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A Happy 2011 And A Disillusioned Outlook For The New Year From Nic Lenoir

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From Nic Lenoir of ICAP

Happy 2011! Disillusioned thoughts for the year ahead

Going into 2011, I decided to first reflect on my January 2010 strategy piece on the year ahead. I remember at the time of writing it that I made a conscious effort to temper my fervor and tried to think objectively without letting my own opinions dominate what should be one's realistic expectations. My conclusion was at the time that with liquidity withdrawal at the top of the central banks agenda, runaway asset prices were unlikely. My conviction was also that as they tried to withdraw liquidity central banks would quickly realize that it was the only thing holding the system up and therefore would adjust their agenda accordingly, resulting in a range for asset prices. I had in particular 1,014/1,236 for the S&P. At the time I did get a lot of criticism for not making a call as to whether we would end the year at the top or the bottom of that range. In retrospect I am actually thrilled with that call. Taking a step back and thinking of what realistically would happen was the best thing I could have possibly done. Certainly and for reasons I will cover in more details below I was inclined to short strength a fair part of the year, with great success in April, and less so in late October. All in all though, having recommended to cover shorts in late August and possibly getting long tactically, realizing the technical picture did not support my strong desire for a break lower, and having capitalized on sharp reversals earlier whether it is the spring debacle in equities or the move towards lower rates started around the same period, I feel it was a good year yet not a great one. My biggest mistake was not to embrace the enthusiasm ahead of QE 2.0 and get behind asset prices. Because I trade more tactically when it comes to positioning I did not hang myself and throw the year away, but I do feel I missed out and more importantly I did so because I let my personal beliefs surpersede fundamental developments. I stick however to the fact that around 1,155/1,165 we had a technical set-up very prone for a reversal, and I think it was very fair at the time to take a stab, knowing to step aside if the market pushed forward. Another belief of mine was that basic commodities would not be able to sustain large price increases as the economy was too weak to withstand inflation (not as measured by the government which is a vast fraud, but as experienced by the consumer). That proved absolutely right for crude oil which I had contended would not manage to trade in a sustained manner above $90, but I misjudged the capacity of businesses and the consumer to absorb inflation in agricultural commodities and base metals. Thankfully my bullish conviction for Lumber partly tempered my misperception. In rates I was obviously convinced rates would remain unchanged in the front-end, and while I felt the rise in the long-end was not over at the start of 2010, I had 10Y topping at 4.10, which was not too far from the highs in early April.

So with all that said there are a few things I would like to discuss: first how can we learn from the good things we did in 2010 while avoid repeating our mistakes, then I would like to explain why I will remain a bear at heart until a number of issues that we will cover are addressed, and what it all means for what we see developing in 2011.

Our mindset was perfect going into 2010: we had a view that the underlying economy was weak, and we knew that in March the Fed's QE 1.0 would end with the ECB scheduled to close long term financing facilities in June. We waited, timed the market using technical analysis which I believe remains the only way to really attempt at timing top and bottoms in market prices and sentiment, and it worked perfectly. Where we went wrong is that after getting a technical signal to buy around 1,040 and rightfully closing out short positions and recommending tactical longs, I failed to factor in the Fed's hints of QE 2.0 at the Jackson Hole conference. When big time portfolio managers go on TV claiming it's a done deal I got irritated thinking they were either taking an ill-advised all in gamble or they were corruptly privied to a certified guaranty of what was to come. It doesn't matter what I believe, I should have embraced the corruption and policies I cannot stand rather than keep too bearish a focus, which only thankfully to careful tactical considerations based on technical observations did not turn into a complete disaster. So while we did overall a good job looking for technical opportunities to express our views, I will need to be much more cynical when it comes to assessing potential government intervention in the economy. At the end of the day it very much comes back to my intimate conviction that a good bearish trade ideally has positive carry or as close to no negative carry a possible. As long as the government makes carry even remotely available to collect because the amount of money in the system is being pumped up and is so great the herd will keep piling in despite how ill-advised and criminal policies may be.

This leads me to the conversation of why I remain so bearish at the core at a time when bullish market sentiment is exploding through the roof. I have added the capacity utilization chart since the 70s as it best highlights my view of the US economy.

There is absolutely no doubt that we have a structural job problem in America. Over the last 50 years women have entered the workforce, we have automated a lot of jobs, and exported many of them. Surely it does not require a nobel prize to understand that it can't work. And because of the state of the pension system and its inevitable failure we have now been ignoring for 25 or 30 years, people will no longer be able to retire which means the job market structurally will not see any improvement from the retirement of baby boomers. Certainly new technologies have opened new horizons and created new jobs at home, but not even close to what would be needed to counter the other factors we just mentioned. It's also worth reflecting on the fact that everyone cannot invent a new revolutionary algorithm, we need jobs for everyone and with the state of the school system it's fair to say the number of people who can actually invent something useful is going to shrink not rise. I am by no means debating women's right to work, that is a given obviously. I am however convinced that no real positive societal growth will be possible in the West without addressing entitlement programs, pension issues, the cost of production in developed economies whether it is via currency revaluation or protectionism, and a more responsible management of the world's natural resources should probably make the list too. Can we continue inflating this mercantilist world economy without an absolute collapse in the value of Western currencies? The answer is not "maybe not", it's not even close: we can't and it's obvious. Maybe we can maintain the illusion for a couple more years. The problem though is that even a 50% drop in the value of the USD will not make up for the production cost difference between the US and China, or Africa for that matter, and at that point most commodity prices will absolutely cripple the average American. Yes maybe the S&P will trade north of 2,000, but 75% of the population if not more will struggle to make ends meet by then. This evaporation of jobs can be seen in simple statistics. For example the rate of growth of the 5th percentile's income level over the last 3 decades is almost 3 times that of the median. And to be sure those who make the most are also those benefiting from asset inflation. The beauty of capitalism in my mind is that it is supposed to constantly respond to shocks presented by changes in the world and lead the economy to a new state of equilibrium. That means that when the middle class is decimated and can no longer support a strong economy asset prices should collapse and with them deflation would readjust costs and standard of living across the population to allow a new growth cycle. I fully realize this is very simple and as I write it I wonder if I am just stating the obvious, but the fact is that not one single government around the world seems to understand this. The US has obviously chosen the path to bail out rich retirees at the expense of the general population. Unfortunately we had an incredible opportunity in 2008 to rebalance the world economy and the financial system, and we did absolutely nothing but make it worse. It's a debate for another day but think that unemployment leads to a gap in taxes collected to finance the federal budget which is not made up by the resulting profits of large corporations benefiting from cheap labor as they find ever more creative ways to pay dismal tax rates. Adjust that and you could solve the deficit without worrying about taxing those who are working! Inflation is not in people's best interest in our case, deflation is. It is a myth and a complete fallacy that one is dramatically worse than the other. It's just like looking at what our history books fed us growing up in Europe, that Hitler was evil, Stalin was a relatively nasty guy who had good ideas initially, and Lenin an ideologue. I barely exaggerate believe me. The truth is that they were all evil and most certainly clinically insane. Of course deflation will hurt, but we have made many mistakes. And at this stage it will hurt less than hyperinflation and it is more in the general population's interest for sure. Truth is democracy has failed us. The only reason why the American population has not protested like people in Europe is because television, facebook and youtube has dummied it into complete apathy. There is no doubt though that it will not last eternally as voices are starting to be heard though as always too late. It is not just an American problem though. The same is true in Europe where the Euro is doomed but European politicians are hanging on to this dream of theirs like a trader to a bad position, letting it fester until the patient is no longer treatable by anything else than amputation. The Euro was born of the post world war II reconciliation efforts and politicians built on it. The humiliation having to cave in to America's lead after being rescued combined with this idea of creating a warm and loving Europe led to dreams of greatness and a Euro currency that would put Europe back on the economic map. Obviously it completely failed at a time where certain public officials in Spain have had to bring their own toilet paper to work for almost a year as funding for even some very basic necessities is missing.

Recently I have tried to read more about Chinese policies to understand better what the new superpower is up to and how it maintains 10% growth no matter what. Beyond some of the stones I turned, I found that just like their European or US counterparts Chinese politicians are afraid of tackling their inflation issues and are trying to dance around rate hikes coming up with so far highly inefficient measures instead. The fear of a recession, of admitting to their people the economy can go down, has scared them into ill-advised populist policies just like anywhere else. This is why I think democracy has failed us. The bubble may carry on, and I will do my very best to identify ways to invest smartly to capitalize on trends but ALWAYS keeping in mind the fact that it will end in tears, very very badly, and never keeping my eyes away from the exit signs.

My main disillusion is summarized in looking at the attached document which is the official forecast for the US straight out of Washington dated January 2009. We have had a higher deficit in 2009 that was forecasted by over $200Bn, which until recently was half of the worst deficit ever recorded hence not a small margin of erro. 2010's deficit was almost twice what was forecasted at the start of 2009, and 2011 looks like it could be closer to 3 times what was expected in 2009. How can one look at that and possibly think that Washington, whether it is democrats or republicans, is getting anything right? It is the same type of misses we saw in Greece, Ireland, or any other government on its way to default. How long will we make adjustment to forecasts to justify today's expenses. Our future is being abused in the worst ways possible.

So with all that said, I would like to close the circle and close the discussion with what I think is possible for 2011. I will not commit to any target levels as politicians will as always adjust their policies on the fly to try to prevent the inevitable, just like they did in 2010. However, I will always do my best to make sense of what is at hand and try to devise what the near future has in stores for us. Only when the government bubble explodes will fundamentals and economic analysis make sense again.

1) I think risk in Europe is grossly underpriced still. I have discussed at length how EURCHF pointed towards troubling signs in the equity markets there. Actually a few minutes ago a friend drew my attention to the fact Swiss equities are taking a beating today. There is nothing surprising about this in fact I was analyzing it last week. Expect markets to catch up in the divergence between FX (EURCHF) and European equities early in the year. Until we either get Euro bonds (a disaster in my opinion for all the reasons discussed previously), unsterilized debt monetization, default by certain European governments leading to a break up in the Eurozone, or an outright break up of the union without defaults, the situation will not get better and remain a recurring theme. If the economy surprises us enough to the upside EURCHF will reverse course, and if not stocks will fill the gap in perception to the downside.

2) The Fed will not hike rates, and neither will the ECB. There is always a risk of June 2008 in people's mind with the ECB hiking in the face of a depression, but that would be a mere one off just like it was then as right now without constant liquidity supply the system would collapse, and commodity inflation absorbs the liquidity being enacted making it a vicious circle. The one-off scenario is highly unlikely.

3) China will not succesfully slow down inflation and it will have to be an exogenous shock for their Ponzi scheme to take one on the chin properly economically speaking.

4) The Fed will try to extend QE 2.0 or start a new program, and there will be a very heated debate. Markets will panic and the government will cave in (get ready for the end of the scheduled QE 2.0).

5) The worst thing that could happen for the long term is if recent changes in mutual fund flows are confirmed and the US retail consumer is sucked back into the ponzi scheme

6) Until the DXY remains above the 60-day moving average and/or 78.00, and it threatens to engage in a major bull move, we will not see a convincing ramp up in equity markets which are completely overstretched to start 2011 and will need at least a 7% or 8% correction before having a shot at a next convincing bull leg

7) Municipalities will start defaulting at an increasing pace but the major states will not file in 2011 so the market is likely to keep on ignoring it

On this note, I wish you and your families a very happy 2011. Thank you all for your support and your business in 2010. Any feedback as always is greatly appreciated as I am only here as long as you care and I can serve your best interests.


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Thu, 12/30/2010 - 15:38 | 838257 gwar5
gwar5's picture

You can't close a circle without saying Kumbaya first.

Thu, 12/30/2010 - 15:41 | 838261 bigdumbnugly
bigdumbnugly's picture

uh, that's all interesting stuff i guess Nic, but you forgot to mention whether dancing with the stars will be continued throughout 2011.

Thu, 12/30/2010 - 15:41 | 838264 wiskeyrunner
wiskeyrunner's picture

I'm trying to think what sort of happy spin we will get Sunday for the stock index futures to gap up 1.00% on the open. You know something is in the works. Just wait and see.

Thu, 12/30/2010 - 16:20 | 838298 etrader
etrader's picture

I don't see where the problem is Techinally on the SPX ?

If you take the Whole Move from the 2000 high, and label it an A-B-C pattern of a flat (w) which took8 years to play out, then this corrective (X) wave should last around 3 years, and form another simple 3 wave abc pattern (think zig-zag).

Time wise we've not even finished the lesser "a" wave  of the a-b-c...(X)

Elliott-wave'ers alway want to count to fast......Slow down have a smoke and enjoy

Robo's wind up posts for the time being, as they wont be for ever, as this double or triple 3 pattern plays out... :->

A pretty patten to show were we are in the cycle.

(We' only just finishing off that little "a" wave where it says any three on that upward X pattern on the chart below.)

Thu, 12/30/2010 - 15:43 | 838266 cxl9
cxl9's picture

During the hyperinflationary phase of Weimer Germany, stocks were a poor store of value against the collapsing currency. There were various reasons for this, but most signicant was that companies were not paying out dividends. Or, they certainly were not paying dividends that kept up with the rate of currency depreciation. They preferred to hoard cash, keep it offshore or in "real" assets, and avoid paying taxes. As a result, share prices remained depressed at a time when people became desperate for income. At one point in 1922 the entire Daimler Motor Company could have been purchased for a price that was equivalent to 327 of its cars.

Just sayin'.

Thu, 12/30/2010 - 17:24 | 838501 BigDuke6
BigDuke6's picture

OK, i warned that if one more person mentioned weimar germany i was going to scream.



Thu, 12/30/2010 - 18:39 | 838628 Miles Kendig
Miles Kendig's picture

Thought Weimar smelled like napalm in the mornin'

Predator 93

Thu, 12/30/2010 - 22:23 | 838926 Smu the Wonderhorse
Smu the Wonderhorse's picture

I read that, too.

Thu, 12/30/2010 - 15:47 | 838272 bigdumbnugly
bigdumbnugly's picture

nic, number 6...

you stand by that despite the paragraphs you wrote above (not to mention #5?)

i agree on your point, but fighting the fed's effect is a risky undertaking.

Thu, 12/30/2010 - 15:54 | 838280 Boilermaker
Boilermaker's picture

Corruption?  Policies that force equities higher?  In-yo-face ramping at all costs?  A pure fraud devoid of fundamentals (and, thank god, "technicals")....

When did all of this start?  Somebody should have told me!

This is a very long winded way of saying "I have no fucking clue what I'm doing or what's going to happen".

Thu, 12/30/2010 - 15:53 | 838286 mule65
mule65's picture

What?!  Nothing about your f'n horrid VIX calls!?!?!

Thu, 12/30/2010 - 20:15 | 838777 brandy night rocks
brandy night rocks's picture


Thu, 12/30/2010 - 15:54 | 838288 TruthInSunshine
TruthInSunshine's picture

Fighting the Fed in 2008 worked beautifully, and Bernanke has an infinitely more complex problem on his hands now, as he's managed to do a quick kick-the-can, or fluff-and-buff, to postpone reality, and has used up massive and precious resources in about as inefficient and irrational a way as possible.

Some say "you can't fight the Fed."

I say that "the Fed can't defeat physics."

The nature of the outcome isn't really in dispute; only the route we take in getting there is.

Thu, 12/30/2010 - 16:12 | 838321 Jasper M
Jasper M's picture

I don't think of it as "fighting the Fed". I think of it as "going with the flow" of the Fed's self-destruction. And, really, they've worked so Very Hard for it, it would be heartless to get in their way at this point. 

Thu, 12/30/2010 - 16:40 | 838400 TruthInSunshine
TruthInSunshine's picture

So don't try to interrupt the Federal Reserve's insane and/or kleptocratic policies, and it will fall underneath its own deaden weight?

Even better!

Thu, 12/30/2010 - 17:25 | 838498 Red Neck Repugnicant
Red Neck Repugnicant's picture

I say that "the Fed can't defeat physics.

Well, unfortunately, the Fed does defeat physics/math quite regularly, and often to your advantage.   

In 2008, the entire financial system in the US was insolvent and fell off a cliff.  

Then Bernanke wiggled his nose like a jeannie. 

Suddenly, all the laws of accounting, finance, economics, corporate law, physics and mathematics were suspended.

You say that you can't defeat the laws of math or physics?  Sure you can:  what's the true value of Bank of America's balance sheet when all assets are marked to reality?  Compare that to their market capitalization.  Zero = 100 Billion. See? Like the guy at Office Max - that was easy! 

Ok, maybe I haven't broken the laws of mathematics, I've just circumvented the laws.  I've cheated.  That's just a silly nuance, though.  If I can exist outside the laws of everything, then that is just as good as redefining them, in my book. 

You gold hoarders have cheated the laws of math all year.  Assume on December 30, 2009 you purchased an ounce of gold for $1100, and then immediately went into a coma, which is not difficult to imagine since most of you have been in a doom/gloom coma all year. Suddenly, today, you wake up and you sell that same gold for $1400 - you just increased your wealth by 27%, and you didn't work a single fucking day.  You just slept, dreaming about canned foods and hand grenades.  You wake up, and - poof! - you're wealthier than when you were awake last. Where did that wealth come from if you didn't work for it?  How is $1100 on 12/30/09 the same as $1400 on 12/30/10?  Bernanke "created" it for you (don't tell me you worked for that extra $300), much like he "creates" equity for the insolvent banks.  You should thank him. 

If you're going to fall into a coma this next year, make sure you buy equities, not gold.  Had you bought LVS, you would have earned 400%, rather than a measly 27%.  Or at least follow Harry's advice...Apple would have given you a 170% return. A 27% return on your wealth during this past year is really quite awful, given a different perspective.    

Thu, 12/30/2010 - 17:32 | 838519 Tyler Durden
Tyler Durden's picture

And since cherrypicked monday morning quarterbacking is the theme of the day, here is LVS' performance when the market did NOT have $4+ trillion in fiscal + monetary stimuli:

And guess what: LVS is worse than gold by the standard anti gold bug definition - not only has it never generated any free cash flow, it continues to guzzle hundreds of millions of capital every year.

But yes, otherwise you are absolutely correct and precisely on the same side of the boat as Merrill Lynch, who also thought the Fed would never be reacquainted with the laws of physics, up until 1 millisecond before it had to be sold to BofA or face extinction. 

Thu, 12/30/2010 - 18:07 | 838573 prophet
prophet's picture

Nicely done.  Happy New Year!

Thu, 12/30/2010 - 23:05 | 838967 qussl3
qussl3's picture

Not to mention the "support" from Singov which nobody can find details for lol.

Fri, 12/31/2010 - 00:22 | 839014 Red Neck Repugnicant
Red Neck Repugnicant's picture

Hey!  That's not fair!  You get to use those graphs, and I can't.

Nuckin' Futs!

Cherry picking?  Oh c'mon!  Of course I was, and so are you when you're talking about gold returns. What did gold look like during 2008, before that very same $4+ trillion in fiscal + monetary stimuli that you mentioned?  30% collapse in 9 months?  The deflationary buzzsaw was leaving nothing behind. Nothing. Everyone in the United States who had assets of any nature was looking into the abyss. 

Even if I didn't cherry pick with LVS, I could simply have referred to a basket of the S&P, which performed nearly identical to gold this year, within a point or two.

But all of that is just a red herring and misses the point of my post:  everyone wants to talk about Fed intervention and how it leads to the banks getting unjustly rich, or about various socio-economic groups of individuals who are getting something for free, yet no one considers for a moment that the only wealth they have today - whether it's their stocks, their silver, their gold, their house, their retirement, ANYTHING - is because the Fed dished out a free lunch to everyone in the past two years. Without the Fed bending the laws of everything, this country would have been turned into an insolvent post-consumerism wasteland, ravaged by greed within every socio-economic class. America was fucking finished. Done. Stick a fork in Her. Crony capitalism and greed by everyone had sucked all the marrow from the skeletal house of cards that this country became.   

But no one recognizes that, right?  Or more correctly, people only wish to recognize how our government helps others, but not them individually. Gold for example: no one recognizes that the $1400/oz of gold that they own is priced by the same magic wand that the Fed uses to keep the entire system afloat. Where was gold heading in 2008?  In the ditch.  Where were all assets going? In the ditch. But people only see what they want, and that never includes an image of themselves sucking off the government tits.  They think their gold holdings (and their wealth) that increased by 27% this year happened because they're smart, while they ignore that a broad basket of the stock market would have yielded nearly identical results. People think that unemployment insurance is outrageous, yet they ignore that their new gold/silver wealth is from the same Fed-issued free lunch. 

If you own gold, how much did you work this year for it to rise by 27%?  None.  And don't say it was countered by a loss in the dollar, because the dollar didn't loose this year.  Send Bernanke a thank you card.   

It's the Tea Party mentality: free stuff for me = good;  free stuff for others = bad.  And I would never take anything for free, like those poor people who sit at home all day watching Fraggle Rock and eating Cheetos Right? I'm different, because I'm...just not one of them. Or something. Meanwhile, no one recognizes that every participant in the big American lie of an economy is bankrolled by the Fed and totally dependent on the Fed for any wealth they have - few exceptions, apply.  

The other argument is that, well, none of this would have happened if the Fed didn't exist in the first place. *LOL*  Tell me about America's "prosperity" before the Fed?  Tell me about the Panic of 1907 and how our government groveled at the heals of John P Morgan with its tin cup. Tell me how many financial disasters occurred in the 1800's without a central bank.  And what about the Depression of the 1930s? - it was made immeasurably worse because the Fed didn't do what it did in 2008. Should we have simply waited 20 years for everything to rebound like our last depression while we're fighting two wars simultaneously and the world dreams of our demise? The magnitude of the depression that we averted in 2008 would have been unthinkably more intense than the 1930s. That's like comparing nuclear bombs from the 50s to those we have today.

blah blah...

send Bernanke a thank you card.  



Fri, 12/31/2010 - 01:45 | 839093 Tyler Durden
Tyler Durden's picture

So you basically used a lot of words to say it is all Fed intervention and then you followed up your claim with a completely unfounded and empirically unprovable statement that life thanks to the Fed is better even though if you actually read the roughly 10 papers on the topic presented on ZH you would derive a completely different conclusion (and there is likely some anti republican undertone in there which we didn't bother to seek)... Somehow we thought it is obvious to our relatively smarter readers that that's the kind of elliptical sophistry used in pioneer brainwash class in 1960s Russia, and the same kind used by Hank Paulson in 2008. Additionally if you truly believe your statement wenurge you to check out paul krugman's blog. You may find that he and you share the same belief that the fed is really on your side.

Fri, 12/31/2010 - 04:01 | 839146 Red Neck Repugnicant
Red Neck Repugnicant's picture

No. No. No. Mr. Durden.  

First, let me say that I agree with the vast majority of your posts, and I find the information that you provide to be very enlightening, insightful and on par with my own beliefs.  This country, and the rest of the developed world, is truly roggered, and there is no one in the media that is as capable of demonstrating that as well as you.  

That being said, there is one fundamental difference between me and nearly everyone here, including you: I don't think the Fed wants to fuck me.  At the same time, I have no illusions that the Fed is necessarily on my side. The Fed has the incomprehensible task of parallel parking a multi-trillion dollar system between a cliff on one side and a deeper cliff on the other. Now, imagine steering that colossal system and everyone involved is a manipulative, selfish, lying, greedy pig with personal agendas and vendettas, i.e. politicians and bankers.

It's a nearly impossible task, and one must assume that the maneuvering process will be exceptionally treacherous and ripe for criticism by everyone sitting in the bleachers watching. 

The alternative?  No Fed, and survival of the fittest capitalism.  What would that world be like? Probably lots of scenarios like the Panic of 1907, except the characters would be different:  good, hard-working American folks standing in line with their tin cups waiting for Lord Blankfein to throw them some bread crumbs after he injects liquidity into the system, like Mr. Morgan had to in 1907. In a pure, unabated, unfettered, survival of the fittest capitalistic environment, the vampire squids would control more than they already do; they would vacuum all assets as if they were neutron stars.  Is that a completely unfounded and empirically unprovable statement?  Yes, I suppose it is, but no more so than claiming the prices of coffee beans and crude are moving up because of those binary blips on computer screens at the Fed, or that life with the Fed is worse than without it.

The question is not whether the Fed should exist, but how should the Fed govern? Should Goldman have been paid par for their AIG exposure?  Fuck no.  Should the derivatives market be unregulated?  Fuck no.  Should narcissistic greedy fuckwads like Stephen Friedman be charged with securities fraud?  Yep.  Should rating agencies be liable for their opinions if laws dictate that financial funds must use them?  Yep.  Should more banks have been unwound and more executives been charged with fraud and gross negligence? Absolutely. Should those executives have been faced with a personal financial wipeout?  You bet.

Once again, another overly wordy post..

Have a happy new year...   

Thu, 12/30/2010 - 20:44 | 838824 geminiRX
geminiRX's picture

You're an ass - 27% is an absolutely brilliant return in this environment. Apple is due to get squeezed down the road from ipad knockoffs (which have more capabilities than ipad). 

Thu, 12/30/2010 - 15:56 | 838291 AR
AR's picture

Dear NIC  /  We hope you have a chance in reading our response. We have now read your generous postings on ZH for 12-18 months now. We thus would like to thank you for always being generous with your time, thought provoking, and in attempting to educate and share your thoughts with this audience (and hopefully, we speak for many ZH readers). Also, as a follow up, we would like to thank Tyler and his Staff for the same and their hard work and diligence as well.  May you BOTH keep up the great work, and the much well deserved success to each of you. In the environment and age that we are in today, your work is appreciated.  Happy New Year to everyone.

Thu, 12/30/2010 - 16:01 | 838302 bigdumbnugly
bigdumbnugly's picture

what he said

Thu, 12/30/2010 - 16:31 | 838369 saulysw
saulysw's picture


Thu, 12/30/2010 - 16:48 | 838424 Cursive
Cursive's picture


Word. Many thanks to Nic

Thu, 12/30/2010 - 16:53 | 838437 Boilermaker
Boilermaker's picture

Oh come on...Nic has been ridiculously bad for quite some time and bases his 'skills' on technical BS.  TD provides legit fundamental based information and only provides some loose guesses on what it means. 

Fundamental information is better than technical-witchcraft-voo-doo bullshit any day of the week and twice on Sundays.  Sure, both don't work (at all) at the moment but at least one (TD) has some merit and credibility.

Sorry, I don't accept or expect NFL QB's to not throw 6 interceptions in a game and I expect 'experts' in the market not to provide guidance that gets your face ripped off. 

I know, I'm a dick.  I can live with that.

Thu, 12/30/2010 - 17:23 | 838492 godgunsandgold
godgunsandgold's picture


Thu, 12/30/2010 - 19:06 | 838655 Shell Game
Shell Game's picture

Nic indeed belongs in this yellow submarine..  Thx Nic!

Thu, 12/30/2010 - 16:09 | 838315 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Am I the only one that remembers Nic posts of 2010 being terminally bearish and virtually every one of them predicting a top,with repeated short positions taken against the Fed sponsored rallies?And yet to read the above "mea culpa" it seems as if he wasn't always bearish and was at times using technical analysis to go long!!!

Keep it up Nic,I'm sure the next high in the S&P is the top,keep shorting and telling us in your posts,then you can tell us how you got it more or less right at the end of 2011.

Just one question tho',how is anyone going to stop the Bernank doing QE to infinity and as a consequence,stop the S&P going to infinity along with it?.

Thu, 12/30/2010 - 16:27 | 838359 Sudden Debt
Sudden Debt's picture

we only went up because of the FED interventions. And if they don't stop, they'll end up destroying the markets.

Thu, 12/30/2010 - 16:09 | 838316 Oh regional Indian
Oh regional Indian's picture

and it will have to be an exogenous shock for their Ponzi scheme to take one on the chin properly economically speaking.

That is brilliantly written. 


And statement 5, a story today, MSM, about a  biggish drop in un-employment claims  applications (Yahoo via bloomberg?). Hiring uptick? Really? And they had a photo of Target store in the background. Strange. Another about a USA today poll sayign Obama and hilary C are most admired in America? Majority?

And finally, Oprah is getting de-iconificated. Fast. I laways felt that when Icons were taken down in earnest, things would start to get bad, fast. I'm sure you get my drift.


Thu, 12/30/2010 - 16:24 | 838349 Sudden Debt
Sudden Debt's picture

Yesterday and today, I finally closed down all my stocks and options. I won't go back in for at least 6 months and even today, I've bought some more silver. The UPS delivery guy is almost becoming part of the family right now :)

But I'm feeling a very bearish wind coming for the EU and the Euro.

Since years, I've been showing to my bosses how the industry in Europe went down year after year, 10% on a yearly basis untilnow that there is almost nothing left besides boxmoving companies.

Europe also has a very expensive infrastructure that is very expensive to maintain. A public service apparatus that is incompetent and way to expensive and these will keep on sucking up to much money steering the EU into a default. But a slow one, just like the Roman Empire, the English Empire... Like those 2 empires, they first became great and after that the maintenance and corruption bankrupted them. For the Romans it took 150 years, for the English it took 60 years and for Europe it will a lot less.

Also, the 2 biggest ports in Europe: Antwerp and Rotterdam are now handling more containers then ever before!



The 2 great empires, the US and EU will need to recover and would just do fine if we did not have peak oil and global warming. Because I really think that these will smuther any recovery.


Thu, 12/30/2010 - 16:26 | 838357 Double down
Double down's picture

I do not care if your calls are right or wrong, that is not why I read you.  I read what is thought provoking.



Thu, 12/30/2010 - 16:28 | 838360 the rookie cynic
the rookie cynic's picture

No one knows what will happen in 2011, though every Nic, Jim, Peter, and Erin will say otherwise.


Thu, 12/30/2010 - 16:29 | 838368 NotApplicable
NotApplicable's picture


I can't help but feeling that I'm

living a life of illusion.

And oh, why can't we let it be,

and see through the hole in this wall of confusion.

I just can't help the feeling I'm

Living a life of illusion.

Thu, 12/30/2010 - 16:37 | 838393 pgarner
pgarner's picture

Sure wish he wrote a bit more carefully. A man who can't write well, rarely thinks well either.

Thu, 12/30/2010 - 16:46 | 838414 Dr. Sandi
Dr. Sandi's picture

As I read the article, it occurred to me that the way to make big bux in the 2011 market is the pretty much same technique that worked in 2010. Take a working cruise on the QE2.

Smells like the real money growth in the markets is oozing from the stomped toothpaste tube with the Federal Reserve label.

And of course,

Silver Bitchez!

Thu, 12/30/2010 - 16:52 | 838439 goldmiddelfinger
goldmiddelfinger's picture

it's over

Thu, 12/30/2010 - 17:08 | 838471 omi
omi's picture

Chart for your enjoyment: 

I clearly meant 'curl down' btw.

Thu, 12/30/2010 - 17:12 | 838479 topcallingtroll
topcallingtroll's picture

It doesnt have to collapse. If we slide backward about the same speed that productivity moves us forward then we can stand still in terms of our material wealth. We need big productivity gains. You serfs start working like those chinks and gooks. It is your patriotic duty.

Thu, 12/30/2010 - 17:14 | 838482 Sophist Economicus
Sophist Economicus's picture

Nic, thanks for all of your postings this year, they were always thought provoking.    Keep'em coming in 2011. 

Thu, 12/30/2010 - 17:31 | 838514 BigDuke6
BigDuke6's picture

While i appreciate the thoughts i lost a goddam fortune after halving my iron ore holdings on the advice of your articles.

i'll goddam napalm your ass.

only my gold got me through...   ;)


Warning - sarcasm in this post. strange concept if from USA.

Thu, 12/30/2010 - 17:52 | 838551 RobotTrader
RobotTrader's picture

Pretty much a killer year for equities.

Russell 2000 pretty much closed out near the highs again today.

Thu, 12/30/2010 - 23:52 | 839015 Red Neck Repugnicant
Red Neck Repugnicant's picture


Thu, 12/30/2010 - 18:21 | 838609 greenewave
greenewave's picture


To find out more about the TRUTH of the recent MORTGAGE SCAM, watch the YouTube video “BANK OF AMERICA ~ A PUBLIC DISGRACE” at (


This is absolutely appalling and I am dumbfounded why the American people aren’t RIOTING in the STREETS as we speak. Thw civil and political unrest we’ve seen in Europe is without a doubt coming to the United States!

Bend over America and enjoy getting SCREWED by the BIGGEST BAILED OUT BANK in the Country!!

Thu, 12/30/2010 - 18:34 | 838625 Miles Kendig
Miles Kendig's picture

I am only here as long as you care and I can serve your best interests.

Nic, you appreciate the finer points of information junkieism and feed my habit with aplomb.  Nice year.  Cheers & thanx

Thu, 12/30/2010 - 20:18 | 838780 schadenfreude
schadenfreude's picture

Thanks Nic for your work. I highly appreciate your opinion, as they match with my personal opinion about the general status quo of the state of the economical world. 2010 opened my eyes about the "Incredible Bernank" and his power to push the markets, which I did not expect to be that severe. Is 2011 the year where kicking the can down the road is over?

Thu, 12/30/2010 - 20:24 | 838792 SAME AS IT EVER WAS

Its all one big bullshit mindfuck.

Thanks ZH for helping call it out!

Thu, 12/30/2010 - 20:35 | 838814 Alex Kintner
Alex Kintner's picture

Great article, thought provoking. Keep 'em coming.

I pretty much agree. That is to say, I'm stocking the cellar with canned goods.


Fri, 12/31/2010 - 00:03 | 839023 vainamoinen
vainamoinen's picture

Thanks for your work Nic! - and never mind the naysayers - they're just part of the wall paper around here.

Fri, 12/31/2010 - 10:25 | 839331 HistorySquared
HistorySquared's picture

QE2 will lead to QE3 will lead to QE4. We can't underestimate Bernanke's belief in printing, horrific as it is. It's a core belief and thinking he will pull back would be akin to someone believing in God all of their life, then one day come to the conclusion that there is no God. 

Bernanke said that when inflation hits 2% they will pull back. But by that measure, they should have already stopped the monetization given any commodity index is up 20%.

They will continue to ignore all evidence to the contrary, find only manipulated numbers showing there is no inflation, and continue to print, especially on government default events.


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