This page has been archived and commenting is disabled.

Confirming "Dumb Money's" Resilience To The Wall Street Siren Song

Tyler Durden's picture




 

When Zero Hedge first admonished our readers in June of 2009 to stay away from markets in light of a general deterioration in market structure, which included a regulator-authorized form of structural frontrunning in the form Flash trading (not to be confused with the imminently following Flash crash), an unprecedented mismatch between stock valuations and economic reality, and Wall Street continued attempts to reflate the ponzi merely for the sake of proving that it can be done, we never expected that retail would take to our warning with the ensuing solemnity. Yet with 16 consecutive outflows from domestic equity mutual funds, shut downs by legendary hedge fund managers such as Druckenmiller and Pellegrini (and many more Tiger derivative blows up to be disclosed soon, once the full extent of the carnage of the flattening of the steepener bandwagon trade is fully appreciated), virtually everyone is asking themselves how did Wall Street not only get it all so wrong, but how on earth is the primary business of the post-facelift Wall Street, which is no longer investment banking, but merely trading (with or without flow-facilitated prop frontrunning) going to sustain the recent record headcount levels (hint: it won't, and many more banks will soon let go thousands of additional staffers as key revenue sources have now disappeared forever), and most importantly, why is this time different? Why did the "dumb money" for the first time ever, not bite on the Wall Street siren song lure of an economic "rebound", but instead has hunkered down, proving that not only is Wall Street nothing more than a pure-play enabler of the ponzi regime's status quo, but that all those who were warning that the economy is far more dire than Wall Street represents, were proven right. These same individuals (and bloggers), first validated in predicting the downward direction of the economy, will see their pessimistic forecasts about stocks validated next. Yet while that happens, all those who still somehow find this a surprising development, are now left proposing hypothesis as to what went wrong. Such as the following piece by the Financial Times.

Deep into the dog days of August, a rather unpleasant scenario is unfolding among the ranks of professional investors on Wall Street.

Against the backdrop of unusually low equity trading volumes, even for a typically sleepy August, continued strong flows out of equities into bonds, and high-profile hedge funds shutting down, a bitter truth is dawning for investment professionals.

Namely, that the ranks of retail investors, commonly derided as “dumb money” by the Street, have made the right call on US equity and bond markets in 2010.

As recently as July, much of Wall Street was awash with bullish research notes for the second half of 2010 calling for higher stocks and warning about low government bond yields.

Such bullish research is a staple of the industry and, flush with their bonuses from 2009, the Street simply thought the massive stimulus from the Federal Reserve and US government would translate into a sustainable recovery this year.

But since the eruption of the financial crisis in 2008, retail investors, like Odysseus, have stuffed their ears with wax so as to silence the allure of such sirens.

Like Odysseus, the successful return to the Ithaca of market efficiency (i.e., the purging of Wall Street's siren songs of capital destruction), will ultimately require continued resistance to the temptation of a relapse into the Ponzi. Yet we are rather confident that having gone far beyond merely a contrarian indicator, the recent divergence of fund flows out of equities and into money markets (to a small extent, and a 180 degree shift from patterns established earlier in the year), but mostly in fixed income, the case is now that with the demographic shift accelerating to the point where few if any are hoping for "double baggers" (and are willing to allocate capital to trades which have worse odds than playing blackjack in Las Vegas), the attempt to front run the dumb money has failed. What this means is that the proverbial bagholder is now Wall Street itself, namely the various prop trading desks, and assorted HFT non-overnight holding strategies (and yes, there are thousands of these). Thus instead of slowly, calmly and methodically selling to the last money in, Wall Street is now stuck in a Catch 22 of how much higher beyond fair value can the "Pig Farmers" (as defined by David Rosenberg) push stocks, before defection becomes the normative game theory mode, and the market crashes to unseen before levels, especially since prevalent short selling levels are now at near record lows, eliminating the natural buffer to a downside acceleration.

More from the FT:

Beyond the two big equity bear markets of the past decade, it’s no surprise that Main Street has soured on equities thanks to the Madoff scandal and the bail-out of Wall Street banks, followed by high bonuses paid out to bankers last year, all crowned by May’s “flash crash”.

While retail investors ran from equities and piled record amounts of their cash into money market funds in 2008, what really hurts the Street is their failure to forget and come back.

The common punchline on Wall Street is that once the markets have rallied for a while, you wait for the “dumb money” to rush in for a slice of the action. Then the “smart money” sells out and sit backs as retail investors get hosed when the market falters.

Except this year, the dumb money has resolutely stayed away and kept buying bonds and foreign equities, leaving the professionals twisting in the wind. So far in 2010, $50.2bn has been pulled from US equity funds on top of the $74.6bn in outflows during 2009, while $152bn has flooded into US bond funds, according to EPFR Global.

Such flows aptly illustrate Wall Street’s sour mood. Talk to people in prime brokerage at big banks and they mutter darkly that many hedge funds are struggling to make money and risk big redemptions later this year. The recent decision by Stanley Druckenmiller to wind down his Duquesne hedge fund is the type of shot across the bow that people in the industry could well look back upon as a foreboding omen.

Of course, this is verbatim what we have been warning about for months and months and months. And just as we have warned about the economy tanking, which is now confirmed by even the biggest permabulls on Wall Street (and we note with a deliberate dose of gloating the even Morgan Stanley's "economists" have now stepped away from the Kool Aid punchbowl to their unquantifiable chagrin...and derision), the next leg down is stocks themselves, first as multiples collapse, and second, as all those corporate decisions to conserve cash (absent a few idiotic decisions by corp fin departments ostensibly populated by crystal meth snorting monkeys such as those of HP and Dell), are finally seen for what they have been all along - prudent capital management in light of the next major downleg in the economy (and, yes, a major rise in corporation taxation) seen all too clearly by corporate Treasurers and CFOs, are all effectuated.

As for the winner out of this?

For many on Wall Street, the pain has been minimal, which perhaps
underpins their usually bullish take on stocks and why they think the
economy is currently experiencing a soft patch. The reality for Main
Street, however, has been and remains a lot harsher. Unless the economy
starts picking up speed, housing stabilises and unemployment abates,
Wall Street stands to learn that the “dumb money” has a much better
handle on the outlook for the economy and stocks.

The dumb money also knows one other thing - that the Fed has now run out of all options to restimulate the economy (and prepare for the Fed's escalating appeal of the Pittman decision to the Supreme Court in the week before mid-term elections to take on a very contentious gravity from a political angle), absent for the nuclear option. That option, as Bernanke knows all too well, will do nothing to reflate leverage-heavy assets, and will merely shoot critical commodities like wheat, oil, cocoa (as recently demonstrated by deranged speculation) into the stratosphere, finally ending the lie of the Core-CPI "disinflation." Wall Street has yet to realize just how ahead of it the "dumb money" finally is - we have long said that Americans, especially those of financial decision-making relevance, are nowhere near as dumb as Wall Street would like to believe, and they just need the right pointers now and then.

Zero Hedge will continue to provide such "pointers", and will be more than happy to read additional validation as this particular FT article, which also confirms that unlike even moderately wise people, who are all too aware that they know nothing at all, Wall Street, being at the other end of this spectrum, believes it knows everything, when the reality is precisely the opposite. And now that the majority has finally been awakened to Wall Street's simplistic ploy to control capital markets, and the general economy, with nothing else up its sleeve than a confidence game, it will be time to finally pay for decades of outright lies to those whose interests Wall Street should have held in highest regard all these years.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 08/29/2010 - 02:09 | 550953 Double down
Double down's picture

Sounds like a new chapter has been started. 

Epic

Sun, 08/29/2010 - 02:23 | 550966 Cistercian
Cistercian's picture

Epic is right!As in Epic Forecast Fail...oddly, retards like me without a PHD in economics saw this one coming...largely due to the efforts of Tyler.

 

  Another ZH mega win.

Sun, 08/29/2010 - 07:55 | 551094 THE 4th Quadrant
THE 4th Quadrant's picture

Far from retarded my friend.

One must wonder what other monkeywerks the 33 Liberty St krew is up to in order to keep things propped up and well lubricated.

If your organization is at risk of failure and you are committed to the game can you silently get put on life support? How many cloaked ventilators are currently in use?

Sun, 08/29/2010 - 15:23 | 551636 Cistercian
Cistercian's picture

 Re ventilators: there is no way to tell...the opaqueness of the big players is amazing.Between the Fed discount window and the HFT 3 card monte game, not to mention actual money laundering activities who knows?

  But one thing is growing more obvious by the day, and that is the inability to keep appearances propped up.The Ultra Fail is coming, and when it does I hope the ramifications for the super villains that caused it are dire...because it is going to be painful indeed for Main St.

Sun, 08/29/2010 - 22:00 | 552147 Thomas
Thomas's picture

I have been saying this to friends for several years now: people--everybody--knows what happened and who did it. You can walk into a 7-11 and find the checkout person has a negative opinion of banks. How is that? Because the banks have them over a barrel. The banks are charging them $3 instead of 50 cents to use the cash machine. The banks suck and it doesn't take a rocket surgeon to figure that out.

Sun, 08/29/2010 - 12:01 | 551307 B9K9
B9K9's picture

Double Down "Sounds like a new chapter has been started."

B9K9 "The conceit of every generation is that their experiences are unique."

Shill bidding is the second oldest con after pig-in-a-poke (straight-up product fraud). It can be dated back to some of the earliest historical written records circa 2500 BC.

Tyler (wittily) writes hundreds of words, yet a simple word check reveals no mention of shill bidding. There is an opportunity to directly warn millions of people about what is occurring on the exchanges, and whose eyes may glaze over at the mention of HFT, etc, but would instantly recognize the term "shilling bidding" from EBay auction experiences.

Simplify & codify (relate) the message of fraud in order to reach a larger audience.

Sun, 08/29/2010 - 13:50 | 551463 Double down
Double down's picture

@B9K9

Thanks buddy I am still a little ESL

I know of the act but not its name.  

Sun, 08/29/2010 - 18:40 | 551923 thesapein
thesapein's picture

I kind of think Tyler refrains from using the term "shill" so as not to presume to know the intentions of celebrities, spokespersons, talking heads, etc. He tends to focus on what's wrong with what they're saying without also having to prove that they are lying. But we're all adults here, right, so he leaves some implications for us to ponder and discuss. We can make up our minds about who is actually a shill and who is just wrong. 

Mon, 08/30/2010 - 00:31 | 552311 Timmay-Jimmay
Timmay-Jimmay's picture

Know what thesapein? I use to think you were a dick (actully, I still do), but I am beginning to like you.

Sun, 08/29/2010 - 13:11 | 551384 midtowng
midtowng's picture

I think the dumb money has been drug, kicking and screaming, into making the right decisions. All those "stupid" bloggers that have been warning about the condition of the economy are being vindicated.

Sun, 08/29/2010 - 14:22 | 551536 Spitzer
Spitzer's picture

Yeah but they jumped into the bond bubble.

Thats a dumb move, considering we are on the cusp of a currency crisis.

 

Sun, 08/29/2010 - 16:21 | 551728 Imminent Crucible
Imminent Crucible's picture

It will turn out to be a dumb move, if they stay in the pot too long.

But the Fed's current approach of using primary dealers as proxies to cloak its hidden QE operations makes it possible for Treasury yields to converge on zero before the scam unravels.

Some of them may be smart enough to get out of bonds near the top.  And while current Treasury yields are certainly irrational, "the markets can remain irrational longer......"

Sun, 08/29/2010 - 18:50 | 551932 thesapein
thesapein's picture

I hate to agree. I didn't see it coming that this bubble was going to get so big before popping, but those who did and have now left the building are probably happy with themselves. As for anyone still buying bonds, probably not the dumb (smart) money, no?

Sun, 08/29/2010 - 22:03 | 552150 Thomas
Thomas's picture

Are you really sure that is the dumb money in the bond bubble? I am not. I think the folks who are fed up may be in money markets, leaving the bond bubble for hot money, sovereign states, and completely incompetent permatards at the central banks. I could be wrong, but I am waiting to see evidence of retailer investors in the bond market.

Mon, 08/30/2010 - 00:03 | 552222 thesapein
thesapein's picture

Kind of depends on when it topped and who has been buying since, no? Still, yeah, we all seem to be looking at the usual suspects for this dead man walking blockbuster.

Mon, 08/30/2010 - 00:05 | 552287 Johnny Bravo
Johnny Bravo's picture

I agree with Thomas.

If you could get money for essentially free, and invest in relatively safe bonds, does it matter what the yield is?

Bond Yields > Free Money.

I wouldn't be so sure that it's just "dumb money" in bonds.

Mon, 08/30/2010 - 00:16 | 552296 thesapein
thesapein's picture

I'll gladly agree with you here if you agree with me in our discussion below.

Mon, 08/30/2010 - 00:33 | 552314 Johnny Bravo
Johnny Bravo's picture

My opinions are not up for negotiation!  LOL.

Let me check out what you wrote though.  You're a reasonably intelligent fellow.  Perhaps I agree with you anyway.

Sun, 08/29/2010 - 02:20 | 550964 DavidPierre
DavidPierre's picture

"The Fed has plenty of tools" ... quote from a guest on CNBC yesterday morning... did not catch this guest's name but I will refer to him as "Mr. Tool".

Mr. Tool went on to say "the Fed can print, and they will". He seemed to be perfectly comfortable with this concept and none of the anchors even batted an eye and just accepted his answer!  The Fed has many MANY "tools" and none of them work, they just collect paychecks each month! It truly is a world gone mad when supposed professionals are given airtime on "propaganda TV" and spout absolute monetary bullshit.

Next thing you know our President will make a national speech where he tells us "he's figured it out", all we need to do is print money and everything will be fixed!

This printed money can be sent out "inversely" to income, for instance, if you make lots of money you will only get a check for $1Million and if you have no income at all your check will be $10 Million. This would kill 2 birds with one stone, there would be no more poverty and the coveted "wealth re distribution" would be complete.

I'm actually shocked that no one has thought of this yet, it is such an easy "program" to implement and EVERYONE could be millionaires! Just like George Bush back in 2002 or '03 on the aircraft carrier, Pres. Obama could have a big banner behind him during this announcement that says "MISSION ACCOMPLISHED!"

It's getting even better now because Mr. Tool was followed by a portfolio manager that says the new concept of 100 year bonds is a great idea and he is a big buyer.

The yield is higher and the volatility is the same as 30 yr. certificates of confiscation!

Since this guy is a money manger he must be smart, right?

If he says 100 year bonds are a good idea they must be and I think I should "get some of that!". I mean what is there to worry about? Inflation is low, this smart man says that these bonds aren't that volatile and I'm not earning one thin dime on my Gold and Silver so why not give 'er a shot?

OK, I'm back, had to go turn in my metal and got me some of those "100 year bonds".

I really am optimistic now, we can all look forward to big fat checks in the mail (they will even arrive on time US Postal Service), we can ALL quit our jobs, be millionaires and live in Utopia!

I know, someone has to work right, why not just give an open invitation to any and all "illegal alien wannbees" and tell them they are now legal, labor drought solved!

OK, sorry for the sarcastic rant but the world is so whacked out I have to wonder whether logic even has value anymore. The stock market is up and I'm thinking to myself maybe stock buyers aren't so stupid after all, maybe people are buying because they know the Dollar will devalue to the depths of hell?

Nah, people today aren't that smart and are probably just watching CNBC with their fingers on the buy button!

Seriously, I really am now wondering whether we don't get a huge stock market rally in anticipation of a collapsing Dollar. We very well could see the stock market double while the Dollar drops 75% leaving only a 50% drop in real purchasing power. One thing I am absolutely sure of is a stock market massacre and crash in terms of Gold because we obviously have nothing other than "tools" running the show at the Fed and in Washington.

In the words of The Mogambo Guru..."we're freakin' doomed!". Hold your Gold assets and don't let loose of even 1 ounce nor share, you will be amazed at how far these assets will take you down the road. 

GO GATA ! 

Sun, 08/29/2010 - 02:37 | 550972 xPat
xPat's picture

So the so-called "dumb money" can now see through Wall Street, but is still falling for the misinformation circulated by the charaltans at GATA? What a world we live in...

xPat

Sun, 08/29/2010 - 11:11 | 551257 RingToneDeaf
RingToneDeaf's picture

What is GATA?

Sun, 08/29/2010 - 12:28 | 551341 ExistentialSkeptic
ExistentialSkeptic's picture

Gold Anti-trust Action Committee

http://www.gata.org/

Sun, 08/29/2010 - 18:56 | 551947 thesapein
thesapein's picture

They are the good guys.

ZH is to X-Men

as

GATA is to The Avengers.

Sun, 08/29/2010 - 19:01 | 551955 thesapein
thesapein's picture

After learning about GATA, if you're an honest type, you'll also learn to see better who the bad guys are when they attack GATA.

xPAT = villian

Sun, 08/29/2010 - 12:35 | 551345 tmosley
tmosley's picture

You either beleive in GATA, or the Fed.  Or you don't beleive in civilization at all.

GATA is by far the more likely of the three choices.

Sun, 08/29/2010 - 18:09 | 551879 Johnny Bravo
Johnny Bravo's picture

I know, right?

"We got out of the manipulated world of stocks to get into the (self-admittedly) manipulated precious metals market."

You sure showed them.  LOL.

Now, as banks sell their gold to you, you think that they're going to allow the "dumb money" to make money?  LOL is all I can say.

Sun, 08/29/2010 - 20:41 | 552051 thermroc
thermroc's picture

"as banks sell their gold to you"

Banks don't sell their gold, their existence depends on it. Read some history.

Mon, 08/30/2010 - 00:01 | 552281 Johnny Bravo
Johnny Bravo's picture

Which banks don't sell gold?

We've all heard about the Bank of England selling gold at its lows.

Individual banks also sell gold.  Gold is only worth it to them as long as it serves a particular purpose.  All purposes are temporary in a changing market.

The retail investor means nothing to these people.

Has anybody even thought about where all the physical gold that the retail investor is buying is even coming from?
My guess is that other owners are unloading to them while the getting's good.

Mon, 08/30/2010 - 00:03 | 552283 Johnny Bravo
Johnny Bravo's picture

What a haggardly fellow.  I've never even seen your stupid video.

Sun, 08/29/2010 - 23:35 | 552235 StateofFraud
StateofFraud's picture

http://www.davidlynch.de/chevalangry2.jpg

 

The dog is gold. The chain bullion banks. The chain will fail first.

Sun, 08/29/2010 - 04:59 | 551025 obelisks
obelisks's picture

" "The Fed has plenty of tools"

WOW ! it sounds so much like Leo Kolivakis !!

Sun, 08/29/2010 - 12:43 | 551350 Eally Ucked
Eally Ucked's picture

Of course FED got plenty of tools, that's good they admit it. Main is Ben and there are  a lot of smaller ones used for mop-ups or spreading shit around so nobody sees it, just general color of things are getting a bit more brownish but everybody gets used to that tint.

Sun, 08/29/2010 - 05:36 | 551060 StychoKiller
StychoKiller's picture

Back when the DOW started dropping from its all-time high (around 14,000 or so), I bailed out when the DOW reached 9,500.  When the DOW finally started going up again, I bought back in at around 7,000.  All was well and good until May6, 2010.  I started investigating just what was going on when I stumbled onto this site.  I bailed completely out of the market again and I DO NOT intend to return until some severe systemic changes are made, as well as seeing hundreds of "perp walks" of those responsible -- until then, it's Gold and Silver, beans, bullets and TP!

Sun, 08/29/2010 - 16:52 | 551776 Freewheelin Franklin
Freewheelin Franklin's picture

Forget gold, buy goats...and chickens. And lots of Mason jars.

Sun, 08/29/2010 - 06:20 | 551076 doggings
doggings's picture

"The Fed has plenty of tools

 

... quote from a guest on CNBC yesterday morning... did not catch this guest's name but I will refer to him as "Mr. Tool".

Mr. Tool went on to say "the Fed can print, and they will".

 

He seemed to be perfectly comfortable with this concept and none of the anchors even batted an eye and just accepted his answer!

well, I think to an extent this is correct, Mr Tool just left the last part of the sentence off.

It should read..

"The Fed still has plenty of tools who still believe that it can do whatever it wants, including print it's way out of this with no ill effects or catastrophic collapses.."

that's actually a correct statement now, isnt it? :)

Sun, 08/29/2010 - 22:42 | 552189 Troy Ounce
Troy Ounce's picture

Tools are still packed in plastic: never been used.

100% sure all those phD's are now reading together the manuals, poor souls.

Sun, 08/29/2010 - 07:05 | 551087 Noah Vail
Noah Vail's picture

I am eager to see how long the "printing" goes on after China, et. al. threaten to dump their Treasuries. Hahaha. Any ideas on what they'll do after that event, hmmmm?

I will be rolling on the floor laughing my ass off. Checkmate and AMF.

Sun, 08/29/2010 - 16:54 | 551781 Freewheelin Franklin
Freewheelin Franklin's picture

China is still in the process of building up its Navy. They won't make a move, at least, until they are finished.

Sun, 08/29/2010 - 19:32 | 551991 thesapein
thesapein's picture

But, really, China is already primed for war, much like we were before WWII, by having their large manufacturing base. Remember how the US was ready for Pearl Harbor by looking like we weren't ready? How long did it take to rebuild and surpass our previous forces, even after looking like we were wiped out? China has superior manufacturing, and, worse, they have been providing for our military needs by exporting rare and precious materials and are already beginning to put an end to that.

China, as a creditor nation, also has the means to fund a war. The US is already over expanded its military well beyond its means. It's doubtful that China would lend us more money while in a war with China.

Sun, 08/29/2010 - 19:13 | 551967 thesapein
thesapein's picture

They've already been dumping our dump. They're just not doing it all at once because, well, that might be counterproductive if they're trying to balance between getting paid back and moving to a hard currency. At least, that's the impression I get.

Jim Willie recently said something about China picking up the pace of dumping UST's... Anybody know if that's true?

Sun, 08/29/2010 - 08:26 | 551105 Pope Clement
Pope Clement's picture

Thanks Tyler for the continuing 'edumacation' and you too Murph for getting me into PMs in the $300 range.

Sun, 08/29/2010 - 10:16 | 551194 Hephasteus
Sun, 08/29/2010 - 12:51 | 551356 Sicilian Stallion
Sicilian Stallion's picture

Its funny that I thought of that "plan" when I was like 5 years old.  I remember asking my dad why the government couldn't just give everyone $1 million so we could all be rich.

I don't remember his answer but he knew that you can't create wealth by printing money.  I would guess he understood economics better that Weimar Ben, Tiny Tim and the rest of the current "dream team".

Sun, 08/29/2010 - 16:06 | 551697 B9K9
B9K9's picture

I would guess he (my father) understood economics better that Weimar Ben, Tiny Tim and the rest of the current "dream team".

Please, I beg of you, desist in sustaining and/or advancing the meme that the power-elite did not, nor do they presently, understand the ramifications of their decisions.

Of course, a regular Joe (such as your father) could readily explain the logical fallacy of such a plan. So too could Mish, Denninger and anyone else either not directly profiting nor paid to lie.

The beauty of a lie of this magnitude is that it is so large, so utterly outrageous, that normal, rational people are stunned into inaction by its sheer audacity.

Shit, when Goebbels was directing his guidelines regarding the Big Lie, even he may have thought there were limits. Ditto Orwell; 1984 was primarily an exaggeration to make a point. Who knew that it would actually become reality?

Sun, 08/29/2010 - 16:56 | 551784 SwapThis
SwapThis's picture

everyone, including the power-elite, perhaps especially the power-elite because of there extreme dilusions of grandure, are capable of miscalculations and especially human error.  As Prof Quigley reminded us in 'The Anglo-American Empire' & 'Tragedy & Hope', these are often very flawed individuals who's arrogance and lust for power can cause the best plans to need alteration, sometimes midstream.  There is no reason to believe they are infallable, in their plans, there actions or their understanding.   

Sun, 08/29/2010 - 23:27 | 552227 Alexandre Stavisky
Alexandre Stavisky's picture

Season of Sorrow   Sire of Sorrow

Since life was breathed into the form of man, he has had to contend against the thorns and noxious weeds of Uneden.  And thereby, provide for his daily and future physical needs.  Organized and clever beings have cobbled the coordinated efforts of sons of men into a kind of form, an imperfect monetary system.  They have come to make material representation of the virtue/vice productions of any man and every man.  Gold, paper money, sovereign bonds, equities, pay stubs, scrips, oral IOUs--all are claims upon the virtues made manifest of men who toil by the sweat of their brow to make exchange with their fellow laborers of the fruits of this garden.

That this system of simple exchange of Virtue has been seized by evildoers and conspiratorial thieves is a tragedy.  But virtue and vice must coexist to know the gap which exists between them.  Never will the sweet be so sweet except by draining the bitterest of dregs from the bitterest of cups.

The present economic tumult finds the subtlest, wilest, connivingest on top, while the real benefactor has been tossed to the very bottom in the eternal wrestling.  Truly the tall trees have fallen.  But all the energy of this new "bottom" is to obtain.  To obtain whatever condensation of virtue can be had.  The present "innovators" and all those who discretely plunder through every human institution, the same as the gutter thief, attempt to procure that which they cannot obtain by blessing of heaven or exertion of muscle and mind.  This is why the nation's pulse (gov't) and purse (treasury) are the complete aim of malefactors.

To possess the robe, wand, library, and august gestures of the sorceror does not elevate the apprentice to the same station.

Having contravened the eternal laws, the punishment must be suffered.  Keynes or his counterparts are the merest of men. They seek to obtain all the fruits of wickedness without having to bear the equivalent punishment. Balance sheet accountant embezzling liars!  These worst of men (that deserve not to be even called men) wish to concentrate societal virtue into a bowl from which only they may drink while leaving the onerous burdens of bitter labour to their "lessors".  Love of money is the root of all evil.  See the money throughout the world...and money which thieves cannot break in to deprive.  Beauty, inheritance, abundance, personal virtue, decorum, peaceableness, contentment, charity, perfect proportion. "What man by taking thought may add a cubit to his stature?"  And then there is money (especially USD) which has so many doors by which depredation, chicanery, duplicity, artifice may enter.

Better is the man who at his greatest feasts, places a platter of unleaven bread and bitter herbs, to remind him of his unworthiness, his smallness...to remind him of the great gap he must traverse to be numbered in the wisest of stars of heaven.

Better yet, when building his paltry domicile upon this poor, poor bit of dust in a wide universe; Man should do so with a foundation of the Seven Sorrows upon which should form Seven Pillars to then contain a screening framework to make some escape from the rain, dews, bitter cold of arbitrary nature.

Tell all the truth,

But tell it slant,

Success in circuit lies,

To great for our infirm conceit,

The truth's superb surprise,

As light'ning to children eased,

By explanation kind,

So truth must dazzle gradually,

Lest everyman go blind.

 

http://www.sevensorrows.com/explanation.htm

 

Sun, 08/29/2010 - 02:29 | 550967 faustian bargain
faustian bargain's picture

Zerohedge is a Tipping Point hub.

Sun, 08/29/2010 - 10:16 | 551196 Hephasteus
Hephasteus's picture

Of thousands of hubs.

Sun, 08/29/2010 - 11:35 | 551279 Miss Expectations
Miss Expectations's picture

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.
Archimedes

Sun, 08/29/2010 - 02:44 | 550978 AUD
AUD's picture

"the dumb money has resolutely stayed away and kept buying bonds"

Damn right!

Sun, 08/29/2010 - 10:25 | 551208 fiddler_on_the_roof
fiddler_on_the_roof's picture

Yes. The really "dumb money" money aka retail is buying soon to be diluted bonds.

Sun, 08/29/2010 - 17:47 | 551849 Johnny Bravo
Johnny Bravo's picture

And gold.  Don't forget that they've been buying gold...

Sun, 08/29/2010 - 19:57 | 552016 thesapein
thesapein's picture

It's called cashing in before the big squeeze. Consider trading in your UST's for what they were once backed up with, yo.

Sun, 08/29/2010 - 23:56 | 552268 Johnny Bravo
Johnny Bravo's picture

I like how you said yo.  It's something I might say.

You seem to forget that the individual investor means nothing to the market.

If it is in the interests of the larger economy for gold to fail, it will.

If it is in the interests of the larger economy for the small investor to get screwed, they will.

I don't know what will happen.  Gold may do well in the future.

If "they" don't want it to do well, don't expect it to.  There's no outsmarting the people pulling the strings in this market.
The Fed is larger than anybody who can oppose it.

Whether you like it or not, it's reality.

Mon, 08/30/2010 - 00:12 | 552291 thesapein
thesapein's picture

It's an artifact of my speech from Japan, yo. Not that I'm necessarily from there. Actually, only been there once.

I know, who am I to think I can outsmart the gods? Well, they're not gods. And I'll admit that I do think of myself as pretty smart. Plus, "they" are not all in perfect agreement. So, maybe I'm also picking a side.

Which side do you want to be remembered as fighting on?

Mon, 08/30/2010 - 00:37 | 552321 Johnny Bravo
Johnny Bravo's picture

It's noble to be against the powers that be.

I just wouldn't bet money on it.  It's doesn't qualify as outsmarting them, because there's no intelligence involved in their plans.  It's all manipulation.

As an investor, I'd rather be on the side that makes me money.  Principles won't keep me fed or keep the lights on.

Maybe that sounds shallow to people.  It is what it is.

Sun, 08/29/2010 - 23:57 | 552271 Johnny Bravo
Johnny Bravo's picture

Quite the lamer, I might add.

Sun, 08/29/2010 - 02:49 | 550980 Zero Debt
Zero Debt's picture

Fed 'will strongly resist' deflation: Bernanke

http://www.marketwatch.com/story/bernanke-talks-tough-on-deflation-2010-...

The Federal Open Market Committee will strongly resist deviations from price stability in the downward direction," Bernanke said in a speech opening the Fed's annual summer policy retreat. The Fed would be "vigilant and proactive" if inflation falls by a significant amount, he said, though he downplayed concern that the economy would fall back into another downturn, or a double-dip recession.

Yes, basically Ben right now is alert as a hawk looking for an excuse to print massively and destroy the dollar. Seek and you shall find, he will get one soon. The market wants to get rid of the cancer, to reduce debt, to re-price inflated assets, but Ben is hell-bent to destroy the dollar and the middle-class life style at any opportunity given. The language "strongly resist" and "not sit idly" clearly indicates a massive monetization of any kind of debt at any end of the curve, buying up falling stocks at any price as long as it is lower, vacuum cleaning the real estate market of "distressed" (=affordable) real estate.

After inflation, you will get deflation, just as surely as the sun goes down after it goes up, rain after sunshine. So in other words, Ben will fiercly resist rain after sunshine and he wouldn't let the sun go down, as long as it goes up everything is fine.

The only slight problem he has in fulfilling his dream is the free individuals who seek liberty from government, peace and the right to not have to listen to endless propaganda. Individuals who owns the only true store of wealth, gold, have found the last resort from central banks. The solution is simply to be your own central banker. When they print, your gold is relatively more scarce. More people are getting sick as hell of this dishonest form of governance, not only in US but in the world.

I hope that liberty can prevail but at the moment things are looking dark.

 

Sun, 08/29/2010 - 05:23 | 551034 StychoKiller
StychoKiller's picture

The Fed:   "Just say 'NO!' to deflation."  What the heck, it worked for Nancy Reagan and the "War on Drug Users."

Sun, 08/29/2010 - 06:27 | 551078 doggings
doggings's picture

and Bush with the "War on Terror" - as though a war against a political idea was ever going to work when they couldn't even stop a few stoners getting stoned lol.

yea, so lets have a "War on Deflation" lets kick it's ass, lets shock and awe it's raggedy ass back to the middle ages with our technological printing power.

muppets, one and all.

 

Sun, 08/29/2010 - 08:43 | 551121 jimijon
jimijon's picture

Or better yet... soon to come... WIN

Whip Inflation Now!

Wasn't that a Volcker / Carter pr pin?

Sun, 08/29/2010 - 09:09 | 551139 Mitchman
Mitchman's picture

Gerald Ford

Sun, 08/29/2010 - 09:46 | 551158 Fred Hayek
Fred Hayek's picture

The Fed urges americans to WhIp DEflation Now!

or WIDEN their stances, as Larry Craig might put it.

Sun, 08/29/2010 - 14:00 | 551480 Milestones
Milestones's picture

WIDEN their stances!!! hahahahahahaha!! CLASSIC. Best of bred winner.    Milestones

Sun, 08/29/2010 - 16:17 | 551722 Rusty Shorts
Rusty Shorts's picture

"WIDEN their stances" - ROFLMAO !!!

Sun, 08/29/2010 - 10:48 | 551227 Caviar Emptor
Caviar Emptor's picture

+10 You got it right.

They're playing with fire, trying to "reflate" a distressed world economy. What they end up creating is inflation in some areas, while the rest continues on its merry path to deflation. That's been the net net of the entire 2008-2010 reflation effort (housing, employment opportunities, retirement assets continue to deflate, but oil's way up off the lows). What they didn't see coming and still don't is that their policy has cratered buying power through a double whammy. 

Sun, 08/29/2010 - 02:54 | 550983 pitz
pitz's picture

Well of course we're going to see the dollar collapse while the stock market goes up, still destroying real value from stock investors (and an even worse outcome for bond investors).  The only to protect and profit from this isn't available to most investors through their 401k's, or, generally non-existent cash accounts.

Now is probably just as good of a time as any to run down to your broker, and lever up your account as much as you can on margin, to buy equities.  At least the basis (the dollar) will have been largely hedged out when the dollar collapses.  Just straight equity ownership, or just straight bond ownership is likely to destroy value and leave you poorer.

I know my advice sounds crazy, and its advice that, generally speaking, is illegal for most stockbrokers to give their retail clients.  But that's exactly why it has a chance of succeeding.  Because its so uncommon and so unique, relatively speaking. 

Sun, 08/29/2010 - 02:58 | 550987 Apostate
Apostate's picture

Could also easily bankrupt the advisee. Just sayin'.

Timing is everything. The guys that can win in that kind of trade are the ones with an infinite line of free credit from the Fed. Joe Six Pack lacks that kind of access to leverage and political cover.

Sun, 08/29/2010 - 03:17 | 550994 AUD
AUD's picture

I think it's good advice, I don't see how anybody can be thinking the smart money is in  government & government backed bonds.

Especially when this story has been told before. Go back & look at money market spreads since 2000 & compare them to the stockmarket.

Sun, 08/29/2010 - 10:59 | 551239 Caviar Emptor
Caviar Emptor's picture

Hehe. When you say "we're going to see the Dollar collapse as The Stock Market goes up", who's do you mean? 

I don't think you realize what a fragile state the US equities market is in at this juncture. A dollar collapse would definitively make all remaining foreign capital pull out. And domestic capital? Well, read this and weep : 

McDonald’s Corp., the world’s largest restaurant chain, became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong

http://www.bloomberg.com/news/2010-08-19/mcdonald-s-sells-yuan-bonds-in-...

Sun, 08/29/2010 - 11:44 | 551290 ElvisDog
ElvisDog's picture

Why don't you do that and tell us all how it works out in 6 months. You can send us your forwarding address under the 160th St interchange on I-5.

Sun, 08/29/2010 - 12:15 | 551325 pitz
pitz's picture

All cash, short equities, in 2007/2008, was also considered to be insane advice, certain to leave a person bankrupt.  But I think you may recall how spectacular the returns were that time around.

 

Sun, 08/29/2010 - 13:36 | 551441 ElvisDog
ElvisDog's picture

I guess the part of your plan that makes me dubious is the "max leverage" element. Short term declines can wipe you out even if you are right about the overall trend. I think given the massive battle between fundamentals and Fed manipulation that volatility will increase.

Mon, 08/30/2010 - 00:23 | 552305 Matt
Matt's picture

yeah, dont use margins or you could get wiped out. instead, unlock some of the equity in your home with a reverse mortgage. "Get up to 40% of the value in your home in tax-free cash with no payments required for as long as you live in your home." - http://www.chip.ca/index.cfm?id=100&language=english </humour>

Mon, 08/30/2010 - 01:26 | 552371 pitz
pitz's picture

Lol that CHIP stuff is absolutely retarded. 

Sun, 08/29/2010 - 17:45 | 551843 TwitFilter
TwitFilter's picture

It would be cool if Retail could dump treasuries BEFORE and pile into equities AFTER HFTs pull bids on a massive scale.  The shoe would be on the other foot and Wall Street would be forced to buy from Retail.

Of course, like everything else, timing is critical.  Yet Retail has an advantage - that being the ability to deal with "fear" coupled with a "nothing to lose" attitude.  This market has toughened Retail while, at the same time, has "PUSSIFIED" Wall Street due to the reliance on stimulus from the Bitches.

Sun, 08/29/2010 - 09:49 | 551161 Fred Hayek
Fred Hayek's picture

Good cartoon except that associating  Obama or his protect the banksters at all costs actions, in any way, with honor is just too incongruous.

Sun, 08/29/2010 - 11:18 | 551265 williambanzai7
williambanzai7's picture

We surrendered with honor in Viet Nam (ho ho)', and the bankers pan handled TARP while Obama he led them retain their honor.

Sorry but Obama is a lackey for Wall Street. Financial reform is a farce.

Sun, 08/29/2010 - 18:54 | 551942 Jim B
Jim B's picture

+1

There has been NO REAL reform to bring the retail investor back!

Sun, 08/29/2010 - 09:54 | 551170 alien-IQ
alien-IQ's picture

I love your subprime inferno as i love most of the stuff on your site....HOWEVER...to place Call Girls on par with Lawyers is just plain wrong and offensive...to call girls.

Sun, 08/29/2010 - 11:13 | 551259 williambanzai7
williambanzai7's picture

By the hour...but you are right, call girls are ok. Lawyers are banker whores.

Sun, 08/29/2010 - 02:59 | 550988 HedgeAccordingly
HedgeAccordingly's picture

It is about time those retards over in the mainstream financial press manned up admitting us "dumb asses" apparently are fucking geniuses. 

Sun, 08/29/2010 - 03:06 | 550991 JuicyTheAnimal
JuicyTheAnimal's picture

My dumb money is short as fuck.  As in short term leveraged times 100 times 3.  These are times where a couple hundred bucks could get you a million.  And you'd still have time to go trade the paper for metal.  

Sun, 08/29/2010 - 11:47 | 551294 ElvisDog
ElvisDog's picture

Are you long or short? It's not a bad strategy with a small amount of speculative money that you are comfortable losing. The problem is when you're leveraged that much, small price movements can wipe you out. You have to get the timing almost exactly right.

Mon, 08/30/2010 - 16:50 | 553676 JuicyTheAnimal
JuicyTheAnimal's picture

Small, affordable bets wiped out each month.  It's like searching for the edge of a cliff in heavy fog.  Except for me, the edge of the cliff is a great thing. 

The way I think of it is that my odds are one in a couple hundred but the pay out is ten thousand to one.  Worth it if you can afford it.  And for right now I can. 

 

Sun, 08/29/2010 - 03:30 | 550997 scratch_and_sniff
scratch_and_sniff's picture

If you cant work out who the fool is at the table, its Wall St.

Sun, 08/29/2010 - 07:33 | 551035 MichaelG
MichaelG's picture

Especially if everyone else left the table.  (Without asking.  Very rude - there will be punishment...)

Sun, 08/29/2010 - 04:24 | 551015 Pillage
Pillage's picture

Gotta be rough when the dumb money says "Sold to you".

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again."

Sun, 08/29/2010 - 07:02 | 551086 cat2
cat2's picture

I think that's an old CORPPSman saying.

Sun, 08/29/2010 - 10:31 | 551214 Red Neck Repugnicant
Sun, 08/29/2010 - 11:02 | 551244 Caviar Emptor
Caviar Emptor's picture

"Rarely is the question asked: Is our children learning?" —Florence, South Carolina; January 11, 2000

Sun, 08/29/2010 - 05:10 | 551030 Azannoth
Azannoth's picture

The dumb money will remain dumb untill they start buying precious metals and other commodieties, otherwise they're just asking the FED to make their saving worthless through hyperinflation, when it come it'l come fast so people won't know what hit them

Sun, 08/29/2010 - 05:29 | 551037 StychoKiller
StychoKiller's picture

2^64 is around 1.84 * 10^19.  Can Intel 64-bit CPUs even deal with the amount of currency that's gonna be required to "solve" the problem of paying off debt (by of course, borrowing from other id10ts to pay for it!)

Sun, 08/29/2010 - 05:52 | 551073 ebworthen
ebworthen's picture

They'll borrow some HFT machines from GS.

It's funny, we're all getting paid with binary data, 1's and 0's in the database, there is no money unless I happen to get a wild hair and get some cash out at the ATM.

The FED could just wire everyone the money for their mortgage through the database, tagged and held in the computing cloud until they recieve their deeds and the banks get their "ca$h" in database dollars.

Probably be a lot less work and more efficient than QEII or buying MBS or Treasuries...but wait...no bonuses involved and they would be bailing people out...we can't have that!  It will represent a moral hazard! 

 

Sun, 08/29/2010 - 08:35 | 551101 Azannoth
Azannoth's picture

"

public class BigInteger
extends Number
implements Comparable<BigInteger>

Immutable arbitrary-precision integers. Modular arithmetic operations are provided to compute residues, perform exponentiation, and compute multiplicative inverses. Additionally, BigInteger provides operations for modular arithmetic, GCD calculation, primality testing, prime generation, bit manipulation, and a few other miscellaneous operations... "

 

http://download-llnw.oracle.com/javase/6/docs/api/java/math/BigInteger.html

 

In one word yes they can

Sun, 08/29/2010 - 05:52 | 551074 Hansel
Hansel's picture

It seems like everyone has Stockholm syndrome with respect to the dollar, imo.

Sun, 08/29/2010 - 23:46 | 552250 thesapein
thesapein's picture

I had to look that one up, though I guess we've all heard of the condition before. Interestingly, I can totally relate. It makes so much sense that I don't think it's actually a syndrome at all. It's totally normal to empathize with desperate people of whom you're in close contact with. Heck, I so disagree with many of my fellow Americans that I often feel like a spy who has gotten too close. Maybe those helping their elites aren't so different from the rogues who defend the helpers (who make the elite positions possible)? So even after recognizing this condition within my self, I still care about many of these people. Is that a syndrome?

Sun, 08/29/2010 - 06:22 | 551077 zaknick
zaknick's picture

"the proverbial bagholder is now Wall Street itself"

 

Beautiful.

 

Crash baby crash!!!!!

Sun, 08/29/2010 - 17:51 | 551852 Johnny Bravo
Johnny Bravo's picture

That's the exact reason why it won't crash.

Sun, 08/29/2010 - 18:24 | 551904 Hephasteus
Hephasteus's picture

Exactly. Wall street is very self reliant. It doesn't have anything to do with other peoples resources. It doesn't need any support.

Sun, 08/29/2010 - 18:26 | 551910 Johnny Bravo
Johnny Bravo's picture

It gets all the support it needs.  That won't change.

You have the "dumb money" taking out a billion here or a billion there versus the Fed giving a trillion at a time.

Who's going to win?

Sun, 08/29/2010 - 18:58 | 551952 Hephasteus
Hephasteus's picture

Gold.

Sun, 08/29/2010 - 23:49 | 552258 thesapein
thesapein's picture

Silver.

Wanna bet? Oh, that's right, we probably both are already betting these two ways. Can't wait to see who wins.

Sun, 08/29/2010 - 23:52 | 552264 Johnny Bravo
Johnny Bravo's picture

If it pleases or helps TPTB to see gold fall, it will.  You can either swim with the tide, or be against it.  If you get caught when the tide is out, just make sure that you're not swimming naked.

I don't know whether gold will do well in the long term or not.  What I do know, is if "they" want it to fall, there's nothing you can do.

That's all.

Sun, 08/29/2010 - 19:48 | 552008 Al Gorerhythm
Al Gorerhythm's picture

JB, I believe that most folk who are withdrawing (in more than one sense of the word), are tired of being misled about the safety of their savings. Their fear, I believe, is a standard response to theft through the ephemeral value of a depreciating currency, or ticket linked to equities.

When you have had skin in the market for as long as I have, there is an epiphany with the realization that, when you hand over your wages to a bank for security, or a fund manager to chase yield, that the role of both industry's managers is to extract as much of your money from your account as they can (without detection) and deliver it into theirs. The fact that the nominal figure in your account rises, doesn't mean that you have maintained purchasing power over time.

When a % of your nominal gain (as opposed to capital gain) is extracted as fees and profit sharing,  there is mathematical proof (using purchasing power as a numeraire) that your returns are being undermined.

The consequences of the level of deceit perpetrated on investors, when using nominal gains as the numeraire, culminates with the logical response that we see... a flight to safety and a flight to self-preservation.

One of those traditional strategies for the individual is the hard metals. Being that they have been in a bull market for nearly 100 years and that they are used as the numeraire for paper money and equities, is proof enough.

Is it any wonder that many parachutes dot the sky? 

Sun, 08/29/2010 - 23:42 | 552247 Johnny Bravo
Johnny Bravo's picture

I agree about all the reasons why "dumb money" should take their money away from professional funds.  It's obvious that they do little for you, and even more obvious that they're not concerned about your returns.

I don't blame people for taking their money away at all.

All I'm saying is that I think it's naive for people to assume that:
1.  The banks will suffer
2.  The market will tank because of it.

Sure, there will be some marginal price decreases as the money leaves the market, and this will bring the market down temporarily.
However, we can't say that this will cause the banks to lose out.

If there's anything that anybody who believes the markets are manipulated should believe it's that there is a vested interest in this country to keep the markets high as much as possible.
The economic security in this nation depends on keeping the markets high, to keep attracting outside investors.

Frankly, in the larger scheme of things, the "dumb money" (I don't really fell comfortable using that term) retail investor is small fish compared to what is really at stake if the markets tank and go to say, 450 on the S&P.

The retail investor will be screwed with the larger picture interests in mind.

The stock market will be propped up, regardless of what happens.

The large banks have trillions to invest, while the small investor has billions.

The trillions will win out every time.  If you're a small investor, I can't blame you for not taking a long term investing approach.  Hell, I tried that, and I lost money myself before I started trading.  Now, I just take a few very calculated snipes a year, and get the hell out of the way.  It's been worth a lot more than nickels to me, so I don't really feel like I'm "picking up nickels in front of the steamroller" as the saying goes.

Good luck to you, as you seem to be a nice fellow.

Sun, 08/29/2010 - 20:58 | 552071 thermroc
thermroc's picture

All things come to an end.

Can't you feel the change? It's in the wind, Johhny. I know you know it.

Gradually the people turn their heads and look on Western Finance with new eyes, new understanding.

What on earth were we thinking? How could we have been so deceived?

 

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around me
Pick up my guitar and play
Just like yesterday
And I'll get on my knees and pray
We don't get fooled again
Don't get fooled again

Sun, 08/29/2010 - 21:22 | 552109 Hephasteus
Hephasteus's picture

I just watched france's prime minister speak at the conference.

They are all the same. Arrogance without end.

http://www.youtube.com/watch?v=F0FBi5Rv1ho

Sun, 08/29/2010 - 23:07 | 552210 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

Hephasteus it seems to me, you have many sides.

Sun, 08/29/2010 - 23:47 | 552253 Johnny Bravo
Johnny Bravo's picture

You can not be fooled again, and good for you if you're not.

If you think that they'll let the banks fail by letting them "hold the bag" that's a different matter.
They won't.
We've already seen who owns the government.  Things won't change until there is a real revolution.  Given the state of America and the general apathy, it won't happen.

Voting doesn't make a bit of difference, and the people voting for either the left hand or the right hand of the beast are missing the point.
You're still voting for the beast.

We must slay the beast before things change, and I don't see that happening.  People should already be outraged.  Yet, nothing happens.

We WILL be fooled again.
It's ironic that that Who song was made for the same generation that finally cleaned America out and put it on its deathbed.

They were fooled, and my generation will be fooled too.  People would rather be comfortable, whatever that is, than lose their lives or livelyhood.  That's what it would take to slay the beast.

Sun, 08/29/2010 - 23:48 | 552255 Johnny Bravo
Johnny Bravo's picture

My god, you're lame.

Sun, 08/29/2010 - 06:47 | 551082 MrTrader
MrTrader's picture

Too funnny, when "journalists" from the Financial Times and retail traders want to outsmart Wall Street. The Media landscape needs a lesson, too. So many fear mongerers out there. Disgusting to read this bullsh1t !

Sun, 08/29/2010 - 12:51 | 551355 tom
tom's picture

Fine, then don't read it.

By the way, the FT journalist - and he's not a bad one, he writes quite well here - was not trying to outsmart Wall Street. he was trying to summarize the sentiment of Wall Streeters that he learned by talking to them. To outsmart Wall Street, he would have needed to write this months ago.

Mon, 08/30/2010 - 00:20 | 552282 thesapein
thesapein's picture

That's odd. I was just thinking what a great blog this was from Tyler and reminds me why Tyler is my favorite blogger on this topic. And, yes, I'm just using you to say more Tyler on ZH and less guest blogs (not including the regulars (love you guys, too!)) would be totally awesome. 

Sun, 08/29/2010 - 14:09 | 551506 grunion
grunion's picture

It was those eyes...Those, those...Horrible eyes!!!

Sun, 08/29/2010 - 21:00 | 552076 thermroc
thermroc's picture

Nice..!

Sun, 08/29/2010 - 07:36 | 551090 jbc77
jbc77's picture

Great write up. Every day I'm in awe of the knowledge thats provided out here. We truly at the point in history were we need a counter balance to the bullshit we're fed 24/7. ZH is that balance and I think it's become the most important financial source of info on the web period.

Sun, 08/29/2010 - 08:26 | 551106 THE 4th Quadrant
THE 4th Quadrant's picture

High Definition blogging?

Sun, 08/29/2010 - 10:57 | 551238 uno
uno's picture

that's why the counter is the patriot act and the internet kill switch

Sun, 08/29/2010 - 19:03 | 551960 Hephasteus
Hephasteus's picture

The problem with telecommunications is that people with 2 lb drilling sledgehammers use it.

http://www.youtube.com/watch?v=VjCw12OuIFk

I sure hope Comcast is bullet, bulldozer, shotgun, proof.

Sun, 08/29/2010 - 20:35 | 552045 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

a p p l e ,   bitchez.

i p h o n e ,  s u c k bitches.

Sun, 08/29/2010 - 21:43 | 552131 Rusty Shorts
Rusty Shorts's picture

What's the wine selection tonight Kathy?

Sun, 08/29/2010 - 22:16 | 552161 Hulk
Hulk's picture

why the transformation from velobabe to KC???

Sun, 08/29/2010 - 22:29 | 552174 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

H A D  to, i guess, not sure of anything right now.

Sun, 08/29/2010 - 23:49 | 552256 Spalding_Smailes
Spalding_Smailes's picture

Charles ShawTwo-Buck Chuck.

Sun, 08/29/2010 - 22:13 | 552159 Hulk
Hulk's picture

Nice. It would be even better if those things could feel pain...

Sun, 08/29/2010 - 07:45 | 551092 John Bull
John Bull's picture

Charlatans...

Sun, 08/29/2010 - 08:12 | 551096 firstdivision
firstdivision's picture

While it is quite fun to see Wall Street flail about like a beached whale slowly dying, I do also fear for those retail investors still entranced by Wall Streets Siren Song.  It has become obvious to most, but I still have a hard time explaining to people that this is the collapse happening all over again to no avail.  It is becoming frustrating trying to explain this when douche bags on CNBC go on, and on, about how great everything is, despite the release of ever worsening economic data points.  Of course I know that CNBC is just trying to keep themselves on the air and employed, because without a fully functioning Wall Street what else would they do?  I guess Cramer would make an excellent Wal-Mart greeter, convincing everyone to "buy,buy,buy". 

The entire beauty of the coming "New Normal" is that people are waking up, slowly albeit, but now are realizing that life was nothing more than a marketing gimmick.  It is refreshing to see that people are saving more, and buying needs more than wants.  Once Apple posts some missed estimates, that is when it will all come crashing down.

 

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afp8OC.OvRnI

and

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aKMJKgmjcRsQ

Coincidence...I think not.

Sun, 08/29/2010 - 11:55 | 551304 ElvisDog
ElvisDog's picture

I used to get upset at perma-bulls spouting nonsense about "I'm long stocks right now", but now I think it's amusing. Bernanke's most recent Jackson Hole speech was a tour-de-force in bullshit. It's really astonishing that he could make the speech with a straight face. My favorite was the line that said the hand-off from government support to organic private economic growth was underway. Hilarious.

Sun, 08/29/2010 - 08:13 | 551097 Dismal Scientist
Dismal Scientist's picture

The professionals know its a crock, they simply haven't found the way to exit stage left (pursued by a bear ... market)

Sun, 08/29/2010 - 08:42 | 551117 mikla
mikla's picture

The professionals know its a crock, they simply haven't found the way to exit stage left (pursued by a bear ... market)

+1

They know they are part of the scheme where they must "pay-to-play" ... they had to buy *your* crap deals in order for you to buy *their* crap deals.

This was true in CDOs, CDSs, derivatives, bonds, IPOs, M&A, and deals across the board.  Further, it was the fundamental basis of the MBS market ... everybody securitized and sold the worst of their toxic crap, *knowing* it was crap, and buying the other guy's stuff, because there's *no way* the other guy could have securitized worse crap than what you were selling.  This particular ponzi had such massive "legs" because it was implicitly backed by the taxpayer through F&F -- there was always a bigger sucker, the government.

Everybody was screwing the other guy.

Until you figured out that, oops, that toxic crap you just bought was even *worse* than the toxic crap you just sold.  Sucks to be you.  How do you exit that position now?

Answer:  You don't.

Sun, 08/29/2010 - 09:54 | 551168 Fred Hayek
Fred Hayek's picture

True.

See this new article over at ProPublica.org titled "Banks' Self Dealing Supercharged Financial Crisis".  Denninger linked to it at his site.

http://www.propublica.org/

 

Sun, 08/29/2010 - 20:37 | 552046 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

Everybody was screwing the other guy.

ahhh, they are all in bed together. B I G   b e d, i bet.

Sun, 08/29/2010 - 13:02 | 551368 Double down
Double down's picture

If I understand history professionals "can check out any time they want, but they can never leave"

http://www.youtube.com/watch?v=UfjsnQSFHxw 

Sun, 08/29/2010 - 20:44 | 552055 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

r e w i n d

Sun, 08/29/2010 - 18:12 | 551889 Mark Beck
Mark Beck's picture

Dismal can you be more specific on what you mean by crock?

Depending upon the client base many "professionals", including myself, are making of late, hard decisions on what to tell customers. This "pain" has translated into some people shutting down their funds. This is an extraordinary occurrence, and one that should not be dismissed easily.

Lets talk about two items; clients and exit.

Clients:

The real challenge is what do you tell people so they understand the strategy without causing too much anxiety. For example, the 76 year old widow who is heavily invested in munis (due to her deceased husbund), but does not really understand state finance. How do you describe possible default in historical terms as to not cause alarm?

The old standby historical safety net notions, which provided comfort in the past, are gone. Client discourse is done with great care. People like to know they are safe. That they can trust in the government.

So it is possible that I can put together a retirement portfolio which includes contribution form SS in todays dollars. To be complete there is a schedule of returns, with in the extreme case, means none of the SS paid in is returned.

So what do you tell your clients?

Exit:

Finance (investment) professionals that act on their data have been exiting the US (equities) markets, assets and dollars for over two years. For a nice word I use the term divesting. But it is really abandonment.

Basically, the risks are to high that the levels of debt placed upon the tax base will create negative growth for years into the future. But even this scenario requires a continuity in markets, especially the bond market.

For the simple approach, put together a spread sheet of historical government data for revenue, costs and debt, and then based on growth estimates, how costs will be addressed from today until some point in the future (include both fed and state costs). Then write down what needs to happen in order to achieve your solution (resolution). Then look at the risk distributions as to probable outcomes. From here look at the CBO reports and the FED balance sheet. This will give you some idea of what the fianace "professionals" continually watch.

---------

Broad conclusion:

The only actions left to the politicians are hard choices caused by crisis. The amounts are staggering, the hardship extreme and the policies painful, when you no longer have the option of more debt.

Mark Beck

Sun, 08/29/2010 - 19:31 | 551993 Dismal Scientist
Dismal Scientist's picture

Thanks for the detailed answer and honesty re your specific professional role. When I say the professionals know its a crock, I mean that they are aware that there are no good choices left, either for themselves or their clients, in terms of guaranteeing a return for the future; given the underlying debt burden that the global economy faces. You yourself say it very well as follows:

'Basically, the risks are too high that the levels of debt placed upon the tax base will create negative growth for years into the future. But even this scenario requires a continuity in markets, especially the bond market.'

So what should a pro do ? Advocate panic and run to the hills, dragging your sack of physical gold behind you, if you don't believe in continuity in markets ? Or continue to play the 'game' and give the best possible advice given the dismal outlook, knowing that the end result is likely to be lose/lose for your clients, while continuing to charge a fee for your services ?

I spoke to a friend who is a financial advisor in the US in a southern state with a middle class client base. He tells me that for the first time in the 20 years he has been doing the job, middle America is genuinely scared about the future. He receives questions on whether its possible to invest in gold or silver via 401k plans.

The answer is thats what they should be doing, unless by a miracle, the economy does recover slowly. He doesn't want to admit it to himself, nor do the clients, nor do the pros.

Again, you have answered your own question. And we do not have the politicians to provide it.

Broad conclusion:

The only actions left to the politicians are hard choices caused by crisis. The amounts are staggering, the hardship extreme and the policies painful, when you no longer have the option of more debt.

Good luck and good night.


 

Sun, 08/29/2010 - 08:28 | 551099 Samsonov
Samsonov's picture

The exodus amount given is of money leaving equity funds.  I ask: is that the same as leaving equities?  I shall presume by equity fund they are referring to mutual funds and not ETFs; as we know, ETFs are very popular and mutual funds not so much.  It cannot be deduced what amount is simply switched to ETFs, or what amount simply to individual stocks, and what amount to bond funds.  The bottom line is that I'm not convinced Joe Sixpack is actually leaving the market.

A further point: If the dumb money is piling into government bonds, then it deserves the name.

Sun, 08/29/2010 - 08:43 | 551100 bigdumbnugly
bigdumbnugly's picture

take it from someone that knows a thing or two about dumb money (though not much about big money unfortunately).

and ugly money?  get gold or silver to remedy that.  that stuff is pretty and shiny.

so what's the dumbnugly newsletter advice to its readership?

Trade in your single-wide, and even all the scrap metal, transmissions and such laying around the yard for equal value of gold and silver.  Hound dogs too. 

contact me if you'd like to be included on the mailing list.   please include your lot number in the mobile home park in which u live.

Sun, 08/29/2010 - 08:29 | 551107 Quinvarius
Quinvarius's picture

I have a feeling that a lot of the bond buyers are just in money market funds and don't realize they are buying bonds.  The ones that do know they are in bonds only have bond funds and stock funds as choices in their 401ks.

Sun, 08/29/2010 - 09:56 | 551172 Treeplanter
Treeplanter's picture

I suspect a big chunk of the money in the markets is trapped there by 401ks.  What happens when enough people decide that paying the penalty for escaping beats the risk of not having control over their retirement money?   Or has this been quietly happening for some time under the radar?

Sun, 08/29/2010 - 10:16 | 551192 HungrySeagull
HungrySeagull's picture

We stripped a 401k a few years ago and ate the penalties all the way through. We still got out and time has erased the wounds incurred.

We have a small one now that was now a private fund held by the employer and vested employees 100% was now 20% vested until 6 years and payouts limited to 5K with everything over automatic annuities.

A staff handbook showed up the first day of July to all employees and at that moment we knew that what little we did have in that 401k is lost. Some staffers managed to get out before the powers that be made the changes they did in secret. The rest? They are trapped.

 

Sure they will get some money when they quit. The majority will stay with the employer. If we make it 6 more years then we hopefully will see the lump sum payout of 5K or less. We are deliberately not contributing because employer already makes annual contributions each year. We fear those amounts will drive the total over 5K.

That is another reason we went to part time. That way the annual contributions wont be as much and the time will be ours when we are off from work. To do that you have to be out of debt.

Sun, 08/29/2010 - 10:24 | 551207 Quinvarius
Quinvarius's picture

I took the hit and dumped one of my old IRA's into PMs this year.  I don't want bonds.  And I don't think a 2% divy is worth the risk of stocks.  If I think stocks are going up due to coming inflation, why would I play company asset prices when I can play real asset prices and real money? 

Sun, 08/29/2010 - 08:33 | 551110 uno
uno's picture

You can see it in the rating of CNBS; the approval ratings for congress, O and the media (all at all time lows).

There is such a distrust (for good reason) of wall street, the fed's and the media.  Two massive bubbles in a decade with Wall street bailouts and scandals can do that.

 

Once the euphoria over the housing bubble broke, people feel trapped, more helpless and doubtful about the future.

I do not see it changing, when the FRN starts losing value quickly in the next few years people will be losing a lot of sleep with the related quality of living drop.

Sun, 08/29/2010 - 08:36 | 551113 Winisk
Winisk's picture

There's an expression that trappers use.  Hit them hard when they are dumb, fat and happy.  It was a good haul.  The dumb money was taken and what remains is justifiably spooked.  This is a post harvest period. They should know this. Wall Street went too far this time and they came back too early.  Curious.  The desperation is showing.

Do NOT follow this link or you will be banned from the site!