We all are Tyler Durden…

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By the way, who exactly is Durden? My girl asked me yesterday, ignorantly. First rule, never talk about him. “He’s my second cousin, a lousy retard”. I think she’s bought it.

No dude, he ‘aint my cousin, nor my neighbor either. Sometimes I dare to think that’s been months since he already jumped off the ZeroHedge boat. He’s too hyperactive as to sink with us, morons. The big papers –WSJ, FT, Economist- haven’t been mentioning him lately. In fact, since that good ol’ family bloke (Jolie’s ass-spanker) impersonated him years ago in a B+ flick, his name’s just vanished in thin air.

But I swear on my mom’s name he’s back. I haven’t seen him, though I can nose him out. No, no… forget ZH!! That’s just the tip of the iceberg, . Look deeper… Still clueless? COMPOUNDING is his new weapon darling! No more bombings of creditcard datacenters… enough with the human fat ransacking. That’s for amateurs. After years of frustration, I finally made up how he’s silently counterstriking this massive animal farm of ours. Politicians, bureaucrats and sometimes even financiers themselves, can’t properly spot the difference in between simple and compounded growth rate. Compounding is Durden’s Troyan horse.

As basic financial textbooks shows, in an upward-trending market, compounding can result in longer-term returns that are greater than the sum of the individual daily returns. As well, in a downward-trending market, compounding can also result in longer-term returns that are less negative than the sum of the individual daily returns. So what, smartass? Wait and see bumblebee! Now mix compounding with volatility and you get a crucial clue: in a volatile market, compounding can result in longer-term returns that are less than the sum of the individual daily returns.

It’s bloody brilliant!! Somehow, Tyler’s spreading volatility among the major indexes! More volatility, less returns. Smaller returns, shrinking banks and companies. I might be wrong, but this is pure animal spirits on its wildest form! It’s him who wrote yesterday’s Independent’s napalm-like column on the dollar; it’s him who’s convinced Bill Gross to burden PIMCO with T-bonds (while he shorts us all with UltraShort 20+ Year Treasuries); it’s him who’s fired up the Turkish mobs against the IMF; it’s him again who, together with John Paulson (the billionman locust) VC’d the A1H1…

Compounding, together with volatility, will suck this artificial liquidity off the market!!! I can’t explain yet, but when I smell charred flesh, it means Tyler’s alive and kicking. Time then to follow him, grab the torches and bonzo the rotten pillars. Starting today, I’m Durden. And if you’re too… remember! Don’t ask questions.