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Guest Post: The "Bernanke Hedge" Book
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"Ben is a lying sack of shit ..."
QFT
Just wanted to add the rarely are the words more true than these spoken; if ever ...
What about silver for those of us that cannot afford gold and other PMs?
Silver is fine.
Got to be kidding. My anger management comes from from shorting GS not owning it.
Let go of emotional biases and accept the situation as it is.
Im more interested in the Bernanke wedge.
I have this picture in my mind of me grabbing the back of Bernanke's underwear and pulling it up over his head.
"Ben is a lying sack of shit"
at least it started well......
unfortunately the article ended on a giant fart.....the usa does NOT have 261m oz of gold....the true number is closer to 0...it has been frittered away since 1961 when the london gold pool started and finally exhausted in the 1990s when the gold for tungsten racket fell on its ass which is why england was forced to give up half of its gold for nothing...
there is no gold in fort knox. NONE.
Yeah. We gave our gold away a long time ago to private people. We are some broke ass bitches as they say in some circles...
If i may, to be 'broke' that means you have no money. The USA is not broke, it is in many trillions of DEBT above it's eyes.
The only problem i see in he above article is that India did not buy actual physical gold, they bought from the IMF a ledger entry saying their have gold. The recent Sprott desire to purchase actual physical gold from the IMF sniffed out the fraud. The IMF has no physical gold for sale folks. It is just like virtually all ETFs (?GLD perhaps?) smoke and mirrors of paper gold upon paper gold that can be loaned out time and again and not the real thing as in physical and owned by one person without any other obligations.
Not true. Read Sprott's inyerview on Clusterstock. Further, Sprott had no problem whatsoever finding all the physical to fill his deal. Ref; Sprott Physical Gold Trust website
So you have HARD evidence that the IMF shipped physical gold to other countries or to their storage facilities who bought from the IMF in the recent past? In the articles on Cluster just says the usual line-item and has no real added value/information quite frankly.
Show me the money... i mean gold.
PS: And the excuse by the IMF not to sell Sprott physical gold is weak at best, fraud at worst. Can you also explain why China was "not a good candidate" (said the IMF) to buy the 191 tonnes of IMF gold? China is a central bank and so even using the IMF's excuse, China would be considered one of the good delivery people for their gold.
Is JM an official state department Kremlinologist or just an amate... Oh, wait it says, Bernanke, not Khrushchev
Sorry, honest mistake.
Interesting. But lacks a probable timeline and end game. Basically, all I heard is buy GS first, gold second. The first is against my moral fiber, the second is very expensive and has high carrying costs.
Keep in mind these are hedge positions, not risk capital. Putting a lot of money in them is counterproductive. Can't give you timeline and probabilities; no one can.
I will say this... there is a massive funding gap coming up in US and Europe (especially UK) leveraged loans; HY roll comes right after that... the worst point is 2012-2014, I estimate. I don't know much about Asia/BRICs/others.
It's a little too late in the game for "just in case" hedging, which is optimal. You have to settle for just in time hedging, which is always more painful to fund.
Hard to love long treasuries, but they are the most functional hedge against the standard adverse shocks in the world. So don't forget them, in IMHO.
Gold....gold. Very expensive, but every portfolio needs a little gold at nearly any price. If you already own some, then you're good. If you don't, weigh the expense against the low probability, huge outcome scenario it would hedge.
as a financial novice, I appreciate these kinds of illuminating articles. Although it is difficult and time consuming to sort through all the various theories, positions, forecasts, analysis, etc., it seems much more productive to read articles that attempt to make sense of what is going on and discuss them intellectually, than to rail endlessly about the utter madness of the markets - a popular ZH pass-time it seems...
At some level the market equation must contain first and second order factors that determine its core behavioral logic . Whether or not that logic is rational is subject to interpretation, but in the end it is what it is. Cursing the truth, however unpalatable the apparent truth may seem, and wishing it otherwise, ultimately changes nothing. To be effectively changed or dealt with, the truth must first be intellectually accepted and understood.
I'm reading Gary Gorton's book right now... Slapped by the Invisible Hand.. it is excellent.
Much as I suspect the author is a part of the Ivy league rowing team I've tangled with, I have to recommend the book. It will give you a real feel for the turmoil going on under the surface.
I would never own SEF for more than a day. Better to put a true short on the XLF. Also, I would add JPM to split the GS position. Also, the flattener/long bond trade seems to be on the same side as the deleveraging/ short financial trade. Steep curves are friendly to the transformation of short-dated liabilities into long-dated assets. This is in turn friendly to GS and JPM. Flat curves mean financials miss earnings estimates and take writedowns. It would make more sense to go long 15% GS, 15% JPM and hedge it with 10% short XLF and 20% in a flattener/long bond. Add in 30% in physical gold and gold miners and keep the remaining 10% in cash for tactical weighting, and this seems to better capture what the article is suggesting as a hedge book.
YMMV
Appreciate your points. I kept it very simple, and there are many variations that are more funding/return efficient.
I think that ultimately the steep yield curve is going to flatten, which I implied as a necessity although I never said it explicitly.
I like GS as a better fit here, because they are a deposit-taking institution (protection) which isn't really a bank (less loan-loss exposure). JPM is ultimately going to have take some massive write-downs, over the course of years (the deleveraging/EBITDA funding part). I guess they could hedge their loan book away... is that what you're thinking?
Now wait a minute,what were all those bars in the NY Fed Basement? Surely some of them belong to us,not that it makes much difference since we are in physical possession of them and can always renege! (I'll bet that Gold Double-Eagle was fake too!)
actually none of the gold in the basement of the ny fed is usa gold - it is all foreign sovereign gold....i have an email from the fed confirming that...
i am not sure how far the usa would get by seizing sovereign gold.