Mike Krieger Explains How To Short Corruption In 2011

Tyler Durden's picture

Submitted by Mike Krieger of KAM LP

How to Short Corruption in 2011

Just because you do not take an interest in politics doesn't mean politics won't take an interest in you.
- Attributed to Pericles, ca 430 BC
Suspicion towards a currency, once awaken, develops insomnia.
- James Dines


Addressing the Commodity Chatter

In the waning days of 2010 and the first week of 2011 it seems everyone under the sun has decided to weigh in on commodities general and gold specifically.  Although I disagree with the conclusion of many of these notes, several of them are very well thought out and bring up excellent points of debate.  I will address one note in particular in this email and others possibly in the future.
Dylan Grice of Societe General is in my opinion one of the best big picture guys on the sell-side today.  I find him to be intellectually honest and someone with a deep sense of human history, which is the crucial component of any successful analysis of global macro trends.  History is in effect an intricate model of human nature.  Since human being are the components of both civilizations and markets, what ultimately drives the big dynamic shifts that change the world forever is human nature itself.  In the period that we are told is the whole of civilized human history (I have serious doubts about this but that is for another time), human nature has clearly not changed although our toys and weaponry have.  All you have to do is study history to see this.  If you don’t understand human nature or and the intricate but volatile web of events we call history you have no business being a macro investor.
Ok, so back to the Grice piece.  In his Popular Delusions piece from December 15, 2010 he talks about how commodities are a horrible investment in the long-run and that you are much better investing in growing businesses.  I am not going to argue with him here although I just want to make two points.  First, is commodities have powerful secular bull markets and having exposure to this asset class is absolutely crucial to a macro investor such as myself that plays these big secular trends.  I have not succumbed to a delusional love affair with this asset nor am I buying into some long-term Malthusian nightmare.  At some stage investors will get this way (it happened in 2H08), commodities will rise to far too fast, and it will be time to get out.  The attitude toward commodities in early 2011 is nothing like it was in 1H08.  It is much more restrained and in fact more investors like equities than commodities today.  I was there in 1H08.  I called it a bubble then.  I have a track record.  This is not 2H08 from a sentiment perspective.  This run has a long way to go in certain commodities (precious metals, agriculture and oil) from where I sit.  A long way.
The more important point Grice makes is one I am hearing repeated by parrots on television that don’t have half the brain power or understanding of Grice.  As such, I want to address this point of view once and for all.  In his note Grice writes:

When you buy commodities, you’re selling human ingenuity. Why bet against human ingenuity by buying physical commodities when you can bet on it by investing in the enterprises whose task is to remove the bottlenecks and lower commodity prices? As a strategy, this is something I will focus on in later notes. I think there are more efficient ways to gain exposure to commodity markets and I will write in more detail about them after Christmas.

While I think this statement on its face it correct, it is misleading and subject to poor interpretation by the weak minded.  Yes, it is true that when you put capital into commodities you are betting against human ingenuity, but human ingenuity can be stifled by outside factors such as government and corruption.  So in buying commodities, and precious metals in particular, I am in fact betting against real GDP growth and human ingenuity…in the SHORT-RUN (this can be described as several years or more when you look at markets from a truly long-term perspective as I do).  Longer-term a bet against human ingenuity has been a disastrous bet and I believe it will be again.  Nevertheless, the state of corruption and incompetence embedded within the current leaders of the United States and the Western World in general (and our Asian soft-colonies) is of such a magnitude that they are stifling human nature, its ability and desire to innovate and yes, ingenuity itself.
Shorting Corruption in 2011

While many will say I am a perma bear and just see everything as half full, I cannot wait until the day that I can sell all of my precious metals and commodity exposure and start to invest in non-mining and commodity businesses and equities generally.  I have no doubt that this day will come but this is all a process and we are very, very far away from that day from a price perspective.  A large part of my intent in writing these notes is to catalyze the change so that it happens as quickly as possible.  The quicker we can change the guard within the elite class on Wall Street and Washington the quicker we can get on with human ingenuity.
Very early on I noticed that what Aldous Huxley and others have called the “power elite” have almost total political and economic control of the system.  Remember the quote attributed to Mayer Rothschild over two hundred years ago that perfectly and simply states:  “Give me control of a nation's money and I care not who makes the laws.” Combine this quote with Lord Acton’s: “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men” and you can start to really put all the pieces together on how money power works and how it has taken the entire world hostage to its selfish ends.
The founding fathers of the United States of America were very well aware of this aspect of human nature when they framed the constitution which is why they made money gold and silver coin and also why they were obsessed with the idea of a division of powers between the executive, legislative and judicial branches.  It is also why states rights was such as big issue.  Unfortunately, what we have today is almost the worst case scenario.  While under a gold standard the politicians will cheat and print and then default (like the United States did in 1971) at least there is the legal framework of moral money during that period.  Under a completely fiat system where money can be created to infinity and that power is granted to a small group of unelected academics (the Fed) that answer to the banks...well you get what we have today.  A society where all the wealth has become concentrated in the hands of a very small, corrupt and unenlightened elite.  Once their greed has collapsed the system they then scramble to secure their positions using their political connections (see the period from 2008-today) and in the process destroy the middle class.  To protect themselves from the “people” they then try to put in a police state or a more authoritarian government.  This has happened over and over and over in history and is happening again right now.  This is pre-1789 France make no mistake about it.
So when the masses of a formerly free people figure out what has happened to them it is not pretty.  My whole hope is to avoid the masses turning violent.  There is no need for it.  The system has an Achilles heel and it is precious metals.  People must become educated on money power, how it works and then use the system against itself.  The entire power of the elite resides in fiat money creation.  Buy physical gold and silver and take delivery if you want to short corruption in 2011.  Take that away and they go away.  Enter human ingenuity.   
George Soros and the New World Order

Many people hear the term “New World Order” and immediately shut down.  They think conspiracy theory.  The truth is this is a term the elite themselves use all the time in describing what they want (see Soros interview here http://www.dailypaul.com/node/153418?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+dailypaul%2FFClq+%28The+Daily+Paul+-+Continuing+the+Ron+Paul+Revolution+Ron+Paul+for+President+2008%29).  What we have the is second worst possible outcome in the U.S. dollar currency system.  The absolute WORST outcome for humanity and freedom is the New World Order outcome, which in a nutshell is a global government and a one world currency.  Think about it.  It is bad enough to have the U.S. fiat dollar but at least you can flee to another nation.  If there is one currency that must be used everywhere and it is managed by some power hungry maniac in Brussels what kind of world do you think that will be like?  I’d rather not.
I personally think there will be no New World Order because people are waking up and becoming educated on how things work and they are doing it fast.  The smartest of the elite are in their old age and we will be rid of them soon enough thanks to natural causes.  My observation of their progeny is that they are much less intelligent, motivated and forward thinking than their ancestors.  I can’t wait until the day I don’t have to listen to the dangerous fantasies about how civilizations should function from the like of George Soros or Warren Buffet.  You guys had your day.  Go away please you have done enough to ruin the future of my generation.
All the best as always,

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Traianus Augustus's picture

Most optimistic piece I have read in quiet a while.  Those SOB's can't go fast enough for me!!!

sgt_doom's picture

A great couple of links I found over at ampedstatus.com awhile back, which explains the Global Banking Cartel in a most pithy and brilliant manner (only 3 to 4 pages in length):



Thomas's picture

Maybe Simon Johnson's "The Quiet Coup" nomenclature should be redirected to Mike's "buy gold" thesis.

4xaddict's picture

Here's an idea, no one over 80 years of age is allowed to have assets in excess of 300M and if they die with more than 50M in their estate the balance goes to their local council.

Sound draconian? I think that's plenty for them to live on and ensurers they feel the same violation of their rights that the young feel.

Sure there are technicalities, but that's what the legal system is for. 

4xaddict's picture

Here's an idea, no one over 80 years of age is allowed to have assets in excess of 300M and if they die with more than 50M in their estate the balance goes to their local council.

Sound draconian? I think that's plenty for them to live on and ensurers they feel the same violation of their rights that the young feel.

Sure there are technicalities, but that's what the legal system is for. 

akak's picture

Here's an idea, no one over 80 years of age is allowed to have assets in excess of 300M and if they die with more than 50M in their estate the balance goes to their local council.

"local council" of just whom, exactly?

Nacho.Libre's picture

My observation of their progeny is that they are much less intelligent, motivated and forward thinking than their ancestors.

They must be a product of our skool system.

Great article!

XitSam's picture

The progeny may be much less intelligent, motivated and forward thinking than their ancestors.  But I think they are also much more thuggish, corrupt and evil.




Nacho.Libre's picture

It's just SOP (standard operating procedure).  If they can no longer trick you into being their serfs, then they will force you at gun point and/or threat of imprisonment  That's why if you don't buy health insurance, you pay a tax or go to jail.  As the society less docile the elite become more aggressive.

Things that go bump's picture

There are lots of thuggish, corrupt, evil people around, but it takes that spark of genius to really elevate those characteristics from a simple propensity for petty crime and bullying into the sort of success enjoyed by someone like Soros.    

tamboo's picture

no need to think too hard, just read the protocols. i'm sure gene simmons keeps a copy handy.

Don Birnam's picture

Human ingenuity is all well and good, but when the fruits of said ingenuity are reckoned in ever-depreciating units of account by the name of the "United States Dollar," it is the wise investor who will commit at least a portion of his ingenious wealth in the not-so-ingenious gold or silver coin.

NotApplicable's picture

I think you mean "Federal Reserve Note." The "United States Dollar" was murdered along with Kennedy.

buzzsaw99's picture

The system can't be saved nor should it be.

NOTW777's picture

when do they announce the JPMorgues silver short profit

jus_lite_reading's picture

Let me say this: I was junked 11+ times for simply stating that the mass animal kills around the world are disturbing and right now, everything is speculation as to the cause. Also, it would be more simple to say if there was a connection between the mass fish/bird kills and the military but it's not... something is going on!

That I was junked for that is disturbing...



TheProphet's picture

I junked you. What's one more?


The map for the deaths in the US seems to follow the jet stream on the inland, and the Atlantic current on the seaboard. Am I the only one who noticed this?

sgt_doom's picture

It's those e-bots from the US Chamber of Commerce --- don't let it trouble you, sir.

Wynn's picture

Junk weeds out the weaker hands. Man up or get out.

NotApplicable's picture


I junked you to see if I could strengthen your resolve. ;)

illyia's picture

Probably an off-topic thing as much as a tin-foil-hat one.

I won't junk you... but birds aren't this issue. They are another, different, issue.

Turd Ferguson's picture

This is fun. Here's a link to the CNBS coverage of last month's BLS BS report. Watch this, then ask yourself how in the world anyone can expect a 400M+ number tomorrow.


Hephasteus's picture

I expect a huge number because I fully expect them to lie their asses off and then get caught.

ReeferMac's picture

They'll never get caught.. Sheesh!

NotApplicable's picture

How could they get caught when they can blame the snowstorms and the sleeping/drunk snowplow drivers?

See, it's really a theological and union issue.

TheProphet's picture

Turd, last month's number was fabricated by tinkering the seasonal employment calculation. In October, they tinkered did the exact same thing.

What is to stop them from doing it again?

Question for you: in December, did unemployment benefits expire for long term folks, who since the passage of the law extending benefits will now be added back to the rolls this month?

NOTW777's picture

cnbc personnel given bonus money for trashing PMs - who sent the memo

they didnt notice the recent move in gold from 1160 to 1420 but the dollar move down today is getting massive coverage

TheClub55's picture

I have zero fear of the one gov one currency... just look at the world today no way it can happen. Even the euro which is made up of very similar nations is looking shaky. And the "greed" of the powerful will stop them from giving up the power to one world wide government.

faustian bargain's picture

The powerful of which you speak are already international.

buzzsaw99's picture

+1 If there was just one world currency then the maggots couldn't get rich manipulating the exchange rate.

Uncle Remus's picture

Short corruption in 2011 - buy physical gold and silver and take delivery.

I like it.

traderjoe's picture

The trick won't be just to purchase gold and silver - but to actually use it in the course of business. To get vendors and shopkeepers to accept it. To have it be widely circulated and for the masses to recognize the coins and rounds, to understand their conversion and values, etc. IMHO, it won't help, in fact even be counter-productive, to have a precious few own the metals - and for the metals to go on a rip higher in price. Silver and gold have to be money of the people.

On to being long human ingenuity. I worry sometimes that Malthus has been thoroughly discredited - to our collective detriment. Perhaps he was just a bit early. The Midwest aquifer is being drawn down. The genetically modified seeds are spawning huge resistant weeds and the bees are dying off.  Economics, IMHO, has a key flaw - it assumes perpetual (infinite) growth in a finite world. The laws of thermodynamics and systems will trump the theories and 'models' of economics.  

CU1981's picture


Peak Population is knocking on the door.

the rookie cynic's picture

Agreed: Exponential function mathematics of economics vs. dynamic equilibrium mathematics of nature


fockewulf190's picture

Well, if anybody offers me silver in exchange for my neuro-rehab services, I´ll gladly accept.  Only thing is I can´t advertise it because I´d have the financial Gestapo driving up in black wagons if I did.  I´m not living in Indonesia where silver dirhams are all over the place and are accepted.

Cognitive Dissonance's picture

So when the masses of a formerly free people figure out what has happened to them it is not pretty.  My whole hope is to avoid the masses turning violent.  There is no need for it.  The system has an Achilles heel and it is precious metals.

This sums up nicely why I have started my own Johnny Silverseed project. The corrupt are vulnerable and they know it. This is why we are subjected to non stop propaganda. We must change minds one at a time. My small effort is one way we can do so.


NotApplicable's picture

That's a very interesting methodology you've come up. I've been thinking about the need to get junk silver into the hands of the public, as I'm sure it is the best currency available for private transactions once our financial reckoning day arrives.

I hadn't yet developed a sales pitch like you have, but I did realize the perfect name for this movement, The March of Dimes 2.0.

Please feel free to use this label as you wish, and there is no need to provide attribution to me (because, as always, it's simply not applicable).

Missiondweller's picture

Great post Tyler.

I too look forward to a day when we can once again invest in equities of innovative new companies. But now is no that time.

When we nolonger have free markets and real price discovery without fed schemes and massive government largess we cannot make informed, rational investment choices. Investment in PM's are a "no confidence" vote of the current system. I cannot say I see a change away from this system soon but see it coming in the form of some type of collapse. In the face of that, the only logical place to put money is in PM's and commodities.

traderjoe's picture

Diffuse public ownership of companies is currently a scam in part perpetuated by the corporate executives - who now make massive multiples of the average worker. There is no way they would profit to these magnitudes if the companies were private. When executives make "only" 10-20x a line worker - and the other conditions are met - will I consider owning a portion of a publicly traded company. 

bigdumbnugly's picture

agreed, it's hard to even imagine a more controlled and corrupt market than we currently have under the pretension of a free market system.

i don't know if it will ever come to the NWO scenario, but if it does they won't be taking me with them - not while i'm still vertical anyway.

blindfaith's picture

let me tell all you "investors and speculators" in commodities what YOU are doing...you are killing, like viruses, you own homegrown industries and your Country.  Junk me, go ahead.

YOU TELL ME HOW, HOW any business in this America is going to survive and compete, and hire when you drive copper, tin, lead, and all the other metals to the sky.  Will you be happy when the last house in your neighborhood, town and city are in foreclosure?  When there are no jobs to be created because no business can plan or compete, or afford to exist?

You tell me how I, as a manufacturer, can pass on copper double in 6 months, common solder from $10 to 17 a pound in 3 months, tin through the roof, brass the same and everyother metal we are using?  You tell me why I, or any creator of products and jobs (which is the basis for a nations wealth) should bother?  Tell me!  What so your kid can have a job?

Over 100 people now lost jobs, 7 stores closed, taxes lost, hopes and dreams in the smoke...and you don't give a funking fat rats ass do you?  Nope not as long as you can rub your hands in dirty blood soaked money.  You think you, somehow, are doing some smarter then the rest of us act, by speculating until the fat lady screams.   Your driving your country into another deeper recession and more pain so you can have more, and more, and more.  When is enough?  Can YOU really have enough ever?  Is there a point when you say to yourself, I am part of the destruction of the Nation I live in just as surely as any foreign threat!

No, like a virus, you will kill your host.  Without remorse, guilt, without regard to age, health, sex, color, blood, or anything else that makes a human being.  You will watch your friends, neighbors, your Country die before your eyes, as you caress every last dollar you have managed to accumulate.

And, you think Bernanke is the problem.  It is you, and has been all along. 

" I cannot say I see a change away from this system soon but see it coming in the form of some type of collapse. In the face of that, the only logical place to put money is in PM's and commodities."  NO...YOU SIR, ARE WHAT WILL MAKE IT COLLAPSE.    YOU.  YOU.

akak's picture

While you are raging against the inmates who inadvertently trample you while fleeing the prison through the one hole in the fence, you might more properly direct your rage against the persons and the power who built that prison and who imprisoned those fleeing it instead.

Stevm30's picture

use BOLD because BOLD will make your incoherent emotional rambling true.

Apocalicious's picture

Yes, blindfaith, yes. <strokes head tenderly>

Close your eyes, and it will all be over soon.

faustian bargain's picture

You've been a member here for over a year, and you still think this? Welcome to my 'ignore' filter.