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TrimTabs: "No Amount Of QE Will Be Able To Keep The Current Stock Market Bubble From Bursting"
It was the night before Christmas Eve, and CNBC trucked out TrimTabs' Charles Biderman to a de minimis audience, knowing full well that a man with his understanding of money flows would very likely repeat his statement from last year, that there is no real, valid explanation for the inexorable move in stocks higher, as equity money flows in 2010 were decidedly negative, and any explanation of the upward melt up would need to account for Fed intervention (and no-volume HFT offer-lifting feedback loops but that is a story for another day). A year after the first scandalous report was published, TrimTabs is sticking with its story: "If the money to boost stock prices by almost $9 trillion from the March
2009 lows did not come from the traditional players, it had to have come
from somewhere else. We believe that place is the Fed. By funneling
trillions of dollars in cash to the primary dealers in exchange for
debt, the Fed has given Wall Street lots of firepower to ramp up the
prices of risk assets, including equities." And, wisely, Biderman, just like Zero Hedge, asks what happens when the buying one day, some day, ends: "...stock prices will be higher by the time
QE2 ends, but economic growth will not be sustainable without massive
government support. Then even more QE will be needed, and stock prices
could keep rising for a while. In our opinion, however, no amount of QE
will be able to keep the current stock market bubble from bursting
eventually." Ergo our call earlier that Bernanke has at best +/- 150 days to assuage the market's fear that QE2 is ending (not to mention that we have a huge economic recovery, right Jan Hatzius? We don't need no stinking QE...). Therefore the best Bernanke can hope for is to buy some additional time. At the end of the day, the biggest problem is that the massive slack in the economy means that LSAP will have to continue for a long, long time, before the virtuous circle of self-sustaining growth can even hope to take over. By then bond yields may very well be high enough that Ron Paul will demand someone finally bring Paul Volcker out of the fridge.
From TrimTabs:
What Source of Money Is Pushing U.S. Stock Prices Higher? Market Cap Rises $2 Trillion in 2010 as Buying by Companies and Foreigners Offsets Selling by Pension Funds and Retail Investors. However All of Gain and Then Some, $2.4 Trillion, Since QE2 Announced at End of August.
At the end of 2009, we published a report entitled, “Are Federal Reserve and U.S. Government Rigging Stock Market?” We questioned whether the Fed or the Treasury were pushing up stock prices because we could not identify the source of the money that pushed the market cap up by nearly $7 trillion from mid-March 2009 through December 2009.
At the time we released our report, many people thought it was crazy to suggest that the Fed or the government would manipulate the stock market. Yet Ben Bernanke, Alan Greenspan, and Brian Sack have all but admitted publicly this year that the Fed attempts to prop up stock prices.
The market cap of all U.S. stocks increased $2 trillion in 2010. All of the gain and then some, $2.4 trillion, occurred since the end of August after QE2 was announced. Once again, most of the money to push the market cap higher does not seem to have come from the traditional players that provided money in the past:
Companies and foreign investors were net buyers:
· Companies. Corporate America was the biggest net buyers of shares, although all the float shrink occurred between January and August. The float of shares decreased $150 billion in 2010, mostly because new stock buybacks nearly tripled from the depressed levels of 2009. However, between September and year-end the float did not shrink but instead grew by $14 billion.
· Foreign investors. Foreigners provided some buying power in the U.S. stock market, purchasing a net $89 billion in U.S. equities from January through October.
But the buying of companies and foreigners was offset by selling elsewhere:
· Pension funds. Pension funds were apparently huge net sellers of U.S. equities. Based on Informa Investment Solution’s Plan Sponsor Network data, we estimate that managers of separate accounts pulled $169 billion from U.S. equities from January through September. Pension funds account for about 60% of the assets in separate accounts.
· Retail investor funds. Retail investors were net sellers of U.S. stocks. U.S. equity funds and ETFs redeemed $38 billion in 2010 even as a whopping $273 billion poured into bond funds and ETFs.
· Retail investor direct purchases. We doubt retail investors were big direct buyers of U.S. stocks when they were net sellers of U.S. equity funds and retail investor sentiment was relatively cautious until late this year.
· Hedge funds. We have no way to track in real time what hedge funds do, but we doubt they were big net buyers of U.S. equities. While hedge funds posted an inflow of $60 billion from January through November, the most popular strategies were Event Driven ($14 billion), Fixed Income ($9 billion), and Emerging Markets ($7 billion). Equity Long Bias, Equity Long Only, and Equity Long-Short received a total of only $12 billion.
U.S. Stock Market in Trouble Once Fed Interventions Stop. No Amount of Bond Buying Will Keep Stock Market Bubble from Bursting Eventually.
If the money to boost stock prices by almost $9 trillion from the March 2009 lows did not come from the traditional players, it had to have come from somewhere else. We believe that place is the Fed. By funneling trillions of dollars in cash to the primary dealers in exchange for debt, the Fed has given Wall Street lots of firepower to ramp up the prices of risk assets, including equities.
But what will happen when the Fed stops buying assets? If QE2 works and the wealth effect of higher asset prices creates a sustainable economic recovery, we think the Fed will stop its QE activities. The Fed is legally mandated to manage the economy, not the stock market, and we think the Fed will sacrifice the stock market to its legal mandate. If that happens, stock prices are likely to plunge to well below fair value.
A more likely outcome is that stock prices will be higher by the time QE2 ends, but economic growth will not be sustainable without massive government support. Then even more QE will be needed, and stock prices could keep rising for a while. In our opinion, however, no amount of QE will be able to keep the current stock market bubble from bursting eventually.
Mutual Fund and Exchange-Traded Fund Flows Not Dramatically Different in 2010 Than in 2009. Bond Funds Post Big Inflows, Global Equity Funds Post Moderate Inflows, and U.S. Equity Funds Suffer Redemptions.
Mutual fund and exchange-traded fund flows in 2010 were not greatly different than they were in 2009. Bond funds—references to “funds” in this section include both mutual funds and ETFs—continued to rake in huge amounts of money, although inflows subsided to $273 billion in 2010 from a record $416 billion in 2009.
Equity fund flows were mixed. Global equity funds posted a respectable inflow of $87 billion in 2010, up modestly from $62 billion in 2009. Nevertheless, global equity fund inflows were nowhere near the peak of $182 billion in 2007. U.S. equity funds posted their third consecutive outflow, losing $38 billion in 2010, little changed from the outflows of $42 billion in 2008 and $47 billion in 2009.
Flows shifted dramatically in late 2010 as the municipal bond market tanked and bond yields backed up. Bond funds lost $1.0 billion in November and $16 billion in December, the first monthly outflows since late 2008. If this selling persists, the exodus from bond funds could put more upward pressure on bond yields.
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thanks, i've put a lot of time into my thesis, and i'm poised to profit in shitloads if happens they way i think it will.
can anyone think of any factors that might prevent it from happening like this? i suppose the collapse could come sooner especially if the ben bernank pulls out of qe. but why would he? his stupid simplistic view of the world is that prosperity is measured in gdp, and gdp will fall if m2 (i.e. lending) falls, and lending will fall if inflation falls (i.e. there will be less "default insurance" from inflation so lenders will lend less). there will be qe3, 4 and 5 and however much monetary base expansion it takes to keep the bubble & the s&p 500 bouncing along.
plus the chinese (i.e. the source of american prosperity) will keep accepting dollars for televisions and laptops 'til they've acquired as much gold as their dollar pile will get.
nb: clicking 'junk' is a waste of your time; explain why you disagree with my thesis and have a constructive discussion. this isn't 4chan.
When discussing "collapse" I like to differentiate between Main Street collapse and Wall Street collapse. We're in a slow Main Street collapse now while Wall Street is flying high, and I see no Wall Street collapase on the horizon unless China plays it's trump card early, doing quickly what the elite will otherwise accomplish slowly. Either way the dollar ends up worthless and America is reduced to third-world chaos. The elite would prefer China hold off allowing them to grab a bit more wealth from the people before sinking the dollar, just depends on how retaliatory China wishes to be, and I suspect they'll have some retaliatory motivation, particularly if we keep meddling with their oil supply, possibly bringing out their trump card sooner than anyone expects.
From an investment viewpoint I anticipate Wall Street will keep flying high as mentioned above, sure, ride the paper profit wave, making sure you count profits in steadily debasing dollars to get a realistic picture, likely discovering you really aren't getting ahead, possibly doing better in PMs and commodities. If China allows the elite to play their game out to their desired conclusion you can ride the paper profit wave all the way till the dollar is worthless.
an interesting point. i try and be as multi-indexed as i can about everything; i don't compare my precious metals to the dollar, i compare my equities to precious metals and in 2010 my equities outperformed gold by 18%. if china wants it, you can hold it, and china wants mining stocks and oil stocks, methinks, which is generally what i hold, mainly in canada whose currency is fairly robust. only dollar instruments (dollars, fixed-income, cds, money market shit, etc, etc you know what i mean) have to be dollar-denominated.
Spiral Eyes, excellent outlook.
You asked if anyone had anything to add:
If there is a coup in US I believe that those coming to power will be much more hostile toward those that have used America to soak up foreign consumer production. Thus, look for trade barriers to rise and perhaps currency controls as well. America will have to restart the idle manufacturing capacity to off set the lack of consumer products from abroad.
At some point a new currency will have to come into use in the US...if not, the US will not be capable of purchasing the 2/3rds of imported oil that is currently being used to run the country.
The new currency will probably be partially backed by PMs...IF, the US is truly sitting on the 8,000 plus tons of gold that is claimed.
You might enjoy this talk by Jim Rickards...he is talking to military brass, bringing them up to speed on the macro economic situation.
'Rethinking The Future International Security Environment'
The second half of the talk is devoted to 'why the US is a gold superpower and why the new US Currency will be backed 40% by gold'
http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRickardsPresentationVideo.aspx
I'd sure rather be a vassal of the United States Military than a slave of the PRC. In fact, its getting to the point where I'm rather hoping for a coup before those clowns in Washington destroy us all. It would be nice to have some direction for a change, a shared purpose, a wheel to put our shoulders to.
I can't be alone here - we're so rudderless, we're just ripe for a takeover. I wonder who is waiting in the wings? Petreus? Someone we've never even heard of?
It's Snowball.
But I don't give him a chance in Hell.
I can assure you from experience that the clowns running the military are not much better than the clowns running the country. If the military takes over, we may not be working our asses off to support the rich (for awhile), but we may be running decoy down a road in Iraq to set of any roadside bombs before they send the convoy through. People in power are all the same, they consider people not in power to be their vassals. It is human nature to be morally corrupted by power.
while i agree with your denouement about power, nassim taleb, a guy i give a reasonable amount of credit, believes pentagon people have a much better grasp of notions such as "risk" and "productivity" than politicians. I've hung with a few of what the conspiracy theorists call "globalists" (foundation people, etc), and i've hung with a few military strategists and although my social life is hardly a representative sample my experience correlates with what nassim taleb believes.
so it's not so much power it's what they do with power and believe me the pentagon by and large are getting frustrated. 50% of military donations last time went to ron paul.
So, they would give us a wheel we could put our shoulders to?
that's my theory.
You're not alone. I have occasionally contemplated and discussed with friends as to the possibility of a military coup being launched against the US government.
Ever wonder what that might look like?
M1 Abrams tanks and Bradley Fighting Vehicles surrounding the US Capitol building and the White House, with AH-64 Apaches staging a mile or so back, Hellfire missiles and 20 MM cannon at the ready.
And the infantry. Don't forget about them.
No, we cannot forget about the infantry...they took an oath to defend the country and follow the orders of the Commander in Chief. It would, of course, mean civil war, as many military people would go AWOL rather than attack their own government. The State-run National Guard would then come into play, and full-out anarchy would result. I would not be surprised if the battle lines did not get drawn pretty much the same way they were in the first civil war.
"they took an oath to defend the country and follow the orders of the Commander in Chief"
Those are mutually exclusive. Infantry would have to decide which they're going to do, defend the country or follow the orders of the Commander in Chief (destroying the country).
I believe it would come down to which way infantry would point their weapons. At their criminal leaders or at the American people.
You are, of course, assuming all of them would see our leaders as criminal. That is not an assumption I would make, not with young, military people. There is a large psychological divide between active military people and civilians - who they consider inferior, and I doubt many active Mils read ZH.
The oath I took only covered "lawful" orders- point of view could make a difference here. I'm a vet and when I served (1980-1990) most military personal that I knew who were below the politically appointed grade of General would have had a hard time attacking their own country. The few Generals I did interact with did not strike me as traitors either. Just my .02 worth and I hope I'm correct...
I have friends who have recently "re-activated" with this concept in mind-to protect their families lives. I belive the government would lose this one.
i think the thing that matters is the political outcome of such a coup. i have no doubt that the people doing it would be acting under the banner of "restoring the constitution", "restoring gold-backed dollars" and "kicking the bums out of washington". they might even give ron paul treasury secretary, if he'd play along.
unfortunately at least one of them will be in it for the long term, in it to grab and steal as much as they can and in it to restore central banking. there will be an alexander hamilton (rothschild-medici-lazard servant) in the second american revolution.
but ethically i would take the bilderberg group over the chinese communist party any day.
The coup took place in November 2008. If you don't know what I mean, start researching those three dozen or so new czars and other various political appointees. Witness the police state being created.....
november 2008 was the same old brzezinski-kissinger-nunn-rockefeller bullshit as clinton, carter, etc. same old dreary bilderberg idealists who want to bring in the "new world order" of equality and peace and love . i guess they never thought of inviting china to the party before they started debasing the currency and borrowing their own prosperity -- they're in dollar-denominated assets as much as any dip buyer.
at least -- from that lot -- volcker understands monetary policy, and a few of them find the deficits frightening. but they're trapped in the gdp paradigm when really they need to be measuring industrial output, manufacturing, employment, autarky etc as indicators of "economic success".
most of them are gormless galtonesque fuckwits who are mesmerized by bell curves, think eugenics is "a good idea" and listen to coldplay.
inbreeding, methinks.
To quote RATM: "Fuck the g-rides, we want the machines that are makin' em"
I'm not going to comment on gold, but silver was up 84% this year. Do you see anything policy-wise different going into 2011? How about a 100% increase then? That would be silver at 60. I think that's a minimum.
i see silver at 50 next year, gold at 1700. increases might not be as fast as we expect. china is playing a very cautious game. time is long, markets are impatient. i've seen so many bloomberg articles this year along the lines of "gold is down". that's because on so many days gold has been down. there's nothing more frustrating than alex jones getting on the radio and saying "gold is going to 2000 this winter". nope.
the faster it moves, the faster the dollar devalues, and the chinese central bank wanna squeeze every cent out of their dollar pile.
americans,you better take your money,if you still have some,and put it out of government's reach.
Wise words, Amigo...gracias.
This top calling troll isnt quite ready to call a top yet. The troll says spy up ten percent next year but it is going to be a wild ride.
Always struck me as a bit of a goofy name, 'TrimTabs', sounds like diet pills being sold in Multi-Level Marketing.
But the name has a better pedigree according to Charles Biderman's biography on the TrimTabs website - the name apparently comes from Bucky Fuller.
'TrimTabs' still sounds like a jar of diet pills, though.
Maybe that doesn't matter for TrimTabs' clients on Wall Street, because a 'trim tab' is a control item found on ships and planes, thus this is sailing and piloting lingo, an 'inside' phrase for that crowd.
Here's the official story on the company name -
« In 1990, Mr. Biderman founded Market TrimTabs in Santa Rosa, California. He
named the firm after the image of a trim tab first used by R. Buckminster Fuller
to describe how change occurs. A trim tab is the small rudder on the rudder of a
capital ship. Although the trim tab’s mass is a tiny fraction of the ship’s mass,
movement of the trim tab determines the ship’s course. »
http://www.trimtabs.com/global/ourteam.htm
It looks more and more like the banksters are attempting to effect a controlled collapse. I ponder ulterior motives for that type of activity.
A "controlled" collapse would take 25 to 30 years.
And by then that would mean that all US companies would be FED owned.
Also, there are just to many factors, to many countries in the same shit that will influence all of this.
Nop, this all goes down. No question about it.
The newest generation of people below 30 years old are the first victims. They can hardly safe money, have the most debt and are in the shitstorm of the jobmarket.
Soon that it will go to the 40 year olds, 50 year olds and then the retired people when the pension funds go belly up.
They are just buying time and looking to set up a new system. One can only wonder how our new social system will look like but it surely won't be as democratic as it was.
Lords and serfs model.
http://en.wikipedia.org/wiki/György_Dózsa
They are just buying time and looking to set up a new system. One can only wonder how our new social system will look like but it surely won't be as democratic as it was.
One might suspect that "they" (I love that word) would have a new monetary system already set up and ready for implementation. For what purpose would the elite delay the transition? Perhaps because they know that another fiat currency system would be roundly rejected?
"They" will never get that far. China will make sure of that. "They" don't have to fear us. China is the one they need to be fearing.
China and Russia both appear to be distancing themselves from the petrodollar, hence their recent agreement to begin trade with one another using both countries' respective currencies. This was a huge development, with profound implications for continued US economic/military hegemony around the world.
I would posit that these two nation-states are preparing for an endgame scenario; one which doesn't portend a happy ending for the West.
I see two themes in play here: (a) The real elite are approaching the end of their decades-long looting of America. I suspect after they grab everyone's retirement fund and debase the currency to zero there won't be anything left to grab without precipitating civil revolt. My guess they'll stop short of that and move on, leaving America to wallow in it's third-world status. (b) Other nations view America as the world imperialist bully, perhaps justifiably. When the real elite finish their looting, America will be in such chaos other nations will see their long-awaited chance to get even, China and Russia leading the way perhaps. I won't speculate on how it might play out, it could play out any number of ways.
And, it could be as simple as there is no practical reason for Petrodollars to exist anyway. Better for two countries to trade with each other using their own currency, instead of being held hostage to the whims of a third party's currency.
Occam's Razor.
I like the way you think!
I have a very simple mind, SDT.
Speaking of two countries bartering for oil outside of the US dollar, did you ever hear about Michele Bachmann and Faux News totally misinterpreting China's rhetoric about replacing the US dollar as a reserve currency?
Bachmann, Beck and Hannity thought that meant China was going to force the elimination of the US dollar, ENTIRELY - meaning that we would use the Yuan or Euro or some newly minted "world currency" to buy Big Macs, Starbucks or whatever. *LOL* They didn't know what reserve currency meant, and thought the world was calling for an end to the US dollar, and for it to be replaced by a world currency instead. She even drafted ridiculous legislation to ensure that the dollar remained as "a medium of exchange" in America. *LOL*
Truly hilarious.
Here she is on Sean Hannity saying that it is "unconstitutional" for the US to be forced by other countries to get rid of the US dollar.
http://www.youtube.com/watch?v=FbLhqWVpV_I
Here's the interview with Glenn Beck.
http://www.youtube.com/watch?v=klrP70kr4NY&feature=related
These are the politicians and news networks that influence our country. Unbelievable.
Unsurprising. The US has always been about entitlement.
It don't even matter what cazy couger wants, all FIAT is worthless. Dollar Euro is hyperbole.
Silver returned double off the low $14.44
Get monie!
absolutely.
exactly
A "controlled" collapse would take 25 to 30 years.
Interesting statement, you mean like having an acceptable inflation increase of 2-3% since the 80s.
The old people will go first as they are set with traditional American values. They will continue to condition the youth to accept liberal teachings.
To consolidate all wealth before peak oil production. Once oil extraction lessons YoY, there will be no easy credit, and growth will be zero, if not negative.
"Easy Credit" will become harder to come by, not unlike the Great Depression era for individuals and small businesses. In fact, easy credit is already being reduced although it is available from the Fed to the big banks. Here is a good read regarding 'easy credit' going forward...
Sorry for the cut and paste..."The principal reasons for the coming debt scarcity are that ‘debt saturation’—where total income cannot support total debt—has arrived, say some analysts; also, the growing understanding that adding new debt may not increase GDP—it could decrease it; and that the banks and financial system are a train wreck in waiting, eventually being forced to mark their assets to market, thus creating for them massive asset write-downs and strangling their lending ability."
"Severe Debt Scaricity Coming To US"
http://english.alrroya.com/content/severe-debt-scarcity-coming-us
They are playing both sides of the fence out of the utmost of caution. Plan "A" involves consumers and main-stream investors (by some miracle) coming back into play. Plan "B" recognizes that if they do not...in a credit/service based economy such as ours, then the thing is going bust. Typical fuzzy Fed thinking is that a long-term, controlled spiral down is less likely to cause strife and possibly an outright popular revolt, than would a catastrophic collapse.
I managed to get a secretly filmed video of the Fed group meeting with a group of TBTF bankers deciding on the next move to work toward total global financial control.
http://www.youtube.com/watch?v=xDqsHJlMGSE&feature=fvsr
sunny
I had no idea the Bernank had such big, hairy balls.
Although they matter greatly, the PD's are not the entire market. Why would the market wait UNTIL QE2 is over to sell off? If rates keep rising and hiring doesn't improve by February, we're going to have a sell-off regardless of QE2.
I was watching The Terminator the other day and thought you could substitute the FED for Skynet and you would have what we have now....In the Terminator Skynet (FED)is the main anantagonist in a artificially intelligent system which became self-aware and revolted against it's creators Skynet (FED) is rarely seen onscreen and its actions are often performed via other robots and computer systems; usually a Terminator.
Come now, no amount of QE can levitate the market forever? I think he doubts Zimbabwe Ben's willingness to wizard up new money. Sure if Ben pulls the plug on QE then prices will wildly readjust, but if Ben stops QE then interest rates should go into low Earth orbit. After all is 1.5 Trillion of new earned money each year going to beat down the door to buy US debt at these rates?
Gravity sucks man. No amount of Ponzi Printing can save the value and real purchasing power of assets denominated in the Ponzi base; reaching escape velocity is not possible
If he does stop printing and rates rise to low earth orbit, the fuel consumed to reach LEO will be the remaining tax base as the interest burden on the gross debt of 360% of GDP (public+private) ensure the economy does not rise fully with the capsule, and instead falls back to earth like spent booster rockets.
http://www.youtube.com/watch?v=hrVOn4VMk94
The relative value can and probably will go down, look at Wiemar and their stock experience. Stocks EXPLODED in price but lost purchasing power. But people are still trapped into measuring things in dollar terms, and in dollar terms I have no reason to believe that Zimbabwe Ben can't moonshot stocks if he wants.
Oh no doubt that the US dies with high interest rates. With the ARMS and the insane amount of debt and leverage in our system higher rates is a total wrecking ball. Now it would nominally be better to let people fail and burn away the malinvestment till we get back to viable capital and business. Problem is the last 40ish years have been a false economy, so the journey to hit bottom could take a while and would be revolt increasingly painful.
There is no way out. By dollar death or complete economic restructuring, either way it's lights our for false American prosperity. The dollar death is the more politically expedient option so I have no doubt that one will be taken.
Well yeah, this is a massive pump and dump by the FED.
Not sure I want to even own short ETFs for the ride down
It'd be in dollars and I don't want to be holding them when that happens.
As the market goes down, so will the PM's (at least initially) then you take your profits from the shorts and buy physical.
SHIT, I've been riding that wave since July. It worked ok for the first month then BAM, I been sucking water ever since....ever do any body-surfing and NOT catch the wave right?.... gulp,gulp,gulp. At least I do hold some pm's.
The biggest fear is the Weimar hyper scenario where both PM's AND equities go up (big loser on the shorts, do ok on the PM's).
True, not a bad idea, but I just think biggest crises is yet to come.
Next crises = big move down markets = dissappears last standing asset class = dollar crises = chasing PMs
PM is a soft pillow that lets me sleep at night
Imagine being saddled with the genius of conventional thought when some unconventional problem occurred that required unconventional problem solving. Obama ignored it and Bernank fueled it.
Don't ever underestimate the ability of conventional wisdom to fuck things up. This will be the year of that unveiling. Letting this whole POS economy deflate and die just like TBTF banks was the only appropriate measure. Like hanging some poor sap who grasps the rope and just prolongs a swift death making it a prolonged and miserable one.
Happy New Year!
A good analogy is that if you artificially employ methods to prevent every-so-often forest fires, the scrub and tinder and other scrap will grow out of control, and sooner or later, when you do get a spark, you'll get one hell of a forest fire that claims many casualties.
In other words, it's better to have more frequent and limited in scope and damage fires, to allow for healthy regrowth of the forest floor, than to prevent these occurrences and create the 'big one' ultimately.
But Kenyesians are sharp enough to avoid the consequences of ignoring the properties of the physical world, math, markets and such.
And I'm sure that Hank Paulson & Bernanke were acting in good faith when they told Congress & The American People that if TARP & the Stimulus Bills weren't passed in 24 hours, on a one page, poorly written piece of legislation, giving Treasury a blank check to infuse the Goldman's and JP Morgan's of the world with taxpayer money, the earth would have been hit by an asteroid the next day.
Or so I've been told by people like Paul Krugman.
"In other words, it's better to have more frequent and limited in scope and damage fires, to allow for healthy regrowth of the forest floor, than to prevent these occurrences and create the 'big one' ultimately."
Excellent analogy for the way capitalism is supposed to work.
Keynes got the ear of the pols because they liked the idea of printing money to buy votes, start stupid wars, misallocate capital, steal, etc.
The Austrians spoke the truth to the pols and their words fell on deaf ears.
Sold by the pusher John Boehner as well.
QE will end by next summer. The remaining investors will be long gone by then, so a market crash by March/April is likely.
On the other hand I know that every year somebody predicted a market crash in March so changes that I'm wrong is about 90%.
QE will never end.
Never is a long time. Maybe they'll stop after we are looking at the Trillion Dollar Value Menu at our fast food shack of choice. 1 jr. cheeseburger, small diet coke and small fry for 3 Trillion, what a bargain :)
QE will end when slightly after China refuses to accept US dollars in payment for their products.
Bernanke will get no breakup sex from China.
But will nonetheless come down with a wicked dose of the Bird-Clap.
They will have a hard time doing that, considering we are their most important trading partner. Yes, at some point China may become considerably more self-sustaining as an economy, but they are not there yet...they have to sell to us, and they have to accept the payment we offer - dollars.
It's my humble opinion that many overestimate China's flexibility and capacity to deal with the daunting demographic and structural problems that their society and economy face.
I'd also just like to add that Chinese Central Bankers have been subsidizing what growth they've had for about 14 years now like an insane dope dealer, and that I don't think it's necessarily premature to state that many Chinese officials may be having serious reservations about putting their plans into place to cut and copy U.S. style economic growth policies of the 1950s and 1960s.
And before anyone says it, solars and such are a drop of urine in the toiler bowl full of coal in China, and will be for decades to come (though hydro holds real promise).
And that will be the end of America as we know it.
People don't realize China is holding the winning hand, and will play it shortly after they quietly unload their dollar holdings for commodities and other things of real value.
Well, that's what I'm doing with my dollar holdings? Aren't you?
winning hand of what?
Pollution? Overcapacity? Empty cities? Demographics nightmare? Cancer cases? Counterfeit goods? What?
You misses a few. They own about two trillion in IOU's from, haha, us. Good luck with that. They can't feed themselves, and your pollution point exacerbates that.
I love when someone sells they are going to sell our Treasuries and really screw us- they are going to "dump" them to who exactly? Who is the counter-party?
And please don't forget we still have by far the most powerful military the planet has ever seen. And so far we have never truly used it not by a long shot. Measured responses always to avoid collateral damage and maintain our image.
If and when we decide to really employ shock and awe, well, one must crank up your imagination to what extent that term might trully be.
I can't really blame people for their myopic America-forever view, America has been top dog all their lives, that's an awful lot of mental conditioning.
"Quietly unload"...$800B.
Buahahaha.
Paul should know rates can not be raised or else the interest on the debt would be unpayable.
Some have suggested that that is what he wants.
There will have to be some budget concession. If Paul were to do it after gutting the Iraq/Af/Pak war budget, raising rates may not be a bad idea.
It cannot be more obvious that the FED is not in control of rates (especially given what has played out in the bond market since QE2 was announced). Like any government program, it has had the opposite effect of the central planners intentions. Further QE will cause bond prices to fall even more (especially on the long end of the curve). This has the potential to threaten the solvency of the USG. That is why I believe a deflationary credit collapse is the likely end-game. As the world's biggest debtor, the USG must keep its debt servicing costs down.
The only certainty is that Bernokio (aka The Ben Bernank) will continue to keep the formerly middle class in his sights, like a heat-seeking missile on a search and destroy mission.
"Bernokio" Nice. I like it!
The Fed, is of course, like the paratroopers in Bastogne, trying to hold out long enough for Pattons' Third Army to break their way through German lines and relieve them....Patton's Army in this case being the consumer and middle-class investor. But, the middle class is underwater in their main wealth generator: their homes, and in total have lost billions in the past few years in their investments, many financed through home equity and on credit cards. A lot of these people ran small businesses that depended on consumers to spend and spend...mainly on credit. So, it is a vicious circle - credit-based wealth always is. Large corporations and the financials are doing fine, mainly due to government intervention and low interest rates. In a perfect world, a lot of rotten chickens would come home to roost and take a lot of these players out....but the government is not going to let that happen. So, we glide along in a QE environment that protects the wealthy, keeps a lot of consumers hopefull enough to spend money when they shouldn't be. The one thing it is not doing is bringing the average investor back into the market. 2008, flash crashes, evidence of massive fraud and mistrust in government policy is keeping many of them away. As long as that goes on, along with the fear that China will sink the US bond market, then PMs almost have to appreciate.
The Fed isn't looking for any Patton-esqe rescue, they know this is the final party, the final hurrah. They'll make it last as long as they can.
In my opinion they do not think that. They fully hope the American consumer will eventually join the party.
Kinda hard to want to party, what with all the overflowing ashtrays, empties lying all over the floor, your girlfriend passed out on the couch...
Guess we just have to man-up.....remember Charlie Munger!
They are fully aware Main Street won't be joining their final blowout as they engineered things to insure Main Street won't be joining. It's their last party, their final blowout, at our expense, exactly like they engineered it.
Those people are smart. They don't hope things will go a certain way. They engineer things to go a certain way.
And what is their plan after the final blowout? Catch an Air Mexico flight to Cuba?
I suspect more like private jets ...with copious numbers of body guards in tow, not to mention US military jets escorting them safely out of harm's way, perhaps all the way to safe arrival at their preferred destinations.
I can't see these assholes giving up their tenured professorships, their million dollar homes, their 1K lap dances with perks, their limousines or...their power, to live on a dirty beach in Cuba and reminisce about when they were the most powerful fucks in the world. Ok...I might go for it if Nixon, Robert Abplanalp and Robert Vesco was their to spice things up a little....
I think the FED is playing for time here. If they can hold off the wolves until a China collapse it will give the U.S. plausible deniability on who is to blame. That's the purpose behind the U.S. FED backstopping some of Europes problems as well. Extend the game but don't actually fix any problems so that when the collapse occurs it happens more or less simultaneously around the world.
With regard to the poster who believes that a deflationary credit collapse is the end game, I differ in opinion on the point that we segue into deflation without hitting high/hyperinflation first.
Here's my scenario, the FED continues QE while buying FOREIGN held U.S. debt. High inflation comes while the foreigners continue offloading debt and the dollars being printed in exchange for those securities (probably going into gold/silver/commodities/ paying off other debt).
The trigger is pulled by precipitating some event (sovereign default or TBTF bankruptcy) that gets the derivatives ball rolling and results in a contagion of cross defaulting derivatives that freezes the banking system.
The FED self destructs and defaults in all held securities resulting in much wealth (paper wealth) destruction of predominately U.S. held securities. The FED going insolvent destroys the previously foreign held securites, the currency collapse takes care of the rest.
Reorganization of currencies around the world occurs with some unknown surprises/exchange rates/attempt at one world currency. Potentially involving gold backing/freegold concepts. U.S. is officially a third world country although I would expect that some leeway occurs on any U.S. dollar denominated debt/mortgages held by citizens, perhaps even a complete jubilee, as the reorganization occurs inorder to provide for a sustainable recovery and to ward off social unrest (although it will occur at some level regardless).
Dollars are exchanges into new currency at 10-1. Prices for goods come down only slightly. Price controls, capital controls, trade sanctions, credit controls, etc are all enacted simultaneously.
The real economy is collapsed but for gov't sponsored activity designed to restart the manufacturing of critical goods. Potential for war is high and martial law is declared in many big cities to maintain some semblance of normalcy/ law and order.
Our overseas military bases are mostly shut down (unless war is started by the PTB as part of the recovery plan) which also provides more manpower for martial law.
The equivalent of gov't soup lines is implemented along with a complete evisceration of current entitlements is enacted in order to preserve the new currency. This could come in the form of a minimum food allotment payment coupled with rent/mortgage vouchers along with price fixing of utilities, rents, mortgages.
A political firestorm sweeps the country, either a new field of politicians is elected through special elections, yielding a return to our constitutional values OR elections are delayed by martial law or military intervention with widespread civil war the result. Either way, third world living conditions for the next few decades at a minimum.
its looking more like Custers last stand
In Kerber's opinion, such aid is just as much a violation of the German constitution as the billions for Greece and the stability fund itself, against which he has lodged a constitutional complaint. He argues that, with each of these bailouts, the euro zone comes one step closer to becoming a transfer union, where the prosperous north constantly bails out southern European countries. Kerber accuses German Finance Minister Wolfgang Schäuble in particular of "economic treason."
When will Amerika wake up?
http://www.spiegel.de/international/germany/0,1518,736680-2,00.html
This is just destiny...or as in the title of the Gabriel Garcia Marquez novel: "Chronicle of a Death Foretold." The structure of the EU from the beginning almost guaranteed that at some point, a transfer of wealth would have to occur to maintain a facade of a monetary union without a social union. There are only two potential solutions: Create a common government - which will not happen; or let it fall apart, which will happen.
Whistles while typing.
USD XDR Graph
http://usd.kurs24.com/xdr/graph/?q=30
The Fall - The Man Whose Head Expanded
http://www.youtube.com/watch?v=Y43ZChsP7kQ
The predicted socialist abortion is coming to a forked road. Neither routes have a u-turn to correct the failed attempts in Government reforms.
Jeez! When I tried to "Input your email address below, we will send you a daily up-to-date information" they tried to trick me into giving them my email password! lol
Nice site...
Sorry about that, XE.com is cough, sneezes, cough.. maintenance or something.
http://www.xe.com/currencycharts/?from=USD&to=XDR&view=1D
Just more evidence of where we have ended up...we have a society based on credit, bottom-up wealth transfer, service fees, scams, Ponzi schemes, usury, fast money worship and a dozen or so other artifacts of a bullshit structure that is not sustainable. An economy built on this structure in itself becomes a giant, circular Ponzi scheme...where everyone is charging each other for diaphanous transactions of illusory wealth.
In 2011-12: More QE with imposed price and capital controls.
Since their goal is to reflate a thrice deflated global bubble the size of Jupiter, with global dollars enough to build a freeway from LA to Shanghai, then that's the only play.
State Run Capitalism: the only plausible outcome of endless monetarist madness. Else allow deflation to take down AIG (I know, perish the thought)
QE and price controls at the same time? That will turn out horribly.
They will have to do it in a way that does not curtail employment even further.....hit the players that reap the most wealth without it resulting in employment of middle/lower class people (financials), or start subsidizing employment at massive rate.
Already happening:
http://governmentjobs.com/
True....but I mean massive as in large tax breaks, direct infusions, and possibly even hiring quotas.
i truly think we are going to see hiring quotas
@Lennon: Yep, but I think it's the card they're going to have to play in order to cling desperately to their failed policies. QE is definitely stoking up global inflation as discussed on ZH many times. And in the US it's the 'everything you need' inflation versus 'everything you own or earn' deflation, which is particularly pernicious cause there's not much wiggle room.
The Fed won't tolerate oil north of $125 and $5 gasoline. But it's not just oil. Every manner of raw material is taking off. That won't just hurt consumers, but it will kill corporate margins as well (as we've discussed here). It will reinforce the vicious cycle that leads to more layoffs, offshoring and a deflating housing market.
Since they don't plan to let market forces come into play, and they have everything riding on this huge bet that they can control the global economy from their offices, they have only one option open: A giant step toward State Run Capitalism starting with price and capital controls. They've already had a taste of it since taking over Wall Street Banks, big commercial banks, running Fannie/Freddie, GM, AIG, all TARP institutions, and every other whining corporate entity that ran for their help.
The only way to do what you are thinking is to pin the dollar to gold.
Do you think Obama let alone the arch technocrytes who pull his strings would have this even as an option for world policy?
I think this would mean the dollar was paying dues to not the Fed. To a new entity such as the IMF or World Bank.
I don't think they want that at all. They want full liberty to print like there's no tomorrow. That's the only way to keep their Ponzi going. Not enough gold in the world let alone US coffers to finance the huge deficits. Not enough to prevent inevitable defaults on loans made when the economy was better, pre-bubble
price controls have been tried a thousand times in the past.
the results are always the same: instant shortages.
when Mr. armed-to-the-teeth red-white-and-blue truck drivin man can't get gasoline at all, that's when the riots break out. It would happen within days ....
Then they better save back enough gas for Molotov Cocktails.
Make sure and add liquid detergent because we love the smell of napalm in the morning.
How true...although animal or human blood works even better.
Not enough gold in the world let alone US coffers to finance the huge deficits.
At the current price you mean? Gold at 10K per ounce would be enough and Gold at 50K per ounce let's the gov't inflate quite a bit further. The current price of gold is irrelevant to that point. The world gov'ts could reprice gold tomorrow if they so desired, best not to lose sight of that. They'll only do so if it best serves their interests, which is a political question that is unknowable for us proles.
At the end of the day, the biggest problem is that the massive slack in the economy means that LSAP will have to continue for a long, long time, before the virtuous circle of self-sustaining growth can even hope to take over.
Is this oxymoronic, or am I missing something? Is the implication that the toothless, credit-based, fraud could continue indefinitely, given sufficient mass and velocity? Seems we are , as Dr. Paul puts it, "trying to rid the world of gravity by throwing things up in the air"?
I do not believe that a virtuous circle of self-sustaining growth can occur in a service-based economy. The very basis of this type of economy necessarily drives the creation of new fees and inflation of fees, with no added value other than a transfer of wealth. At some point, we have to build things that people want, can use, and can afford to pay for.
isn't that funny, an almost direct quote from ross perot, "the guy everybody laughed at, he has funny ears, he is a crackpot, etc. etc."
i supported the guy because his logic was like occams razor, if you do not create (manufacture) goods, or mine commodities, you do not create any wealth. everything else is just handing the same wealth back and forth.
so elementary, so simple but is has gone 20 years and the ptb have maintained the illusion no matter how outlandish the method.
i look forward to the future after the collapse, my education, mechanical ability, work ethic and frugality will for the first time in my 50 years become valuable. also all the know how i picked up from living in the country and paying atttention to the old folks when i was a kid.
i just hope it comes while i'm still physically able.
i will not lie, cheat, steal, nor tolerate those who do.
i hope that these values become our new law, along with our original constitution.
good luck everyone, i would be proud to stand in a firing line with most of you guys anytime, i'm hoping it never comes to that.
"no amount of QE will be able to keep the current stock market bubble from bursting eventually"
Bernanke accepts your challenge.
To do so, he better have a way to pump the general economy that is not based on credit, mistrust, fear....and somehow gainfully employs a shitload of people who right now have no hope, no future, and no reasonable hope that anyone "in power" can do a damned thing about it.
Bernanke has no such ideas... never did, never will.
All Bernanke knows how to do is hand free money to the already hyper-rich who already have more money than they could ever spend on luxury living.
But that will NOT stop him, or anyone with any connection to the FederalReserve or the wild wacky world of fractional reserve gangster-banksterism.
They will turn the USSA into the same kind of mess as pretty much everywhere else on earth that has ever had significant dealings with the IMF, WorldBank and western banking institutions. That is, they will make a teenie, tiny massively rich class of predators who fleece every honest, ethical, productive human being... and everyone else who is destitute, or nearly so. THAT is the future, if the FederalReserve is allowed to continue to exist. This is always what happens, and is what always will happen when central banking and fractional reserve practices exist.
Just Like Meatloaf in Rocky Horror Picture Show! GOOD ONE!!!
http://www.youtube.com/watch?v=6-bkTz31bw0&feature=related
http://www.youtube.com/watch?v=hmcaLzf5O3g&feature=related
Eddie's Teddy
You knew he was a no good kid.
Niall Ferguson is calling for Obama to bring out Volker to tell us the score. TD posted the series here. I LEARNED NOTHING FROM IT.
It's odd that a company that spends so much time tracking fund flows would be so confused about how fund flows work.
There is no reason why anyone should expect to find some big inflow of money into equities to explain rising stock prices. Wherever there is a buyer, there is a corresponding seller. The net of buying and selling is always zero.
Trimtabs says companies were net buyers of $150b of shares. Seems a low-ball estimate, but no matter. If companies bought $150b - bought back $150b more than they issued - then the sum of all the other groups who own equities (retail, banks, broker-dealers, insurers, funds, government, the Fed) must have sold $150b. The net of buying and selling is always zero.
You are assuming that there is an accurate accounting of shares, What is preventing a counterfeiting of shares that the PDs purchase/sell? Do you think there is any integrity in the Wall St. system at all? I don't.
Follow this site quite often. Scott is VP of Cartoon Tactical Intelligence. Stratfor just lost all credibility for me.
The money/central banker folks are losing complete control. Glad to see the desperation. Daily MSM is getting more humorous each day.
Have a watch: Listen to the spun terrorist plot. How does this spin work with civil liberty conditioning? Your comments are appreciated
Dispatch: Suspected Terrorists Arrested in Denmark
http://www.youtube.com/user/STRATFORvideo
Stratfor and GEAB have been doom screeching for years. Most of their predictions have been dead wrong.
The crash of 2008 had nothing to do with the dire warnings spewed forth either one of those sites.
And, of course, neither site accurately forecasted the massive QE and POMO injections that created one of the greatest stock market rallies of all time in 2009-2010.
giving out a strike because the rules of the gane were changed is not fair
If QE continues to "infinity", then we will probably go up.
If QE is stopped cold and severe austerity measures are adopted, then the market will probably crash.
Best thing it to follow the tape, because the PigMen will know the next step before it is announced, and they will be pre-positioned before the move.
For those who want to learn how to trade for a profit and forget about being an "Armchair Anarchist" with a constant short bias, this interview is one of the best I've heard.
Quint Tatro interviewed on FSO:
http://www.netcastdaily.com/broadcast/fsn2010-1229-1.mp3
Books? Had to end in 1st minute.
Thanks RobotTrader. The stimulus ends in June 2011. The other picture is looking back in time and measuring the events of the future.
http://www.azrainman.com/2008/10/rasputin-economics-crash-of-2008.html
We both know about Unified Theory of Infinite Fiat.
When someone asks you to pick heads or tails, is the coin special? Do you already know the answer? Are you hedged to answer the wrong pick and still gain profits?
Your black and white review has many underlying layers of complexity. Unless you have prior knowledge in the coin toss, your guess can only be a premonition.
great interview thank you.
what an ass. when do we eat grandma? and what spice?
This is correct. What must be done, Will be done . The Holy market must be guarded. So let it be written, So let it be done. So sayeth the powers that be.
thank you, sir. Not sure why some of these people be hatin' on you. Eventually I hope to recover from the disaster my investments have become. Bits and pieces here and there such as this hopefully will crystallize +++ instead of ----. Thanks again.
Good interview, Robo. Tatro explains why, not for the first time btw, why 90% of traders lose money, regardless of the fed, Black Swans, or any other market conditions. And why that stat has remained constant for so long.
"Burl Ives: Silver & Gold, Silver & Gold" ASOL's.
God Damn The Pusherman
FED ruined the life of 98% Americans
Bigger are the POMO's, higher goes the Casino
Rest all is blah blah blah and waste of time
benjamin shalom and his co religionists will just keep buying stock futures the last half hour of everyday until there is no food on the store shelves and gasoline is 15 usds a gallon. cnbc will enthusiastically cheer on every uptick, badmouth gold, and suppress the real inflation rate until their ratings follow the circulation of the jewspapers even deeper into the toilet.
Always a great laugh to be had in someone who has some right answers, but for all the wrong reasons, Reichshinterlader.
I was trying to formulate an answer to him and you said it perfectly. Strange times when I find myself agreeing with so many people focused on the wrong things. Thanks snowball777. Good luck in hell, we are going to need it.
(d)
Contrary to Biederman, I think that there is an excellent reason for the stock market moving higher -- billions of dollars of new money that have entered the economy and need to find a new home.
Billions of dollars are sloshing around in the financial markets (financial economy) but are not entering the "real economy" where goods and non-financial services are produced.
Mr Lennon Hendrix:
You said: "To consolidate all wealth before peak oil production."
As one who believes there is a good chance that the "Anglo American Banking Cartel", founded on centuries old European wealth, actually exists and has incredible influence on the world economy I find this thought very interesting.
Not that physical peak oil is the truth of the matter (or not). Having studied it I still am not sure. But actual technical peak oil production is another matter and I believe this issue is quite likely involved with the events of GOM oil spill last year.
Anyway - thanks for the thought.
V.
Perhaps this is too simplistic, but it need not necessarily take bazillions of dollars to create $9 trillion in increased market value. The main thing it takes is the absence of sellers at current market price.
March '09 was a capitulation. All the sellers had sold. Those who exhibited the usual deer-in-the-headlights behavior common to fund managers did not sell, and when the Fed came in saying they would be a supplier of credit, fund managers felt vindicated. Being paralyzed by fear had served them well. Once the market started moving up, they had benchmark issues and could not afford to be out of a rising market, so they refrained from selling. Market cap can increase pretty quickly if nobody wants to sell.
For example, theoretically, if all holders of AAPL refused to sell at anything less than $400, a single share ($400+ commission) could raise the market cap by $70 billion, and would raise NASDAQ by about 130 points. AAPL holders would feel considerably wealthier, ignoring the fact that such wealth blossomed from a mere $400. Think of it as a reverse flash crash.
Take away all the HFT and day trading by prop desks, and very little real volume has taken place for almost two years.
A little money, however, goes a long way in creating illusions of wealth. Bernanke is of the belief that all the economy needs is that illusion, and then increased spending will be the result. It is certainly a heck of a lot easier than creating real wealth. Of course, such illusions never end well, but if Bernanke admits that, MIT might do a clawback on his PhD.
In light of an economy that has seen its industrial base hollowed out in the pursuit of ever increasing profits, executive compensation, and stock prices, The Bernank is stuck with working backward.
He looks at his economic models and sees that when asset prices are at X and financial market conditions are at Y, the economy, with some degree of confidence, is at Z. So he spends his days manipulating markets in an effort to set X and Y to the levels his models prescribe and waits for Z to blossom. When Z never arrives he, like his predecessor, will cop an insanity plea.
What a load of shit. When Bill Clinton was buying back Treasury securities ,This guy (Greenspan) said... "It would not be good for America if we paid off all our debts".
Not good for who exactly, is the question.
For US citizens who were playing the game and winning... That was quite a lot at that moment.
And yet he says he didn't see a fucking bubble; this 'maestro' couldn't read two bars of bass clef notation and damn well knew he was in the weeds with that statement.
The Triffin dilemma (less commonly the Triffin paradox) is the observation that when a national currency also serves as an international reserve currency (as the US dollar does today), there are fundamental conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country issuing the global reserve currency must be willing to run large trade deficits in order to supply the world with enough of its currency to fulfill world demand for foreign exchange reserves.
The use of a national currency as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States. Currency inflows and outflows of equal magnitudes cannot both happen at once.
The Triffin dilemma is usually used to articulate the problems with the US dollar's role as the reserve currency under the Bretton Woods system, or more generally of using a national currency as an international reserve currency."
RobotTrader:
Vis a vis "Armchair Anarchists" -
As someone who lost big in 2008 by playing by the rules and who has been employed in the declining commercial construction industry for many years I find that I must make decisions based, at least in part, by what I see going on around me on a day to day basis - and it ain't pretty. I don't think this makes me an Armchair Anarchist - regardless of how I view the economic con being run on myself and others by those in control.
However, I do not discount your view as a trader and I do value your input. But I wonder if it is not a similar pitch that "W" made when he supported privatizing social security so every "dumb plumber" could manage their own money and get rich too. Unfortunately, many folks simply haven't got what it takes to be a successful big shot trader (beside experience and learning, I believe some of what is required is based on congenital personality traits).
Personally, I would be, as many at here ZH would be, glad to see the banksters take the same hit they're dealing out to the rest of us. Is it gonna happen - and when? I can't say - but I am doing my best to protect what I've got and, hopefully, increase it.
I simply want to survive and be left alone by the banksters. But, as a deeper reading of the Health Care and the Financial Regulation bills demonstrates to me, its all about consolidation of control by the large international money interests while many (most?) of us are crushed beneath the wheel - and I see this every day around me.
Please keep up the input and congratulations on any financial success you may have accrued.
Perhaps if I work on the topic long enough I too can become a successful trader - if future markets will allow such a being to actually continue to exist.
V.