Things That Make You Go Hmmm - Such As The End Of H1

Tyler Durden's picture

In his latest Things That Make You Go Hmmm, Grant Williams dissects the key misconceptions at the end of the first half of the year, and isolates 5 specific topics that were supposed to not be an issue, yet somehow the market completely mispriced, such as 1) High oil prices are NOT going to be a problem, 2) The chances of gold becoming the world’s most important reserve currency in the next 25 years are only slightly better than those of the Euro, 3) A Greek default impacting US banks too severely, 4) The European debt crisis derailing the US economic ‘recovery’, and, "last but not least" 5) The sustainability of Greek debt should the austerity program be voted through and carried out. Williams does not (yet) focus on the key misconception that dominates the speculative stock community as we enter the second half. Luckily, he will have more than enough time to do so when it is disproven in a few weeks. In the meantime, here is TTMYGH with a nice healthy dose of inverse revisionist history.

Hmmm Jun 30 2011

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disabledvet's picture

was it good for you, too?

markmotive's picture

So have corporate earnings.

Here's something to make you go 'hmm'. David Rosenberg predicting another recession:

10kby2k's picture

Corporate profits are the last thing to be affected.

Caviar Emptor's picture

In the post-crisis new-economy the focus is all about putting out one fire after another with the money hose, preventing a new problem from blossoming into a tsunami of defaults, keeping zombie companies that are technically bankrupt open, and dealing with a constant parade of corporations with their hands out saying "Gimme". 

Of course that has rotted out the very core of US capitalism. Because it's no longer about true competition and new ideas replacing old, inefficient ones. The Fed picks winners and losers. And when it's no longer about competition there's no incentive to succeed, improve or meet demand. Everything the Fed does has unanticipated consequences, and that's where their blindspot is. 

There's more than just moral hazard at stake. The hazard is dropping the ball completely. And missing the side-effects of reckless monetary policy until it's too late to stop them. 

Ricky Bobby's picture

One eloquent explanation sir!

centerline's picture

At some point there will be a "oh shit" moment when interests conflict from within.  That moment will be marked by the massive "thud" sound of one of those balls hitting the concrete.  I wager we won't see it coming.  Marginal notice at best for those of us who pay attention everyday.

Prepared's picture

so obvious to few, ignored by most = PM's bitchez's!!!!

RockyRacoon's picture

Options are obviously limited.   I guess that means print money.

Prepare accordingly.

baby_BLYTHE's picture

indeed, back in mid-2009 Marc Faber predicted ZIRP4EVER, Multiple QEs, Total Collapse and War. An interview that will be replayed 50 years from now for predicting America's total impolosion

"Total Collapse Will Come"

Smiddywesson's picture

Then I beat him by two years.  But I don't know anything either, I just read a lot.  Read the following books and such a collapse will be evident every time:

1) The Lords of Finance

2) This Time Is Different

3) Black Swans

4) The Fourth Turning

Financial collapse and war is alway written into Act IV of the script.  It's just nature baby.

baby_BLYTHE's picture

I have read both (1) & (4)... Both Great books

10kby2k's picture

When I ask myself what conditions would drive the FED to abandon ZIRP....I can't forsee any. 0% overnight money forever. And when instituted it was a temporary measure. These are epic times.

n00b tube's picture

So, is this the time when China & Russia start increasing the amount of UST selling? With so few willing to buy them up, the saturation will crash bonds - driving investors into equities temporarily. Rising - I mean spiking - interest rates will quickly halt GDP growth, leading to the "Crash of 2011." In anticipation of this event, some are buying up all they can of physical gold and silver as COMEX registered continues to hit new lows. The only rational medium-term market strategy is to either get short or own hard assets.

Is this about right?

Smiddywesson's picture


 "The only rational medium-term market strategy is to either get short or own hard assets."

No, no, no.  None of these discussions has anything to do with timing a trade.  If you short now, you probably will do ok because the ramp is probably over, but "probably" doesn't make money.  After seeing virtually unlimited power to manipulate the markets being employed, we all have to understand that anything is possible.  That makes ALL systems of trading obsolete except on lower time frames.


If I have learned anything over the last two years, it is these markets are completely fabricated.  Because of that fact, you can't take a position based on fundamentals or technicals.  Either you know the scam or you don't.  If you don't, then do not take a trade.  Otherwise, in these markets, you might as well play roulette.


We have all been programed to feel like losers if we don't join the game of Three Card Monte.   There's a time to trade and a time to sit in cash (or PMs). There will be good times to trade in the future.  Why take a trade now and get scammed?

Caviar Emptor's picture

Either you know the scam or you don't.  If you don't, then do not take a trade

Exactly on the money, bro. (No pun intended)

centerline's picture

If you don't know who the sucker is at the table....

n00b tube's picture

I appreciate the candid response. I'm in a slow and painful process of ending my days as a sheep. I used to joke about markets being rigged, but I really had no idea just how deep the rabbit hole goes.

centerline's picture

IMHO, low rates is one leg of the stool.  They can't be allowed to rise or that in itself would crash the system.  I would expect "unusual" (LOL) intervention in the bond market where it blows out.  It wont be right away though... there will be a scare first to justify to action.

Oh regional Indian's picture

This made me go Hmmmmmmmmmmmmmmmmmmmmmm!!!

And Hmmmmmmmmmmmmnnnnnnnnnnnmmmmmmmm!

Really did!


CrashisOptimistic's picture


The story of the half-year was more or less his first mentioned item.

Brent opened the year at about 95 and closed June 30 about 112.  That's 15ish%.  It erased the 2% SS payroll tax cut without breaking a sweat.

Frankly, the rest doesn't matter. 


A Man without Qualities's picture

However, considering how much money printing, ZIRP, decline of the Dollar and efforts to increase the value of most other assets, growth of demand in emerging markets (especially the great Wall of Chinese credit) and the increase in demand for fossil fuels in Japan plus the turmoil in the ME, including war in Libya, a key source of supply into European markets, you could argue that 15% is surprisingly little...

CrashisOptimistic's picture

Nah, that's just speculators holding it down.

Quixotic_Not's picture

The Trend is continuing, nothing new to mention...

And in other news, the fleas have eaten the dog!

Edmund Dantes's picture

Gold is money, all else is shit!!!

Edmund Dantes's picture

"And now, farewell to kindness, humanity and gratitude. I have substituted myself for Providence in rewarding the good; may the God of vengeance now yield me His place to punish the wicked."

DavidC's picture

Well, as far as I can see, NOTHING has changed between 2008 and now, except for massive printing of money on the basis that 'Inflation is good, deflation is bad'.

Consider, banks are still sitting on 'mark to fiction' 'assets', interest rates are stuck at historic lows, unemployment is still high (ICs over 400,000 again but because it came down 1,000 this week it's supposed to be good!), house prices still on a downward tack, consumer confidence low.

And yet the stock market has had a priapic week. Everything is OK. Not as far as I can see.


DavidC's picture

Oh, yes, Goldmans laying off staff, and Lloyds here in the UK intending to lay off 15,000 (yes, fifteen THOUSAND!).

And this week has seen several UK high street retailers, including Habitat, going bust with others slashing jobs and shutting shops.


Caviar Emptor's picture

Yes. Been reading about that. Feel bad for all in the UK. The side-effects of reckless monetary policy are manifesting sooner for you than for us. But one by one developed economies are getting ill from the medicine that the central bankers prescribed in their wisdom

topcallingtroll's picture


But we gotta make money no matter what we think of the long term macro environment.

Stagflation is probably the key macro theme.

A Man without Qualities's picture

The main reason these retailers have gone bust is that there is not really much of the actual business left.  Most of these businesses were taken over by private equity firms a few years ago, who entered into sale and leaseback on the buildings, sold the assets on the basis of ludicrously high rents they agreed to, paid themselves a massive dividend to get the cash out of the business and as soon as the market turns down, default on the lease (leaving the lender with an bad asset, which usually comes back to the bank, eg Lloyds, which lent them the money.)

The now defaulted retailer will get sold for a nominal sum back to the same private equity firm, the bank takes a loss on the mortgage, and life goes back to normal, with the taxpayer picking up the tab. 


schizo321437's picture

I would guess the SPR release was supposed to keep petrol cheap during the holiday season if it will last 2 months.


Next year it won`t look like so much of a bribe, like money printing it will be `normal`. Seriously, politicians are so pitifully weak at looking ahead if Obama`s given himself only one year breathing space.

Cpl Hicks's picture

Obama's time horizon is 16 months and a few days. The teleprompters get regular maintenence, pollsters are polling, the back rooms are full of real cigarette smoke, the MSM is still onboard.

Plenty of time for golf.

Grand Supercycle's picture

Since DOW/SP500 is now EXTREMELY overbought, the reaction next week should result in a significant retracement.

S&P500 daily charts show updated rising wedge and possible head and shoulders pattern with target of 1,150 when confirmed.

Smiddywesson's picture

Don't take this the wrong way, because I do use technicals, but that rising wedge and head an shoulders talk regarding the S&P500 is a fairy tale.  This market moves when Uncle Ben says it moves.  That invalidates the technicals.  And it certainly invalidates Elliot Wave Theory which is of marginal use during normal times.

You wouldn't be an Elliott Wave head, would you Grand Supercycle?

Elliot Wave is based on the market being an especially good vehicle for reflecting human nature.  When the markets are heavily manipulated by the central bank, the markets don't reflect human nature, they reflect what Bernanke wants.  Using technicals or Elliot Wave Theory under those conditions is an invitation to disaster, which is why Prechter's subscribers have gotten killed over the last three years.  And Prechter can stuff his claims of calling the bottom to the day on March 9, 2009.  He has three publications for his primarly subscribers, multiple additional newsletters for secondary subscribers, his free newsletter, and all of the interviews he does to select whatever call he believes will make him look good.  He is a smart guy and employs a lot of smart guys, and their observations are valuable because they draw in a lot of other data, but Prechter's Elliott Wave stuff is worse than worthless.  It is a bunch of baloney built on a few useful core observations which Charles Dow spotted too.  Worse yet, it can't tell you when, and when is what makes winners or losers.  

Caviar Emptor's picture

As previously broadcast here on ZH (and obliquely in The Matrix): "There is no Market". 


Spoon boy: Do not try and analyze the market. That's impossible. Instead... only try to realize the truth. 
Neo: What truth? 
Spoon boy: There is no market. 
Neo: There is no market? 
Spoon boy: Then you'll see, that it is not the market that moves, it is only The Bernank. 

topcallingtroll's picture

These patterns are useful, but not as useful as just watching the tape and pre anticipating market psychology. If this debt ceiling thing werent in front of us it would be smooth sailing until mid august or so.

People still believe. They are willing to risk a lot to fund their dream retirement. If this thing ignites with retail participation we could see an amazing run by years end.

Excessive unemployment and welfare/disability bennies are ruining the economy. Scared hungry proles are highly productive.

centerline's picture

Lots of folks still hungry (desperate) for returns and haven't a clue of the risks.  MSM blackout of most facts and real news is pretty impressive.  And there are many who have been around awhile and have been lulled into thinking that since we have rough patches before, nothing bad will come of this either.  Lump this on top of the retirement funds that absolutely must perform and we still have a casino for now.

I only have play money in  this shit storm purely for the sport of "fishing during a hurricane" for the lack of better analogy.  Historic times my friend.

DosZap's picture

People still believe. They are willing to risk a lot to fund their dream retirement. If this thing ignites with retail participation we could see an amazing run by years end.


Let's see how HAPPY the sheeple are when their 401k's, and CD's, and IRA's are frozen, and invested in Treasuries, without their consent.

How's that Dream gonna work for ya?.



Cruzan Stomp Revival's picture

If QE1 was crossing the Rubicon in terms of monetary policy, it looks like we're about to plow right ahead on the fiscal front as well:

This morning we speculated that Treasury Secretary Tim Geithner was seriously considering just ignoring the statutory debt limit by claiming it was superseded by section Four of the 14th amendment. Sen. Chuck Schumer, D-N.Y., confirmed that that course of action has been considered by the White House. Talking Points Memo‘s Brian Beutler reports on a conference call with Schumer today:

I asked Schumer, a lawyer, whether, in his view, the administration had the power to continue issuing new debt even if Congress fails to raise the debt limit. He acknowledged that the question’s been discussed, but said the White House probably shouldn’t go there just yet.

Yep. Just ignore the debt ceiling so you can spend whatever the hell you want to. My best guess is that these madmen will at least try to waive all taxes when the US is on the verge of collapse and monetize 100% of spending via the Fed. They won't get there of course, but it has been discussed already I'm sure.


Caviar Emptor's picture

Yep. Just ignore the debt ceiling so you can spend whatever the hell you want to.

And it's about time! 

And when we reach the next inevitable debt impasse after they do that, I propose the next glorious step in monetary evolution: Everyone just come to DC and take whatever you think you need. Now that's an American Revolution in the making!

FeralSerf's picture

Why not just give everyone (except the ones they don't like much) no-limit ATM cards?

Monedas's picture

The world has never approached the Capitalist ideal as close as North Korea has approached the Socialist ideal ! What little we enjoyed of the economic miracle of Capitalism was by historical accident ! The worlds brief romance with Capitalism has been wasting away for 100 the detriment of all ! Scientific Socialism has been given hideous advantages and opportunity to succeed and has failed miserably everywhere ! Capitalism hasn't failed us....we have failed Capitalism ! Monedas 2011 A simple hoarder disgusted and saddened that stupidity and cruelty and dishonesty have caused so much needless suffering......and the world is still in denial !

topcallingtroll's picture

I respect Leo for giving his invvestment picks and market timing moves in real time. He just went all cash right before the major market moves.

The market will only go down if the dims think the tea party is bluffing about shutting down the government and the treasury market.

Otherwise it is smooth sailing for a while in my judgment.

Fear rules the market. The retail investor doesnt want to participate, shorts are at high levels. The market is poised for further moves.

I give my calls in real time. When i go all cash in my spec portfolio. When i go all stock in my spec portfolio. And I wont let anyone.forget my zsl call one week before the crash. And my last call vde in the 105 range. That is probably a short swing trade.

I like to hear real time calls from others, even Leo.

Yeah i sold gold a couple hundred dollars early. Nobody wins them all!

Gold is likely to give a modest return by years end, but i just cant get enthusiastic. I will buy silver big if it hits the 200 dma but probably just for a quick flip.

Summer doldrums are over. Win or lose it gets exciting from here!

DosZap's picture

Summer doldrums are over. Win or lose it gets exciting from here!


No their not over PM's will continue to drop, not a lot, look for Silver to Maybe get to $32.00/Gld $1,400.00.(buy your butt of if it drops to there,both).


Dip blips on the screen, until the next wave of crisis contagion fears hit.


We will be at $1650-$1800.00 by years end, if there is no limit put on the debt ceiling.

We are at 100% GDP debt ratio now,22% real UE, and 45 million +/- on .gub assitance.


Not the phony crap we are fed.


lindaamick's picture

IMHO there is no financial reality left.  The stock market stays up (via fraudulent numbers

and controlled injections from central planning in order to keep the ever dwindling working middle class confident in the structure.   However, the numbers of people not using this

marker of a "healthy or recovering" economy is growing.  Retiring baby boomers, public

opension losers, growing unemployed and other groups gradually being squeezed will eventually tip the scales in favor of a total loss of confidence in the government and the

financial structure that is totally designed to support the rich and rob everyone in the

lower 90%.  At this point the game changes; not before.