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Nassim Taleb: "We Are Going To Have, At Some Point, A Failed Auction"

Tyler Durden's picture




 

Set aside the stupidity about Taleb causing last week's sell off for a minute and you have 14 minutes of very relevant insight not only into last week's crash, but into the real events that precipitated it: namely market structure, European contagion and the precarious US economic situation. In a Bloomberg TV interview a thousand times more informative than Taleb's CNBC appearance (presumably it has to do with the absence of the Power "I love to hear my voice" Lunch brigade), the Black Swan author discusses what keeps him up at night: a failed auction. Once again, we differ in a slight nuance that not even a failed auction, but the impression that the auction status quo is changing will be sufficient to set off the treasury avalanche. Whether that means a dramatic change in the Direct Bidder regime, the Primary Dealer hit ratio, or some other metric, we don't know, which is why we log each and every auction to keep track of any potential outliers and aberrations.

Also, Taleb shifts his eyesight away from Rubin and Greenspan as the biggest perpetrators of the crisis and now focuses on any person who works for the Office of the Management of the Budget. Nassim also spares no words of kindness for Geithner, Summers ("he will do to us what he did to Harvard") and, of course, Bernanke, "who crashed the plane."

Taleb's advice: stay away from Treasuries (especially long-term), avoid both the euro and the dollar, have a collection of metals and agricultural land exposure, and "use the stock market as something for entertainment not investment." And definitely stay away from school and equations.

 

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Thu, 05/13/2010 - 17:08 | 350145 Leo Kolivakis
Leo Kolivakis's picture

Love Taleb's "in your face" style, but he's wrong. The risk of debt deflation is still too high to shun Treasuries altogether. In fact, the biggest contrarian bet of all over the next decade will be to go long Treasuries, and stay long.

Thu, 05/13/2010 - 17:35 | 350213 jc125d
jc125d's picture

Leo, when rates spike, where goes your long treasury bond price? Go long and stay long, stay underpaid for the risk. What am I missing? 

Thu, 05/13/2010 - 17:46 | 350255 I am a Man I am...
I am a Man I am Forty's picture

When are rates going to spike??  Before that happens they will send the market down a thousand points so everyone will run back into treasuries.  At least it is working so far.

Thu, 05/13/2010 - 17:49 | 350265 Burnbright
Burnbright's picture

Nothing, it doesn't make sense to go long treasuries when swap lines are open and interest rates are basically 0% meaning money is free.

Hmm lets bet against inflation when money is fucking free, real smart.

Thu, 05/13/2010 - 19:14 | 350452 Popo
Popo's picture

Well, one must point out: It would have been 'real smart' to bet against inflation in Japan for the past 20 years -- and rates were at 0%. Low rates aren't always inflationary.

Thu, 05/13/2010 - 21:25 | 350723 AccreditedEYE
AccreditedEYE's picture

Japan was cut off Popo... an isolated event. This is a global collapse we have coming. Also, we have commodity prices and risk assets rising together. $ not being loaned out by banks be damned... with all of the liquidity in the system inflation has GOT to leak out into various places. It's either that or you do get a market crash because deflationary forces are overwhelming the firepower of the Fed. You can't have your cake and eat it too. Both ways out are ugly.

Thu, 05/13/2010 - 17:42 | 350237 Edna R. Rider
Edna R. Rider's picture

It seems you can accomplish nearly the same thing but staying in cash.  At 3-4% with significant risk (unless your crystal ball works better than mine) it seems cash is the best asset right now if you believe things will be "OK" but deflation will ultimately take hold.

Thu, 05/13/2010 - 17:42 | 350239 PeterSchump
PeterSchump's picture

You obviously do not fear a failed auction.

Thu, 05/13/2010 - 19:19 | 350459 Popo
Popo's picture

A failed auction isn't possible under the primary dealer system.

Thu, 05/13/2010 - 19:50 | 350526 mephisto
mephisto's picture

Excuse my ignorance, but why not?

Thu, 05/13/2010 - 22:43 | 350850 Landrew
Landrew's picture

Duh! A 100% primary purchased auction is a failed auction. That is exactly what he means. When a government has to purchase all of it's own debt that is a failed auction.

Fri, 05/14/2010 - 08:41 | 351372 Crime of the Century
Crime of the Century's picture

A failed auction isn't possible under the primary dealer system.

Whoa. Do you even understand what Tyler is saying above?

Thu, 05/13/2010 - 19:56 | 350541 assumptionblindness
assumptionblindness's picture

Leo does not fear a failed auction because he has witnessed evidence that it will not be allowed to occur.  I often find myself torn between knowing what should happen (failed auction) and what IS happening (green shoots, V-shaped recovery, ZIRP forever).  Leo (like the rest of us) knows that the game is on, however, doesn't believe in a hard landing.  Maybe that is why he can make the leap to solar investments...green energy technology will be the next big thing as long as there is reserve currency money to pay for it.  As for myself, I beleive that we have already blown our money shot...calling in a fluffer to set up a 2nd take is a waste of effort.

Thu, 05/13/2010 - 22:22 | 350818 living on the edge
living on the edge's picture

Leo, if you go long on treasuries you can say "so long to your money"...

Thu, 05/13/2010 - 23:13 | 350896 digilante
digilante's picture

Agreed, Leo. There will be no fails on USTs. TBT is still a very crowded trade. USA, and now Euroland have assumed the Japanese Disease - years of "sub-optimal" growth and very low IRs. And every time Europe or SA or the Asian periphery barfs, there will be renewed luv for the USD and its proxies.

Fri, 05/14/2010 - 00:44 | 350979 bruiserND
bruiserND's picture

Leo,

After 15 years in the Treasury bond pit at the Chicago Board of Trade commencing in 1980 I would have to say that Taleb's comment /observation / prediction was the wisest thing I've seen in quite a while.

Ever seen it locked limit sellers for days while everyone is long and the only way "out" is in a body bag?

The law of supply and demand needs no rationale.

Fri, 05/14/2010 - 00:57 | 350986 Double down
Double down's picture

Love him too, but I think you are wrong about treasuries, being long those may look "wise" but is merely "Avant guard".

I dislike arguments with too many certainties, a diamond with many flaws and cracks may still be a diamond but far from priced as such.  

Something else is brewing 

Fri, 05/14/2010 - 04:26 | 351142 ConfederateH
ConfederateH's picture

Leo's sage investing advice:  sell all your gold and buy solar stocks and 30 year tbills.  Sounds like Leo is suffering from brain-flatulence.

Thu, 05/13/2010 - 17:11 | 350153 sheeple
sheeple's picture

Nero Tulip: I'm innocent!

Thu, 05/13/2010 - 17:23 | 350186 -1Delta
-1Delta's picture

+1

Thu, 05/13/2010 - 17:12 | 350156 Cistercian
Cistercian's picture

 Benrons response to the crisis is like hosing down a fire with gasoline.

 A plane analogy would be pushing the stick forward while lighting the afterburners....and never pulling up.The only question is: how big will the crater be?Impact velocity and fuel remaining influence crater size, as does angle of impact.After the EPIC FAIL that is coming, people will dissect and investigate the catastrophe for years.

 And, given enough time...probably repeat it!

 

Thu, 05/13/2010 - 20:34 | 350624 Problem Is
Problem Is's picture

" Benrons response to the crisis is like hosing down a fire with gasoline."

Little bald boys who play with fire will get their beards singed off and their little helicopters engulfed in flames...

Thu, 05/13/2010 - 17:15 | 350167 Greater Fool
Greater Fool's picture

Taleb seems to be overreacting to his past at times. His book on dynamic hedging of vanilla and exotic options is a little low on equations as such books go, but it has lots of graphs and numbers and a good amount of common sense, which is rare. Excellent book. Too bad he's too busy making himself into a cartoon character.

Thu, 05/13/2010 - 17:19 | 350174 bada boom
bada boom's picture

"The stock market is a big hoax, hype thing"

 

Thu, 05/13/2010 - 17:20 | 350179 whatsinaname
whatsinaname's picture

Any good engineers here ? Now BP wants to put a tube into the broken pipe. I sure wish them luck but have my doubts. At that pressure will the robot be able to put the tube in without messing up.

Please save Key West and the Coral Reef !!

Thu, 05/13/2010 - 17:43 | 350243 JW n FL
JW n FL's picture

Drill Baby! Drill!!

 

Conservative Bush Voters Rock Bitches!!!!

 

http://enviroknow.com/2010/04/08/who-approves-offshore-drilling/

 

heres your handy work! http://www.youtube.com/watch?v=EJ91G3e0OBQ&feature=player_embedded

Thu, 05/13/2010 - 18:23 | 350334 Jesse
Jesse's picture

Operation Catheter?

Thu, 05/13/2010 - 20:45 | 350643 Problem Is
Problem Is's picture

I was just reading whatsinaname's BP post...

It made me think of your Lloyd B. God and his big straw...

Then I scrolled down..Whoa...Jesse...
If Lloyd can reach over and drink up your milkshake Jesse, can't Lloyd put his big straw in and drink up the oil?

Fri, 05/14/2010 - 03:17 | 351102 merehuman
merehuman's picture

Odd that your plea for help would be junked.

Am i wrong to think this leak could have been closed days ago, were they to simply close it. But are in fact attempting to close it and still get the oil out and it aint working out for them.

At this rate all points of entry into the gulf ought to be monitored and perhaps blockaded so the entire ocean does not get poisoned. The size of the opening is 20 inches, thats the size of your average garbage can lid.

How much of florida will get the seabreeze? I mean oil fumes?

Thu, 05/13/2010 - 17:22 | 350185 Mongo
Mongo's picture

Cameron knows the problem?... ORLY?

 

I think they are all the same but lets give Caremon a chance and watch what he accomplishes.

 

The first politician in government position that says that stimulus is MADNESS gets my vote.

Fri, 05/14/2010 - 08:47 | 351387 Crime of the Century
Crime of the Century's picture

I think they are all the same

Chris Christie doesn't give a flip what his detractors think, or whether he gets reelected. Refreshing.

Thu, 05/13/2010 - 17:31 | 350205 Hansel
Hansel's picture

According to Taleb, is agricultural land that which is currently growing produce, or which could in theory grow produce?  IMO, everyone has become a rent seeker and no one wants to work, meaning no one is willing to put in the work growing crops.  Further, just about all land could grow something (even a backyard in suburbia, and actually some of the best land was turned into developments in the boom), but it takes work.

Thu, 05/13/2010 - 18:06 | 350303 Hulk
Hulk's picture

Depends on how much you want to spend. Producing ag lands can be expensive.Our approach was to buy land that had 60% of the timber removed 10 years ago, hog off the brush and convert to both pasture and crop land. Much cheaper that way and one can find great deals on land that has been timber harvested. Tons of work, I can't emphasize that enough, but we like the physical labor

 

Thu, 05/13/2010 - 20:23 | 350595 ColonelCooper
ColonelCooper's picture

10,000 square feet will grow more than enough food to feed 10 people under most circumstances, IF you can irrigate it.  Generally I plant half that, and keep about three times that amount sown into alfalfa and clover.  I rotate plots every 3-4 years.  That 5,000 feet grows enough four a family of four, and I probably give away a third.

As Hulk said, one cannot stress the amount of work, especially while you are establishing plots. (it gets easier)  If you enjoy hard physical labor, it's a hobby.  If you don't, buy some shit that I'm gonna need, and I'll trade you veggies.  :)

Thu, 05/13/2010 - 20:40 | 350645 Hulk
Hulk's picture

It beats wasting time in the gym, eh ColonelCooper?

Fri, 05/14/2010 - 00:56 | 350984 glenlloyd
glenlloyd's picture

That's an argument I made years ago, that the gym had actually just become a substitute for physical labor, a sort of "clean" way to stay in shape. Overall it doesn't have the same impact as cutting your own firewood or planting / cultivating / harvesting crops or tending livestock. You can get a nice physique but you don't learn much.

Fri, 05/14/2010 - 03:24 | 351107 merehuman
merehuman's picture

 

I shared with my neighbors also, and with the birds,bees, slugs and other bugs. Eggshells seem to keep the slugs down. I have REAL green shoots now and the taters are up 16 inches.  beer works on those slugs too as well as boards treated with a solution of sugar water. But you have to pick them off each day till they are all gone. Also have ground squirrels, there went the tulips. Deer jump the fence, leave tracks in the garden as they munch and the dogs wake the entire hood. Its a wonderful life.

Fri, 05/14/2010 - 08:52 | 351394 Crime of the Century
Crime of the Century's picture

Sounds like a rural/suburban garden. I have had good luck with the motion sensor Scarecrow, although it is most effective in keeping cats from using my raised beds as giant litter boxes.

http://www.amazon.com/Contech-Electronics-CRO101-Scarecrow-Motion-Activa...

Thu, 05/13/2010 - 17:32 | 350206 Highrev
Highrev's picture

A Failed Auction? To whom? Between sovereigns, they're all pretty much the same, aren't they? Where's the money going to go? Into private debt? Perhaps, but that'll take a while.

Thu, 05/13/2010 - 20:23 | 350585 Bear
Bear's picture

Right on ... What CB, when asked would not buy Treasuries? It is long past the time when any legitimate buyers are still in the market. If push comes to shove the US Treasury will buy it's own bonds. That's how I got rich ... going into debt to payoff my debt ... a billionaire for a minute.

New market in personal CDS's ... kind of like the CCE (Chicago Climate Exchange) 

Thu, 05/13/2010 - 17:38 | 350217 Rogerwilco
Rogerwilco's picture

There will never be a failed auction in treasuries, for the same reasons the Treasury will never default on U.S. debt.

Thu, 05/13/2010 - 17:42 | 350236 bada boom
bada boom's picture

There will be some day.  The sun will not last forever;-)

Thu, 05/13/2010 - 17:48 | 350262 JW n FL
JW n FL's picture

Why?

Why will an Auction Fail?

Beucase the Banks with a 0% Fed Window will not support the Treasury?

O... Wait that would be printing out of thin air to print out of thin air and a lie?!

Yeah... whats your point... is the Fed out of Paper?

The Fed is not going to fail, the Sheepeople who don't know and don't want to know don't care that you know and you think that this time around its different...

 

First of all, let's talk about debt. While leverage works well when things are going up, it obviously magnifies problems when things are going poorly. In some sense, assets are contingent, but debt is forever. Here in America, total debt compared to GDP now stands at around 280% to 300%. (By definition, these numbers are estimates, since it's impossible to arrive at a precise figure, but the latter is not needed in order to get the gist of what's going on.)

This is the highest debt-to-GDP ratio that the country has ever seen. By my calculations, as we exited 1929, debt-to-GDP was about 200%, though it did rise pretty dramatically while we were in the Depression, to about 300%. But by 1950 or so, the debt-to-GDP ratio came in at about 150%. It rose to some 220% in 1990. So obviously, our current ratio of total debt outstanding to GDP is the highest it's ever been (the Depression excepted).

Thu, 05/13/2010 - 17:56 | 350285 bada boom
bada boom's picture

JW, are you responding to my comment or Taleb?

I don't think a treasury auction will fail.  The consequences would be unimaginable.

Thu, 05/13/2010 - 19:09 | 350445 akak
akak's picture

The unimaginable all too frequently becomes the inevitable.

Or have you not been awake for the last 2 or 3 years?

Thu, 05/13/2010 - 19:43 | 350510 bada boom
bada boom's picture

Go easy on me akak, I just got back on the wagon after a 10 year drinking binge.

I understand anything can happen, I just don't know all the consequences.

By the way, what's happened the last couple of years;-)

Thu, 05/13/2010 - 20:45 | 350583 akak
akak's picture

Sorry, I was smiting trolls here bigtime today, and maybe got a bit carried away!

No offense meant to you --- I was speaking more generally in my comment above.

After cleaning up trollturds behind JohnnyBravo ("MasterBates") and Jory and JayBayBaker, one's nerves do get a bit frazzled!

Fri, 05/14/2010 - 03:32 | 351111 merehuman
merehuman's picture

The rest of the world may lose their confidence in the dollar since the euro is setting a new trend.

All those dollars coming home would shake our remaining confidence via hyperinflation. A "perceived" failed auction could do it as i am sure china and others are watching also and will act according to their own interest.

Fri, 05/14/2010 - 09:03 | 351417 Crime of the Century
Crime of the Century's picture

Folks can argue whether an auction actually failed or not, but the inevitable hyperinflation makes the point moot. Currency fires will create a firestorm where all paper gets sucked into the vortex.

Thu, 05/13/2010 - 17:51 | 350273 Rogerwilco
Rogerwilco's picture

Dammit, are those gold bugs messing around again? They were warned not to rocket any of that unobtanium crap toward the sun to trigger runaway inflation in the core...

Fri, 05/14/2010 - 01:00 | 350991 Double down
Double down's picture

It is and always will be the perception that matters, Tyler knows this

Thu, 05/13/2010 - 18:24 | 350336 Sam Clemons
Sam Clemons's picture

I agree.  Anyone who thinks that we aren't just printing and buying it ourselves at the current time are morons.  Anyone who thinks that we would stop doing this for some reason is also a moron. 

Those who live by inflation die by inflation.

Thu, 05/13/2010 - 17:38 | 350223 Sqworl
Sqworl's picture

Nassim your such a sh*t...too funny and honest for primetime...lmao x

Thu, 05/13/2010 - 17:40 | 350235 John Bull
John Bull's picture

Maybe some English classes? Still a genius...

Thu, 05/13/2010 - 17:45 | 350250 Sqworl
Sqworl's picture

Bernmonkey crashed the foching plane??? lol

Geithner can't unload his bubble house in Westchester!  lol

Thu, 05/13/2010 - 17:46 | 350257 reachsb
reachsb's picture

I beg to differ with his Lordship. Under Ben, the Fed has displayed a remarkable tenacity to print its way out of trouble. Ben is implementing his helicopter thesis with gusto (never mind the fact that he is destroying the currency and the reserve status in that process). So Ben and his proxies (indirect bidders at auctions) are going to ensure that something like that never happens.

"This illustrates why a failed Treasury auction will be avoided at all costs. Any interruption to the trillions and trillions of dollars flowing through the Treasury market each year would cause an immediate and enormous train wreck that would ripple through the entire world's financial system (and trigger an avalanche comprised of hundreds of trillions of dollars of interest-rate derivatives). A failed auction is simply not an option for the Fed or the Treasury Dept."

http://www.chrismartenson.com/blog/shell-game-continues/37778


Thu, 05/13/2010 - 17:48 | 350261 bada boom
bada boom's picture

Agreed.

Thu, 05/13/2010 - 18:20 | 350330 JW n FL
JW n FL's picture

Why is this 300% debt to GDP any different than the others?

 

First of all, let's talk about debt. While leverage works well when things are going up, it obviously magnifies problems when things are going poorly. In some sense, assets are contingent, but debt is forever. Here in America, total debt compared to GDP now stands at around 280% to 300%. (By definition, these numbers are estimates, since it's impossible to arrive at a precise figure, but the latter is not needed in order to get the gist of what's going on.)

This is the highest debt-to-GDP ratio that the country has ever seen. By my calculations, as we exited 1929, debt-to-GDP was about 200%, though it did rise pretty dramatically while we were in the Depression, to about 300%. But by 1950 or so, the debt-to-GDP ratio came in at about 150%. It rose to some 220% in 1990. So obviously, our current ratio of total debt outstanding to GDP is the highest it's ever been (the Depression excepted).

Thu, 05/13/2010 - 18:50 | 350404 masterinchancery
masterinchancery's picture

More like 800% of GDP including entitlements. And once it becomes clear that Z Ben is printing large quantities of money to buy treasury bonds, the endgame will begin, and probably end, quite rapidly.

Thu, 05/13/2010 - 19:20 | 350464 JW n FL
JW n FL's picture

1,000% debt to GDP....

 

Why will it end? will the Treasury run out of money? will the Sheepeople decide marshal law is better than living a lie?

 

Why will it end, percentage of debt was not really the question..

Thu, 05/13/2010 - 21:37 | 350742 faustian bargain
faustian bargain's picture

Why will it last forever? That seems unlikely.

Thu, 05/13/2010 - 20:13 | 350570 Bear
Bear's picture

Thanks for your input. What comprises total debt? What are your sources? I'm looking at the debt clock (sourced by FED,CBO):

Household + Business + State + Local + Financial firms + Federal Debt (assumes FED debt?) = 55.7 Trillion

US GDP stated at = 14.3 Trillion

debt-to-GDP then = 390% .... but what are included in historical figures?

add in unfunded liabilities at 109 the debt-to-GDP = 762%

No wonder no one in the world cares about spending a few billion on Greece, Eurzone, or nationalized healthcare

Mon, 05/17/2010 - 15:07 | 356770 JW n FL
JW n FL's picture

add in unfunded liabilities at 109 the debt-to-GDP = 762%

 

How come all unfunded liabilites are due this year? even though they are paid out over the next 10 years? or whatever number you are using for dramatic effect.

 

Look, I tell you I pray the lights don't go out!

 

As well I dont make up numbers, plug them in for dramatic effect! 762,000,000,000 % based on 26% usery law change... for services, looking forward over the next 100 years.. all due fucking today.

Seriously, either get serious and real... or exercise your right to be stupid.. what the fuck ever.

Thu, 05/13/2010 - 17:58 | 350290 TonyV
TonyV's picture

I love Taleb's Black Swan. I also agree that we will eventuall have a failed auction. However US treasuries can remain irrational a lot longer than I can remain solvent

Thu, 05/13/2010 - 19:05 | 350439 Windemup
Windemup's picture

A failed auction will not be a black swan unless you have not heard of one nor thought about the consequences of one.

In that case, for you, it might be one.

 

Thu, 05/13/2010 - 17:58 | 350291 ZeroPower
ZeroPower's picture

His comment re NOT going to b-school piqued my interest. No, dont take any classes with equations (so any structured finance or derivatives classes are out).
No math classes, word.
Take accounting classes, psychology?

No thank you.

Thu, 05/13/2010 - 18:00 | 350294 Howard Roark
Howard Roark's picture

How can there ever be a failed auction if the Fed uses proxies to bid? Seems to me the only evidence of a failed auction we will ever see is well after the fact when M2 (?) increases by the amount of the auctions? The Fed is running a much more sophisticated scam to allow an auction to actually fail.

Thu, 05/13/2010 - 20:01 | 350546 lovejoy
lovejoy's picture

Repeat - delete

Thu, 05/13/2010 - 19:59 | 350547 lovejoy
lovejoy's picture

There is no way there can be an auction fail. Taleb, the genius at risk, has no clue on monetary policy.

Fri, 05/14/2010 - 03:39 | 351114 merehuman
merehuman's picture

" There is no way an auction can fail"

Ok there is no way house prices can go down

There is no way we elect a black president

I rest my case

Thu, 05/13/2010 - 18:10 | 350299 Mercury
Mercury's picture

I love Taleb and this is a good as he ever comes across on TV.

BTW what happens if China decides to sit out for an auction or two and take down some bullion instead?

Hey Bloomberg, get rid of that vertigo-inducing moving background! In what way do you think we're benefiting from this distraction when important shit is being discussed?

 

Thu, 05/13/2010 - 18:40 | 350380 bada boom
bada boom's picture

"what happens if China decides to sit out for an auction or two and take down some bullion instead?"

Well then, I guess europe or the middle east might be interested.

And unfortunately, the war might begin.

Thu, 05/13/2010 - 19:37 | 350492 lovejoy
lovejoy's picture

We don't need China to buy Treasuries. The only reason that do is that they have a surplus of dollars sitting at the Fed in something akin to a checking account. They earn nothing on it; so to generate yield they move moving from checking to Treasuries. So simple and just because they own a lot of them, everyone mistaking believes that we need them to buy our debt.

What nobody realizes that is the government can spend/print money without having to issue bonds, by simply increasing reserves at the FED. The government is not revenue constrained. However, if they spend too much, the dollar may weaken and inflation may result.

Thu, 05/13/2010 - 21:46 | 350758 Mercury
Mercury's picture

Right, you and Bobby Mugabe alone have this insight.

If the government announces that it will no longer be issuing debt but will instead just print money it's game over that day.

Thu, 05/13/2010 - 23:23 | 350905 ratava
ratava's picture

remember it was UK's inaction and reluctance to protect their citizens that kept him in power. maybe zimbabwe was a practice round.

Thu, 05/13/2010 - 18:30 | 350354 johngaltfla
johngaltfla's picture

It was a great interview, BTW. If you have not read his books do so. Then watch this interview. The biggest, nastiest black swan of them all is a failed Treasury auction and at some point that means we see a SOMA purchase of 1/2 the auction, which in my book is a FAIL.

Thu, 05/13/2010 - 19:06 | 350440 Gromit
Gromit's picture

Read "Fooled By Randomness" not the cash in book.

Thu, 05/13/2010 - 18:30 | 350357 ZackAttack
ZackAttack's picture

Utter bullshit.

A failed treasury auction would be an Extinction Level Event for western society. You will never see one with a b/c below 2, not as long as they can print up as many electrons as they want.  

Thu, 05/13/2010 - 18:34 | 350364 johngaltfla
johngaltfla's picture

Zack, an auction with less than 2-3% taken by indirects would be viewed as a FAIL in a 3,10 or 30 year.

It would be a disaster. Despite the idea we can monetize it, the fact that it happens would create a stir. Despite popular belief the credit markets follow those results closely and if we ever see a 30% SOMA, 50% Primary, 45%+ Direct result, the shit would hit the fan in a huge way.

Thu, 05/13/2010 - 19:22 | 350466 JW n FL
JW n FL's picture

Why? becuase private money would withdraw into? sitting on the sidelines? cash in for Physical Gold?

Why? would it matter?

Thu, 05/13/2010 - 20:39 | 350638 johngaltfla
johngaltfla's picture

Uh, loss in the "full faith" clause in our money as presented by the government could be one major reason. You're looking at it from an investing perspective. Divorce yourself from the American centered universe and realize it's a big world out there and they are getting tired of us shitting on them with our financial games.

The "money" would be stuck. Why the hell do you think our multinationals have been moving to Bermuda, the Bahamas, etc. and getting their headquarters out of the United States? They don't want to be the last dumbass without a chair when the music stops.

Keynesian economics only works as long as there is someone stupid enough to keep financing your bad habits. That era will end in our lifetimes.

Thu, 05/13/2010 - 18:33 | 350360 Sun Tsu
Sun Tsu's picture

-1000 Geittner, Summers and Bernacke

Debit to GDP ratio rises with hyperinflation.

Obama's Jubilee, wealth redistribution.

Reality imitates the Oprah Winfrey Show

Thu, 05/13/2010 - 18:36 | 350370 Sun Tsu
Sun Tsu's picture

Iran-Pakistan Al Qaeda nuclear strikes are all now guaranteed.

Thu, 05/13/2010 - 19:19 | 350458 Cistercian
Cistercian's picture

+20 kilotons

Thu, 05/13/2010 - 18:45 | 350394 THE DORK OF CORK
THE DORK OF CORK's picture

The Obama administration has created a Doomsday Machine.

Enjoy life while you can.

Thu, 05/13/2010 - 18:53 | 350412 bada boom
bada boom's picture

Sorry, but wasn't it created in 1913?

Thu, 05/13/2010 - 19:28 | 350481 THE DORK OF CORK
THE DORK OF CORK's picture

Yes Bada  - the compound debt implosion device has been a long time in the making - my apologies.

 

Thu, 05/13/2010 - 19:25 | 350469 JW n FL
JW n FL's picture

Damn Obama and his Tarp and Paulson! Damn right, Hang Obama...

 

Liberal Democrats... we need Conservative Republicans... only the Republicans and Jesus can save us now!

 

Pro-Life Bitches!!!!

 

THE DORK OF CORK ='s Sheepeople! 

Thu, 05/13/2010 - 20:46 | 350658 eggy123
eggy123's picture

Jw,

Are you are Huffington Post troll? Stop with the crap about Dems/Repubs.

Obama iseven MORE of a dumbass/evil genious han Bush. OK

Now STFU about it.

 

 

 

Fri, 05/14/2010 - 03:49 | 351119 merehuman
merehuman's picture

JW you are full of surprises. Republicans got us in this mess, with help from the democrats on the other side of the bed.

dont you think this is beyond normal 2 party  politics. i see no hope in rigged elections, besides it will all be over by then. hell its too late now, we have crossed the friggen Rubicon. I suppose jesus will have to do! What do you imagine he will do, replace Obama?

Thu, 05/13/2010 - 18:54 | 350417 TooBearish
TooBearish's picture

Hunt your Black Swans elsewhere Nassim - not gunna happen - wouldnt be prudent...

Thu, 05/13/2010 - 19:34 | 350486 CookieMonster
CookieMonster's picture

These markets (and politics) are such a mean-spirited, manipulated joke, not just the equities. Taleb points to metals and agland as safehavens but is that going to be enough? The very last question about what to do was telling: Accounting, Comp.Sci., Law (and NOT finance or math) points to not just hard assets, but also hard skills that do something. If you want to see further into that kind of future, start thinking AMISH! If they had time, he may have been able to explain more. Makes me think that his brain is too smart for his speaking ability - we need to hardwire his brain into a computer and see what is inside in order to get some answers......

Thu, 05/13/2010 - 20:33 | 350621 Wyndtunnel
Wyndtunnel's picture

The Meek shall inherit the Earth.

Thu, 05/13/2010 - 22:05 | 350785 David449420
David449420's picture

The "Meek" are as contemptable as the psycotic bandits who have brought us to this time.  Sitting back, and doing nothing makes the "Meek" part of the problem that still has to be fixed. 

Thu, 05/13/2010 - 20:06 | 350566 mogul rider
mogul rider's picture

There were only two investment that saved in the Great Depression, short term treasuries and gold.

What will save you in the Greater Depression? Not sure but history has saved my ass thus far. If I'd listened to most of you dopes I'd be broke. I asked my grandfather and he concurs, however, Roosevelt went after his gold which he hid in the woods.

Short Term tresuries under 6 months and gold in the forest. No paper gold crap either

Guns and Bullets in the closet and grub in the basement  and a wench in my bed

 

Thu, 05/13/2010 - 20:13 | 350580 Celsius
Celsius's picture

I love how they are trying to discredit him in the opening with his consulting connection to a trading house that may have been involved in last weeks crash.

Thu, 05/13/2010 - 20:37 | 350630 Henry Chinaski
Henry Chinaski's picture

Whether that means a dramatic change in the Direct Bidder regime, the Primary Dealer hit ratio, or some other metric, we don't know, which is why we log each and every auction to keep track of any potential outliers and aberrations.

How do I sign up for the automatic email notification?

or Tweet?

Thu, 05/13/2010 - 20:39 | 350637 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Taleb gives sound investment advice.

Thu, 05/13/2010 - 20:54 | 350672 Ned Zeppelin
Ned Zeppelin's picture

There will be no failed auction, although the signs of one which required major-league Fed intervention to prevent may be apparent. I'm with our leader, TD, that the signs will be subtle and in the mix of directs and indirects, or some other factor, but that is how it will transpire.  Once it "fails," the printing presses will be on full bore 24/7, and hang on to your PMs. If they are still legal.

Thu, 05/13/2010 - 21:30 | 350732 The Merchant of...
The Merchant of Venice's picture

The Fed and Treasury are quite aware of the available land the Federal Government controls.  It has plenty of resources to ensure no Treasury auction fails.

The US will keep spending to prop up Europe until it starts playing dominos in Central Asia.

Thu, 05/13/2010 - 22:15 | 350806 HarryWanger
HarryWanger's picture

Is this the same Taleb who only 3 months ago said everyone in the US should be short US Treasuries? Now it's just "stay away" Nice moonwalk on that.

Is this the same Taleb who only 3 months ago said short the S&P with everything you have? Now he says just "use it for entertainment". Another nice moonwalk.

Gimme a break! He's just like the rest, they hide when there is solid evidence of growth then pop up like weeds the first pull back we see. Well, fortunately, we will see him and his like crawl back in his cave in about two months as we pop above 1250.

Thu, 05/13/2010 - 22:26 | 350826 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You are a worless spammer.

I meant worthless but I will leave the comment for AUSTERITY.

Thu, 05/13/2010 - 22:55 | 350872 AccreditedEYE
AccreditedEYE's picture

+1  I enjoyed taking money from you today Wanker. Get used to that feeling.

Fri, 05/14/2010 - 01:07 | 351003 Cistercian
Cistercian's picture

 "solid evidence of growth"...I have to agree.There is stunning growth of the use of the theivo-matic algos to pump the market higher on no volume.There is stunning growth of applying inverse fundamentals to arrive at market price too.

  It is a rigged game, a casino.The actual economy is being totally destroyed...and you are helping the enemy.If we wanted propaganda and lies, the MSM provides that.Your presence here is unwanted wanger.

 Some think you are amusing in your total embrace of ignorance and evil.I do not.What sets Zero Hedge apart is the laser like focus on reality....as incredibly ugly as it currently is.People who can are buying PM's with both hands.And that's change you can believe in.

 Your shell game algo enhanced piece of crap market is doomed.Because everyday, more and more people can't but help wonder how it can be so high, and their lives so low.

 

 The end game is here bozo.Watch Europe for a preview of whats coming here....and wait till the derivatives detonate their 1.4 quadrillion dollar warhead as the system implodes.

 

 Good luck with apple then.....

 

Thu, 05/13/2010 - 22:58 | 350858 akak
akak's picture

James Kostohryz (aka "HarryWanger"), are you STILL collecting that data on us "radical utopian", anti-establishment idealistic dreamers who demand honesty and accountability from our corrupt and criminal overlords in our "futile rage"?  One would have thought that you would have collected far more than enough by now!

Thu, 05/13/2010 - 22:53 | 350861 Landrew
Landrew's picture

Ah short S&P? In what way did that not make a fortune? You sound like a jealous lover. Money is made up or down if your on the right side of the trade.

Thu, 05/13/2010 - 23:40 | 350924 Celsius
Celsius's picture

Another Keynesian in our midst! Keynesianism is on its final death throws....

Von Mises bitchez!

Fri, 05/14/2010 - 00:43 | 350974 chindit13
chindit13's picture

Good to see Little Mary Sunshine back again.  Don't mock the fellow, but rather look at this as his Farewell Tour.  Last week's Evaporation of the Bids gave anyone who trades with his eyes open a glimpse into the future.  Harry, or James, while ostensibly studying the permabear mentality, is in fact lying down in the petri dish and letting all of us study the dementia that was written about so well long ago in Charles Mackay's classic work on Popular Delusions and the Madness of Crowds.  Learn from it.  Thank him for his sacrifice on the altar of delusion.  His like shall not pass this way again......until next time.

Sat, 05/15/2010 - 06:44 | 353435 akak
akak's picture

Kudos, Chindit!

As cynical and morally crippled as James/Harry is, your words have actually made me feel a smidgen of sympathy for the inevitably miserable fate of this deluded and blinkered apologist for high level crime, corruption and sociopathy.  A smidgen.

Thu, 05/13/2010 - 22:47 | 350856 DeweyLeon
DeweyLeon's picture

Harry (1165) Wanger-

He's just like the rest, they hide when there is solid evidence of (no) growth then pop up like weeds with the melt up we see.

 

 

Thu, 05/13/2010 - 22:57 | 350874 akak
akak's picture

No, he isn't even that --- he is an arrogant and amoral writer named James Kostohryz, who has written for MarketWatch among other sites, who is conducting a self-style "study" on the psychology of "idealist utopian radical permabears" such as most of those of us who comment here on ZeroHedge (aside from Leo, of course), who rage away against corruption and criminality in a futile effort against overwhelming power, at least according to him anyway.  Beware this troll, and do NOT respond to him in any way!

Thu, 05/13/2010 - 23:30 | 350917 Citizen of an I...
Citizen of an IKEA World's picture

WTF?  An interviewer with actual interview skills?  An honest journalist rather than a spittle-blasting molten tower of vanity?

I think I'll just replace CNBC with Bloomberg on my DirecTV favorites button, immédiatement.

Kudos to Monsieur Durden for posting this. 

Fri, 05/14/2010 - 00:05 | 350946 faustian bargain
faustian bargain's picture

btw - taleb's post-interview 'tweet':

Was on Bloomberg TV --impressed: vastly more professional than competitors; better, thoughtful  staff, even the make-up was superior.

Fri, 05/14/2010 - 00:57 | 350987 Hillbillyfreak
Hillbillyfreak's picture

What they should be teaching is not to listen to morons on TV like this guy or any guy or gal.  I can't believe I listened to this thing.  What a waste.  What they should be teaching is that you need to learn to make your own conclusions and make your own decisions.  They should be teaching how to read the market.  How to make decisions.  Patience.  Discipline.  How to think for yourself.  They should be teaching that you should avoid spending countless hours reading blogs and comments posted on blogs, unless of course you have no life.  They should be teaching you shouldn't spend time writing comments for blogs.   They should be teaching that most morons are on TV to push their own agenda -- it might be a book, it might be a paperback book with a new chapter, it might be their book as in their investment portfolio. 

What should you being doing now?  Your bunker should be complete and you should be stocking it with things you will need to survive like food, whiskey, toilet paper, weapons that inflict fatal results with minimal effort cuz when the men find out you've got whiskey and the women find out you've got toilet paper.... well, things could get a little ugly.

BTW, there can not as in never be a failed auction.  Failed auction is an oxy moron.  Won't happen.  If Ben buys all the paper you can call it something else but its not a failed auction.

Sat, 05/15/2010 - 06:16 | 353427 Reflexivity
Reflexivity's picture

What they should be teaching is that you need to learn to make your own conclusions and make your own decisions.  They should be teaching how to read the market.  How to make decisions.  Patience.  Discipline.  How to think for yourself.  They should be teaching that you should avoid spending countless hours reading blogs and comments posted on blogs, unless of course you have no life.  They should be teaching you shouldn't spend time writing comments for blogs.

 

To teach someone to 'think for themselves' is the must difficult thing of all to teach.

Fri, 05/14/2010 - 04:39 | 351149 godfader
godfader's picture

German auctions fail every once in a while and it's no big deal. Recently the 30y ultra long failed, barely made headlines.

Mon, 05/17/2010 - 15:20 | 356814 JW n FL
JW n FL's picture

"The government lies and the press lies. But in a democracy, they're not the same lies."
Anonymous

Fri, 05/14/2010 - 06:43 | 351225 wintermute
wintermute's picture

JW and others are right. We are not going to get a failed auction in the obvious sense that there are no buyers - because the Fed will always print money to buy treasuries.

The present situation of partial monetization can continue for a while - but there is a inflection point:

When the rate of printed money starts to exceed the rate of credit destruction - then we are past the last exit on the road to hell. Hyperinflation, dollar destruction, riots etc...

All that was needed to prevent this was Glass Steagall remaining and the Balanced Budget Act of 1995 being adhered to. Shame.

Wed, 05/19/2010 - 23:18 | 362234 HFT1
HFT1's picture

Love to see Taleb telling it how it is. Some of you talking about treasuries not losing value? You can't have it both ways owning gold for inflation hedge and hold treasuries with worthless $ (if your gold bet is correct) while losing even more value during rate hikes. Don't see inflation yet but you won't see it coming that's the thing. 2012 INFLATION and I buy more gold from you at 680 in 2011. Well see, good luck to all.

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