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The Weeping In The Counting House

Tyler Durden's picture




 

Via Mark J. Grant, author of Out of the Box,

The Counted and Not Counted

 

Sing a song of sixpence,
A pocket full of rye.
Four and twenty blackbirds,
Baked in a pie.

 

One of the constant and consistent themes found in Europe is the lack of acknowledgement of what is there and not there. It is a pervasive infection that has gripped the Continent as tightly as some vice grasps a horseshoe. This manner of doing business clouds the reality of what is at hand and pushes consequences out to some date in the future. Sometimes it is as simple as the tax in Greece on swimming pools. “It is not a swimming pool it is a Jacuzzi, a sacred bath for religious observations, a bird bath, a medicinal spa to cleanse the feet, a playground for my son’s toy boat, a home for any dolphins that might drop by, a rectangular drainage ditch or perhaps a second source of drinking water for the house.” The swimming pool is defined as anything and everything so the tax does not have to be paid.

 

When the pie was opened,
The birds began to sing;
Wasn't that a dainty dish,
To set before the king?

 

In other cases it is deceit by definition. Yes there are seven fig trees but we only count three because one is just a sapling and the other doesn’t produce enough figs to really make a difference and the other was planted by grandfather Pathos as a tribute to the gods and the fourth is not a Greek fig tree but an Arabian fig tree and so is not really the same species. This is the basic methodology of European invention but denial does not change the fact of all seven of the fig tree’s existence.

 

The king was in his counting house,
Counting out his money;
The queen was in the parlor,
Eating bread and honey.

 

In the case of the ECB, the debt to GDP ratios, each nation’s obligations to the European construct et al., Europe counts only what it wishes to count. Some people defend this on the basis of some god given right, like the kings of old, to only count what they wish to count and that it is up to each nation and up to the European Union to include what they think is right and proper. In my mind, this is a very destructive argument because not only is the truth masked by charade but because, in the end, you face the consequences of owning seven fig trees and not three of them. The denial of reality is often a dangerous game because Father Time eventually drags you kicking and screaming to the truth and since it is not expected; reactions can be devastating.

 

After the first Greek bailout both the IMF and the EU informed us, in no uncertain terms, that the new measures would bring the debt to GDP ratio of Greece to 120% by 2020. That was their statement, that was their assurance and I was taken to task for saying the correct number was more than 400%. There was no magic to my conclusion; I merely added up ALL of the debts that the government of Greece was responsible for, I counted everything including bank guaranteed debt, regional government guaranteed debt, derivative contracts and corporate debt guaranteed by the country. Then I divided it by their GDP and presented the facts. What was obvious then, what should be obvious now, is that the refusal to count what is owed does nothing to change the eventual outcome as the debts pile up and become due.

 

The maid was in the garden,
Hanging out the clothes;
When down came a blackbird
And pecked off her nose.

 

So today we hear a new, new number that the debt to GDP ratio for Greece is 190% and that the country will have a primary surplus in the next few years. These statements have all of the truth to them as Lithuania is part of the United States or that penguins can be found in the Amazon. The problem then, in believing this kind of nonsense is also exactly what we are facing now; Greece cannot pay her bills, the PSI card has already been played and someone is going to have to pay the piper and no one wants to pay him. Whatever remains of some coalition between the EU and the IMF is now in tatters as neither entity wants to take the hit. In fact, neither entity can afford the hit without devastating consequences and yet the hit is going to be taken, of that much I can assure you, because there is nothing left to do. Even in the distant possibility of debt forgiveness a hit gets taken and the only question that remains is by whom. More money could be given, more debt could be added again but Austria and the Netherlands have already said “No” and so the final act is underway.

 

The same misguided mentality is also directing the play in Spain. The Oliver Wyman stress tests put the penguins in the Amazon and Lithuania next to Alabama. Moodys was relatively kind and offered the possibility that Oliver Wyman had confused the penguins with flamingoes but I have no such inclination as one bird flies and the other doesn’t and so kindness should not be used to cover up the obviousness of a bird that has no possibility of winging into the air.

 

You see, in the end, no matter what you wish to count; there are still seven fig trees. The roots of seven trees, not three, grow this way and that way, the figs of seven trees must be plucked, the leaves of seven trees will fall to the ground and seven trees must be watered to bear fruit.

The Kings are in the Counting House. They purposely mis-counted what was in the vault. The Secretary of the Treasury has presented the bill for Greece and Spain. There is weeping in the Kingdom.

 

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Wed, 10/03/2012 - 11:00 | 2851855 Deo vindice
Deo vindice's picture

Figures lie and liars figure. The more things change the more they stay the same.

These guys couldn't count properly when times were good. What makes anyone think they can when times are bad?

Wed, 10/03/2012 - 13:19 | 2852306 asteroids
asteroids's picture

Greece has crossed the event horizon and fallen into a fiscal black hole. Nothing will save her until the debt is crushed into oblivion.

Wed, 10/03/2012 - 11:00 | 2851858 PrintingPress
PrintingPress's picture

Print me a river!

Wed, 10/03/2012 - 11:08 | 2851880 Stoploss
Stoploss's picture

Well, there is one thing we can do.

Buy more gold.

Wed, 10/03/2012 - 11:23 | 2851865 Cognitive Dissonance
Cognitive Dissonance's picture

If there is one theme that resonates within the investment professional community it is that the system is more or less transparent. In other words, the average investment professional can justify working within the system because they (want to) believe that it is reasonably fair and balanced (sic) and thus they are fulfilling their fiduciary obligation to be prudent. That if they just studied the charts and fundamentals hard enough and applied enough brains and inspiration they can beat the system, thus rewarding their clients and themselves.

This is why this series of articles by Mark Grant is so revealing. The average investment professional is only now beginning to understand the true depth of subterfuge and deceit perpetrated by the system. And it is a massive shock to their own personal moral system to begin to realize that not only have they been played the fool for years, decades even, but that they are in fact willing tools of the corrupt financial system.

It is never comfortable to see yourself clearly in the mirror.

Mark Grant's article from a few days ago.

Wed, 10/03/2012 - 11:26 | 2851911 Dr. Engali
Dr. Engali's picture

Boy you said a mouth full of truth CD. I would add that many of us have been working with clients for years, our clients trust with their future and we have to manage their accounts in a system we no longer believe in. It makes for a very difficult conversation with some of them when we talk about the future. Often I will try to lead the discussion to PMs and why they need to protect themselves , but maybe one out of ten will act on it. Another part of the conundrum at the same time is you don't want to scare your client off, if they go down the street the next guy might not give a shit about their future. It's a delicate topic to be sure.

Wed, 10/03/2012 - 11:38 | 2851956 Cognitive Dissonance
Cognitive Dissonance's picture

I have lost more than half my client base because I have refused to chase "yield" and "risk" over the true fiscal cliff simply because everyone else is. It all works well until it doesn't. Then my clients are left looking at me (if not suing me) because I did not "save" them from themselves.

The crash of 2008/09 was absorbed by many retail investors as just another market plunge that was eventually (mostly) recovered from. Bad.....but not so bad that they were devastated. So many of my clients ask me "Why all this talk about PMs and "real" assets?"

In an extremely telling example of herd behavior, most retail investors feel better about losing money in the markets if everyone else has also lost money. I don't mean to say that they are happy about it. But they weren't alone in their loss, thus they alone weren't "stupid". In fact, they weren't stupid at all because they were just doing what everyone else is doing.

Misery truly does love company.

The second time this happens I suspect the average retail client will not be so forgiving and will cast about looking to blame anyone other than themselves for their stupidity. I will not be part of that game on either end.

Wed, 10/03/2012 - 11:50 | 2851992 Dr. Engali
Dr. Engali's picture

It sounds like we share the same experiences. I wonder what the ratio of advisors out there who feel like we do versus those who don't.

Wed, 10/03/2012 - 13:04 | 2852240 Manthong
Manthong's picture

“Mark Grant's article from a few days ago.”

See what happens down here in the rabbit hole, CD?

Yesterday becomes a few days ago.  : )

Wed, 10/03/2012 - 13:25 | 2852319 Cognitive Dissonance
Cognitive Dissonance's picture

Sorry. Stuck in a time warp over here. :)

Sometimes I scroll back through the ZH pages to re-examine what was going on way back when. I am always surprised to find something that feels like it was days or weeks ago was actually just hours or at most a day ago.

Wed, 10/03/2012 - 11:03 | 2851867 youngman
youngman's picture

It starts with the data....and at this point everyone is lying...the People on their taxes...the banks with their loans...the politicians in their statistics......the IMF and Central banks with their economic forecasts and Stress tests.....sooooooo...who do you believe......I believe in Gold and Silver...they do not lie..

Wed, 10/03/2012 - 11:03 | 2851870 No Euros please...
No Euros please we're British's picture

Breaking News:

Penguins sail down Amazon, last seen heading straight for Lithuania.

Wed, 10/03/2012 - 11:05 | 2851872 kaiserhoff
kaiserhoff's picture

The Red Queen Theory - you must run as fast as you can to stay in the same place  (and even then...)

Wed, 10/03/2012 - 11:06 | 2851875 El Viejo
El Viejo's picture

No one wants to be a party pooper.

Wed, 10/03/2012 - 11:10 | 2851883 OldE_Ant
OldE_Ant's picture

Last one at the table gets the check.   Looking like the bail will be so fast the waiter will be standing there with the bill and no-one to pay.

ENd of LiNE

Wed, 10/03/2012 - 11:14 | 2851893 The trend is yo...
The trend is your friend's picture

I for one have anticipation fatigue.  After years of this shit, i can't ignore it so i continue to observe and the more i observe the more anxious i become.  It is difficult to sell everything and buy physical GOLD and silver, it is difficult to short and it is difficult to to blindly buy long.  Sometimes i envy the people on the street that still have their heads in the sand and are in bliss.  ZH and sites like it are great with individuals that have great knowledge and insight but as i said Anticipation Fatigue is a drain on the psyche

Wed, 10/03/2012 - 11:40 | 2851960 CrashisOptimistic
CrashisOptimistic's picture

There is a cure.

Forget all that shit, including gold, and buy farmland.  Sharecrop it with a farmer who wants cheap rent, or learn to do it yourself.

All this shit is going away.  Only food will still have customers.

Wed, 10/03/2012 - 12:49 | 2852000 stuckonarock
stuckonarock's picture

And stress is bad for you!

Worry about an imagined event can be removed using "timeline therapy"

A tool created by Neuro Linguistic Programming.

 

http://www.youtube.com/watch?v=yMjyZFKXhXc

 

Its def gona happen(financial unwind) but you may as well be happy while it does !  be happy and prepare :-)

See a timeline therapist  10 minutes = all fear gone

its a mind technology....  it works

Wed, 10/03/2012 - 14:50 | 2852723 Deo vindice
Deo vindice's picture

An abiding faith in God and prayer work for me.

As Cromwell said to his troops, "Trust in God ... and keep your powder dry".

Having that right balance will keep the stress of worry away.

Wed, 10/03/2012 - 11:16 | 2851897 theorist
theorist's picture

Wonderful article. Mr Grant has been saying it like it is. There are so many uncounted liabilities on the books of every EU nation that to account for them properly would probably indciate that each and everyone of them is insolvent. Eurostat, the accounting standard used by European governments is a joke. You are allowed not to book contingent liabilities on blanace sheet. Derivatives are missed off. SPV's used for financing are missing as the government has "only" given guarantees to them. As a case in point, Greece and Italy were very active in using Derivative "Hedging" programs for their issued government debt. These "Hedge" transactions were actually used to borrow huge amounts of money over and above what was being explicitly borrowed.

Wed, 10/03/2012 - 11:31 | 2851941 youngman
youngman's picture

I have to admit it has been hard to watch the US stock market hit new highs.....but I just can´t swallow enough pride to invest in it.....I am into gold and silver...and at least they are keeping up......to me they should be 3-4 times as high as they are right now...

Wed, 10/03/2012 - 12:02 | 2852037 BrigstockBoy
BrigstockBoy's picture

Look no further than muni debt markets in our own country for opacity. It's also a rigged game. Like her or not, Whitney pointed this out in her research report Tragedy of the Commons where she refers to poor disclosure and arcane accounting rules. I would argue that it's done this way to keep the sheeple in the dark in spite of the fact that the information is readily available. The ratings agencies are perpetually in on the joke... 

Wed, 10/03/2012 - 12:19 | 2852097 JohnKozac
JohnKozac's picture

Are there any greeks left in Greece? From the BBC on TV it looks like most natives have scaddled to Bulgaria, Canada, Australia or up northern Europe. Now only MENA people roam the streets there looks like on the Tele.

Wed, 10/03/2012 - 12:19 | 2852100 Winston Churchill
Winston Churchill's picture

"How many fingers do you see,Winston ?"

1984.

Wed, 10/03/2012 - 12:56 | 2852207 Bertie Bear
Bertie Bear's picture

I had my 40th birthday drinks in a pub near The Bank of England, London called the Counting House. Daniel Defoe who wrote Robinson Crusoe used to work there as a bank clerk. That's my contribution to readership education!

Wed, 10/03/2012 - 12:54 | 2852208 rlouis
rlouis's picture

"You can fool some of the people all of the time.... and those are the ones we want to concentrate on."

George W. bush

Wed, 10/03/2012 - 13:23 | 2852317 Sandmann
Sandmann's picture

Greece should start a Space Program. With its financial situation it can afford anything

Wed, 10/03/2012 - 14:19 | 2852569 mudduck
mudduck's picture

As God is my witness, I thought turkeys could fly. http://www.kewego.com/video/iLyROoafYtDe.html

Do NOT follow this link or you will be banned from the site!