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We’ll Never See Dow 10,000 Again – And Other “Good” Things
A guy I know for a long time calls up to bitch about my rants on
Bernanke and the QE. He is a 2&20 Walls Street “buy side” type.
He’s been at it for a long time. He says to me:
You don’t get it. Bernanke is giving you a once in a lifetime opportunity. He’s writing a put under the market. You’ll never see Dow 10,000 again. What the Fed is doing is a “good” thing.
This guy is coining money on the prospect of QE, he will probably rake
in more when it is a reality. We shall see if this all works out, but
one can’t argue the fact that from his perspective QE=Good. There are so
many things that we contemplate as being “good” when in fact they are
really not good. To me, saying,” QE is good” is like saying. “War is
good for the Economy”.
-It is Good when the US pursues a beggar my neighbor policy of trashing
the dollar. It is Bad when China manipulates its currency however.
-Laisse-Faire economics is Bad, Keynesian economics is Good.
-Price discovery is Bad, mark to model is Good.
-Balanced budgets and paygo are Bad, deficits are Good.
-ZIRP is Good for the economy, saving is Bad.
-A no downside risk equity market is Good. Bubbles however are very Bad.
-The Fed forcing inflation is Good. It would be Bad if prices were stable or went down.
-That QE and ZIRP undermine the dollar is good. When oil goes to $100 that would be Bad.
At the end of the day QE is going to raise the cost of living for every
American. We face the double hit of homegrown and imported inflation due
to the collapse of the dollar. The vast majority of Americans will be
poorer as a result. But some fat cats earning 2&20 will make a
bundle in a rigged market. QE will put the mother of all hurts on us at
some point in the future. But for now it is a Good thing. And therefore
we need more of it. And we’re certain to get it.
We need some leadership that cuts through the crap. It makes no sense
to follow a reckless and dangerous policy that has the objective of
enriching such a small portion of the population. The downside risks are
large. We are in completely uncharted waters with monetary policy. The
Fed is making a “Grand Experiment” with absolutely no consent from the people.
We can only hope that the next election brings a sea change of thinking.
That would appear to be unlikely. While it is now certain that the “Ins” will be “Out”
I don’t see a single voice in those who will step into leadership that
is apposed to QE. Until that happens Bernanke will continue to brush off
the warnings (from other Fed board members) and plod down a road that
he is espousing as Good, even though he knows full well that it is Bad.
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Yeah , sure. I'll bet the Japanese will beg to differ. 20 years from when the nikkei was 40,000. The consequences of what these idiot financial leaders are doing is yet to be seen. Yours, Maverick
Bruce,
Most of those 2 & 20 guys are long beta. They're praying for QE2, QE3,etc.
Yes Leo they are praying for QE2&3&4. Some will get wealthy from what is unfolding. It is the biggest swindle in history. And You love it....
Yes, Leo does love it Bruce, because while you and most of us here have chosen to oppose, condemn and fight our corrupt and failing financial/monetary system, Leo has unabashedly chosen to collaborate with it, and implicitly to defend it. His avarice and narrow short-term interest render him incapable of meaningfully opposing the immorality inherent in the current financial and political power structure, and his repeated advocacy of surrender to the status-quo elites show him to be nothing but an amoral and venal sellout, if not an actual sociopath, like virtually everyone on Wall Street and in Washington today. He deserves to burn in Hell with the rest of them.
What makes Leo particularly loathesome is that he seems to recognize the injustice, corruption and unsustainability of today's monetary and financial system, but chooses to side with it anyway in the hopes of lining his pockets with whatever short-term profits he can derive from his abject submission to it.
I've had the same conversation a hundred times with the same type of guy, and it's pointless to argue. Their performance fees are based on dollar valuations. Twenty percent of dollar devaluation goes right into their pockets. How can they not like it?
Who doesn't like to believe that what's good for oneself is good for everybody? Who, when randomly rewarded by the twists of fate, doesn't come up with a story to explain how it was actually labor and foresight?
Problems arise when one group manages to turn its self-serving bullshit into widely held belief.
It used to be: what's good for GM is good for America. At least GM's interests were partly aligned with those of ordinary Americans.
Now it's: what's good for Wall Street is good for America. When in fact there's an almost total mismatch.
That all said, the dollar does need to devalue substantially. Deficit reduction would be the sane way to achieve that.
Bruce,
Your "raking it in" friend is thinking in terms that used to be meaningful (dollars), most people still do and it's dangerous.
He can continue to rake in sea shells with every Ben tide as he pleases...I'm goin for the coconuts...LOL.
if bernanke says 'its safe to surf this beach' captain... then its safe to surf this beach!!!
how do these morons get 2/20
Bruce. I think you need to change CRAP node of term to WTF. As WTF will be the most searched for thing in the world shortly.
Bruce,
Always enjoy your posts and have learned as much as I can from them. As for your friend .... ask him how he rates the risk of one of the countries that doesn't like Uncle Ben's currency debasement enema doing something that results in an "Archduke Ferdinand" event. (Maybe send him an article that defines what effect a "bucket shot" attack would have on the country).
Barliman
I don't think this guy, (or Bernanke) gives a rats ass on who might complain. So long as QE makes him money it does not matter. This is called enlightened self interest. What is good for me is good for me and it does not matter if others get stepped on. If America/Bernanke succeed it will be on the back of others in the world. Some of those are our "friends".
This about the money. It has nothing to do with right or wrong.
Hay Bruce ever watch someones life...as they go through the cocaine metamorphosis...same thing...eh.
Skippy...at some point you just have to distance your self from them, not get sucked in, till they hit bottom and offer assistance...if anything is left of their prior self.
A very crucial point: "The Fed is making a 'Grand Experiment' with absolutely no consent from the people."
its all about priorities. first, The Fed must preserve itself at all costs to human (livestock) capital, which includes re-inflating the toxic real estate/MBSs on its balance sheet.
So what if poor folks and old folks starve?
HOW LONG WILL WE ALLOW A PRIVATE ORGANIZATION TO TERRORIZE OUR FELLOW AMERICANS?
HOW LONG WILL WE ALLOW A PRIVATE ORGANIZATION TO TERRORIZE OUR FELLOW AMERICANS?
Answer: Until the system collapses and we realize that the Fed does not have our best interest in mind.
yes, even private monopolies eventually make a mistake when they are populated by mortal men, so there is no doubt that The Fed has a limited shelf-life. However, they will not go quietly, and i often wonder how many more lives it will cost. World wars, suicides, divorces; all just collateral damage to The Fed.
Bruce,
ask your 2&20 friend how much of his OWN money is in his fund. it's fun to collect 2&20 while Ben's inflating away, but does he have balls conviction to "play" with his own cash??
He's got his money at risk in this. He thinks this is a once in a lifetime opportunity. The chance to take a risk and make a reward when there is no risk. If you were in his shoes you would look at it and say, "I am going to get as much as I can while I can".
Do you blame him? I don't. I blame Bernanke for creating this situation.
they keep saying
it a consumer debt based economy
they say, "consumers gotta spend money"
they say, "consumers gotta borrow money"
consumers say, "what money?"
consumers say, "we don't qualify for your loans"
ok - this is what a consumer debt based economy looks like
doing the same thing over and over again and expecting a different result
is the definition of mental illness
If you want a different result
you gonna have to come up with a different mantra
Bruce is the guy you talk to named Robo by chance?
No.
any chance this is Benanke just giving out a cry for help?
We can only hope that the next election brings a sea change of thinking.
Maybe it will take more than just an erection.
This could be important:
Maybe not. Maybe US people will vote in rainbows and unicorns, and no hunger and cold will be necessary to erase brainwashing.
We can only hope that the next election brings a sea change of thinking.
Right.
Pulling the plug on BB's doomed experiment will be left to powerful players outside of the U.S. We will be treated like ill mannered lepers, cordoned off and left to twist. A lot of folks, like Mr. Durden's "friend", will be left in an unrecoverable state of shock and despair when they realize that the Bernanke put didn't fulfill its promise.
"FOUR LEGS GOOD, TWO LEGS BAD"
- George Orwell, Animal Farm
We will get to see something called HYPERSTAGFLATION.
Uh, never see Dow 10,000 again because it's going down to 1000 and not getting off the mat again?
Bruce, I think you are overlooking a new crop of voting members come 2011 (Plosser, Kocherlakota). Hopefully things don't go to hell by then.
The money? A hedge fund. Good one. Money rolling in.....
We’ll Never See Dow 10,000 Again
I think I heard that before somewhere...
I smell top tick frustration. Always appreciate your posts Bruce.
You've already nailed this with your discussions on currencies.
In a word: unsustainable
But laissez-faire economics and Keynesian economics are both bad.
When Zimbabwe gained independence in 1980, their dollar was worth slightly more than ours. When I was there in 2003, exchange was approx 2200 ZMD to 1 USD. My guide(I was on safari) told me the government could no longer afford the paper to print more money, thus one (1) $500 note was redeemable for eight (8) $100 notes.
Looking up Zimbabwe on wikipedia(yeah, I know), in the first paragraph you'll read:
"Although his administration was initially credited with improving the standard of living and the economy during the 1980s, his rule has been characterized by gross economic mismanagement, hyperinflation, and reports of human rights abuses."
Benanke got your attention yet? I believe he has the undivided attention of the world's central bankers, particularly the Chinese, Japanese, Brazilian, Russian and European CB's - and all denizen's of this board.
Just like Paulson had Pelosi's undivided attention on that fateful weekend in the fall of 2008. The message at that time was "F.U. bitch! I want $700 billion dollars or I'm gonna pull the plug"! So Nancy made a few phone calls and closed the deal. WTF, it wasn't her money anyway.
(Sorry to single out Nancy - but you get the picture).
Same game and, needless to say, Bernanke and the Anglo-American financial oligarchs currently cut a sharp figure as they strut their stuff on the world's stage.
Plannin' on rollin' over for them? We just may have to. But, being a man of honor, I personally refuse to hold the jar of vaseline!
(Apologies to those prefer we not speak "in the vernacular")
I think Paulson saved the tanks in the streets line for other people. To get Pelosi on board he just whispered "botox embargo". She signed a blank piece of paper seconds later.
I do not understand it either. It appears that as long as it makes the Street richer even if it impoverishes everyone else it is ok.
What I think the Street fails to understand is that with Oil and Food going up up up that there will be no consumer spending. It will not create Jobs. Higher Oil and Food will affect Companies earnings. How will Food companies make a profit with higher food costs. How will the bottlers make a profit with the cost of plastic bottles going higher because of Oil.
Foreigners will not want our Dollars or our Debt. Last auction told this tale.
So many downsides to the Qe 2.
there's a psychology at work, that's why. he is human as are you and I. This is a great article but to not understand that the CB'ers aren't setting out to "steal" is absolutlely fundamental to understand the "man behind the mask." Moreover is this Wall Street individual is buying on the basis that "the CB'ers can commit crimes therefore it is time to buy" THAT is even more scary. What there is is an understanding that innovators and motivators and all the other "or's" matter "but for credit...and confidence." Well...the CB'ers can give us many things. But confidence? That is something that can only come through participation in "the game" and ultimately...winning.
who says company earnings matter to stock prices ?
Your acquaintance probably looks down his nose at all the hoi polloi that 'work' for a living doing regular jobs and for those of us that are unemployed. One of those 'born on third base and thought he hit a triple' snots that the 2&20 crowd like to hire, after all, can't let the 'wrong people' get on the gravy train.
He will be right for a while but then he will be very very wrong and will never know why.
No, I don't think he looks down his nose at anyone. He gives big bucks away to charities.
He is an opportunist. Bernanke has given him an opportunity. He is just making the most of it.
Bernanke is breaking the rules of risk. It won't last, It won't work. But while Ben is fiddling with our demise there is money to be made.
By the way, if (when) this all goes south guys like him will be on the short side. It is just smaller buy and hold investors who will have their face ripped off.
yah, but everyone - especially the neocons - thinks the guy on my handle is a crackpot
That's OK, I'm proud to be a classical liberal. Hyek, Mises, Milton Friedman and Ronbo are good company.
Why you got junked I'll never know.
If anyone thinks either of the identical political parties will "fix" this mess...
Read on:
Finding Shelter in a Currency Crisishttp://classic.cnbc.com/id/39669917
"Boner Care"?
To them he's only a "kook" because he doesn't believe in unfundedly spending $gazillions on foreign invasions and occupations. Oh yes, and the neocons somehow think that we could have the discipline to spend fiat funny money "responsibly".
POMO is not as big as the fear that could enter the Wall Street Pig Men (herd of swine). All it takes is one algo bot taking a break for mass stoploss triggering, and stampeding over the cliff. This is why it's stupid to be long this market unless you're a day trader. I'm nervous even attempting to play commodities because panic knows no refuge, other than cash.
Sentiment rules markets, and tends to reverse abruptly off extremes. Prechter is still calling for Dow 1000. :D
Prechter and all his bushy-tailed little prectologists are just SO amusing as they scurry around stashing dollar bills in hollow trees for the threatened deflationary winter. Meanwhile, it's too bad they never noticed that the snow is melting, the crocuses are pushing up (one might say "inflating"), and the calendar says "April".
That prediction is justified by the idea that there is massive amounts of credit that is going to go bad and never be repaid. In that case, the fractional reserve system works against the banks, $1 bad credit means $10 lost loan capability. As that ripples through the system the debt collapse is the equivalent of a huge decrease in money supply - as money and credit are largely synonymous in a fractional reserve system. It makes sense to me, but I would genuinely like to hear any counter arguments.
So who are the two thin-skinned cowards who flagged this as junk?
Robert Precter and Mish, is that you?