits 6 years for senators ,, 6 years for house
industry has not ended it is just somewhere else ,, the giant sucking sound ,
He's right. We do, and we are. Join us!
+1000
Hehe. And maybe we'll all live in Candy Land. You're signing your own death warrant in a world where bombs, riots and crime become the preoccupation along with rogue nuclear nations. Sitting in a bunker under the White House having a high old time and doing nothing is not the vision people will want to share.
Once upon a time in Candy Land we could all go shopping and complain how big government was the problem preventing us from buying more. Times have changed and the world has become far too dangerous a place for fantasies.
Yes, let's raise all our children as hawks.
BB gun at 5
22 at 7
Assault rifle at 11
They want smaller deficits, huh? (when will they bring the troops home and how many bases will they close?)
They want smaller govt, huh? (what's their position on abortion again?)
They want to attack the Fed, huh? (how come I only see the SEIU out protesting lobbyists and Wall St?)
They are a vast minority with very loud mouths who will act as little besides spoilers for many Republicans, witness Dr. Rand Paul's awesome foot in mouth act, and will play the part of the Perotistas in Obama's re-election bid, at best. They may even act as a catalyst to get disappointed liberals up off their asses to vote against Bible Spice et al again.
No, the TeaPotDome Express does not impress.
When they come out for raising cap gains taxes and reducing the size of the MIC, maybe we'll listen. Until then, they're the same rightwing base they've always been, and just as supply-side deluded as ever.
RBS still has money to pay an analyst???
Much as I agree with the general thrust, all of the GDP stuff is the tail wagging the dog. Scale matters folks.
There are trillions of dollars in real estate losses that have not yet been realized. Kicking the can just makes that worse. Real estate collapse is driving deflation. This should remind us still, yet, again, that microeconomics is a science of sorts. Macroeconomics is just reading chicken entrails.
the solution is not political at this juncture ,
luke or puke will not matter .
light a match burn baby burn ,, especially Keynesian mindset.. the idea that the bootstrap method will work ,just let out more rope ,
yogi had it right The towels (printing) were so thick there I could hardly close my suitcase
No more printed money until the market cries deflation... If the market is screaming higher no new money... its a classic trap
The first paragraph of this post belongs in the book "Postcards from Hell"
The first paragraph of this post belongs in the book "Postcards from Hell"
Syllogism:
A. Without a newly developed policy mechanism to provide income-graduated ('progressive') bond haircuts, there can be no peace.
B. No one in the global elite has even conceived of income-graduated bond haircuts. I just thought of them a few months ago and no one cares.
Therefore
C. There can be no peace.
their will be pieces
+ concise!
Another 10% off the S&P, that is, unless some "mystery player" kicks another $10 billion into the SPX (or $100 Billion, or $1 Trillion, or $10 Trillion).
The feds (especially the Fed) are directly manipulating the equities market. They are unlikely to deflate, though volume may disappear completely as all humans exit the market, leaving only the algos and the Fed's golem to pump u the number.
The problem is that there are so many pigeons sitting at the table. Everybody knows that they are all going to bust, but the question is in what order. Back in early April, it looked like the fat guy with the big cigar was going to get hosed and then, beads of sweat start to form on the forehead of the guy eating the fetta cheese. So all of the sudden the fat guy looks good, by good I mean that he might have a pair of sixes or, it could be aces full of kings on the river, who knows, you're going to sit this one out, because you know that fetta cheese has zilch. When they lay down, it turns out that the fat guy's got a pair of deuces and fetta had 6 high. You were holding two bullets, but you're out.
We all know that the shit is going to hit the fan, the question is, what's going to be the order of the take downs. These schmucks have to play for higher stakes with shittier hands and every day that passes makes them more vulnerable. The more desperate they are, the bigger the bet.
And in case anyone is wondering, the fed's (the fat guy) all in, they're a nickel short and they're not credit worthy enough to borrow one.
Best regards,
Econolcious
Six high is not a possible hand. Just sayin.
Someone is paying attention.... Thanks.... As you can tell, I'm not much of a poker player, I must have been the pigeon at the table... Buy...! Buy...! Buy....! ;-)
pigeon at you may have been the pigeon..
but others who do not buy the gold are setting in the poop lol
"restructuring"
I'm counting that word this week. That's one.
to recap the Euro was created to improve trade between the member countries, to eliminate pricing distortions. the natural result of this is deflation, or lower prices. the global economy is now suffering as a result of its own success, more competition, lower prices.
austerity is the government or fiscal extension of the free market policy, the US is running a reflationary policy, fiscal stimulus, while Europe is gradually coming around to our way of thinking, so austerity? no.
as for QEII, here, modern history suggests they will be preemptive, rather than late in implementing new fiscal plans. however the (wet) T (shirt) Party, may throw a blanket over things, it could still be sexy enough for Wall Street.
exhibit A, in California the governor wants to purloin funds from municipal redevelopment funds, to cover their state treasury shortfalls. now these redevelopment funds are a conduit for corporate welfare. when a city builds a new stadium, some workers have jobs, and the owners and businessmen get a huge financial upgrade to the value of their business (the only thing Geo Bush II ever made money on, the Texas Rangers because the city gave him a new stadium) So if you wonder how far can the Tea Party go before it cuts into the bone of corporate welfare, (already there in social welfare, as teachers are being furloughed faster than runaway Toyota). If redevelopment is pulled in, at the local level, then we are going down.
but ultimately revaluing things like the housing market would be great for the real economy, and Obama has shown, at least in this oil rig deal, that he can change positions (drill baby drill) on the moment, (our foot is on the throat of BP), he depends on Americas uber short attention span,a nd lack of critical awareness, that he and his predecessor are really the same man, (different wifes)
but the T Party might not be bad for wall street and all the chameleons have to do is say me too.
Off topic, but anyone read this?
http://monkeyfister.blogspot.com/2010/05/major-change-down-below.html
UPDATE 5:45pm CDT: A brand new MAJOR eruption is happening. tune into the SpillCam at BP.com . It's black, all you can see is a cable. It started with yet another GUSH plume/tornado.
Oh, dear-- now, we can see that that is a LOT of oil-- and a BLIZZARD of Hydrates..
UPDATE 6:03pm CDT: The current eruption is way, way worse than the several that occured earlier. I think this might be a "Main Event" situation.
UPDATE 6:45pm CDT: An hour after the start of this most recent eruption, and it is still just a wall of oil, methane crystals, and gack.
WAY, WAAAY worse than the first event.
A few more of the same with frequent eruptions. Somewhere there was a claim that the ocean floor dropped a few feet.
http://www.correntewire.com/major_bad_changes_deep_below
There have been several major eruptions of the seabed under riser pipe. I've been watching and live-blogging all day. Some screengrabs. Whatever happened is very serious, and I am sure not good news for BP or even Republicans. Seabed dropped several feet, Spillcam covered in oil, Spew increased. New leaking hole in seabed. Possible casing failure.
NOTE Seabed dropped several feet???? --lambert
Ok back to the regular post.
Sorry.
Gully, thank you very much. This oil disaster will affect us more than most realize so far.
I look at it in terms of oxygen production, and at oxygen depletion.
I like to breathe clean air and am concerned since much(80%) of our air is created in the ocean. The dispersant may kill off much of the oceans ability to create oxygen.
have humans forgotten they need oxygen? I ask , because many of our actions on the world stage are suicidal, as we take so much for granted.
Last year I fought the FED and the FED won. I have learned my lesson. Here is the new gameplan. QE nearing end, begin shorting the market. QE starts again or looks like it will be soon announced, likely at options expiration to screw the shorts, close out shorts and open longs. This is a no-brainer.
uber bears like bob prechter are in cash, but if you want to play. i like your plan, and short the stock and long the calls, sacrifice a few points to the wall street gods, and sleep well knowing if the bid evaporates tomorrow you are in good shape.
Junjuah, Rosie, Prechter... all the same ilk. Now we know why traders REACT to markets and bank analysts and newsletter clowns make PREDICTIONS.
Let's grant that everything he says is true.
Myself, I'm a trader, but I assume that the sentiment of ZH community is that most people support the idea of long-term investments as a more rational and socially benefitial thing. In that case, who cares about SP500? You should only invest in companies that have increasing earnings and show good signs of growth and expansion of ACTUALY DEMAND from the consumers. These companies exist, regardless of the market condition, some companies just have a product that people want at the moment, and the market recognizes that if earnings are growing regardless of what the rest of the market is doing. Fuck, let SP go to 400, it's irellevant!
Yes, that's very on point. What I found interesting in Janjuah's comment was his linking of 'quality' as a long term investment guide to the ability to SET PRICES. Is that a nod and a wink away from corruption? Or just super duper heroic companies that make such great video games, er, critical goods and services that they can charge us and we're happy to pay?
I figure both.
OK, here we go...The Dwarf in Members Only (DIMO) said last week that any cuts in trade would cause "all-out war".
The ball's in your court, DIMO.
By JEAN H. LEE, Associated Press Writer – 14 mins ago
SEOUL, South Korea – South Korea's president slashed trade to impoverished North Korea and pledged to haul Pyongyang before theU.N. Security Council, vowing Monday to make Pyongyang "pay a price" for a torpedo attack that killed 46 sailors.
On a lighter note, Mandy looks awesome again this morning.
Was she berating the court jesters with questions about a currentsea collapse again? Mandy "MI5" Drury is the best at whipping the poor Yankees into reality.
What ??!? More QE ?!?!!?
Who would have thought? Canada will be raising rates next month and withdrawing liquidity to cool off housing prices.
All in for November...
Yes, and let's not forget that he called the May 2010 drop since....JULY 2009. That might qualify as within decades.
holymoleymotherofgod,
Talk about over complicate it. Deep stuff to make your head spin.
Bob was bang on 2007 - 2008 because they were largely free market fundamentals. He's his timing shot to bits because since then it's been politics and it shall be until the Establishment have the legal infrastructure in place to start their new system.
This article is ironic. It demonstrates perfectly why modern economics is a vicous circle that will ultimately destroy the planet unless our monetary policies are fundamentally changed.
On one hand, it is banging the drums of the necessity of economic growth to pull us out of debt problems (economic growth is a good thing, apparently).
Yet, it is economic growth which has ultimately caused these problems.
Every one of our monetary systems is fiat paper based money -- ie debt. Because of this, to avoid inflation, there is a requirement for eternal economic growth. Of course, in the real world outside of economics textbooks, eternal economic growth isn't possible. This is pure fantasy. So for the last few decades most of the western developed countries have been "faking" their economic growth through increasing debt levels. This has now reached a crisis point.
Now, the right wingers will rant on and on about how it is big government overspending that has created this debt mess -- utter hogwash. We are in this debt mess because our monetary policy requires eternal exponential economic growth, but in the developed world we simply have less and less opportunity for growth -- we are already developed, and the only thing that can give us economic growth is immigration. In the case of the US, economic growth reversed as most of its manufacturing packed up and left for China. Yet Americans believe that they have a right to continue to lead their extravagant consumerist lifestyles, as long as they keep spending, which is of course what the Keynsians are telling them to do. This is disaster waiting to happen.
The idea of eternal economic growth is absolutely, utterly absurd. It is amazing that so many people can believe such a preposterous proposition. We now as a species sequester about half of the total biological productivity of the planet for ourselves. There is a direct link between GDP and ecological footprint. 99.9% of the food we eat is produced by ecosystems. You'd think economists would be noticing a problem... It is pure insanity for economists to delude themselves into believing that continued economic growth is good.
Yes, we need to cut back government spending, but that ultimately is not the problem. The problem is a monetary system which requires eternal economic growth, which violates the laws of thermodynamics. And there is nothing in the universe which can violate the laws of thermodynamics. We need to return to a gold backed currency which does not require unending growth for the economy to function.
correct,
Infinite growth requires infinite energy. Earth has finite energy. The carbon system or cap and trade or whatever your country calls it is the begining of the production-consumption neutral, energy sustaining currency system.
Of course most of us appreciate man made global warming is a farce but this is just a tool to guide the masses to accept lower energy use to support their standard of living.
The new SDR trading unit will be carbon backed not gold.
No, global wrming is not a farce. You actually believe that tens of thousands of independent scientists around the world for several decades have somehow been conspiring together to make this whole thing up in order to steal your money? Do you not realize that you would save a LOT of money by reducing your GHG emissions, and at the same time experience no loss to your quality of life (it would actually go up, all else beign equal)? As Climategate clearly shows, there is no conspiracy with Gore as the leader. The hacked emails got to the heart and guts of the most controversial climate scientists and all they could come up with is a handful of questionable emails over a 13 year period, most of which were taken out of context (the so called "trick" refers to a valid statistical technique to bring together two unrelated data sets onto the same graph), and a few emails which seem to reveal some poor behavior on the scientists' part, which don't in any way invalidate the unquestionable evidience supporting AGW, and certainly dispell the myth that there is some grand conspiracy to fabricate AGW in an effort for scientists to steal your money. Gimme a break!
Brilliant,
That's straight out of the UN hand book...i've literally heard that word for word from UN lobbyist at a recent climate change conference, most delegates had a good chuckle too. Is that similar to the 10s of of thousands of independent scientists that agreed that 40 years ago if we did not deal with global cooling 25% of the planet would be wiped out by 2000 (that's why Earth Day started btw). For AGW scientist read funded lap dog, lobbyist or genuine person with no access to raw data because it's already been corrupted at source. There is nothing indepenent about the science and you know it.
It's not about money or a conspiracy it's about the business of population control which is totally reasonable and sensible. I'm totally in favour of a global energy currency just not under a dictatorial oligharchical government system.
Its like a 50 year old trying to tell a teenager something base on their life experience...the teenager will say, I'm different than you, this time is different, so those lesson you learned don't apply to me. Sometimes they are right...a kid runs off to be a rock star and actually does become a rock star etc...or times are truly different and what the old buy knows to his core does not apply anymore.
But mostly, the kids should listen and pay heed...
Just as we should to previous generations, back say to biblical times. We know what debt does, we know it leads to debt peonage or to default/jubilee...and we know a country can fruitfully manage it currency without indebting itself to a few elites, but we ignore until we are desperate.
There is no real plan except to respond to crisis. Knee-jerk policy making, with the appropriate amount of surprised look, so to avoid any jail time. So be on the look out for any "triggers". Beyond this normal state of affairs, Bob does not see a crisis at the state budget level, before the political flop. The state's need additional aid and need it before October 1st.
I think you will see another stimulus bill passed, but it will be really another state bailout. The one thing I cannot get a handle on is how they will sell it to the public. It would be ironic, that due to an mid term elections additional state aid is denied, when prior, any aid political measure would pass without question.
----------
Bob is asking the question we all are, he just asked it in terms of Greece.
Once the banks are bailed out (remove bad debt to remain solvent) will bailouts or aid once again be provided by the central banks to a corporation (bank or private) or a sovereign state in crisis?
Or will they selectively let the system bottom.
One answer my lie in the "first use" purchasing power of velocity. Once the wealth is transfered from the tax payer, it makes sense to me, to devalue. Obviously, to maintain worth, the capital must exit the country of currency debasement.
----------
For US real estate, the second coming of crisis insolvency has been compensated for with the continued financial bailout conduit of Freddie, Fannie, FHA and FDIC. After the MBS buy initiated by the FED expired, some of the slack was just moved to other funding avenues. Even though we have banks filing for bankruptcy every week, they are not considered "triggers", that is, need a direct response by the Central bank.
----------
At this point in time I do not think the FED is that interested in what the equity market does. However, for whatever misguided reason, the politicians do.
----------
I would also like to say that the media seems to have gone completely brain dead on what happens when stimulus is removed and there is no real growth.
The political hopium of "stimulus' (ARRA), was that once initiated, somehow it would magically replicate itself in the private sector. However, private sector growth in terms of bank credit was not directly supplied.
Its like a house built on a hillside, and then we remove the stilts. The question, what happens to the house? Well Mr Congressman it crumbles to pieces as it rolls down the hill.
The market will respond to failed policies. It is just a matter of time.
Mark Beck
I suspect that I agree with Assetman in that this next electoral cycle or two will be about anti-incumbency rather than ideology since more and more Americans are coming to believe their franchise has been rendered moot. Just as Klegg and the LibDem's were able to cut Labor so too will these next cycles be all about voting "no confidence". As what is commonly referred to as governing from the "reasonable center" is viewed as anything but reasonable. What the US will see over the next couple of cycles is divergence to the left & right and growing alliances between these two ends of the political spectrum. What I like to call social libertarianism.
Many of those that form this reasonable center have banked heavily on the fed's efforts at QE creating the narrative for growth & jobs, just like in Europe. Fools! The efforts to date to wick some of the worst aspects of the previous bubble onto sovereign balance sheets without wicking all of the poison off private balance sheets has only served to irreparably contaminate both. Now the private sector lacks the capacity to stand on its own and the public sectors haven't a clue except to short stroke the public for the aforementioned "private" sector until roll risk joins landing a job as the next topics of 90 second cocktail party conversation.
There can be little doubt left that the $US has another massive run left in it. 2.5 before 4.5 seems certain as does 2 before 5 in the 10yr and that junk is rapidly becoming just that. All of these factors will be developed and used as a means to inject fear to try and move the heard. What many are coming to realize is that just as the fed's bullets are losing their punch many appreciate that they have all the tools and knowledge they will ever need to move the whole to resolution rather than simply restructuring. In this I look for convergence between Mr. Market & Main Street as the message from investors & the voting public will become the same. Resolution.