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Cash on the Side
I have an account with one of the well know WS names. The guy I work with calls this morning. He says:
“Across the entire‘Wealth Management’ side of our firm we have clients who are sitting on cash earning zero return. For that reason we think stocks have to move higher.”
The guy is right. I’m scared to step up and so are a lot of others. So I say back to him, “I’ll think about it.” I did, my thoughts:
The recommendation is to position for a year-end rally. That’s what’s supposed to happen. It happens every year. But all I see is uncertainty.
What’s the Best Case for the EU as far as the markets are concerned? The answer is that a deal in excess of $3 trillion is coming. This is what the market is currently looking for:
-A deal where there is a soft landing restructuring of Greek debt.
-A “solution”, where dozens of big banks will be infused with fresh government capital (a la the US TARP).
-The outcome will be the Socialization of the banking sector and the problematic public sector debts of the PIIGS. This massive transfer of debt/risk will be facilitated with a leveraged SPV.
-Numerous weaker financials will be absorbed by the State(s) (a la Dexia). The terms of those TBTF
wind-downs will be market friendly. Equity holders will not be wiped out, Preferred and subordinated debt will benefit from a new State guaranty.
-Coupled with the above, there will be an IMF package to assist in the bailout to the tune of $400 billion.
That’s the Best Case? To me that is a disaster. If all this were to happen it would result in a near immediate downgrade of both France and Germany. The “guarantees” of the SPV guarantors would be devalued in a month.
If this is the way the world is going to go, it is a road fraught with risk. The EU would look like the USA with Fannie and Freddie. Trillions of dollars of debt and guarantees would be "off balance sheet". The losses would be born by Germany and France.
I think there is a very real risk that a “positive” outcome in the EU will lead, in short order, to a broad based credit crunch in Europe. The solution to that problem will be for the ECB to print money and the Federal Reserve will have to (again) come to the rescue with a multi-trillion increase in dollar swap lines to the EU Central Banks.
The "Big Bailout" is a very slippery slope in my opinion.
That is an outcome that I would rather ‘sell on the news’ than ‘buy on the rumor’.
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The Worst Case (as far as the market is concerned) is that the deep thinkers in the EU actually start listening to the voters in France and Germany. The result is that the “Grand Plan” to save the Euro experiment is a dud.
An outcome under this scenario is a deal that is woefully inadequate to the task. A popgun approach. Any “successful” plan must put the German taxpayers at risk. A plan that falls short of today’s very high expectations would be seen through by the markets in just a few hours.
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On the USA side of things, there seems to be a disconnect between the real economy and equities. Over the next six weeks we have a few hurdles to cross:
-Another Continuing Resolution is necessary to keep the government running. The date for this is November 18th.
-There MUST be a resolution of the Bi-Partisan deficit commission on $1.4 Trillion of deficit reduction. (November 30th)
-As of today, the outlook for any 2012 stimulus is up in the air. Failure to pass any legislation will result in a $120 billion middle class tax increase that would kick in January 1. (The reversal of the “one-year only” 2% FICA tax reduction.) We may end up with the “Jobs Bill” being very much a slice of bread when a few loaves are needed. Should that be the case, 2012 GDP estimates would fall to the 0-2% range.
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It’s just a joke to think we are out of the woods with energy prices. Look at this chart of the real cost of crude for much of the country. This chart is telling me that $105 oil is the bottom of the range. It’s also telling me we are headed back up, not down, as Mr. Bernanke keeps telling us. (I discount NYMEX crude pricing as a measure of anything).
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There's a credit crunch that’s sneaking its way through the US debt markets. The latest evidence is in Jumbo Prime loans. See Zero Hedge for details (link). It’s creeping into critical areas of finance. Consider these words and charts from UBS:
The high yield primary market was virtually shut this week, with no deals pricing in the fourth $0 volume week since the start of August.
Since August, weekly volume has averaged a meager $699 million, versus $6.7 billion per week during the same period in 2010
Secondary markets have continued to trade wider. This week, the Broad Market, B-rated, and CCC-rated high yield indices all touched 2011 wides (and their widest levels since 2009). The BB-rated Index, while having fared better than its lower rated peers, also touched a 2011 wide during the week, and its widest level since mid-2010
.
It's increasingly clear that a credit contraction is in the works. In part, that’s due to folks like me that look at high yield debt returns and see capital loss resulting from default and restructuring. High grade debt pays nothing. Why bother.
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There is no good news coming from China over the next few months. Period. Depending on how the currency issue with the USA is resolved, it could get ugly.
We shall see what the markets will bring. There is too much cash on the sidelines and cash has been made trash by Bernanke. My broker friend may be right that the broad tape has to move higher. But I don’t trust it. I’ll keep the money in the wallet for a bit longer.
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I choose to wage war on the banksters by using PMs and the information war. The more people we wake up, the stronger we become. If we can get enough people enlightened, then we can avoid a physical war. My concern is that some sort of physical war may be upon us. As hard as we all work to clue other people in, we still have legions of people to get to. It is an endless task, but I do not wish to wage physical war, so I will continue fighting the info war at 100 percent strength. Physical war will destroy a man--killing another human is a life changing mind fuck. Seeing a family slaughtered WILL FUCK YOU UP! WE need to intensify the information war OR the nightmare of physical war will make this life into a hell.
i greened you. +
Cash for now. When the floor falls out, the PMs go on sale one more time and will be backing up the pickup....
The USD has been debased 98% and yet the deflationists continue to say there's no way the Fed will continue to print. The deflationists have an awful lot of faith in the Fed and the government when you consider their track record. One thing is for sure, gold and silver will never go to $0, but paper always does. We don't know when, but this can't go on forever.
Go ahead and trade your paper. I'd rather secure an early seat in the lifeboat.
I read at ZH that the CFTC is going to implement position limits on the COMEX. This will not be good for commodities if it happens. If the CFTC does it--it will be a buying opportunity. Why get in now, it seems there is a blood bath coming. Wait for it and then BTD --PM stocks, oil stocks or whatever your heart desires...no bank stocks though, well none for me I vehemantly dislike all big banks and short them when I can. If I could find some interesting, clever, and legal ways to take money out of the big banks pockets I would.
Yeah but the CFTC keeps granting the criminals extensions. Surprise. On the other hand, recent activity seems to show that the cartel is indeed trying to cover all their shorts before the gold/silver shit hits the real market price fan, so just as soon as they're done covering, then we can expect the regulation to pass.
Thanks--I will keep my ears open. Would you think that they could cover their shorts at the time when the CFTC announces the limits when the price drops and they exit at little to no loss from the short positions?
Here's the perfect solution to Obama's problems: A medium-large size terrorist attack on U.S. soil. Here's why.
1. No more hassling over that pesky deficit. Massive spending bill would pass overnight. Beautiful!
2. No more stress for Obama on re-election. The sheeple line up behind him just like they did W after 911. Awesome!
3. Free hand in military exploits. Obama can send troops into Iran. Who's going to say no? Especially because you KNOW that Iran will be blamed for it. Giddyup!
4. No more dissent from abroad. Foreign leaders get in line to show support. YEAH!
From a political perspective this would solve the economy, re-election, and foreign relations issues.
Is this recent "Iranian terrorist" news story a primer for a future "Mean, bad-guy, turbin wearing, Iranian attack"? I wouldn't be surprised. Could be Mossad. Watch for it.
http://original.antiwar.com/justin/2007/02/16/the-high-fivers/
distraction from the Holder "Fast and Furious escapade". EVERYTHING in this world is really so predictable anymore.............let's move along to the next chapter.
I know: Greek one-year bonds, 150% yield!
Oh wait, the risk/return ratio...
I just bought Greek bonds at a 20/1 leverage. I am going to be so rich
when then bail Greece out again. They are going to bail Greece out again, aren't they?
Oh yes...... A couple of times they will.
Bruce - the top tier in the Wealth group, parked money in cash, and waited out the 2008 train wreck. They were smart enough not to listen to the idiot stock brokers/advisors. I did attrition analysis for the huge Wealth Group in major bank.
like, there was no insider info passed along to these bastards?
The market runs on inside information, however all the signs were there for everyone to see. I went to cash at the top. I was lucky, but I also wasn't greedy. Long only traders who are not afraid to sit in cash, or swing trade the strong rallies in bear markets, do pretty well. Avoiding the short side puts one on the side with the market manipulators and makes you immune to short squeezes. The secret is not being afraid to sit in cash and a lot of winners use this strategy.
My 30 year old 401k was moved to cash jan 1.
My goal now is silver rounds, 401k maxed out for taxes, plan is to add $1000 a week in siver and gold right now. Comments?
Don't start purchasing yet.........Large paper takedown starting on the 20th of this month going into options expiry on the 26th.
Load the boat then !
If you already have a stash, then Threeggg is absolutely right and you should time your purcheses. If you have no stash at all, I believe you should start to slowly stack right now. Nobody can tell how long this fiasco will go before it comes to an end without warning. We seem to have bottomed at $1600-$1650, but I wouldn't be surprised if we get another attack during options expiry, so you may have a chance to greatly step up your purchases.
The 401k loan suggestion is a good one. The opportunity costs of taking your money out are zero because, as you say, your money is in cash anyway. However, taking it out now in the form of a loan allows you to move quickly and protect yourself.
Thanks for posting those dates.
the Gold and Silver rounds are great ...when you say "rounds" do you mean they're bullet shaped to take down Ben 'Warewolf' Bernankenstein? ...if so i'm even more impressed with your strategy
...after Ben 'Gold Price & Market Rigging Criminal' BaBentCrook took down the Gold price there's nothing that goes against the futility, the anarchy and criminality of Central (ie. Monopolist) Bankers actions better than a nice hard slap in their fat corrupt faces with a big wet fish from Joe Public then buying even more of the anti-Fiat, anti-debt, antidote precious metals
Finally regards "maxing out" your 401k for tax reasons that's precisely the sugary trap Big Banks and Big Govt colluded together to offer you to provide them with a sweet easy target to rob... get out of your 401k fast as you can.. your 401k will never match PM's over any period for rate of return and the capital sum itself is at high risk of being stolen by the State while invested in PM's is out of their crooked reach (you bought antique bronzes with the 401k money, that's what you did, didn't you?)
How to short Bernanke -- buy and hold physical PMs and wait.
If you can take a loan against your 401K, do it, and buy PM's. Replace payments back to the fund will be with worthless dollars.
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augmister Vote up!
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Vote down! 0
If you can take a loan against your 401K, do it, and buy PM's. Replace payments back to the fund will be with worthless dollars.
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Yes.
+ $50,000
Did that. Sold speculative at $35, $40, $45. Kept core. Bought Harley. Been nibbling again, though.
If we could do this spring's mini moonshot from time to time, I could finally pay the last installments on my Congressman.
"................. I could finally pay the last installments on my Congressman."
Sorry to break the news to you..... But congressman are like toll roads..... You never pay thhem off completely.
Moved to cash/US gov't securities some time ago. Have done well, preserved capital and ain't coming back for a while. Need more gold though.
I'd call that broker back and ask where he was 7 trading days ago when Yield Stocks were yielding 0.30% more than today. Does he work fro Wells Fargo? I saw this headline on CNBC (So did MacroTony):
Wells Fargo Cuts Stocks, Then Tells Investors to Buy (no link, the headline says all).Maybe if enough brokers talk up a year end rally, it will happen, not!
You be smart Mayhem
agree with your outlook, how do you advise clients at this point? Is there any fear about a larger dislocation?
Bruce Krasting:
You state in your best case scenario that the federal reserve will run to the rescue with more money printing. So you certainly do not want to be in cash. Why are you in cash if you believe it is about to be made less valuable?
Gold/Silver is your next best place to park.
Agree with the observation that gold will do well in this environment until TSHTF, at which time, fiat will be enforced at gunpoint and gold "winners" will not be allowed. Probably need to offshore ownerhsip of gold to be safe, as crazy as that sounds right now. That is what I think is the inevitable outcome.
Offshoring your PM's???? Why not just send away my guns away,too.???
Ill have to learn how to shoot as a medium or by osmosis.
You seem to have the best of all problems----Congratulations,Bruce!!! om
buy gold physical, STFU. sleep tight.
Looks like Bruce isn't a PM bug then...?
Don't fool yourself on all those US budget rules and dealines.
It's a moving target and TPTB change them at will.
The prime wides are foreboding to say the least
Stay in cash. Your squigly line seems to argue "get into oil." Welllll.....
http://www.youtube.com/watch?v=evdbooUlBas&feature=player_detailpage
The Worst Case (as far as the market is concerned) is that the deep thinkers in the EU...
You lost it right there. Deep thinkers? These people have their collective head so far into the sand that the soles of their feet have disappeared. What we have is a bunch of dysfunctional Eurocrat 'ministers' and pols married to the concept of their "European dream", who cannot see it is fatally broken and they are destroying their societies by hanging on to it far beyond its natural death.
If you move from cash to stocks, someone else is moving from stocks to cash so the move makes no impact.
You are going to lose anyway you look at it. You invest with a 3% return? you just lost 17% due to inflation. You keep it in cash? You just lost 20% to inflation.
It's a lose-lose game.
I would invest in guns, storable food, aerable land, and precious metals.
Exactly. But three years ago would have been a good time.
Unfortunately Bruce is going to have to line up with the rest of the herd as they trample each other at the gate.
Hey CPL. Been wondering where you've were. Welcome back. Looking forward to some more web insights. Don't understand most, but always file for later.
I've been busy with the organization of #OWS for months, rigging up a communications framework to help those on the ground and developing escalation procedures. The occupation is going well, but we had no idea it would get this big. The intention was to run the protesters as a decoy and then kick over the market and keep it in the gutter for weeks. However...
It was decided collectively that we didn't have to do a damn thing to kick over wall street btw. Time, compound interest, debt and the greed of the 1% is what is going to crush them, running the numbers the 1% have around two weeks to print more money than has ever been seen if they want to keep their zombies alive. While everyone focuses on Europe, countries across the world are getting ready to print money hand over fist. When the 1% make their collective move, they knock their own chess piece of the board because of piss poor math skills. That, and anonymous has some more professional help at this time to deal with them, lots of old spooks are losing their pensions/benefits and are not very pleased. We have a guy that's 83 living in Thailand that was an intelligence analyst, he's fucking amazing as are all the SWAGSec guys.
So we've collectively focused our energy into other things like teaching people about basic stuff like phone infrastructure setup (if you have that you've got a network) and useful anonymous tools the 99% can use to safely relay information and notify people when they get arrested (yes, we built and app for that).
We are preparing for a power vacuum and collapse basically. The busiest anonymous group has been the square foot gardening guys. As the techies we are dealing with known technology that we can drop as a turn key. The folks teaching people to grow food in an urban environment is proving challenging. Somewhere like NYC, there isn't enough dirt to fill a bucket and the veggie plot rentals have a waiting list now.
Right now. The only piece of news that should be on anyone's mind is the declaration of war the US senate just signed for the anti-china bill. Might as well be a declaration of war. for all the sense it makes.
You got the "network" mapped out yet? I always figured that if one laid out all the names of board members of the S&P500 and various gov't paid consultants and figure-heads you'd be only one or two steps away from the real puppetmasters. A reserve intel analyst told me thats how they figure out how to kill brown people anyway...
Anyway, the shadow network of the real 1% of the 1% shouldn't be that hard to seige if the right people sat down to do the work first.
Not sure, I'm not on offense duties. I handle operational direction when my turn is in the chair.
However my understanding most of the old cold war spooks losing pieces of their pensions came with their own policies. Anonymous does have an agressive front, but in this case we've taken on the role of organisers, logistics and operational needs. Mainly though we act as a switch board and pair up people looking for stuff.
But if you want to see a connectivity map of human relationships check out the website http://theyrule.net/
Not sure how current it is but the names and faces of the top end of the world don't change that much unless they die.
Elsewhere here on the Hedge I read the old Chinese proverb:
"The best time to plant a tree was twenty years ago, the second best time is now."
Physical gold and physical FRNs: everyone should have both!
What gets me is people are focusing on the past and current situation instead of modeling the future and trying to obtain a best case scenario.
At this point the magic eight ball says no matter the decisions committed to today, in ten year spread we'll lose around 1/3rd of the human population on the planet because the rot is far to deep and we as a species have shit very deeply into our sand box. It will take hundreds of years to repair it properly instead of the usual gloss job we have become accustomed to.
If the changes were started in 1978, we would have been okay today. However as one mentioned the second best time to plant the tree is now if you forgot to plant it 20 years ago. The question isn't the about the tree being planted, it what are you going to do for 20 years while that tree grows.
Same can be said of having 9 woman delivering a baby in a month. We can cheat and bend the rules some things for a little while but eventually reality catches up. Supply is always overruled by logistics. The reality needs to support the idea, not the other way around.
I keep saying we are not going to see any real change until we are up against obdurate physical limits and there are in your face shortages of things and/or a break down in the infotainment system. When the majority can't eat or breathe easily, then we'll have something. Until then, all these crises look like paper shuffling to Joe and Joesephine 6pack.
The sad thing about the global warming debate is that it has taken attention away from a real killer, pollution. We are fouling our nests and that is an obdurate fact, no drama, no fiction, no conspiracy theory required.
I hope Bruce is locked and loaded.
I salute your use of "obdurate" twice in one post. I know that's hard to do.