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Kyle Bass' Latest Must Read Letter: "The Cognitive Dissonance Of It All"

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The Cognitive Dissonance of it All (pdf)


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Tue, 02/15/2011 - 12:11 | 963633 43 Steelie
43 Steelie's picture

Thank you TD. This guy is one of my 2 must reads in addition to Sprott.

Tue, 02/15/2011 - 13:48 | 963969 Cash_is_Trash
Cash_is_Trash's picture

maintaining a sufficient inflation buffer and applying preemptive easing as necessary to minimize the risk of hitting the zero bound

Scary meddling going on at the Fed.

The 2004 document was written by Bernanke, Reinhart and Sack.

Fantastic document by Bass.

Wed, 02/16/2011 - 03:20 | 966006 StychoKiller
StychoKiller's picture

My intuition tells me that hitting the zero bound will result in a lot of financial calculations bending by 90 degrees and becoming completely Imaginary number(s) in the Argand plane!  Oscillations will be the least of our worries...

Tue, 02/15/2011 - 12:29 | 963661 NOTW777
NOTW777's picture

dont worry obama promising right now to cut the deficit in half

says the deficit is Bush's fault and from the "previous decade" and due to the recession.

Tue, 02/15/2011 - 12:20 | 963664 markmotive
markmotive's picture

Absolute must read.

Might also suggest listening to this interview on the global debt trap:

Tue, 02/15/2011 - 12:30 | 963700 Chris Jusset
Chris Jusset's picture

Agreed ... a must read ...

Tue, 02/15/2011 - 12:20 | 963665 jus_lite_reading
jus_lite_reading's picture

Took quite some time to read but will require more DD on my part. In all, very good work. Some quick notes:

I believe the EU will be forced to abandon the PIIGS or disintegrate completely- the great EU experiement failure.

I believe the EU is in the worst fiscal condition of all, followed by the US and UK close second.

I believe social unrest in the US will explode on the scene very very soon but it will begin in Greece once again.

I believe a global cataclysm is imminent and the direct result of greed, corruption and the love of money. More later.

Tue, 02/15/2011 - 12:32 | 963713 Hubbs
Hubbs's picture

I think US still too numb and dumb, fat, lazy etc to launch civil unrest at this point. Will need to time, but also will take a European country to show us the way first.

Biggest concern is how quickly can things unravel,  even more so  than whether they unravel.

Tue, 02/15/2011 - 12:38 | 963732 Johnny Lawrence
Johnny Lawrence's picture

Hope you're right, Hubbs.  I've lost faith in the American public.

Tue, 02/15/2011 - 13:10 | 963861 Agent P
Agent P's picture

Faith, does not exist, in this dojo, does it?

Tue, 02/15/2011 - 13:04 | 963840 HellFish
HellFish's picture

Most people in the US are a week or less away form being very hungry.  Very hungry people will act violently. 

Tue, 02/15/2011 - 14:04 | 964043 jus_lite_reading
jus_lite_reading's picture

Actually, very hungry people's very hungry children will make very hungry people act violently. The end has drawn near. We're counting down the days, not years...

Tue, 02/15/2011 - 14:02 | 964035 jus_lite_reading
jus_lite_reading's picture

How fast? This fast-


Coming to a town/village near you...

Tue, 02/15/2011 - 14:31 | 964168 Vergeltung
Vergeltung's picture

my balls instantly ingite in flames if I connect to GlueHuff. sorry.  what did it say?

Wed, 02/16/2011 - 03:24 | 966008 StychoKiller
StychoKiller's picture

Wisconsin Governor and state house are gonna toss out all collective bargaining(s) for public employees -- do Cheesheads know how to Riot like Egyptians?

Tue, 02/15/2011 - 12:23 | 963675 SheepDog-One
SheepDog-One's picture

Just Lite agreed on those points.

Equities are the least relevant thing around, but people are trained to believe 'stock markets=economy'.

Tue, 02/15/2011 - 12:27 | 963689 Hubbs
Hubbs's picture

The stock market is a front. Just like a legitimate appearing business that crime families set up to hide behind, and whose real purpose is to launder money, just as the FED is laundering Wall Streets crooked "investments" (bets) gone bad.

Tue, 02/15/2011 - 12:51 | 963791 kridkrid
kridkrid's picture

Nice analogy.  I will use as my own :-).

Tue, 02/15/2011 - 14:09 | 964073 jus_lite_reading
jus_lite_reading's picture

Excellent anaolgy. It's amazing it has taken a crisis to expose this rigged game for what it truely is- a money laundering, "wealth transfer" from the middle classes to the now even more wealthy. Even Warren Buffet is shaking in his boots.

Tue, 02/15/2011 - 12:28 | 963698 alexwest
alexwest's picture

thank GOD there's second guy in whole world ( excl myself) WHO DOES KNOW THAT COMPARING FED DEBT / GDP IS BOGUS

GDP iS fake.. that why OBAMA prosiimng cut in half.. he's not promizing cut in absolut $$, he cutting debt/gdp ratio.. its made up to glide out levels of debt.. so only proper way to measure is DEBT/FEDERAL REVENUES, OR COST OF SERVICING/DEBT..

so any zane person reading that understand that in 2,3 eyars of +1.5 trln budget deficits it will be THe END..

DEBT IS GONNA HIT $18-20 TRLN.. no way out.. only cost of servicing will be 1/3-1/2 of federal budget..
so there will be either default/new $$ curr, or HYPERINFLATION (AKA PRINTING MONEY AKA Q. EASING)

hiking taxes wont help,,. you can double yet budget wont
be balanced.. and not taking account of deminishing economy ..who WOULD WORK TO PAY 50-80% INCOME TAXES.. ???

so save your self,, out money into gold/silver ,, move out of US , Australia/Canada/Europe and just watch..


Tue, 02/15/2011 - 12:35 | 963720 melachiro
melachiro's picture

Dude, try decaf.  I get a migraine trying to stumble through your posts.

Tue, 02/15/2011 - 13:11 | 963866 Nepenthe
Nepenthe's picture

Hmm, that gave you a headache but your patch indicates you've spent many hours sitting under a giant microwave beam. Brilliant!!

Tue, 02/15/2011 - 12:29 | 963699 Boilermaker
Boilermaker's picture

Who gives a shit?  REITs have just, again, reversed their large sell off and are sailing into positive territory.

Hell, this is like being on the right side of a point shaving scandal and having the referee's complicit with it!

Tue, 02/15/2011 - 12:32 | 963701 buzzsaw99
buzzsaw99's picture

everything will be fine once fannie and fraudie regurgitate the toxic crap they ate back into the laps of the banksters for pennies on the dollar.

You go back, Jack, and do it again...

Tue, 02/15/2011 - 13:29 | 963916 living on the edge
living on the edge's picture


Great song too!

Tue, 02/15/2011 - 21:22 | 965509 abalone
abalone's picture

Ain't that the truth. Deal me in!

Tue, 02/15/2011 - 12:31 | 963710 bluehorsesandal
bluehorsesandal's picture

A couple of months ago I put a link to this Charles Mackay's quote in my Bloomberg banner. My commitment is to keep it there as until we see asset prices showing that people recovered their senses...

Tue, 02/15/2011 - 12:35 | 963721 Racer
Racer's picture

: Fed's Lacker says any new Fed effort to cut unemployment risks inflation


and Fed's Cumming said inflation is quite low at the moment


Which planet are these people on?

Tue, 02/15/2011 - 22:43 | 965683 The Navigator
The Navigator's picture

That's the problem, they're on OUR planet - if we could just get them Off Planet, what a paradise we'd have.

Maybe we could take a piece of Alaska, rename it the State of Corruption, ship them all off to there, and they can go FUCK each other and leave us alone.

Tue, 02/15/2011 - 12:36 | 963724 PicassoInActions
PicassoInActions's picture

Today on CNBC

"Adding to the cost of food won’t greatly distort most household budgets. Food, gas, clothing, personal care products and cleaning and laundry supplies make up less than a quarter of household spending in the United States, according to government data."


Does any1 know where did they collect this data?

Tue, 02/15/2011 - 12:40 | 963742 Johnny Lawrence
Johnny Lawrence's picture

I've read in other places that groceries only comprise 5-6% of the average American household budget.  I don't know if that's true or not, but it's what I've seen.  Stark comparison to Asia & Africa where its 30%.  Again, no idea if the numbers are accurate.

Tue, 02/15/2011 - 12:42 | 963755 Quintus
Quintus's picture

I believe they just pull it out of their collective asses.

Tue, 02/15/2011 - 12:44 | 963759 DonnieD
DonnieD's picture

They must collect it from family's earning $250,000+.

Quick math says that a family making $100,000 easily spends 35-40% of their net pay on food, gas, clothing, cleaning and laundry supplies. A family making $60,000 can easily spends 50% of net pay on those items.

Tue, 02/15/2011 - 13:26 | 963911 TooBearish
TooBearish's picture

Yep - they collect the data from the dark, cavernous void in their Ivy league buttholes

Tue, 02/15/2011 - 13:30 | 963918 AZSovreign
AZSovreign's picture

Speaking of clothes a pair of Levi 501 jeans went from $34 to $58 here in AZ at a local dept store...

Tue, 02/15/2011 - 14:14 | 964087 jus_lite_reading
jus_lite_reading's picture

Coming from CNBS, you know it's BS. My calculations put middle class Americans spending on food, fuel and non-discretionary items ex housing at 32%-38% soon to be 45%

Tue, 02/15/2011 - 12:42 | 963752 Cognitive Dissonance
Cognitive Dissonance's picture

Kyle Bass' Latest Must Read Letter: "The Cognitive Dissonance Of It All"

You rang? Sorry, but I was taking a nap.

We must be nearing a top. All kinds of people, including those who already knew and were outspoken and those who were too afraid to speak out against the herd, are calling for the Fed's head.


Tue, 02/15/2011 - 14:02 | 964037 Miles Kendig
Miles Kendig's picture

As this inexorable process maturates.

Tue, 02/15/2011 - 14:14 | 964090 Cognitive Dissonance
Cognitive Dissonance's picture

Hey Miles,

My brand new "Certified Junk by Cognitive Dissonance" mugs just arrived from the WilliamBanzai7 Zazzle store. I'm the first kid on the block with the new CD mugs.

Are you jealous? :>)

Tue, 02/15/2011 - 14:38 | 964183 Miles Kendig
Miles Kendig's picture

:D  Just because I can't help it .. It's a recession!!  Welcome to commodities inflation at the retail level


I'm having enough trouble trying to hold that black coffee in my Mad, Mad world or digital dickweed mug, hence the reason I have to add bits of chocolate on occasion.  Still get the shakes from ponzinomic withdrawals once in a while. 

No such thing as too much love for the incomparable art, or those that generate it at wb7 labs.


Tue, 02/15/2011 - 14:46 | 964237 Cognitive Dissonance
Cognitive Dissonance's picture

I feel like a little kid in the candy store every time I visit WB7's store. Oh, I want this. No, I want that and this. An that and that and that.

Then the adult in me makes me promise I'll only spend $50......this time. Note to self. Call my accountant and see if I can claim WB7's stuff as a business expense. :>)

I love that so many of the ZH veterans have been showing up lately. Old timers month at The Hedge.

Tue, 02/15/2011 - 15:29 | 964361 Miles Kendig
Miles Kendig's picture

Big time.  All around.  I am simply loving how the fight clubbers are driving considered opinion beyond the 140 standard of Twitterization.  Yes, many of the macro situations have been resolved for many, but that does not preclude some super D duper absurdly dynamic or dynamically absurd spins down thread.


And yes folks, Zero Hedge is THE spot to find the very best in bastard (and the trolls that live off the labor of others)

Stamp that trunk junk Cog!!

Tue, 02/15/2011 - 15:06 | 964344 Revolution_star...
Revolution_starts_now's picture

Damn it CD I was hoping to get my avatar on a coffee cup, T shirt or maybe something big enough to put on a bill board.

( bernank blowing cash out his ass, a classic i tell you, a classic)

Wed, 02/16/2011 - 03:36 | 964402 Miles Kendig
Miles Kendig's picture

No doubt.  And a hella better junk than that bowling for dollars, Kardashian crap linked above.  Even if it as all fiat!  I'd rather have the tickets than that junk

Cheers and here's to hoping all that passing ink doesn't plant a tat on your trunk

Tue, 02/15/2011 - 12:57 | 963812 papaswamp
papaswamp's picture

Since 2002, global credit has grown at an annualized rate of approximately 11%, while real GDP has grown approximately 4% over the same timeframe – credit growth has outstripped real GDP growth by an astounding 275%.


Wowza! Great analysis on Japan are they screwed sooner than I thought.

Tue, 02/15/2011 - 13:22 | 963900 blindman
blindman's picture

Tuesday February 15 9:00am   1 hour News

great interview here. "road map to catastrophe.."

Tue, 02/15/2011 - 13:25 | 963908 Downtoolong
Downtoolong's picture

Thus far, the systemic risk that was present in the global credit markets in 2007 and 2008 has not subsided; rather, it has simply been transferred from the private sector to the public sector.

Well said. Most profits of big banks come from successful risk transfer. By successful, I mean risk transferred to those who usually don’t realize they are on the receiving end. The banks are smarter than most to realize that risk transfer and wealth transfer are one and the same.

As for systemic risk, I’m not sure anyone has yet defined exactly what it is. Nonetheless, I’m sure Wall Street banks will claim they have it under control once they have distilled it down to a single index and written $100 Trillion in OTC derivatives contracts based on it.

Tue, 02/15/2011 - 13:32 | 963920 johnnymustardseed
johnnymustardseed's picture

I think is sort of silly to say that interest rates will go up. How can they, when the FED is buying/creating the debt? There will soon be only one buyer and that will be the FED. So, it is all funny money anyway. It is important to think more about where you want to be when this comes to an end.

Tue, 02/15/2011 - 13:51 | 963983 A Man without Q...
A Man without Qualities's picture

A 100 bp increase in the average cost of debt for the US government will raise interest expense by  approximately 6 times the latest quarterly revenues of Apple.  

We are living in the realm of the absurd.

Tue, 02/15/2011 - 14:06 | 964062 DonutBoy
DonutBoy's picture

Interesting point about central bank leadership straight from academia, as in LTCM.  What could go wrong?

Tue, 02/15/2011 - 14:08 | 964067 Racer
Racer's picture

: US Treasury's Geithner says must reform entitlement programs to rein in debt


Yes, entitlement programs like the daily entitlement programs that give all the taxpayer money to primary dealers type of programs.. end those today and stop fleecing the people and killing the poor, sick and elderly

Tue, 02/15/2011 - 14:52 | 964266 jmc8888
jmc8888's picture

Not to mention let the bondholders lose on their fraudulent bonds.  Everyone knows they are.  Even if we did this in 2008, no one could legitimately complain.  In 2011, it is flat out retarded for anyone to think this way.  This stuff is WORTHLESS. 


We have 3 options

1) Print (keynesian)

2) Cut through imposing austerity (austrian)

3) Glass-Steagall (wipe the fruaulent shit out of the entire system, starting with ourselves)

Now, not only do #1 and #2 not solve the problem, they make the people who created this crisis whole at the expense of others.  At least until the hyperinflation hits.  (if they stop printing it's back to hyperdeflation, as what caused the collapse of derivatives can and will happen again).  This doesn't mean PRINT, because again printing is leading to hyperinflation that we're already seeing, because it is already here.

So you engage in #3, where the people who knowingly bought crap, are made in a capitalistic system to lose.  Now Glass-Steagall looks at everything on the books. MBS, CMBS, derivatives...EVERYTHING.  What isn't real, which is the MAJORITY of financial aggregates, will be wiped away, and with that, over 17 trillion in today's debts.

Yes, this not only rids the 'problem' once and for all, it also gets rid of the 'debt' or the secondary problem.  So instead of paying lip service to one by empowering the other, you shut BOTH SHITTY PROBLEMS DOWN.

Glass-Steagall or New Dark Age

Side note: Jesus Obama is tossing off Warren on tv: Just look at the so called democrat suck the cock of the great WB.  Seriously, obama is calling for the nut in his mouth. 



Tue, 02/15/2011 - 14:38 | 964194 redpill
redpill's picture

If there was one question I wish I knew the answer to, that would be "how long can they keep it up" (and I'm not referring to a rare but potentially serious Cialis side effect)


Tue, 02/15/2011 - 23:00 | 965711 The Navigator
The Navigator's picture

Same here - every morning I scan the financial websites to see if reality finally hit. One day it will. It's amazing to see these ponzi markets and ponzi governments continue while the zombified sheeple wander around in Idiocrastan, oblivious to the butt fucking they're taking.

Tue, 02/15/2011 - 14:56 | 964294 mcguire
mcguire's picture

kyle bass has a hard on for selling japanese debt.. i guess in his view, this will be the first ponzi to go.  from my read, he is hedging fiat with fiat, which is great, but you have to be nimble.  from an 'individual investor' point of view, when the music stops, it will be hard for me to cash it all in at the coin shop and say, "cool, i shorted jgbs, bought mbs's, made a fortune in these here USDs, now give me 2 pounds of gold"...  from the little guy perspective, accumulation of physical is the most prudent way to go..  oh yeah, i bought 2500 starbucks via packets too, wrote them off as a business expense, diversifying the physical portfolio.. surprisingly, these nice little packets have not increased in price in the past 3-4 months.  :)

Tue, 02/15/2011 - 15:14 | 964379 redpill
redpill's picture

Well if he only advised people to buy bullion, they probably wouldn't be willing to pay him top dollar for his investment services.  If they need someone who can dodge in and out of JGBs while they sleep at night, well then that may be worth paying someone!

Tue, 02/15/2011 - 17:46 | 965004 6 String
6 String's picture

Well if he only advised people to buy bullion, they probably wouldn't be willing to pay him top dollar for his investment services.  If they need someone who can dodge in and out of JGBs while they sleep at night, well then that may be worth paying someone!

Hayman owns bullion fwiw.

Anyone have any idea how to short JGB's?

Tue, 02/15/2011 - 20:49 | 965424 co2010
co2010's picture

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Tue, 02/15/2011 - 21:18 | 965504 topcallingtroll
topcallingtroll's picture


Tue, 02/15/2011 - 21:18 | 965505 topcallingtroll
topcallingtroll's picture


Tue, 02/15/2011 - 21:44 | 965540 duncecap rack
duncecap rack's picture

Fantastic post. Zero Hedge rocks.

Tue, 02/15/2011 - 23:35 | 965793 PulauHantu29
PulauHantu29's picture

Who cares? Recession is over, isn't it? The Bernank said so.

Wed, 02/16/2011 - 14:33 | 967459 huckman
huckman's picture

Too bad Kyle didnt expand his Japan currency devaluation outcome scenario further. i.e. which sovereign would be most negitively impacted and hence which would most capitalize from that scenario.   

Tue, 03/08/2011 - 12:32 | 1029843 nyse
nyse's picture

This dude is so on it.

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