This page has been archived and commenting is disabled.

Michael Pento Says Double-Dip Recession Is Now Guaranteed

Tyler Durden's picture





 

As usual, Pento's TV appearance are about as contained and demure as Alan Greenspan on Ambien: "[Bernanke's statement that the economic recovery is intact] guarantees that we are going to have a double dip recession, because his track record is 100% accurate, but it is 100% accurate in the wrong direction. I look at markets and I look at economics, and since this whole rebound was derived by artifical means, why would I ever believe that we are not going into double dip recession. Should I listen to Ben Bernanke or should I listen to the price of oil which contracted from $85 to $72 a barrell in few weeks, should I listen to the 10 Year that went from 4% to 3.2% in a few weeks, should I listen to Doctor Copper that went from $3.50 a pound to $2.77 a pound: where would I want to put my allegiance with, markets or Ben Bernanke. We need to sell assets, and we need to allow the deleveraging process to consummate. We are going in a wrong direction and that's the double dip recession is virtually assured. 2008 taught us very clearly that decoupling is a dodo bird's philosophy. The US is headed down. You'll see home starts, permits, sales plummet in the next few months, that's going to add more supply to the housing market, that's going to put bank assets under duress, that's going to put their capital under duress, and that's going to help bring us into a double dip recession." Pento's asset allocation advice: high levels of cash, hide in the short-end of the Treasury curve, and own gold, precious metals and high-paying dividend commodity stocks.

When the man speaks the truth and nothing but the truth, there is little to add.

h/t Adam

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/09/2010 - 17:51 | Link to Comment painequalschange
painequalschange's picture

"high-paying dividend commodity stocks"

such as?

Wed, 06/09/2010 - 17:58 | Link to Comment pigpen
pigpen's picture

Sorry computer glitch. Only meant to post once.

Wed, 06/09/2010 - 18:31 | Link to Comment Freebird
Freebird's picture

Fat fingered Piggy.

Wed, 06/09/2010 - 18:03 | Link to Comment Monkey Craig
Monkey Craig's picture

POT

Wed, 06/09/2010 - 18:03 | Link to Comment Lets Hang Parliament
Lets Hang Parliament's picture

Well once upon a time BP...

Wed, 06/09/2010 - 18:08 | Link to Comment Careless Whisper
Careless Whisper's picture

pento has perfected the "whatev" raised eyebrows, hands in the air. (@ 3;48)

Wed, 06/09/2010 - 21:46 | Link to Comment Howard_Beale
Howard_Beale's picture

Yeah, he has that one down. Pento reflects what the collective at ZH already knows. The double dip is underway. Where is George Costanza when we need him to put on his best Bernanke impression and scream at someone about double dipping. Now THAT would be funny. Jason Alexander, you have been paged.

But back to being seriously serious, Pento's thesis that we will suffer a severe market decline (guaranteed on that one), QE 2 will go into effect, and to load up on materials is a dicy prediction for me. I think there will be enough hedge fund failures forced to liquidate these commodities that we might get the opposite effect. Without China doing their storage game as they did in QE1, where will the demand be to get away from fiat currencies? There may be no demand for materials at all. To believe that QE 2 will actually produce the same results as the first round of QE is iffy, at best. Where are the safe havens? I don't have the answer. I have gold, I have silver, and no debt. I worry constantly about what to do with what I have. I guess I fall not in stagflation as Pento does but in the all out depression camp. Writing really helps one figure out where they stand at times.

So while I agree with Pento that we are on the next leg down, not so sure about his idea where to put your money when the S&P is at 850. Since I am short the market in fiat dollars, and am not a currency trader, and I know I am not alone here, the thought that commodities will be the things to own when China has already stockpiled what they need for now and many years forward seems to be last year's trade.

Open to all comments on this. My gut is that QE 2 will not be met with the same reception as QE 1. Stagflation, depression, hyperinflation. The same discussion we have had on this blog since I joined last July. I guess we will have to wait and see. Because I sure don't have the answers and don't trust anyone else with what I have but myself.

Wed, 06/09/2010 - 22:13 | Link to Comment Mr Creosote
Mr Creosote's picture

While I don't have the answers, I think you're ahead of the pack by having some PM and no debt.  I'm more concerned about deflation than inflation presently. In which case, I'm comfortable with a larger cash position and a conservative portfolio with a strong dividend yield.

Thu, 06/10/2010 - 00:13 | Link to Comment RockyRacoon
RockyRacoon's picture

QE-2 will come.  Or, it's in the process of it as we speak.  It won't be called QE-2, or anything else.  Congress will have no input.  Did Congress vote on AIG?  The Fed doesn't want an audit!  Now we know why.  Not only would the common folk burn down half of DC, but Congress would tar and feather Bernanke.  QE-2 will be (is) a quiet operation.  We should be looking for those back-door signs, not an obvious move to liquefy that can take criticism.

Thu, 06/10/2010 - 01:54 | Link to Comment Pondmaster
Pondmaster's picture

Howard -

 

I have the same concerns as you . Where is a safe place ?!?!? Like Fox Mulder , I trust no-one . Top o list - Our Gov't , next on list , Big Banks (TBTF) , next corporate America , next MSM , and lastly myself . I am trying to preserve what wealth I have for my families . My wife leans to spend spend spend  (aka capital improvements ), if dollar is heading north (hyperinflation). I do see selective inflation ahead , especially in the areas that CPI excludes , foodstuffs and energy (aka Climate Bill that will destroy us ) . Thats why I frequent ZH , to find ideas to assimilate .   

Thu, 06/10/2010 - 10:15 | Link to Comment WaterWings
WaterWings's picture

Marriage, yes. For some an asset. Others, a liability.

Thu, 06/10/2010 - 05:40 | Link to Comment total nonsense
total nonsense's picture

Very well said, I think you are exactly right that there will be nowhere safe to hide. I have owned gold on and off here but my fear is the same as yours that when it all breaks down everything will get smoked. Hmmm smoked ( maybe weed is the place to be) haha...But i think in this situation that cash is king and that is where you should be. Sitting on that cash will come in very handy when the market gets crushed and you will be able to pick through some great companies and stocks. I would say GOLD but i am a little up in the air about the deflation/inflation idea.

Wed, 06/09/2010 - 18:03 | Link to Comment Spitzer
Spitzer's picture

BP, 10% yield not good enough ?

Wed, 06/09/2010 - 21:49 | Link to Comment Howard_Beale
Howard_Beale's picture

Chapter 11 is good enough for me.

Wed, 06/09/2010 - 22:32 | Link to Comment jeff montanye
jeff montanye's picture

ge's yield was rich until it wasn't.  these aren't contracts.  they are policy choices.

Wed, 06/09/2010 - 22:49 | Link to Comment Spitzer
Spitzer's picture

GE was into financial services.

Wed, 06/09/2010 - 18:10 | Link to Comment Sudden Debt
Sudden Debt's picture

Air! It seems everybody is using it!

Wed, 06/09/2010 - 19:05 | Link to Comment Kurtieboy
Kurtieboy's picture

Link not working.

Wed, 06/09/2010 - 19:29 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

This YouTube direct video looks correct.

http://www.youtube.com/watch?v=eK-J6E9j27k

Wed, 06/09/2010 - 19:49 | Link to Comment Double down
Double down's picture

Thanks CD

Wed, 06/09/2010 - 20:15 | Link to Comment SWRichmond
SWRichmond's picture

Margaret in red....thanks CD.

Wed, 06/09/2010 - 21:23 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It looks like the video Tyler is talking about is the second one. The first one has pretty Margaret in red. Both total about 9 minutes. Both worth watching. Michael Pento doesn't suffer fools very well, even pretty ones in red dresses.

Wed, 06/09/2010 - 22:03 | Link to Comment Howard_Beale
Howard_Beale's picture

CD,

You can continue to eat and drink as you read this. I can't top my Special Olympics earlier post--been saving that baby for months since I want more categories other than blind hurdles and quad long ski jumping in my never to be published but always politically incorrect Youtube animated farce of the truly "Special" Olympics.

In my post above I have commented about the nearly one year I have been around here and the Stag vs Hyper vs Depression debate we have always had. No one knows the answer and we are all preparing as best we can. I think this all falls into your work and I just wanted to thank you for it.

Thu, 06/10/2010 - 05:56 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Thank you, both for you humor and your kind words.

The last 2 Chapters begin to pull everything together and I do talk about where we go from here. But some people might be disappointed because it means change and personal responsibility and not someone else doing the hard work. And of course it all begins within.  

The thing is that this will come, it will happen, people will become more responsible for themselves and their governance. The question is how much pain do we wish to endure until we make the decision to stop the pain.

Wed, 06/09/2010 - 21:46 | Link to Comment JW n FL
Wed, 06/09/2010 - 21:17 | Link to Comment FEDbuster
FEDbuster's picture

Oil and gas MLP's like Linn Energy (LINE) current yield about 10%.

Wed, 06/09/2010 - 22:55 | Link to Comment bbbilly1326
bbbilly1326's picture

Rio Tinto RTP ?

Thu, 06/10/2010 - 05:10 | Link to Comment Bay Trader
Bay Trader's picture

check out TOT. 4th largest megaoil by market cap, dividend yield currently at 6.88%, p/e below 10. the world will not stop using oil anytime soon and that near 7% dividend is a nice cushion

Thu, 06/17/2010 - 13:28 | Link to Comment Dr. Dre
Dr. Dre's picture

sorry for delay in answering this question - the login approval thing took some time.  

Canadian Oil Sands baby...

check out Claymore Canadian Royalty Trust ETF -- but rather than buy that just buy components directly..  Also a great resource is this site -- independent energy analyst who posts on web for free +30 days after publication.  http://mcdep.com/

Here is what is "solid" about these stocks:

* High, High dividends 8-11%

* this gives (somewhat) of a floor on the equity pricing should we have deflationary bout and oil goes south

* on the other hand Canadian Oil sands (which most of these are) have a high marginal cost of production (btw 60-80/BBL) so when prices go over that (and I say when, not if), you are highly levered to oil price gains...

 

somewhat limited downside, strong upside potential and phat dividends -- you are paid to wait.  About 80% of my equities are in these guys...  good luck 

 

ps. wait for energy pullbacks -- Support for WTI is $65 and Resistance around $85 -- if we get a big crashola a la eliott wave jolt in 4Q as some are saying -- okay oil will be below $65-- maybe mid $50-s but load up the boat baby -- it will triple by 2013-2014 if not sooner...

 

 

Wed, 06/09/2010 - 18:09 | Link to Comment Sabremesh
Sabremesh's picture

If you ask that question six more times, the Good Lord will provide you with an answer.

Thu, 06/10/2010 - 07:28 | Link to Comment blindfaith
blindfaith's picture

"they know not what they do" sums it up.  Maybe the 'good lord' is out of hearing distance, yea...thats gotta be it.  Or else 'he' is tired of hearing the same old crap.

Wed, 06/09/2010 - 19:16 | Link to Comment deadparrot
deadparrot's picture

Hate? If he hates anything, it's BB.

Wed, 06/09/2010 - 19:08 | Link to Comment Hephasteus
Hephasteus's picture

C-C-Combo breaker

Wed, 06/09/2010 - 17:58 | Link to Comment nwskii
nwskii's picture

since you asked 7 times no answer is needed

Wed, 06/09/2010 - 18:05 | Link to Comment Duuude
Duuude's picture

 

BellySnort!!!

Wed, 06/09/2010 - 18:10 | Link to Comment Sabremesh
Sabremesh's picture

Some people will believe anything. Sorry, I was joking - there is no God.

Wed, 06/09/2010 - 18:12 | Link to Comment Blues Traveler
Blues Traveler's picture

sabremesh, God is dead...God "sabermesh is dead"

Wed, 06/09/2010 - 18:20 | Link to Comment gmrpeabody
gmrpeabody's picture

ROFLMAO!!!

Wed, 06/09/2010 - 17:59 | Link to Comment Pladizow
Pladizow's picture

Marc Faber, Jim Rogers, Peter Schiff, Gerald Celente and many more, could not have said it better.

In a year or two from now, will Ben testify to the fact that no one could have seen the double dip coming?

Wed, 06/09/2010 - 18:02 | Link to Comment Conrad Murray
Conrad Murray's picture

We need to all throw down on a Hollywood costume/make-up artist.  Get someone from the ZH crew all fancied up like one of the Congrescreeps and have him or her sit in on one of those hearings and get the shit flying.

Wed, 06/09/2010 - 18:07 | Link to Comment Duuude
Wed, 06/09/2010 - 19:10 | Link to Comment The Rock
The Rock's picture

but of course!!

Congress:  So you do know where the economy is heading?

Ben: It wouldn't be inaccurate to assume that I couldn't exactly not say that it is or isn't almost partially incorrect. Oh, on the contrary. I'm possibly more or less not definitely rejecting the idea that in no way with any amount of uncertainty that I undeniably do or do not know where the economy shouldn't probably be, if that indeed wasn't where it isn't. Even if the economy wasn't at where I knew it was, that'd mean I'd really have to know where it wasn't.

Wed, 06/09/2010 - 19:11 | Link to Comment akak
akak's picture

+10 Greenspans!

Wed, 06/09/2010 - 19:16 | Link to Comment sushi
sushi's picture

A new paradigm sums it up succinctly.

Thu, 06/10/2010 - 00:18 | Link to Comment StychoKiller
StychoKiller's picture

Alexander Haig:  "I decisioned the necessification of the resignatory action/option due to the dangerosity of the trendflowing of foreign policy away from our originatious careful coursing towards consistensivity, purposity, steadfastnitude, and above all clarity."

Thu, 06/10/2010 - 03:20 | Link to Comment Woosirsir
Woosirsir's picture

I guess I know what you are saying ....

Wed, 06/09/2010 - 17:59 | Link to Comment Conrad Murray
Conrad Murray's picture

A solid and succinct explanation.  Nice clip.

Wed, 06/09/2010 - 18:04 | Link to Comment Monkey Craig
Monkey Craig's picture

anyone else having difficulty loading this video?

Wed, 06/09/2010 - 18:17 | Link to Comment Let them all fail
Let them all fail's picture

what video? (yes)

Wed, 06/09/2010 - 19:23 | Link to Comment Narcolepzzzzzz
Narcolepzzzzzz's picture

Had the same problem, found it on youtube:

http://www.youtube.com/watch?v=g17UX8FoPbY

Wed, 06/09/2010 - 19:41 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Longer version of two interviews on the same day.

http://www.youtube.com/watch?v=eK-J6E9j27k

Thu, 06/10/2010 - 07:38 | Link to Comment blindfaith
blindfaith's picture

any chance of a 'cliff's notes' version for the 50% of Americans still on dial up because the providers thumbed their noses at Pres. Bush's directive to have high speed in every home by 2006, and then re-affirmed by our current puppet.

By the way CD, your series is a mind blower...haven't had such deep thinking since college...heavens knows most folks now days chew their cud like cows with no clue.  Which is just what the international elite want.

Wed, 06/09/2010 - 21:20 | Link to Comment merehuman
merehuman's picture

video? We dont need no friggen video, we got imagination. I read the short article and imagined Bernanke falling down. No other way he coulda fell. Now please flush !

Thanks to bildeburg and rothchild i get a long vacation.

Wed, 06/09/2010 - 18:10 | Link to Comment Blues Traveler
Blues Traveler's picture

You mean I have to for the bj and the hotel room?

Wed, 06/09/2010 - 18:19 | Link to Comment tahoebumsmith
tahoebumsmith's picture

Do you sit in front of a mirror and watch when you mindfu(k yourself like that?

Wed, 06/09/2010 - 18:33 | Link to Comment Slash
Slash's picture

so in our indebted 75% service sector economy......where is the huge rush of buying going to come from? no savings....no credit....hopefully people aren't yet dumb enough to max out whatever credit cards they still have again.....

 

where is this huge spending spree going to come from? What has to happen for leo to change his tune? does the S&P need to go to 10 before he'll admit we're in hot water?

Wed, 06/09/2010 - 19:18 | Link to Comment deadparrot
deadparrot's picture

Ha, if the S&P goes to 10, Leo will be right when he says it is a great buying opportunity.

Wed, 06/09/2010 - 19:24 | Link to Comment centerline
centerline's picture

The big spending spree will happen for sure! Right when Benny fires the full spread of QE2.0 torpedoes. There will be a mad rush to buy everything tangible as the entire world will suddenly realize the USD is going to zero in a flash. That is if the banks don't lock us down when firing solution is locked in.

Wed, 06/09/2010 - 20:19 | Link to Comment TBT or not TBT
TBT or not TBT's picture

We'll all sue each other, all at once, right?, and then money will trickle down from the lawyers and rain down from insurance companies.

Wed, 06/09/2010 - 18:22 | Link to Comment akak
akak's picture

Give it up, Leo, you complete asshole ---- nobody is buying your idiotic, reality-denying, mainstream propaganda here.

As a troll, you receive my automatic "flagged as junk".

I just wish we had a "flagged as obscene bullshit" option here.

Wed, 06/09/2010 - 18:34 | Link to Comment akak
akak's picture

The fool is you, Leo, who thinks he can brainwash the awakened into believing your pro-establishment lies and propaganda.  I don't need to know a great deal about "economic analysis" to realize when I am being lied to and presented with disingenuous, outrageous and malicious disinformation.  But it will disappear soon enough, as more and more posters and readers here become alert to and grow intolerant of your incessant crap.

You sicken me, you fucking Quisling.

Wed, 06/09/2010 - 18:42 | Link to Comment goldfreak
goldfreak's picture

well said AKAK

Wed, 06/09/2010 - 19:18 | Link to Comment akak
akak's picture

Note to new readers: The original post by Leo to which these were posted in response was deleted by being "flagged as junk".  Sorry for any confusion.

Wed, 06/09/2010 - 21:30 | Link to Comment merehuman
merehuman's picture

akak, i listen to what you , GG and many other regulars are saying. Someone like Leo can only fool those who want to be fooled. What you financial fellers call the "Greater fool".   I gather is the last dummy in on the ponzi?

The only writer i have trouble with is Mako. I get its the math, but he keeps intimating "billions will die". I get to thinking he knows more than he is saying and would love to hear how he gets that idea.

 

Thu, 06/10/2010 - 04:06 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Mere, try halfpasthuman.com

Astonishingly prescient so far.

Plus, this is grand super cycle hyper everything time.

So, it will all be over the top.

Plus imagine the true fall-out of DH in the GMO. That has just begun to make itself felt.

For some philosophic takes on the world (see I'm saying it, PHILOSOPHIC), check out my blog:

aadivaahan.wordpress.com

It's philosophy guys and girls. But I feel all of the world is a piece, fractal and all that sort of a thing, so important to be philosophical.

Think! Be. Come...

;-)

Wed, 06/09/2010 - 23:33 | Link to Comment thisandthat
thisandthat's picture

Maybe "flagged as junk" posts should remain, only with content removed and the reason stated  - surely would avoid any confusion.

Wed, 06/09/2010 - 23:38 | Link to Comment akak
akak's picture

Now that such things are happening more and more, I think that that would be a wise course of action here, instead of having gaps and holes left in the threads, some of which have led to mistaken assumptions and bad feelings already.

Thu, 06/10/2010 - 01:09 | Link to Comment thisandthat
thisandthat's picture

That or removing the flag and let people judge for themselves, seeing how this can and is abused.

Thu, 06/10/2010 - 10:19 | Link to Comment WaterWings
WaterWings's picture

@akak

Good word: Quisling

Wed, 06/09/2010 - 18:56 | Link to Comment 43 Steelie
43 Steelie's picture

Leo, it's not facts, it's data you are looking at and interpreting differently from others (in my opinion incorrectly as evidenced by your miss last Friday)

We all get what you are doing...which is being contrarian for the sake of being contrarian. You are looking at the fund flows as well as commenters and thinking to yourself, "Which direction is going to get the most outlandish response from readers?" And you go out of your way to defend it rigorously (even seemingly insecurely at times) with the hopes of telling everyone at the end of the year, "I told you so."

Good luck to you. For all of our sakes let's hope you and the other bulls out there (like Bernanke) are right and things do not turn out as bad as ZH is predicting. I for one am not going to go along with you as I don't think the bottom has been registered yet and would prefer to invest for the long-term.

 

 

Wed, 06/09/2010 - 19:10 | Link to Comment Crummy
Crummy's picture

Hard facts aside, the assertion that the Fed normalizing monetary policy will have a stabilizing effect completely ignores the fact that we've been walked out onto a financial ledge of sorts - Or was it a plank? Sorry, I've developed a short memory as sort of a survival mechanism, I think...

Wed, 06/09/2010 - 18:31 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

Please be respectful of Leo.  Learn the history of how he came to ZH.

I don't agree with him, but I see plenty of facts on the ground in my business that support his case.

Taiwan is "sold out".  Everywhere.  A supplier of mine in China is at capacity -- one of their other customers received an unexpected 100% upside order from their customer.

No small number of sell-side analysts in the electronics space are looking for signs of a peaking cycle.  They are having a very hard time finding data points to support their case.  I believe the peak will come, but from where I sit Q3 looks strong.  With 12 week lead times, Q3 is basically in the bag for many of these manufacturers.

Wed, 06/09/2010 - 18:36 | Link to Comment Slash
Slash's picture

ever think about maybe it's just rational behavior in an irrational and manipulated environment? In other words, they're confusing false signals from the massive government intervention as real sustainable demand, yet are preparing for what they think will be a huge surge in fulfillable demand....

Wed, 06/09/2010 - 18:42 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

Certainly I do.  These guys run very lean, they build to order, and they know all about the whipsaw effect of shortages leading to double-ordering leading to inventory builds.

And that is precisely the thesis of the sell-side guys who are itching to call the peak.  But they are having trouble finding data points to make their case.

The turn will come -- of this I have no doubt.  But I don't see it coming before Q4.

Wed, 06/09/2010 - 21:38 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

We're having a hard time getting bearings from Korea and Japan to our company in Peru.  Someone's economy is running hot!

Wed, 06/09/2010 - 19:24 | Link to Comment zen0
zen0's picture

This is, of course, the classic case of the Austrian Business Cycle theory.

 

How do so many entrepreneurs malinvest all at once?

It is the result of credit expansion.

In the new manifestation, it is the result of governmental fiscal expansion.

It is not good.

Wed, 06/09/2010 - 18:40 | Link to Comment akak
akak's picture

No. I respectfully disagree.

I have nothing but contempt for Leo, and do not see where or how he has earned anyone's respect here.  He consistently does nothing but intellectually insult us, and admonish us to surrender to a corrupt and sociopathic financial elite as "the only game in town".  He denies reality at every turn, and gives us specious and shallow pro-establishment propaganda that reads as if it came directly from CNBC.  He mocks those who dare give a "vote of no confidence" in the corrupt financial and monetary systems by holding gold, deriding it as an "Armageddon play" in the most specious and vacuous manner.

No, Leo deserves nobody's respect here, and it continues to befuddle me why he is even a part of this otherwise insightful and authority-challenging website.

Wed, 06/09/2010 - 18:44 | Link to Comment LeBalance
LeBalance's picture

Squid provocatuer, neh?

Wed, 06/09/2010 - 18:44 | Link to Comment Slash
Slash's picture

I wasn't defending Leo. I think he's full of it to.....well I think he (along with 99% of people) just suffer from a false paradigm that we call "economics". He thinks the old rules apply. Of course, ZH readers should know more than most that the "old rules" only work as long as credit/debt is constantly expanding......

 

there is a point of debt saturation. A point where a rational lender will not lend anymore to the customer b/c the customer already has huge debts.......it's not secret the "customer" (what's left of the decimated middle class) is strapped to the ground with debt....

 

 

btw.....debt riddled service sector economies failing is a tale as old as time. Everything we're currently experiencing has happened ad nauseam all through history.

Wed, 06/09/2010 - 19:03 | Link to Comment akak
akak's picture

"... debt riddled service sector economies failing is a tale as old as time. Everything we're currently experiencing has happened ad nauseam all through history."

And therein lies the problem.

Most people nowadays, and the overwhelming majority of Americans especially, are profoundly and fundamentally ignorant of history, and most certainly when it comes to financial and monetary history.  As such, they have no intellectual basis within which to place current events into any sort of context.  Worse, they are arrogant in their ignorance, and believe that "history is irrelevant", when they could not be more wrong.  And then there are those, such as Leo I am guessing, who take what they have seen in their two, three, or four decades of adult life as the full extent of history, or of meaningful history anyway, never realizing that the last few decades were a fundamental aberration in world financial and monetary history.  Given this blinkered focus on the immediate past, they construct false premises and derive false conclusions based on a radically limited and warped historical background.

Wed, 06/09/2010 - 21:44 | Link to Comment merehuman
merehuman's picture

Well put akak, very well put.  I only made it halfway into the 8th grade and got my GED in job corps after reading many books on my own. Ignored history completely till now. I have learned more from all of you in the last few months than in my entire life. I do follow many links  and am thankful for the diverse way you all express yourselfs.  These combined expositions of our dilemma  do leave this gentle reader with the strong impression of disaster in the making. Leo looks much the fellow running to the beach happily as a tsunamy comes his way.  Happy days o yea

Wed, 06/09/2010 - 22:03 | Link to Comment akak
akak's picture

Thanks MH.  I am happy if I am able to make some small contribution here from time to time.

Speaking of tsunamis, I will never, ever be able to erase from my mind the image of the person in the video of the tsunami approaching the beaches in Thailand in 2004.  As the alarms are sounded and people are screaming warnings to those by the water to run away, this particular person just stands there watching the wave roll in, until it washes over and kills him.  I will never be able to understand the mentality of anyone who is not willing to even TRY to save themselves from approaching calamity.  But sadly, that is exactly how I see the average American, fully in denial even as the giant wave becomes visible on the horizon.

Thu, 06/10/2010 - 00:22 | Link to Comment RockyRacoon
RockyRacoon's picture

He could at least have stuck his head between his legs and kissed his ass goodbye.

Wed, 06/09/2010 - 23:49 | Link to Comment Slash
Slash's picture

indeed, pretty much nailed it.

Thu, 06/10/2010 - 00:38 | Link to Comment merehuman
merehuman's picture

lol

Wed, 06/09/2010 - 19:04 | Link to Comment ozziindaus
ozziindaus's picture

Banks are more than eager to lend. That's their business. It's just that credit worthy borrows don't want it and credit worthless debtors can't get it. Nothing wrong there. I just wish it was always the case like the 80% downpayment on homes in the 50's. 

Wed, 06/09/2010 - 21:41 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

ozzii has a good point.  I don't want any money (credit) as I am not sure I could even make 0% for sure on it.

No small businesses I know (granted a small circle) want any loans.

Wed, 06/09/2010 - 21:48 | Link to Comment merehuman
merehuman's picture

My small business is closing its doors on the 23 june after 30 years. Happily i owe no one but the IRS. And they cant take what i havent got.

I can be Harry Hobo once again.

Thu, 06/10/2010 - 10:21 | Link to Comment WaterWings
WaterWings's picture

Would love to share a campfire and some squirrel.

Wed, 06/09/2010 - 19:35 | Link to Comment centerline
centerline's picture

Debt saturation. That is the key that everyone misses. It's a phase transition. Additional debt now equals negative GDP growth. De-leveraging has not occurred. This is a state of balance sheet voodoo limbo. The slope of hope. That's all.

Thu, 06/10/2010 - 00:25 | Link to Comment StychoKiller
StychoKiller's picture

Come on akak, Give yourself to the Dark Side, we have cookies! </sarcasm>

Wed, 06/09/2010 - 20:41 | Link to Comment Nikki
Nikki's picture

I hear ya boney, parts are in short supply and demand exceeds supply in the electronic component space. However, scarcity of supply might not mean excess demand. The fabs shut down during the recession and suppliers aren't convinced of genuine demand because of the waning stimulus. They aren't adding capacity.... Just allocating it.

Wed, 06/09/2010 - 21:41 | Link to Comment Chump
Chump's picture

This comment, which deserves respect, highlights why Leo's comments often don't get that same respect.

Wed, 06/09/2010 - 18:23 | Link to Comment fuu
fuu's picture

Hotlink FAIL.

Wed, 06/09/2010 - 18:31 | Link to Comment Reese Bobby
Reese Bobby's picture

You are one funny guy.  "...we prefer the slope of the yield curve..." Brilliant satire! Well done!

Wed, 06/09/2010 - 18:36 | Link to Comment Teaser
Teaser's picture

Such a buzz kill....

Leo, I was halfway through my bott of 15 year old scotch and on my third cigar, and you had to post this?

My advice to you, get yourself some good scotch, a box of cigars, and turn on your favorite music, clear your mind and contemplate your own mortality.

This 'might' help restore your senses.

And as a side note, how can you do such a great job covering the imminent pension explosion, and simultaneously not think this sucker is going down with all hands on board?

Wed, 06/09/2010 - 18:53 | Link to Comment A_MacLaren
A_MacLaren's picture

Me thinks Leo is a Junk Post addict, and he posts what he post To Get Junked.

He's a Junky.

Wed, 06/09/2010 - 19:19 | Link to Comment akak
akak's picture

Well, I think he got his fix.

Wed, 06/09/2010 - 18:14 | Link to Comment mark mchugh
mark mchugh's picture

Pento rocks!

Wed, 06/09/2010 - 18:25 | Link to Comment akak
akak's picture

But I can never get past his uncanny resemblance to Wayne Newton.

Wed, 06/09/2010 - 19:14 | Link to Comment The Rock
The Rock's picture

LOL

Wed, 06/09/2010 - 18:15 | Link to Comment Rusty Shorts
Rusty Shorts's picture

 - what happened to the video????

Wed, 06/09/2010 - 19:25 | Link to Comment sushi
sushi's picture

Agreed. This thread appears to consist of a massive bun fight over some element that has been withdrawn. Seems to have something to do with getting a hotel room and a bj in a failing service economy.

Wed, 06/09/2010 - 21:53 | Link to Comment merehuman
merehuman's picture

me thinks the BJ is failing. The dollar is still on european viagra, how long till it comes down?  If the sex is good who cares , all those algos cant be wrong

 

(god ,i hope this is funny) shh thei'l hear you.

Thu, 06/10/2010 - 00:13 | Link to Comment Rusty Shorts
Rusty Shorts's picture

LOL, at the crossroads...

 

http://www.youtube.com/watch?v=GQSup_gBOqI

Thu, 06/10/2010 - 10:28 | Link to Comment WaterWings
WaterWings's picture

Woah. I couldn't take my eyes away. Nice post with the 10 year old that declared war on the world.

Wed, 06/09/2010 - 18:15 | Link to Comment ozziindaus
ozziindaus's picture

I agree with everything he is saying except for QE2. I doubt it's going to happen until everyone begs for it. When I say everyone, I include those on this site. 

PS. QE does not necessarily stoke inflation or raise the equity markets. There is no evidence of that. Until we write off bad debts, including loan forgiveness, there is no way inflation can penetrate into the economy. 

PPS. QE1 recapitalized bank balance sheets. That was the intent and vwala, NO INFLATION. Equity market rebound was purely technical. 

Wed, 06/09/2010 - 18:21 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

Exactly.  Velocity on that QE1.0 money was darn near zero.

QE2.0, when it comes, will be met with relief and applause.

Wed, 06/09/2010 - 18:29 | Link to Comment Spitzer
Spitzer's picture

what was Mugabe's QE1 velocity ?

Wed, 06/09/2010 - 18:38 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

You can choose to compare to Zimbabwe or Weimar, or you can choose to compare to Pound Sterling in the 30's, or Yen over the last 20 years.  What is your rationale for choosing the former?

Wed, 06/09/2010 - 18:54 | Link to Comment Muir
Muir's picture

The velocity argument has been used before, as well as the tired, "you can't have inflation with high unemployment."

Unfortunately, both arguments are debunked by the the FEDs own economic studies on inflation in various countries.

It's also interesting to note that the FEDs own study papers from 2002 stated that the rent/price ratio was skewed.

There has been a tremendous destruction of money via the massive destruction of credit, the FED threw trillions into it and came up short.

Could QE v2.0 occur?

No crystal ball.

 

Wed, 06/09/2010 - 19:24 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture

Maybe I'm sloppy with terms here, but I'm equating "tremendous destruction of money via the massive destruction of credit, the FED threw trillions into and came up short" with zero velocity of the the QE1.0 money.

I'm of the view the Euro disintegrates, creating more destruction of credit, with the resulting void filled by an expansion of the de facto USD currency union.  That is the pretext for QE2.0 and another Save the World strategy by the FED.

It may be already happening with the re-opening of the currency swaps.  We need to watch the FED balance sheet to know for sure.  Keep in mind that since Oct 2008 the FED asset base has held relatively constant (slight growth, but nothing like the moon shot in 4Q08) because as swaps were re-paid the proceeds were recycled into purchases of Treasuries and Agencies.  Willem Buiter would call this qualitative tightening, I believe.

Now as these swap lines get re-open, does that kick-off fresh growth in the overall size of the FED balance sheet, or do we see Treasuries and/or Agencies decline as currency swaps increase.  That will be the difference between qualitative and quantitative easing.

Wed, 06/09/2010 - 20:31 | Link to Comment Muir
Muir's picture

"tremendous destruction of money via the massive destruction of credit, the FED threw trillions into and came up short."

credit = money

credit is destroyed, money is destroyed.

Wed, 06/09/2010 - 19:21 | Link to Comment Celsius
Celsius's picture

I am going all in on the DOW with QE10.0 (aka QE 2020)

Wed, 06/09/2010 - 18:25 | Link to Comment Spitzer
Spitzer's picture

The old bullshit argument that you need a functioning economy to have inflation. Iceland and Zimbabwe and Argentina don't count I guess.

Throughout history, basket case economies have an inflation problems.

Wed, 06/09/2010 - 18:27 | Link to Comment akak
akak's picture

Shush!

Don't you know that ivory-tower Keynesian theorists are above such crass matters as having to consider facts and history?

Wed, 06/09/2010 - 18:47 | Link to Comment Anarchist
Anarchist's picture

The problem with the Zimbabwe argument is that there has been an ongoing economic war against them since blacks took over. China is now making sure the vast resources Zimbabwe has will be developed. The Zimbabwean economy is now on an upward rise and inflation has pretty much been tamed. The same play book was used in Sudan. China is proving that paying for stuff trumps the wests favorite game plan, invading and meddling in the hope of stealing it all.  

Left unsaid is that the ruling tribes in Zimbabwe and Sudan have not learned the lessons of their former former colonial rulers. It is better to spread the wealth around to buy peace then to constantly fight insurgencies funded by the west. Sudan is starting to pay off a few of them and this has taken away some of the groups the West has been paying.

The Chinese are going to learn a hard lesson since they send too many Chinese to these remote sites and leave little work for the locals. The bulk of money paid for the resources ends up in the ruling tribes coffers.

Wed, 06/09/2010 - 18:52 | Link to Comment akak
akak's picture

"The problem with the Zimbabwe argument is that there has been an ongoing economic war against them since blacks took over."

I have to disagree with that analysis.  The only "war" against Zimbabwe after blacks took over, to the extent that there was any at all, was with white-ruled South Africa, and even that was mostly diplomatic.  Trade continued between the two countries unabated, as well as with its neighbors, and in my time in Zimbabwe in the middle 1980s, the economy was relatively prosperous and had little inflation.  The inflation did not start in earnest until around 20 years after majority rule came to Zimbabwe, and only escalated under the increasingly autocratic and erratic rule of Mugabe.  To blame the Zimbabwean hyperinflation on outside forces is grossly misleading.

Wed, 06/09/2010 - 18:55 | Link to Comment ozziindaus
ozziindaus's picture

You can deny it all you want but the US is still the largest economy in the world, NOT Iceland, Zimbabwe and so on. What's worse is that the US holds the responsibility/burden of issuing the reserve currency of the world. The expansion of USD's is based on demand and not voluntarily at will. There are too many forces preventing the FED from imprudently manipulating rates. The FED does not arbitrarily dictate or set rates which is the main driver of monetary expansion policy but instead turn to the bond markets for guidance. If you don't believe me, then check the lag between FEDFUND and say the 10 year T's.

I'm not a Keynesian or a Fedhead or paper pusher but please understand the mechanics of monetary policy before coming to any conclusions. 

IMO, the FED (and it's member banks) are in self preservation mode. Their absolute worst enemies in times like these are the government who push for Keynesian style expansion and the ignorant public who demand it. The FED's greatest asset ($$$) is nothing they want to just throw away like most people think. 

Wed, 06/09/2010 - 19:28 | Link to Comment Spitzer
Spitzer's picture

The expansion of the USD is for the same reason as before any inflationary event.

A shortage of the said currency.

Wed, 06/09/2010 - 19:40 | Link to Comment ozziindaus
ozziindaus's picture

And the bond markets are not anticipating inflation anytime soon. Instead they are anticipating deflation and risk. Inflation will come but look to the bond markets for hints on the timing. Not the equity markets and not (and here comes the junk trigger), gold. 

Wed, 06/09/2010 - 20:49 | Link to Comment Spitzer
Spitzer's picture

The bond markets are as fucked as the Nasdaq in 2000 or MBS in 2008. They are anticipating nothing, they will be taken by surprise.

Wed, 06/09/2010 - 22:30 | Link to Comment akak
akak's picture

Bingo!

Waiting for the bond market to "signal inflation" would be like standing in the middle of a busy highway but waiting for the impact of the first truck to "signal" you to step out of the way.

Wed, 06/09/2010 - 19:41 | Link to Comment equity_momo
equity_momo's picture

Great post.   If the Fed wanted an inflation problem , QE1 would have been 10 times worse/larger. The Fed always just wanted to slow down the car crash and manipulate the waves to try to maintain control.

MASSIVE dollar printing = fed ultimately lose control

Zero dollar printing = fed lose control.  

right now we're still in deleveraging mode and will be for a few years - risk assets will work that out sooner or later.

Wed, 06/09/2010 - 21:52 | Link to Comment Mark Beck
Mark Beck's picture

The member banks balance sheets have been capitalized through the transfer of wealth from the public, in amounts which are greater than all of the tax receipts for one year. Take a look at the amount of member bank reserves at the FED.

http://research.stlouisfed.org/fred2/series/WRESBAL

If you pay taxes, you have just given your money to the member banks.

These banks are not hurting, unless they have not de-leveraged. Which, if so, at this point in time, is their own fault (leverage greed) and not any market.

The FED Keynesian amounts trump the fiscal nonsense even adding in half of the ARRA that has been released. $1.35B MBS + $300B T buy, + $250B (est) swaps FY2009+2010 = $1.9T minimum. Some would argue that there are more than $50B in China MBS swaps alone that have been moved around. Also, I am not imcluding the Maiden lane and AIG nonsense.

Actually $ (paper Money) outstanding to the FED is a liability on the books. See the following link, go to the bottom of the page.

http://www.federalreserve.gov/paymentsystems/coin_about.htm

----------

If you have read Ben's transcript to congress, it is clear he warns about fiscal policy and rates, but what he is really afraid of is a US sovereign debt crisis.

Because once this happens, you no longer need a central bank to set monitary policy other than debasing the currency so Treasury can pay the bills.

If the US cannot sell debt, you no longer need the FED! This is what Ben B. is afraid of.

The debasement can happen at Treasury just as effectively as at the FED. In fact the FED is really just an unwanted middle man. The government can readily debase the currency just as effectively as the FED. Also, we could hire a highschool grad to do the math, no need for an economics PhD.

Mark Beck

Wed, 06/09/2010 - 22:44 | Link to Comment CurrencySpider
CurrencySpider's picture

Yes the FED is the middle-man but that is only b/c the constitution does not allow legal tender other than silver-based. For fiat currency, you need an independent organization adopted by the government.

Thu, 06/10/2010 - 07:17 | Link to Comment Woosirsir
Woosirsir's picture

One thing for sure. BB is not telling the truth after he made a difficult decision. On the contrary, he is playing game with the market, so as to get what he want the market to response. He is a lonely man. But do you think he can do his job well if he speak openly? Poor guy! We are either going into recession or having devalued $$$. Which one you want? Collapse of $$$ has slim chance, because all people over the world holding USD is paying to support it!!! They are forced to pay for it by BB. He is doing a good job for the world. Imagine if America go to a deep recession, other countries will suffer too. Therefore, China is still buying debt from US to avoid US going to deep recession, which in turn affect the political stability of China. The drop of Euro also prove that USD will not collapse, because lot more other countries are having even worse problem.

Wed, 06/09/2010 - 18:59 | Link to Comment Muir
Muir's picture

"I agree with everything he is saying except for QE2. I doubt it's going to happen until everyone begs for it. When I say everyone, I include those on this site."

ozz,

kindly speak for yourself.

And, yes, I do understand the consequences.

 

Wed, 06/09/2010 - 19:15 | Link to Comment ozziindaus
ozziindaus's picture

I was merely trying to illustrate the extreme social mode swings required for desperate measures such as QE2. I'm sorry if I said all, I meant some who will undoubtably cheer and demand "money printing" once we approach the depths of the up and coming deflationary depression. 

Wed, 06/09/2010 - 19:29 | Link to Comment Spitzer
Spitzer's picture

so a debtor nations currency is going to appreciate during a depression ?

Wed, 06/09/2010 - 21:12 | Link to Comment Howard_Beale
Howard_Beale's picture

when it is a global depression, anything is possible.

Wed, 06/09/2010 - 20:16 | Link to Comment poorold
poorold's picture

I believe it is more likely than not that the FED has already started QE2.

 

The fear of a Fed audit did only one thing...made the Fed prepare for that.

 

It can't be too hard to keep (or start) a second set of books.  After all, mob businesses have been doing it, like forever.

Wed, 06/09/2010 - 20:56 | Link to Comment Harbourcity
Harbourcity's picture

"It can't be too hard to keep (or start) a second set of books. "

 

A small entry on a page links to an entire new set of books.  

Thu, 06/10/2010 - 04:26 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Actually, given the vastness of the Fed's operations, the length of time they have had to create fudged books unquestioned (pretty much till the last 2 years) and the uber-complexity, I doubt any direct observation will ever give the true representation of their position vis-a-vis their finances.

They have had power (unchecked) for too long.

I mean, look at FOrt Knox. Is that not the ultimate "heyyyyyy, lookee what we got here, billions and billions of ounces of REAL, tungsten free gold".

And that is just one ace up their sleeve. Think of what that will allow them to do.

And on that front, I find the lack of a Knox audit the most bizarre example of how un-free a nation the US actually is. The people, in a govt. for, of and buy (!) them, cannot ask how much gold they collectively own?

Strange!

Wed, 06/09/2010 - 18:15 | Link to Comment A Man without Q...
A Man without Qualities's picture

"You cannot engender prosperity by printing money."

Very nicely put, but if you "print" money and only give it to your friends, they become more prosperous relative to everyone else....

Wed, 06/09/2010 - 18:32 | Link to Comment Spitzer
Spitzer's picture

But they are still spending purchasing power that already exists.

Would the board of a public company get rich by diluting their own shares and printing more for themselves ?

Thu, 06/10/2010 - 05:18 | Link to Comment A Man without Q...
A Man without Qualities's picture

If they dilute the shares and award themselves an increase above their pro rata share, then yes, they do get richer...

Wed, 06/09/2010 - 18:46 | Link to Comment thesapein
thesapein's picture

Right, because printing money really means creating new claims on the wealth of others?

Transfer of wealth in progress...

Pure ownage.

Wed, 06/09/2010 - 18:17 | Link to Comment hognutz
hognutz's picture

God, Guns, & Gold!

Wed, 06/09/2010 - 18:18 | Link to Comment Rainman
Rainman's picture

I detest the term " double dip recession ". We never left the first dip but for bullshit, smoke, mirrors and artificial life support.

Pleas don't give the oligarchs any credit for pulling us out of the can only to be shoved back down due to forces out of their control. That's exactly what these incompetent jackasses want you to think. Truth is they've fucked up and distorted world financial systems beyond comprehension.

 

Wed, 06/09/2010 - 18:24 | Link to Comment akak
akak's picture

Well said!

You hear that Leo, you dipshit?

Wed, 06/09/2010 - 22:57 | Link to Comment LeBalance
LeBalance's picture

Leo, for the curious (sharks), what are a few numbers that according to your esteemed analysis will never ever happen?

Gold = $2,500, or a lesser number?

Dow = is probably going to the moon, but throw something out there that's not going to happen, please.

Anything else that you take as a key facet of your religion.

It would be nice to see you proven right.

////EDIT:There was originally a Leo post above mine. It is gone now.///

///EDIT: in fact, it appears that Leo has left the building (post), entirely.///

Wed, 06/09/2010 - 18:37 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Bingo.

 

Bernanke: Why are we still listening to this guy?

http://www.youtube.com/watch?v=HQ79Pt2GNJo

(what's really funny is to watch the CNBC ticker Gold prices in the clips at the top of the screen)

 

And, by the way, Pento continues to be one of the few people on TV making any sense whatsoever.  Kudos to you sir.

Wed, 06/09/2010 - 21:15 | Link to Comment johnnynaps
johnnynaps's picture

I couldn't agree more Rainman. Only, I go back even further....back to the 2001 recession. The price of the DOW, Dollar-Euro price action and the massive government debt are what I use to support this thesis. Granted, it is easy for GDP to rise when your currency weakens and you create an ATM out of a housing market.

I give no credit to any politician or financial genius. As far as I'm concerned, 90% of these assholes still have their plush positions when they should be hanging from a tree. Oh yeah, we are doomed.....Bernanke went on record saying we have a resilient Economy.....right before Lehman. Get ready!

Thu, 06/10/2010 - 00:29 | Link to Comment FEDbuster
FEDbuster's picture

The "recovery" was like using defibulator paddles on a heart attack victim, only to get another flat line.  Now it is time to turn up the juice, for a couple more tries.  Only after a few more "attempts" can Dr. Bernanke call for an official time of death.

Wed, 06/09/2010 - 18:22 | Link to Comment bugs_
bugs_'s picture

Some of us never saw the recovery so we won't notice the second dip.

Wed, 06/09/2010 - 18:22 | Link to Comment mrhonkytonk1948
mrhonkytonk1948's picture

Laffer was on Bloomberg this afternoon saying essentially the same thing.   Double dip in the cards.

Wed, 06/09/2010 - 18:52 | Link to Comment Baron Robber
Baron Robber's picture

Laffer is as bad as berntwanke at forecasting. he's an idiot

Wed, 06/09/2010 - 19:15 | Link to Comment Brett in Manhattan
Brett in Manhattan's picture

If Laffer had any shame, he would've crawled into a hole and stayed there.

http://www.youtube.com/watch?v=IU6PamCQ6zw

Thu, 06/10/2010 - 00:34 | Link to Comment Temporalist
Temporalist's picture

Arthur Laffer on Bloomberg:

http://www.youtube.com/watch?v=3mAk0oeK6ro

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