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The man who made billions shorting subprime shares his latest observations.
Hat tip Pragmatic Capitalist
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Thank you ZH.
"MARK IT ZERO, DUDE"
Huh?
JKB expects higher inflation and interest rates, so he
put half into credit and mortages and a quarter into
junk bonds and says he's prepared for currency and credit collapse?
Counter-intuitive to say the least.
Too many gold bugs here mean gold going down...
gold going down - over what time period?
Gold is best used to settle BOPs between sovereigns roller skating back and forth in the fifth sub-basement at 33 Liberty. Using it as a medium of exchange in any modern economy is impossibly impractical. As a collateral aid between individuals it works to the extent it is not widely known. About as much use a woman in India carrying around her wealth in chains. As a golden calf, it is perfect.
We need to have public servants tie the money supply to growth in real GDP plus 2 or 3% and press on.
"Two paws up!"
some interesting thoughts, but I really doubt that inflation in the US might become a problem because the recovery is too V-shaped... (and therefore banks lend too much money out)
Is it ever going to hit the fan?
Shhhh, not so loud.
It IS hitting the fan, albeit slower than you would expect and mitigated (for now) by massive infusions of liquidity, thanks to Ben and Tim.
Remember, the game plan is to extend and pretend and hope we have time to either rob the American taxpayer of everything they have before the eventual collapse OR find some why to keep the Ponzi going for a few more years or even a decade.
Maybe even both if we're lucky.
Didn't you take notes, dude? It was your turn.
Current global economic environment is truly in the twilight zone. Stock markets are rocketing higher as bond yields plummet. California is selling bonds as munies are at record low interest rates. This just after it issued IOUs over the summer. The foundations of economics, risk and supply & demand etc., that have governed the world for centuries no longer exist. Nothing makes sense anymore. If money printing could solve so many problems why haven't we done this before and why don't we continue it forever until everyone has their own house, 3 cars, and a yacht? All my sanity and logic tells me deep down that this cannot possibly work but for how long will this go on, what will ultimately set off the collapse, and how severe will it be?
The reality will express itself in terms of ALL fiat currencies COLLAPSING against Gold.
Laugh, laugh, laugh. You're funny Gordo. And when is that going to happen? The year 2120?
I like you Anonymous... you make me laugh... you make me feel smart. You are my new best friend.... excluding my other best friends of course...
Well somebody has been laughing for the past 10 years, and it's definitely not you:
I rest my case.
Ok rest, but you failed to answer my question. I have to log-off cuz my baby momma just called and needs diapers. Gotta go to the gold exchange and trade in this gold necklace for cash. Which one you ask? McDonald's is now trading gold for cash and their drive thru is fast.
now rub the salt in the wounds and show what the
dow or sp500 did....
Once again, anonymous gets burned. Who is this anonymous dude? And why does he post so much? I wish he would finally get an icon.
I am Chumbawamba.
some of us anonymouses are still waiting for TPTB@ZH to approve our application so we can become our very own Chumawumbas too.
until then, we're happy they still allow us to be anonymice so we can continue to spew our mindless sorties and steal your cheese.
That's Chumbawamba to you.
Not wumba.
er, what is your case...a double top is forming?
Fall 2008 was an anomaly. A time of unprecedented volatility, in which the majority of investors (idiots in the main) didn't know what to do and fell back on the "safety" of the dollar. No doubt, this behavior was encouraged by a society ensconced in decades of a fiat monetary system, several generations of people who forgot the necessary and appropriate role of gold.
In days ahead it will be spoken fondly over beers as the buy opportunity of a lifetime, and we shall brag about how many ounces we procured while we quaff our delicious homebrew next to a warm hearth burning an oak log.
I am Chumbawamba.
Chummy.... was that you?
One of your bestest posts.
Not with gold being manipulated as much as it is... People forget that Federal Reserves are the biggest holders of gold.
Personally, I think that this current event has finally solidified that little to no true economic fundamentals exist anymore. In the past, liquidity plumes no doubt help "fuel" economic recovery, but at the same time they always did so at the expense of business activity that could lead to sustainable productivity increases. This time, however, the productive businesses have simply collapsed and only liquidity operations exist.
I find it odd that the government (and FED) is going to all is clear from here, but no one even brings up that almost all free market operations are being propped up (or completely ran) by the FED. They might get a liquidity plume this time, but it certainly will never lead to productive business activities.
You believe that utter load of bull?
Don't think they even pretend that what little that may remain is ours.
Custodial arrangements for other European CB's and others apparently. Did the 5,000 tonnes that left the U.S. during 2005 and 2006 as noted on the USGS export report ever get straightened out Gordo?
Don't think so - I'd be surprised if it did.
No more than you believe it has intrinsic value beyond it's physically conductive properties.
At least it can conduct whereas a fiat currency eventually is only good for lighting fires.
Bingo Mr. Kendig.
In that case, what "intrinsic value" do FRN's have? Why the hell do YOU hoard them?
Problem: will I be alive when this happens. I'm already 42.
For those who know exactly what's happening, its no problem at all, but in fact an opportunity to prosper. Just sock away as much physical Gold as you can right now IN YOUR POSSESSION and you'll be set for life. After that, just kick back and watch the drama unfold (as all the day traders around you lose their shirts trying to trade a rigged market).
I don't think you've really thought this through.
If you're talking about a worldwide collapse in fiat money, you're not just talking about the dollar being worthless, you're talking about a collapse in the mechanics of commerce. You think that producers are just going to switch over to a gold standard? Someone selling you food or clothing or services is just going to say "yeah, give me a gold coin for that"... you really think that's what will happen overnight? Yeah right. It could take years before the actual mechanics of commerce are working again.
And it's likely that commerce won't flip over to a gold standard without major government intervention - and if the government (or whatever is left of it) intervenes, they're certainly not going to allow for a system of haves and have-nots. That is, they're not going to let the guy who saved a shit-ton of gold be the new king of the neighborhood. Uh uh, they're taking your gold - better to have 1 pissed off gold hoarder than 50 pissed of neighbors. And if not the government intervening, one of those 50 pissed off neighbors will. You think you can defend your gold 24/7 with a gun? Think again. There's always someone bigger and stronger there to take it from you.
Here's how you survive the collapse of all fiat money:
Own land
Be able to protect that land
Possess a valuable trade or knowledge
Work well with others
The idea of getting rich on gold after the complete collapse of the dollar just isn't thought out. Life doesn't work that way.
Here's anonymous again, spouting off more dweebish tomfoolery. You just don't get it, do you?
Please, stop commenting, you're an idiot.
I am Chumbawamba.
i was going to comment on the economic nonsense
he spouted but i recalled the wise words of one who
warned against correcting a fool or casting one's
pearls before swine...
he spouted the economic wisdom of a monetary and
economic boob.....
gold is the mistress of civilization...own and it
you own your destiny on this planet...
paper systems can "work" to a perverted point but once corrupted they spread gangrene and cancer and
that my friends is what we are dealing with at
this point...
the problem with paper monetary science is that
it evinces a patina of plausibility, but in the end
it disntegrates...
there was a great movie in the 1940s called the
money tree i believe....that is what paper currency
ultimately becomes - dried out leaves..
Value is a judgment, not a property. It doesn't matter if you're talking about paper or gold or seashells, they all operate on the same principle. Just because you say gold has value, doesn't make it so.
I agree with Anonymous and even if I didn't I think he is entitled to his opinion...
I believe that many of the goldbugs today look at an economy such as Zimbabwe and say "Look, that's what's going to happen to the US". The US is not, has never been, and never will be Zimbabwe.
The ability to distinguish the subtle differences is key to your success. Good luck goldbugs.
PS. I do enjoy the doomsday reading it's kinda like a Will Smith movie.
the us will never be like zimbabwe? prove it....
Zimbabwe was more honest, at least they printed their $100 trillion dollar bills. Here is a look at how gold works in a failing economy: http://www.youtube.com/watch?v=7ubJp6rmUYM
My "Three B's Hedge Fund": Beans, bullets and bullion.
you missed a 'B' in there: Bourbon
That's a breathtaking amount of HUBRIS, which no doubt will cause the downfall to depths even worse than Zimbabwe.
What's happening in Zimbabwe right know? You think our ruling oligarchs are better than Robert Mugabe?
Some of us have learned what's happening but have no resources to prepare or prosper. Some of us are fucked. Economic evolution will weed us out.
Guess I am replying to you Gordon because I like what you say since lurking for the past two months here, trying to learn all that I can as a humanities trained person.
But here's the kick in the balls. I'm a non-productive parasite living off a government check. It started in the 90s when I jumped out of a C141 into the dead of night with a few others before the red light at the door went on because of sudden gusts of wind on the drop zone. Ended up dragged for 50 meters unconscious and fracturing my neck and lumbar before the DZ medics got to me. In appeals now with the VA which should win and a good back pay to 1998.
I'd like to invest that into physical gold, I don't trust good faith and trust of the USG in currency. Especially since I live now in the eurozone and am at the point of eating ramen for dinner.
At this time, a retroactive adjudication would net tax free 130k. I'd invest that in gold and German Bunds. But the second kick in the balls is that when they get around to finally paying that, I expect it to be worth around 5k in Euro.
Some of us are aware of what is happening, just no ability to prosper.
1 oz silver coins may be a better way to go for a small part of your eventual portfolio. Think of it as an insurance policy... not an investment per se. As I've said before it's tough to make change for a chicken with a Kruggerrand.
Around 4+ billion people on this planet have no ability to prosper. Do what you can to prepare for the possibility of systemic collapse but don't let the fear of it consume your hope. It's still a low probability event.
Our company just purchased (yet to close) a 200,000 sqft building. The risk as I see it is to hold on to cash for too long. And I'm a solid bear.
Anyone who would work if they could work is not a parasite. Least of all someone who had the balls to put his ass on the line in the service of others. Unlike our political masters.
Things hopefully will be OK. Websites like this may just change peoples thinking... but that is just probably the meds talking again...
We are all with you buddy... we are all the same...
On a long enough time horizon the survival rate for everyone drops to zero.
Try to enjoy the ride... the rest is immaterial.
+1 Thank you.
This former divisionite and 100% disabled veteran joins you. Fortunately, I had the capacity to write my memoirs and lead the REMF's on a wild ride first before I became housebound. Here is one to another hoping you take it all the way.
Oil. Modern civilization is the product of cheap energy. That's where the real pain will be felt.
@Mos:
Regarding your concerns, Mr. Bass describes the current situation as the "Golden Period", where only the immediate, pleasant effects of the stimulus, bail-outs and money printing are felt.
He further states that the "Golden Period" typically lasts for 12-18 months at most. After that, he expects a vicious global inflation to take hold which will quickly lead to a large number of sovereign defaults, with Japan probably the first to go.
Remember the term, "the new economy?" It was spoken ad nauseum during the dot com years. Company valuations were based on nothing other than hype and spin. People were in denial thinking that the market could only go up...until it didn't.
This too shall pass and when it does, it's going to be so fukcing ugly.
Grab your food, guns & ammo, gold, and silver and hope for the best.
I guess your last sentence was rhetorical. The whole thing beats the hell out of me, too. I happen to share the educational background and institutions of most of the folks driving this thing, but damn if I can figure out what they are trying to do. It wasn't anything I ever learned at B-School. And since it seems they also believe two plus two equals at least six, I guess I never learned the math either.
I have stopped holding my nose on equity longs, and have just moved to the sidelines. Just too absurd. I have more belief in a 30% one day crash than I do in gravity, but I might be wrong. Things may fall up after all. I emptied a few safe deposit boxes of gold a week and a half ago and said goodbye to almost all of my yellow metal. I bought it all in 1998/99. I rather feel like melting down the rest of what I've got and do a Cortez/Montezuma on Bernanke and Geithner, but that would be the waste of a good asset. Fun, but in the end a waste.
I can only come up with two possible explanations for what is going on. The first is that Bernanke and Geithner and virtually every other CB'er or SecTreas on the planet are idiots. The second is that the only way they think debts can ever be repaid is by debasing currency and making $23 trillion the equivalent of a tip at Starbucks.
I guess that even if my first explanation is correct, the second happens anyway. Oh no! Better go buy my gold back!
Sure, they'll debase the dollar to pay back the $23 trillion.
But wait.
Current expenditures will nominally cost Sextillions, so the hole will become all the deeper.
The one and only way out of this debt abyss is repudiation of the debt and issuance of a new currency.
The Feds are preventing the consumers from doing this in bankruptcy.
If you have any sort of income at all, you are ineligible for chapter 7.
If you have more than $350k in unsecured debt, you are ineligible for chapter 13.
Which means the only recourse for you is chapter 11. If by miracle you get a good bkc lawyer, best case scenario is at least $10k to get to a confirmed plan.
The hitch is that you have to persuade your unsecured creditors to approve the plan.
What are the odds that your second mortgage beneficiary is going to take the time to vote for let alone read your disclosure statement and proposed plan? Yes, your mortgage that is bundled with thousands of others in a rotting sewage CDO?
The debit side of the national balance sheet is rigged so that only the truly huge can afford or achieve repudiation of debts.
And the U.S. will repudiate debts by hook or by crook.
monitoring some of the bear blogs - the excitement is palpable
e.g. http://slopeofhope.com/2009/10/exxxxxxxxxcellent.html
Which is what tells me it's not the end (of the rally and the bears' pain).
In a normal time, weaker yen is a no brainer re demographiscs and debt. Japan finance minsiter out this am saying he is now not opposed to intervention. The race to debase kicking into high gear
Prechter of Elliott Wave continues calls for new lows
http://www.fundmymutualfund.com/2009/10/robert-prechter-of-elliott-wave....
In a totally unrelated note unsubstantiated rumors of Larry Summers whipping junior level Fed Reserve employees with cries of "print! print! print" and "this should of been my job!"
Tyler, how has Hayman Capital performec over the last 6 months?
Mr. Bass is spot on here, particularly with his explanation of the current market "euphoria".
I particularly like how he describes the current "Golden Period" where only the immediate, pleasant effects of all the borrowing and money-printing are being felt. This can last for 12-18 months, to be followed by a vicious, global inflation that will produce a veritable blizzard of sovereign defaults, with Japan a likely candidate to be the first.
As we are barely 7 months into the so-called "Golden Period", global stock and bond markets are clearly not yet discounting the extremely unpleasant events that will begin to unfold 6 to 12 months from now.
Profound article with a few clear steps. Just that the steps they suggest do not add value. The value you add is up to the ZH audience.
Also when the whip comes down there will be a world of pain. Stay tuned.
Classic: A rolling loan gathers no loss
LOL. It's not really rolling. It's flopping as control over velocity has been relegated from reason and common sense to pure sentimentality and illusory tricks.
From 'Mos'
"All my sanity and logic tells me deep down that this cannot possibly work but for how long will this go on, what will ultimately set off the collapse, and how severe will it be?"
Answer: Very
the views of this paper are rather consistent with my own....particularly with regards to the mirage hazing over china...as such it seems ludicrous to fear the rise of the yuan as an alternate reserve currency other than in an alternate universe....
another key distinction which the author makes is the distinction between potential and kinetic inflation....i strongly agree that while kinetic inflation is low, potential is quite high...thus we should lay aside the battle between inflationists and deflationists as i have long argued here...the key is time frame...get that right and there is no real debate....
this masquerade plays on.....
All bears must die unfortunately before the selloff can begin. Just mother market and our federally managed stock markets way of frustrating the most investors. Nothing personal.
Cheers,
Pigpen
Very long and boring article. I guess thats what you have to do to prove your point from an economist view. Like a paper to prove that some kinds of monkey crap point out that monkeys are in trouble because they are sleeping with their cousins.
Some of us ADD types would prefer an executive summary.
what a bitch....go fuck yourself and your low
rent mind....
how's that for add?
ZH# 89300-
Yah, we were probably all thinking what you said. Thanks, I don't have the heart to tell people that the boob tube has rotted a hole in their gray matter rendering them spineless, brainless, infertile, and illiterate. You got heart man.
An excellent article but terrifying in its implications.
I think this says it best: "For centuries, inflation has been wrecking one country after another, yet men learn nothing, offer no resistance, and perish - not like animals driven to slaughter, but worse: like animals stampeding in search of a butcher."
- Ayn Rand, "Egalitarianism and Inflation" from "Philosophy: Who Needs It" p.169
Can someone please explain how investing 75% of your portfolio in MBS and corporate HY bonds is a good position to profit off a massive jump in interest rates?-
The only thing I can figure is he is long credit spread vs short Treasury. I think he also accelerates his estimation of inflationary potential when he talks about the collapsed multiplier on bank reserves. It seems he is diregarding the deflationary forces of the lost velocity of the collapsed shadow banking system.
TimmyM
I don't know that I buy all of this. No doubt, as insane as banks and corporate US are, another debt bubble could be attempted. Surely it is the desire of Bernanke, Summers and Geithner. The difference is that the US no longer runs on a reserve requirement and hasn't for over a decade, so the matter of Fed equivalents doesn't hold much water. Also, savings equals debt and it also can deduct debt, meaning money taken in can be used to pay off bank credit, which in essence eliminates it. This might be perceived to increase money available for banks to loan, but it may do something very surprising, swell dollars and at the same time concentrate the remaining assets in the banks into the bad asset kind, as there is less money in the hands of those that need it to service their debts.
I find the Japanese situation fascinating and I concur that China is really a bomb ready to go off.
for all the high falutin macro-talk he is buying junk bonds and leveraged loans ?
i am assuming short duration in this instance means less that the golden perios otherwise he could get well fooked
VIX daily chart is trending up now.
www.zerohedge.com/forum/market-outlook-0
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