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Jeremy Grantham: This Is Nothing But The Greenspan Legacy's Latest Bubble, America Is Now "Thorougly Expensive"
Yesterday we first posted Jeremy Grantham's latest letter which incidentally is a must read for everyone who still is stupid enough to think this market reflects anything remotely related to fundamentals, when instead all it is pricing in is the money printing Kommendant's daily predisposition to continuing his dollar decimation via ZIRP and shadow QE. Just like all those who are buying Apple at these stratospheric prices are in essence selling life insurance on Steve Jobs (sorry, someone had to say it), all those buying into the market here are betting the Fed is apolitical when it comes to monetary policy decisions: a proposition so naive and ludicrous, it is not surprising that only the momos continue to buy into the rally, which is driven purely by Primary Dealers recycling money they lend to the treasury which in turn is repoed back by the Fed, so that the banks can buy 100x P/E risky stocks with the same money used to keep the treasury curve diagonal. This is nothing but Fed-sponsored monetary pornography at its NC-17 best. Of course, those who grasp it are few and far between, while the rest of the population is ignorant in its hopes that S&P 1,500 is just over the horizon, without a resultant crash back to 0 on the other side of the bubble. So for all those who are still confused (this means you Kommendant Bernanke) here is a 6 minute clip in which Grantham tells it just the way it is: there is nothing more to this rally that free money and banks' last ditch attempt to lock in another year of record bonuses before it all goes to shit. And the implication - play with the big boys at your own peril. "Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors. There is nothing more dangerous and damaging to the economy than a
great asset bubble that breaks, and this is something that the Fed
never seems to get. Under Greenspan's incredible leadership he managed to give us the
tech bubble, and by keeping interest rates at negative levels for three
years drove up the housing bubble, and finally the risk bubble. And
Bernanke has happily picked up the mantle, and seems totally
unconcerned about creating yet another bubble. He has interest rates so
low banks can't possible not make a fortune. Savers are being
penalized, anyone who wants to buy cash faces a painful experience, and
so we are all tempted into speculating, which is apparently what he
wants and we've just had one of the great speculative rallies in
history, second only to 1932-33."
Some of Grantham's bubble observations:
- Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors.
- There isnothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get.
- The current UK and Australia housing bubbles are no exception to the trendline: if they don't explode it will be the "first time in history that a bubble has not broken."
- Other current bubbles: commodities and the emerging market equities.
- In every bubble there is an element of greater fool, but nothing will stop the enthusiasm of the EM bubble due to the slow growth of the rest of the world, they have become the "only game in town."
- "It is not usual that you will get three bubbles in a 10 or 12 year period. Normally one bubble will chew up 20 years because it leaves such a painful experience, people don't queue up to put their hands on the same stove and burn themselves again. "
- The US market is now thoroughly expensive again.
Full must watch clip after the jump.
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Hmmm...Whack a Mole Monetary Policy
+1. Very nice.
Fractional reserve banking and compound interest rate.
People may say what they like about Islam but Islamic Banking and the principles and the rules of the said should be legal foundation of ALL firms which want to engage in banking. I have said numerous times that Islamic Banking is the way to go [and not the new type of Islamic Banking but the one pre-1990s] and not the artificial and purely destructive western style post 1900s baking. Its eschatology is known, it is mathematically certain, it is logically followed. Say what you will about Islam as a religion but Islamic Banking [for those of you who feel offended by the name, it can easily be changed] is what the future of banking should look like. I know that both Judaism and Christianity have a prohibition on usury [compound interest] but various theological interpretations of laws have diluted both of those religions guides for banking. Reasons vary why that is so, but it can be summed up in; religious expansion/closing of religion. I started this post whit this introduction simply to point out that the illness of the modern world is caused by disgusting, perverted and never-before-used practices based on distorted mathematics, greed, compliance and idiocy. Inflation is inevitable, inflation is the killer of sustainability of whatever system and 99% of individuals. Inflation is the constant result of the [post] modern banking. Goddammit but what the fuck can we do. We are not Larry Summers, we dont have GS, JPM whistle to summon the White House dogs. What the fuck can it be done. The solution is starring us in the eyes and they just keep feeding the cancer, they prolong the tumor growth by feeding it with healthy tissue.
I am not sure if the UAE is using an islamic based bank rules - but things are sure rotten to the core over there. Greed is a prominent human trait - doesn't matter what religion paradigm is followed. T
Most banks in the Islamic world use both models to do banking, plus even a purely Islamic bank is still a bank and not a charity.
Islamic banking would mean no interest at all (zero), i.e. no making money on money. That would exclude using derivatives (except forwards) altogether.
What's there not to like about a religion that advocates the death of all outside their religion?
at least with islamic banking you have a "vested" interest in keeping things on the up and up....
I won't argue the merits of your statement, but I will say you disregarded Cheeky's serious post. You just ran off into the weeds with your biased slant on a cogent argument. Stay on point.
Oh, sorry, are you sure you are not talking about Talmudic Judaism.
Your ignorance about all things Islamic is staggering. Also, since your post reeks of cultural indoctrination either via biased newspapers or TV stations i will only direct you towards exploration of pre-1960s Islam which was mainly non-theological. Of course i compare the pre-1960s Islam intertextually to other dominant monotheistic religions. And if you want to talk about death, religious and racial profiling and outright disgust toward anyone not being denominated in the same faith as you, pick up a copy of Talmud and read it. Also the blood seeking members of the IDF will be used here as a confirmation of my argument, since they and their leadership uses the same Talmudic Judaism to craft their policies/actions and to unite all members of society who think the same. Sources to verify this are numerous and well known. But i will give you just this one. Enjoy reading it.
http://www.israeltoday.co.il/default.aspx?tabid=178&nid=20940
Oh, nice job in refuting my previous post. You fucking dimwit.
Dude, Chill out. he made those remarks in the contexe of a Bible quiz for kids!
Personally, I can't see why so many on this site idolize you... but that's just my opinion. I haven't seen much from you that makes you more intelligent than others, and this particular post is no exception. While Islamic banking works for ISLAMIC PEOPLE, I will say that it's generally a bad idea to turn to religion for any aspect of governing.
Aside from all that, I was making a joke, and you sit here and say "nice job refuting my post." Maybe I wasn't trying to refute anything.
If it makes you feel better, pretty much all religions do the same thing that I said about Islam.
It just so happens that the Islamic extremists are the most likely to be stuck in the 12th century, when compared to other modern religions.
Do you see Christian extremists beheading people in videos where people are holding RPGs and AK47s in the background? Honestly, I don't see too many Jewish people doing that either. Of course, I'll admit that the Jews commit atrocities in Israel, Palestine, whatever, but I don't see them flying planes into buildings or burning people and hanging their corpses from bridges either.
First, let me say that I'm the LAST person to believe in these contrived wars in the middle east. I think the war on terror is bullshit, and I think that we need to come home. I will agree with you that all extremists are bad, including Jews, Christians, etc, however.
One thing is certain, you need to lighten up buddy.
cheeky, FIGHT CLUB†
LOL. I bet he couldn't fight, either.
Also...
What do you call the hundreds of years of violence between Sunni and Shiites because one is descended from Mohammed's uncle or whatever and one is descended from his nephew or whatever?
I don't know what the exact difference is between the two factions, but I know that it's (pretty much) that simple. Hell, it could be one was his brother and one was his brother in law. I don't know. Still, the difference is that minimal.
And yet, the theological governments in the middle east have been killing people and committing atrocities against each other for years over so slight a difference.
I believe you've been following Agora Financial a little too much.
Islam bank better than Jewish bank.hahahahahahaha
The Koran is a tool used by thugs to control non thugs.
The Bible is a tool used by thugs to control non thugs.
Banks are used by well dressed thugs to control both the Koran and the Bible thugs.
Come on Cheeky
Think about it. Islam is a rip off copy of the same old cranky God worshiped by the Jews. Big Mo had the Jesus/Christianity thing (you know- miracles, transporting through space and time) and the Monotheist deity available from Judaism, before he cobbled together his religion, gathering converts with a sharp sword.
Good concept too. Become a Muslim or die. Pretty simple- not a hard concept to figure out. Become a Martyr for the faith and get 75 Virgins, etc. Hey, great sales pitch.
Islamic banks charge interest- but they do not call it interest. Lots of wink, wink, nod, nod going on in Islamic finance.
Religion- the opiate of the masses.
MB, you haven't studied the Quran, obviously.
I really don't need to. I see the effects of its believers on the television quite frequently.
Of course these are extremists, and all extremists in every religion are bad.
However, the crusades were like 800 years ago... and I see people beheading people in the name of Islam on TV.
Add to that women being stoned to death for being raped and so called "honor killings" and I really don't think that what I said is too farfetched.
TV? Come on, you can do better than that....can't you?
Nothing tells the truth like pictures!
Remember, someone wants you to see those pictures. There is always a motive from behind the lense. Use YOUR lense wisely.
Yes, the people videotaping the beheadings and doing the actual beheading want me to see the pictures...
And I want them to see... THIS!!!
*grabs balsac* LOL
Your showing your ignorance. You might as well be naked in the middle of Madison Square Gardens thats how obvious it is.
"Your showing your ignorance."
You DIDN'T REFUTE MY POST AT ALL YOU FUCKING DIMWIT!
Just kidding. LOL.
But while we're on the subject of ignorance...
Your showing your ignorance should read "You're" showing your ignornace. Or even you are showing your ignorance.
Your is a pronoun that shows ownership.
Also, it is Madison Square Garden, not Madison Square Gardens.
I just thought I'd help you out, you know... since you're showing your ignorance and all.
Maybe you should teach english grammar instead of debating subjects you have very little knowledge about. Stick to what you know and I will try to improve my grammer.
Really? Pictures on web sites are sometimes photoshopped and TV pictures edited. That's an old propaganda trick almost as old as photography itself.
So are you denying that the people of Islam stone their women to death for being raped?
Are you denying that they behead American citizens, such as Daniel Pearl, a reporter for the Wall Street Journal?
JB you are not too far off the mark.
The best people who can offer a more enlightening explanation, would be those non-Muslims who have experienced life in an intolerant Muslim country.
The intolerant cannot discuss anything which faintly touches on their faith with any level of tolerance.
Newbie, I am trying to discuss the book. I am not trying to discuss the fact that many people in this world are ignorant assholes. Now, go do whatever it is you do.
I thought that you were being an asshole by calling him Newbie, and then I looked at (his?) name and was like... ohhh.
LOL
When the fundies take over this country we will get to enjoy their intolerance.
Every student will be taught that Moses rode a brontosaurus until they were deemed too dangerous and God ordered them destroyed. This was back when the people were united under God and great things were possible, not like today when the dangerous atheists started thinking for themselves and caused this great cataclysm.
*Yeah, I know, I am taking license and revising history, but we've got to explain them dinosaur bones somehow, so why not add a moral lesson and a few presuppositions?*
What can be said? This person relies on television to form his opinion of something other than corporate monopoly of public opinion.
Hey J. Bravo - FWIW - I value CB's posts very much.
I don't see why, but that's your choice!
Also, you think that the fact that something is documented in pictures on television makes it less relevant?
I don't know. I always thought that "a picture is worth a thousand words."
When Islamic people stop stoning and killing their women for being raped, and stop beheading U.S. reporters in their countries, you can make your arguments. Well, actually you didn't make any. You just said that my argument was somehow wrong because there are pictures of it.
On this day in History, April 24th, 1915:
http://www.armeniapedia.org/index.php?title=Armenian_Genocide
It wasn't just some extremists.. it was an entire country. Food for thought.. carry on.
The debate was the RELIGION. The debate was The Quran. You give me some stupid example about how the powers that be are ruthless. Tell me something I don't know.
Unless I'm mistaken, The Turks are Muslim and at that point in time followed the caliphate. Which means you're pretty much a Muslim and reading the Quran as a requirement. So I think my post is very valid. If you can't break away from American Idol for a minute to see just how barbaric that religion can be, then I forgive you. Because the first couple of shows of AI are damned funny!
Your post is invalid. I want the words of the book, not the actions of the men who claim they are ascribing to the said book. Like I said, you point out that some men are ruthless when given power. If a murderer was reading Playboy, would you blame Hugh?
"If you can't break away from American Idol for a minute..."
Ahahaha! BAHAHAHAHAHA! Oh man, oh man! oh man.....my side hurts hold on.....oh man,,,,,,hahaha....hahahahaha!
BAHAHAHAHAHAHAHAHAHAHAHAHAH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I CAN'T STOP! i CAN'T....AH HA.....AH...AHHHHHHHHHHH!!!!!!!! ahhhhhhhhhh...........
Well the bible doesn't tell radical extremists to go to funerals of dead AIDS patients to scream "God Hates Fags" at them.
Yet, the beliefs and intolerance perpetuated by the Christian religion do just that.
Look man, I'm sure that the Quran is fine on its face. I've met a lot of Muslim kids at school and stuff, and they're always really nice and respectful. A lot of times, the other white kids aren't really nice to them, and I try to take them under my wing and stuff. With that said, I don't think that Muslims are bad at all.
But, there are still factions of the Muslim religion that preach very bad things, just like there are factions of any religion that preach very bad things.
It's still ordained clerics (for the lack of a better term) of the religion preaching to commit atrocities against the non-believers.
pat robertson funded the contra's, with donated money
To add, he also inherited many many diamond mines from his father. I won't go into the diamond business.
Here's some webpages on the life of the "Prophet" himself by a Hindu using the Koran and the Hadith:
http://www.flex.com/~jai/satyamevajayate/mohwar1.html
http://www.flex.com/~jai/satyamevajayate/mohwar2.html
http://www.flex.com/~jai/satyamevajayate/mohwar3.html
http://www.flex.com/~jai/satyamevajayate/mohwar4.html
I said the book. I am not looking towards deeds done by men. I am strickly speaking about the book. Any asshole can misinterpret, and no one is perfect. I know Muhammed was a bad ass mother fucker who wooped up on caravans, I know that. Thank you for stating the obvious.
The original book does not advise killing anyone, ever. The quote about "jihad" is the biggest misinterpretation ever. "Jihad" is a personal war with one's self. Enough said.
So, the "Prophet" misinterpreted and misapplied the very message that he perfectly dictated? As did his immediate successors, the Caliphs, who ruthlessly conquered the Middle East and North Africa?
Correct.
That isn't an orthodox Muslim answer, never has been, possible to get yourself killed saying that in the Middle east.
My full response is below. It is not in response to me getting killed. As for that, like I have said, there are many ignorant ass holes, from every single land.
Sorry was not done.
Correct, lets add though, he may have kept it close to the book, by not killing anyone and justifying it by using what we now so ignorantly hear termed "Infidels". He may have said he had to kill, or otherwise he would have been killed. This would have satisfied the Quran.
We have the literal translation of the book; rumors of Mohammad may be written into history, justified or not, we will never know. The Califs sound like a bunch of ass holes.
Great threads lately, you crazy mofo's are passionate. This is way better than Idol.
One, isn't the Quran based on Muhammad's teachings?
Two, you can't be sure that you have a literal translation of any old text. I mean, especially before the printing press, any number of scribes could have changed the original work as they saw fit.
Yes, I'm splitting hairs. Girlfriend's over there sleeping on the couch, the homework's done, and I'm bored. LOL
The Quran was free verse, everybody memorized it. Because of this, it has an absolute literal translation. If someone had a book and said, "This is what the Quran says." Anybody and everybody would say, "No, this is." Once again, it was memorized from the get go.
The Quran was dictated to Muhammad by an angel. He memorized it, and sang it to his followers. He was illiterate.
Well, you're the expert!
I guess I was just thinking about the Bible and how many times it has changed. I'll admit that I don't know eff about the Quran though.
muhammads last wife, was 9 years old. that is one sick motherfucker
"Old enough to bleed, old enough to breed!"
Or... "if there's no grass on the field, play in the mud!" (Ewww...)
LMAO!
All of this reminds me of a Michael Jackson joke.
"What's the best thing about twenty-eight year olds?"
"There's twenty of them!"
HAHAHA.... yeah... I'm sure somebody'll get all hurt, to which I reply:
Don't be gay.
Mohamed had the same problem Joseph Smith had. He'd tell a story one way the first time and a different way the second time. He'd also forget his rules and would have to revise them when they put a damper on the advantages of his fame. (Polygamy in both cases. If I am ever a prophet, polygamy will be rule number 1, that way nobody can call me a hypocrite for wanting me some of them younger women.)
spend some time with Robert Spencer. jihadwatch.com. I think you will actually learn something about "the book". Try out Fitna as well , courtesy of Geert Wilders (youtube it).
We completely disagree about everything, I am afraid. Here is a video about what I believe, concerning......"Bin Ladin didn't blow up the projects".
Bin laden - immortal technique,mos def,eminem
http://www.youtube.com/watch?v=ggzSzl2oDHI
immortal technique is dope, and so is mos def to a lesser extent.
Eminem has skills, but he's always too provacative. His beats are sometimes annoying. (yeah, I know they're Dre based, but I am not the biggest Dre fan either)
Tech is unbelievable, M is hit or miss (when he hits it's damage), but Mos is SOOOO Def!
Mos Def- The Rape Over:
http://www.youtube.com/watch?v=srx-Wf5KrzQ
I bet we'd have a lot of fun going to see shows together! We seem to have comparable musical tastes.
You know who I'm a big fan of? KRS One. I don't know why I told you that, but I love that guy. I have a tennis ball signed by him (weird, I know) on my mantle.
Dude- You don't need to defend Mohammedanism, just mohammedist banking. They got you off target and you took the bait.
The banking speaks for itself; no interest bitches!
No worries. I think the Quran is a beautiful story and I do not mind saying so.
You are going to a Hindu site promoting the superiority of Hinduism over Islam to learn about Islam? No wonder.
Try this one instead as a primer:
http://islam101.net/introductory-mainmenu-33/13-introductory/12-islam-a-...
The truth about the Armenian Genocide...
http://www.thetruthseeker.co.uk/article.asp?ID=5859
http://www.redicecreations.com/specialreports/armeniangenocide.html
The world evils of the last 100+ years ALL trace back to the Rothschilds:
http://www.thetruthseeker.co.uk/article.asp?ID=6543
+1984, Rock
Awesome article and web page. The history of the Rothschildes really puts Paulson's and Bush's "crash" of '08 into perspective becausse the Rothschildes had done the same trick before. Not to mention JP Morgan, who was at least in cahoots with, if not directly operating for, the Rothschildes. The Rothschildes are "out of" the banking business, for the most part...I wonder why. The crash of '12-'13 will be the final crash, unless we invent a functioning zero-point energy.
"This sort of thing (an absolute collapse of the markets) happens every 5-7 years." J, Me Diamond!
Maybe with him running things.
America we must stand up now.
Strange how I have many Islamic friends that I consider close. One in particular has been a beacon of optimism, and a close friend who has assisted me in many hard times. Oh! my bad, you were just being facetious...
Not sure if you're talking to me, but I'm bored, so I'll respond anyway.
Yeah, I was just being provacative for the sake of amusement.
Some people have sand in their vaginas, however.
merkins no doubt
DAMN, that's funny!
We have working models all over the world that could be used for both banking and healthcare. Doesn't matter to me what their names are or which religion\culture is using them. Taiwan and Japan have excellent, inexpensive healthcare systems that work well. Pre collapse america will never adopt those models, due to fraud and corruption of course. Perhaps we will see these functional working models on the other side...
I totally agree. Thats one of the reasons I liked Singapore so much. They researched many systems or models to come up with the correct one in each area. The U.S. on the other hand picks them by how much big business can capitalize on them.
When our dear leader is elected (not this one, the next one, who will likely be white and have a Bible in his pocket) and takes complete power, maybe he will implement those changes in a reasoned way. I doubt it though.
CB,
Why not just nationalize them or turn them into heavily regulated utilities? The way things are going, we are headed that way. What will the politicians do the next time the financial system blows up? Throw trillions to the bankers? C'mon!!!
Hey Leo ! Im all in favor of nationalization of banks. IMHO its the best view on the matter, but there are two reasons it will never happen.
1) do you really want the banks to be run by the same people as they are now
2) do you want them to turn into GSEs and go ape shit insane cause the government is behind them no matter what the loss on the balance sheet (same as now)
Perhaps we need a lottery to create a committee to audit the bank crimes and make recommendations of criminal indictments directly to a jury foreman chosen at random. How do we create a system to remedy the corruption in the system? We need citizen guardians randomly chosen like juries. random power may be our only insurance.
+1. Totally agree.
Excellent points CB, you convinced me.
You're gay.
Brilliant response!!!! Can't believe the Mensa Club didn't consider you!!!
How on earth could you grow the Welfare State if you couldn't debase the existing money supply?
If you can't extract the transfer payments to the welfare recipient, by a systematic confiscation of stored wealth from the saver, how will you get your pudding?
They will have pudding lines instead of welfare cards to buy pudding.
way to derail what could have been an interesting discussion of usury gentlemen.
will leave you with this thought: if we refused to consider ideas from any culture, religion or country that exploited, maimed, manipulated, exterminated, dominated, (etc.) people of their own and other cultures, there wouldn't be any ideas to consider.
(CB, perhaps we will have enough time & patience one day to discuss this in an unemotional framework. if and when that day comes, you should do a post about it, as methinks that the west has much to learn philosophically from the east in the subjects of banking, debt and wealth.)
The east has much more to learn from the west. Most eastern nations continue to live under benevolent and not-so-benevolent dictators.
Borrowing from an Islamic bank is akin to having Tony Soprano spot you a little change- many, many strings attached.
The rest, my friend, is advertising.
kayman, yes, you're right, the east has also much to learn from the west as well, especially in the realm of respect for the individual human being. i'm sure we can quibble over quantities til the cows come home, but i'm willing to consider that in the end, it's an equal amount of learning needed from each other on both sides.
and yes, silly me, i was looking in the abstract once again and ignoring the harsh realities. thanks for bringing me back to earth. but in the effort to improve/rebuild/reconstruct, does this make futile exploring the principles on which it was based in order to pick out the things that may work when mixed with other principles?
(e.g. chindit's story on burmese banking)
or maybe is it more worthwhile to throw out the bathwater altogether and discuss the practical possibilities of open-source decentralized banking & finance instead?
This style of banking would certainly be an improvement of the current system. However, I cannot support any system which is based on some invisible, magical diety floating in the clouds (or in "our hearts", or whatever). We've had enough faith-based magic in banking, I'd say.
Unfortunately, fractional reserve banksters will seemingly always find a way to seep in from the sess pools... using bought-and-paid-for politicians as mouth pieces who promise the brain dead masses lots of freebies.
Compound interest is not usury. Whatever lessons the Islamic world has to teach us, Islamic finance isn't one of them. To whom exactly are you prepared to lend your own capital (and therefore put it at risk) for zero return? Just look at S. Korea, Singapore or any number of countries who grew over the last 50 years using "Western" banking vs. countries that used the Islamic model. Limiting the size of our financial institutions and separating plain old utilitarian banking from capital markets focused investment banking and risk taking is what we should be looking at. But there's nothing wrong with making a buck or pricing risk.
Great stuff from JG.
I've watched this all week. So much so, I think I'm in love with the interviewer. Anyone have her number?
Pauline Skypala, she should work with FT in London: +44 20 7873 3000
Good luck!
She told me to go f*** myself. Story of my life, really.
Great pass. My bad not hitting the net.
Wow. I watched this not long after the Larry Summers interview and it's like comparing Albert Einstein to Bobo the Keynesian clown.
(Summers being Bobo, of course)
Cash has been the best performing asset class over the past decade, with the exception of gold and commodities, and he dares to call cash returns "low"?
Certainly, if equities are risky, investors have taken little or no reward for such.
Meanwhile news from Arizona (regarding the anti-illegal laws) ought to scare every right minded bond investor in the USA (and China too). Inflation may show up sooner than some of the deflationistas may expect. At the rate at which small businesses are shutting down, I'd expect more reasons to worry for the consumer - notwithstanding the commodity bubble thanks to the Fed.
They are at least not high enough. One point should be remembered: it is past the point making money is enough. If not making the most money possible or closing to this one, it is all burnt.
ZIRP is a product of the sovereign bond markets, and the near collapse of the corporate sector, not really a policy initiative. If ZIRP is that offensive, perhaps negative interest rate policy would be an anti-climax.
The policy initiatives come in when they issue treasuries, which are overwhelmingly biased in the short end of the yield curve where policy makers are all jawboning for higher short-term interest rates to get them off the hook.
The "bubble" has long since burst, its just a matter of time before deflation sets in.
http://dshort.com/charts/N225-SP500-deflation-series.html?N225-SP500-ove...
What do you mean though about Apple? Isn't it totally normal to expect people to shell out 3X as much as the do for PCs on inferior computers during a recession?
I'd say Apple should be at 175 times earnings, because their products have a shiny glowing Apple on the back.
Hell, it's the same reason I'm (not) buying an iFad!
Went long on AAPL at $197 because I am like a magpie and am attracted to shiny objects.. It's now past $270 in weeks.
Who cares about anything else besides shiny.
i was in netflix from 45 to 55... i thought I was smart cashin out at the time..
You pension fund managers need to find your own forum.
I would have thought it was a bad move then, but obviously time has proven you to be correct!
The only stock I still have in my portfolio right now is F, from 1.50! Hahaha... I'm the shit.... ;)
I'd say to sell AAPL, but what do I know! Given this market, you might get another 100 bucks out of it. Hell, there's some idiot in a beret and thick black glasses buying stock from his iphone right now!
How about the long bond bubble? There is good data going back hundreds of years on the pound sterling, that savers demand a 3% real, after tax return on long bonds. Even if we had good government, and an honest Fed, long yields would look something like this.
3% net (real yield) + 3-4% inflation premium + 3-5% total tax burden = 9 to 12 percent nominal long rate.
It's hard for younger people, especially home owners to accept that, because they have never experienced credit markets that were free of manipulation. The bizarre thing is that any freshman in Econ 201 should be able to figure out where we are in the cycle. How in the hell could rates ever be lower? But "investors" are still lining up to flip houses. Go figure.
+1, absolutely earth-shattering assertion, but true.
People at-large generally don't understand the concept of "risk-adjusted return", and similarly many young people can't conceive of a world without the Fed: Even though that's a relatively recent invention (~80 years), they have never known a world in which it did not exist. Even Bretton Woods is within a few decades, but most people can't conceive of a world before it (because they weren't alive, or weren't adults).
Probability, history, reversion to the mean, and basic third-grader logic all dictates this, so it should be obvious: What are the odds the current 0-2% Fed Funds rate will drop? How much might you "lose" if you bet against that? What are the odds the current 0-2% Fed Funds rate will rise? What might you "lose" if you bet against that?
Reversion happens, though. Double digit rates are-a-commin', because as an investor, you'd be crazy not to demand them on the long bond. Of course, the US Government will sovereign default long before we get to double-digit rates.
Long bond prices are not exactly part of a tradeable commodity, such as you would trade zinc. I believe that lower interest rates are in the cards, not higher interest rates. Its higher risk some sovereign markets that will probably push lower interest rates accross the board, and higher long bond prices for the long term.
Look at longer term Swiss rates, they are almost where Japan's are. If there's anywhere in the world that sees higher long term rates in a sovereign bond market, it has to be Japan.
What central bankers universally desire is higher interest rates in the short term yields, which is an entirely different animal.
On the whole, long-bond rates may stay low for a while (a year or two?), but they can't really get much lower. There's only a couple percentage points room for a drop. In contrast, it will become increasingly clear that soveriegn credit risk makes a long bond paying zero a really bad idea for any "investor" that wants a bond.
I understand large institutions can't just leave piles of cash under the mattress (they have to buy *something*), but opting out of the long bond market will be increasingly a smarter move, including sovereign long bonds. That's why rates will go up.
Anyone buying Greek bonds for the past year must be insane.
I agree with you on Japan (growing sovereign risk, higher long bond rates), but don't believe it's only Japan (IMHO, it's all of the sovereigns).
Of course, there's collusion to keep long bond rates down (e.g., printing), but IMHO that can't hold out ... the numbers are too big.
Agreed, that's the attempt to re-capitalized insolvent institutions on the backs of everyone else. IMHO, though, it won't work (e.g., the numbers are too big, deleveraging is not possible).
Well said Mikla,
There's just no room on the downside. Allan Greenspan complained bitterly that he couldn't control long rates. I don't think comrade Ben can either. I think he's been lucky. One after another our trading partners have been shooting themselves in the foot.
No matter how starved people are for yield, no one is going to sleep well on the other side of this trade.
If you look at Swiss 10-year rates, they are very near to Japanese rates. They were, at one time, around the same as the rest of the Eurozone. So, long bond rates actually can decline a couple of percentage points to the downside, and then remain there for an extended period.
Even through the war, long bond rates remained low after the depression, and as far as I know, U.S. rates were ~2% in 1949.
What we might see eventually in the next few weeks and months are negative rates on either the discount rate or the overnight rate.
Don't know where you are trading, but the CBOT has a good range of interest futures and even options on the US 5 & 10 year notes, T bills and the long bond. We also don't have that evil one half point transfer tax, at least not yet. That would confiscate all wealth in short order.
Anyone wanting to play this for a rise in interest rates should go with the long bond, because the interest component is nearly all of the net present value of the instrument.
I see your lips moving, but just don't understand what you're saying.
1. Don't know that you don't know
2. Know you don't know
3. Don't know you know
4. Know you know
5. back to 1
This is another of the myriad reason I keep coming. Thanks people.
Few students are motivated to seek out the reasons for the existence of money in the first place.
They have been purposely kept in the dark by the state which even when they teach economics leave out the course "What is Money?" and why should it be based on a hard standard.
Perhaps even if they were to learn of the redistribution of stored wealth from the savers to their high school of choice or the university 'professor' who doesn't teach, but has tenure, they might not even care.
I agree with all of your points.
One of my first clues that the housing market was too high was the fact that people needed 1% interest rates just to be able to sign. If they couldn't afford the prices of housing otherwise, what were they going to do when rates rose?
And now we have the answer.
Anybody that is buying houses as an investment for the short term now will feel the rip in the butthole once rates rise again. All rising rates will do to anybody is make the values of housing decrease.
That's why I believe that there's still more downside to go.
Wake me up when the SEC files charges against the Fed.
This is nothing but Fed-sponsored monetary pornography at its NC-17 best.
Ultimately they will be gang-banging a string...
all that just for a KO recommendation?
and i'm with kaiser, but i think the bubble is in 10-30 year maturities, not just the long bond.
agreed. Also, think about all of the extremely low yield stuff, municipals and state debt, that has insufficient risk premium. Lots of opportunities coming up.
Great interview, thanks for posting. GMO is among the top funds I track on a quarterly basis. If you take a look at their Q4 holdings, and click on activity at the top of the ninth column, you will see they are long stocks across the board, so again, watch what they're doing, not what they're saying. Admittedly, they have big positions in staples like Johnson & Johnson (JNJ), Procter Gamble (PG) and Merk (MRK), but they also have big positions in Oracle (ORCL) and Intel (INTC). It's funny he mentioned Coke (KO), because while they have huge positions there too, they've been selling it as of Q4. Kind of makes you wonder about investment gurus talking up their books!
"there is nothing more to this rally that free money and banks' last ditch attempt to lock in another year of record bonuses before it all goes to shit"
This is something I keep on hearing from investment banking friends. When I argue that the markets have gone so far past fair value that it's got dangerous, one said, "why would anybody want the market to go down?" Of course, I would love the S&P to be at 1,400 and with a p/e of 10, but we are at 1,200 and p/e of about 20 (but I don't buy the e number as operating earnings hides a lot of bad shit). But, maybe they are right, the situation is so fucked up, concepts of "fair value" as meaningless as the question, what is a Dollar worth?
Anyway, there seems to be a sense among the bankers that there is not much time left so lets milk it one last time before the big collapse. As for Bernanke, he's like a barman on the Titanic, he knows the ship is sinking and he can't do anything about it, so he might as well keep pouring out the booze.
viz your last paragraph Man W - i was`struck by the size of the goldman QUARTERLY bonus. is this new, i wonder, or do they not expect profits to cover an annual bonus?
Goldman's profitability, by definition, is never in doubt. Someone correct me if I'm wrong, but I think that GS is structured as a partnership, with K-1's and bonuses distributed quarterly.
i was with a brokerage partnership in the 90's and i think that structure precludes the public trading of the stock, but not sure.
nope, they are a publicly listed corporation like any other company.
Most of my investment banking buddies HATE their jobs. And yes, they want to make one last killing fast and get the fuck out of there asap before everything goes to the shits!
The Calgary MLS system is showing signs of stress. Many price reductions occuring in a lot of nicer neighbourhoods with a lot of new inventory hitting. When Calgary is getting stressed...watch out.
The Wizard of Oz- How the Balloon was Launched
"First there was a strip of light green silk, then a strip of dark green, and then a strip of emerald green; for Oz had a fancy to make the balloon in different shades of the color about them......
She was within a few steps of it, and OZ was holding out his hands to help her into the basket, when, crack! went the ropes, and the balloon rose into the air without her. "Come back!" she screamed; "I want to go, too!" "I can't come back, my dear," called Oz from the basket. "Good-bye!" All eyes were turned upward to where the Wizard was riding in the basket, rising every moment farther and farther into the sky."
He mirrored my thoughts verbatim! He did not mention the Hollywood Futures Index being the newest bubble. So how many bubbles do we have now? Dollar bubble (began in earnest in '71 when Tricky Dick told the world no more gold for currentsea), various housing bubbles (Canada, UK, Aussie), emerging market equities, commodities (not yet, but I know people will run there eventually),and the HFI (started 4.20, the aniversary that the final Grand Master of the Knights Templar, Jacque de Molay, was ordained). 4 bubbles! Holy Moly! Blobflation baby!
To add, his advise on investing is perfect. Not that I want to see Coke do well. Shit, I'll say it, boycott COKE!
"CORPORATIONS WILL RULE THE WORLD! MUHAHAHAHA!" Paul Kkkrugman yelled while speeding around a blacktop on a tricycle, wearing an eye-patch. "Yeah! Hey Paul, I'm a racecar! VROOM!" Timmah liked making loud noises too. Usually he had trouble making friends. "Hey Timmah, you hate China too right?" Timmah did not reply, he was busy digging a hole in the mud. "What are you doing?" Paul asked him as he stuffed a cream puff in his mouth. "Hey thats my cream puff!" Shouted Law Wrench Summers as he ran over to him. "Did someone say creampuff!?" C. Romer appeared almost out of no where, smiling as always. Summers doubled over. "I think I am having a heart attack." "Then I get the cream puff." Romer said, still smiling. "Aweady gown." Paul had stuffed the rest in his mouth. Summers was lying on the ground. "I need a coke, stat. Someone get me a coke." Timmah threw white powder on him as he ran by laughing hysterically. "That will do. SNORT." "Did someone say Coke?" She was still smiling. "God you are oblivious," quipped Kkkrugman, as he did a line off of Summers' belly. "Shut up!" Romer replied. She was still smiling.
Edit:
5 bubbles, not 4.
This guy makes me feel sane..... thanks dude!
Our leaders have our best interests at heart and are doing everything possible to restore our economy to firm footing. Our President puts the country ahead of politics. His policies will benefit the poor and dispossessed. Those who have benefited most from the market economy must give back some of their wealth so that others may benefit. Have faith in the vision.
I hope you forgot to turn on sarcasm befor that post....
I bet your bong is covered with Obama stickers. Don't smoke up all your good shit the hard time are coming. Get some five gallon pails of Doritos for the munchies.
Oh yes indeed. He articulates his plans and visions to support the 'heart of our financial sector' in Manhattan so very well.
http://www.huffingtonpost.com/2010/04/22/obamas-wall-street-speech_n_547...
Never mind, I'm on the phone with Don Stott or Jason Hommel.
Till now we're in love with bubbles as nobody experienced ever the negative effect of a total breakdown due to bubbleconomics.
This shit gets deeper. If you really knew the truth.
Amounts outstanding of over-the-counter (OTC) derivatives - 2009
http://www.bis.org/statistics/otcder/dt1920a.pdf
The casino is very desperate. Let's look at the latest peasant looting.
Ordering Domino's Pizza on TiVo
http://www.youtube.com/watch?v=jhYSEFIixi4&NR=1
Domino's Pizza Australia iPhone App - Order Domino's Pizza on your iPhone
http://www.youtube.com/watch?v=YyEW9gwrtsM
2010 Fall Pilgrimage
Sept. 9-20, 2010 Oberammergau, Germany
http://www.legatus.org/public/index.asp
Follow the leaky spigot. The CFR loves to create Rome drama. The peasants lap it up
http://www.legatus.org/public/media/0-2010_fall_pilgrimage_autogen/Oberammergau_Registration_Form.PDF
Cough. Sneeze.. Cough.
reinhart fan?
- Rome, Legatus, Pizza, Peasants...hmm.
Steve Liesman's response: There is no bubble. What bubble? Show me the bubble.
Answer: It's obviously in his brain.
Not in his veins? Pity.
Nice.
Heh.
Mario Bartiromo in fact suggests that boom & bust is good for america. I sort of agree with her actually !!
http://finance.yahoo.com/tech-ticker/maria-bartiromo-%22i-don't-think-there's-anything-wrong-with-a-boom-bust-economy.%22-473001.html?tickers=xlf,xhb,%5Eixic,%5Edji,%5Egspc,c,gs
The next bust will be a sight to watch from the sidelines.
'Mario' lol looks more and more like the fat plumber
bartiromo is as relevant now as she was when the ramones first asked her to their parties.
"This is nothing but Fed-sponsored monetary pornography at its NC-17 best."
Altar boys are to Catholic priests as tax paying citizens are to central bankers.
What's with the junking? That was a great line! Let me go spread it around. :-)
Piling up the proof that "The Great Recession That Never Really
Was"...
Rasputin
- Sat, Apr 24, 2010 - 07:54 AM
...has been completely crushed under a mountain of Infinite Fiat.
As have the hopes and dreams of stock bears, deflationists and
other assorted "Doom and Gloom Types" such as ol' Rasputin.
Let's start with everyone's favorite, the venerable DJIA:
It's up EIGHTY FRIGGIN PERCENT in thirteen months, and UP EIGHT
STRAIGHT WEEKS IN A ROW!!!
Heh, but what's even more staggering than that meteroic rise in
electronic-digit casino chips is the explosion of new McMansion sales:
Up a stunning:
TWENTY-SEVEN PERCENT
...in one month! (March over February).
What's even more disheartening to deflatonists, however, is that
the median price for a new McBox is a whopping, eye-popping:
TWO-HUNDRED FIFTY THOUSAND FIATSCOS!!!
...which is just mind-blowing when one considers that this sky-high
price is roughly SIX TIMES the median sheeple income of 45k fiatscos or
so AND we are three years into the supposed biggest real estate
collapse the world has ever witnessed.
Moving on to the "Heartland", RV's are staging a spectacular
comeback as well, with sales up double-digits, and Elkhart, Indiana
(where seventy-percent of all RVs are made) booming again--even as gas
prices creep back up and over three fiatscos per gallon.
Speaking of Infinite Fiat, let's check in with the "Champion Credit
Chronicler" himself, Doug Noland, and see what horrors his latest
"Credit Bubble Bulletin" has in store for deflationists and Doomsters,
shall we?
To wit:
"Federal Reserve Credit jumped $20.5bn last week to a record $2.318
TN.
Fed Credit was up $98.3bn y-t-d (14.4% annualized) and $149bn, or
6.9%, from a year ago.
Elsewhere, Fed Foreign Holdings of Treasury,
Agency Debt this past week (ended 4/21) surged $21.8bn to a record
$3.056 TN.
"Custody holdings" have increased $100.9bn y-t-d (11.1%
annualized), with a one-year rise of $409bn, or 15.4%."
(Ras): Should I stop there, or torment you with EVEN MORE facts and
figures?
Okay, you asked for it:
"International reserve assets (excluding gold) - as tallied by
Bloomberg's Alex Tanzi; were up $1.261 TN y-o-y, or
18.9%, to a record $7.924 TN."
(Ras Conclusion): As much as I DESPISE these facts, and HATE WITH A
PASSION both our corrupt monetary system and the fact that TPTB have
rubbed my little Rasputin snout in their endless fiatsco piles, my
obligation is to report the truth as I see it.
And even the blindest, dumbest, most stubborn, stalwart Rasputins
must stand in slack-jawed wonderment and awe at the outstanding job the
Fed and Uncle Gorilla have done in turning the "Great Disintegration"
into "The Great Recession That Never Was".
Bernanke, Geithner, Paulson and Hopey, I salute you.
Sadly, Robo, no drunk driver ever stops drinking after the first DUI. Ever.
My dad plowed into a car when he was drunk and a little girl lost her eye. He did a little jail time. Didn't stop him from drinking and driving.
Our country is run by a bunch of drunk drivers.
1. Don't go out on the roads after 10pm on a Friday or Saturday.
2. Don't count on our government to value your life, assets, or rights over their buzz.
More bubbly, anyone. Drinks are on Uncle Ben.
"ME! [Bueeeerrrrrrp!]" -Law Wrench Summers
I wish someone would start to track the overnight parking passes for Walmart parking lots. I see more people living in vans and RVs parking in Walmart lots. The other day I counted 13 at 8PM. They park in other big box store lots too, but Walmart is traditionally the most friendly to these people.
RobotTrader
I always enjoy your postings on that site. Ras always makes my day in the creative writing skills and metaphors used.
Robot, the sustainability of the invested fiat is what is in question here.
The liquidity was a boost, as it should be. You provided a lot of different facts that show its impact. But, what is the real economic longevity in the way it was spent. The question is the real return on investment. The RoR, in this particular instance, must include costs of borrowing.
In this scenario we have the requirement to continually scrub debt. That is, we are never free of future cost of borrowing. The effect is one of prolonged exposure to the cost of credit. In this case sovereign debt. This must also include the sensitivity to sovereign debt rates in a de-leveraging global environment.
The mistake, from a the liquidity standpoint, was one of efficiency. The majority of the FED balance sheet went towards MBS. But, this was really just a way to de-leverage banks balance sheets by moving their bad debt through Freddie, Fannie and direct (FDIC). Essentially, we have spent our treasure on bad debt. The result is to burden the productive capacity of the economy through indirect cost of borrowing, but also in the capacity of such borrowing.
Fiscally, we are not in a position to withstand this squandering of national wealth.
One way of looking at this, is to realize that the FED said it wanted to hold its MBS for about two years before trying to sell? The $1.35T should have been invested in rebuilding today. They have taken almost one years tax receipts and gave it to private banks who now hold it in reserve. This is a very strange way to stimulate growth, and I would argue a very inefficient way. The key here is that the money was not invested in the economy, the money was used to clean up the balance sheets of the big banks.
Also we must realize that if real estate prices adjust to mean wages the MBS investments are potentially worthless. We would have been far better off just buying more Treasuries. Even though this to is unacceptable, because of long term exposure, they are at least a little more efficient in economic benefit through government spending today.
Our money should have been spent on growing the productive elements of our economy that are sustainable in terms of generating tax revenue at resonable rates.
Mark Beck
Once again, simple fact is because of the FED and our flawed monetary system(and yes, crooked) there is way too much money around than there are real economically productive uses for.
When you have massive reverse inquiry from buy siders in the Junk Bond world begging for more supply, you get 10X levered subordinated deals being done with no covenants that end up funding a $400mm dividend payment to their Private Equity sponsor so Steve Schwartzman can buy another house.
When you have capacity utilization at 73%, besides refi's, which everyone in the junk world has already done, what else is there for them to do with money. Were gonna see more leveraged recaps, buyouts...Thats why stocks can keep going. As long as Junk bond appetite is strong, stocks cant go down.