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"The Cash On The Sidelines" Is The Smartest Money...

Tyler Durden's picture




 

GMO, Boston's $104bn asset-management firm, has 'given-up' on the bond market. However, this is not a clarion call for equity bulls, as the FT reports, GMO's head of asset-allocation Ben Inker notes the only time he has held more cash was in late 2007, before the financial crisis. Today's equity valuations, he notably points out, are predicated on today's profit margins being sustainable and he thinks US corporate profits are set to fall - even if growth picks up. Critically, this smart-money cash-hoarder rightly sees the problem as one prominent during the presidential election - that of income inequality. "One of the things that happens as profits grow as a per cent of gross domestic product is income becomes more and more unequal because the ownership of capital is extraordinarily uneven. And there's a natural tension that forms there from a societal perspective." So far, Inker adds, government spending has supported the economy and so profits. But a pick-up in growth requires higher consumption, and the only way to get that is through higher incomes, which must come from profits. So that's where the dry powder is Maria - in the smartest investors' hands.

 

Via FT:

...

 

But his dislike of fixed income does not mean he is a fan of stocks...

 

Rather, Mr Inker says that he is waiting for better times; forty per cent of a benchmark free asset allocation hedge fund he oversees is in “dry powder”.

 

The only time it has held more cash was in late 2007, ahead of the financial crisis, he says. A tenth of the portfolio is in emerging market and asset-backed paper and the rest is in stocks for want of anywhere safer.

 

...

 

However, he thinks US corporate profits are set to fall even if growth picks up, in part because of an issue that was prominent in the presidential election – growing income inequality.

 

One of the things that happens as profits grow as a per cent of gross domestic product is income becomes more and more unequal because the ownership of capital is extraordinarily uneven. And there’s a natural tension that forms there from a societal perspective.”

 

He says that since the financial crisis, government spending has supported the economy and so profits. But a pick-up in growth requires higher consumption, and the only way to get that is through higher incomes, which must come from profits.

 

...

 

A disorderly break-up of the euro remains the big “undiversifiable risk”, says Mr Inker. Emerging markets are fairly valued but “scary” due to the unknown path for China.

 

...

 

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Mon, 11/26/2012 - 22:18 | 3013231 fonzannoon
fonzannoon's picture

Ben Inker? You can't make this shit up....

Bobby printingpress however is long equities.

Mon, 11/26/2012 - 22:33 | 3013266 PrintingPress
PrintingPress's picture

Long paper!

Tue, 11/27/2012 - 11:16 | 3014234 Enslavethechild...
EnslavethechildrenforBen's picture

Zimbabwe $dollars forever!

Mon, 11/26/2012 - 22:20 | 3013239 ziggy59
ziggy59's picture

Anyone see this? Blames it on Sandy...
CME Declares Force Majeure at Manhattan Gold Depository
http://www.nasdaq.com/article/cme-declares-force-majeure-at-manhattan-go...

Cant be they cant deliver what they dont have?!...

Mon, 11/26/2012 - 22:41 | 3013279 Kali
Kali's picture

Wow, too many coincidences for me.  Austria claiming the salted "delivery good" bars from Douche Bank.  Now this.  Something very funny going on here.  If you don't hold it, you don't own it.  I am certain that was why US fought so mighty against RP and others to audit the gold. It ain't there or it's more tungsten than gold.

My gold foil hat is pinging loudly and frequently tonite : )

Mon, 11/26/2012 - 22:45 | 3013292 Samsonov
Samsonov's picture

And if you do hold it, you may not own it for long, at least in any situation where it would really matter.

Mon, 11/26/2012 - 22:51 | 3013306 Kali
Kali's picture

University of Texas should be giving Kyle Bass bjs everyday for bringing the gold home.  Only problem is, they will probably need the Texas militia to keep it. I sure hope they tested it.

Blatantly manipulated PM markets, Corzined gold, retail salted bars, "delivery good" bars salted.  Oh, BTW, where IS ghaddafi's and sadam's gold?  In Venezuela? j/k.

Mon, 11/26/2012 - 23:01 | 3013321 Samsonov
Samsonov's picture

Now that is one fine question that I've never heard asked before.  I imagine those two a-holes "held" plenty...maybe that had something to do with where they are now.

Mon, 11/26/2012 - 23:31 | 3013395 ziggy59
ziggy59's picture

Libya has or had 144 tons
Iraq had lots..

This interesting..

http://www.usagold.com/mkpics/forum/iraq-gold.html
and this.
http://www.truthorfiction.com/rumors/i/iraqigold.html
What if they werent fake?

Tue, 11/27/2012 - 02:24 | 3013634 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

My brother-in-law lived in Tripoli Libya for the last five years, in top posts. He said it was common knowledge that Gaddafi buried his gold in shipping containers in the desert, then machine gunned the bury-ers

Tue, 11/27/2012 - 09:36 | 3013942 SilverDOG
SilverDOG's picture

OpenThePodBayDoorHAL,

 

Hello satellite surveillance !

Where is the rewind button?

I am going to Libya, with a shovel.

Going diggin' Bitchez !!

Not.

Tue, 11/27/2012 - 00:32 | 3013522 Real Estate Geek
Real Estate Geek's picture

UT's Board of Regents may not want to swallow just yet because "The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board."

http://www.bloomberg.com/news/2011-04-16/texas-university-takes-cue-from...

 

By the way, you mentioned salted good delivery bars in Austria.  I didn't hear about that and haven't yet seen it on ZH; any info would be appreciated. TIA.

Tue, 11/27/2012 - 00:55 | 3013552 Kali
Kali's picture

OOPs,  I was thinking of Kyle's nickels.  Foolish to keep the bars in NY.

Silver doctors and Max Keiser sites both have the Austrian salted bar stories.  And don't forget about Germany's light bars they received recently.  And the US rebuff to Germany's request to audit "their" gold. 

Tue, 11/27/2012 - 02:28 | 3013635 Real Estate Geek
Real Estate Geek's picture

Thanks!

Tue, 11/27/2012 - 10:34 | 3014098 Omen IV
Omen IV's picture

Chavez in Venezuela took physical delivery for almost all the countries holdings of gold - because he is a good socialist and not a capitalist - being outside the club has its advantages

Mon, 11/26/2012 - 22:27 | 3013254 orangegeek
orangegeek's picture

NASDAQ100 shows declining volume over moves up and increased volume on down moves.

 

http://bullandbearmash.com/chart/nasdaq100-weekly-416-austerity-debt-fis...

 

It really is only a matter of time before the big sell off.

Mon, 11/26/2012 - 22:28 | 3013256 fonzannoon
fonzannoon's picture

Ben Freaking Inker? I swore I was not going to pour another drink. But you know what? I did. Because this is officially nuts. Ben Inker drove me over the edge. Wherever you are Ben Inker, take a bow, because you knocked my final screw loose.

Mon, 11/26/2012 - 22:31 | 3013264 Cursive
Cursive's picture

@fonzannoon

It's like drinking from the firehydrant of surreality.

Mon, 11/26/2012 - 22:42 | 3013284 fonzannoon
fonzannoon's picture

Cursive my wife is watching the voice and yelling at me for not watching. I am trying to explain that I don't need to see a piece of shit in order for my ears to verify that it is in fact a piece of shit. I am reading that Ben inkjet likes cash.I am questioning everything right now. But you know what? Ben injet likes money markets. He does not even like cash. If Ben inkjet said "get your money the hell outta here and own cold hard cash" I would not have poured that drink. Damn you Ben Inkjet!

Mon, 11/26/2012 - 22:58 | 3013318 Dr. Engali
Dr. Engali's picture

Hey Finz I'm right there with you. I can barely tolerate reading about it any longer. Deep down I feel this thing should blow apart any minute, but somehow it just keeps on grinding out. I'm pouring myself a drink as I type.

Mon, 11/26/2012 - 23:09 | 3013339 fonzannoon
fonzannoon's picture

it's good to see u, cursive and centerline on here. as i run around slamming into rubber walls contemplating this shit it's nice to know a few people i trust will pat me on the head and sympathize. it means a lot. 

Mon, 11/26/2012 - 23:44 | 3013425 Oh regional Indian
Oh regional Indian's picture

Seriously Fonz. Be Inker is like a final straw. What will be next?

Auric Goldfinger??????

The frightening thing is, if it a plan to give the global public the finger, how long have they been planning this?

*In udder noose, as the Indian rupee continued it's slide against the dallar, Reserve Bank of India Chief Groveller Printy Scroopeepul said they had no choice Butt to Plug the growing fis-cull Gap, as directed by Sub-Prime Minister Money Moan Sing and his henchman, MoneyTake Sing*

And that is the noose from India...

*head shake*

Bizarro world, indeed and word...

ori

 

Tue, 11/27/2012 - 00:22 | 3013508 Fish Gone Bad
Fish Gone Bad's picture

how long have they been planning this?

 

It takes a long time to move money unnoticed to the other side of the trade.  Our impatience has been learned from reading paragraphs in a history book.  The War of 1812 lasted about 15 minutes according to my impatience theory.  WWII was over once Japan bombed Peal Harbor.  Anyway, I have been learning a fine lesson in humility and planning.  Take a look at what happened to the US indians and how they actually lost their lands.  They were gotten into debt and then their lands were confiscated as payment (those of course who were not outright killed).  The process did not happen overnight...

FGB

 

Tue, 11/27/2012 - 00:30 | 3013520 Oh regional Indian
Oh regional Indian's picture

Insightful stuff FGB.

My own study of history points in similar directions. A twist to the ZH tagline:

On a long enough time-line, even the most diabolical plan is implementable.

ori

Mon, 11/26/2012 - 22:40 | 3013281 centerline
centerline's picture

Welcome to the club.  Come on in.  Grab a seat.

Tue, 11/27/2012 - 08:17 | 3013784 Dr. Sandi
Dr. Sandi's picture

Quoting Mr. Inker in the article:

"One of the things that happens as profits grow as a per cent of gross domestic product is income becomes more and more unequal because the ownership of capital is extraordinarily uneven. And there's a natural tension that forms there from a societal perspective."

How about we just say that when a couple of guys have all the money, the rest of us don't have any to spend?

In a consumer-based economy, when consumers have no BenBux, there isn't much economy. It's not like this stuff is rocket surgery or something.

Mon, 11/26/2012 - 22:31 | 3013265 Jack Ryan
Jack Ryan's picture

For a great well thought and well researched site, PLEASE look up his numbers, they SUUUUCK.  Being early is the same as being wrong AND consistently early is a GREAT way to destroy your purchasing power. 

Mon, 11/26/2012 - 22:35 | 3013270 DavosSherman
DavosSherman's picture

Smartest money is in gold NOT cash.

Mon, 11/26/2012 - 23:34 | 3013400 Appleseed
Appleseed's picture

Gold is money, so smart money is in money lol.

Mon, 11/26/2012 - 22:37 | 3013273 AllWorkedUp
AllWorkedUp's picture

"Being early is the same as being wrong". Well said. I've been early my entire investing life and am lucky I'm not completely broke. Try picking a top in bonds. That'll break ya. Take my word for it.

 

So why isn't the smartest guy in the room buying gold and silver?

Mon, 11/26/2012 - 22:43 | 3013286 HermesHiccups
HermesHiccups's picture

Been there done that as well, there is a great saying that applies to all of us early to the party folks

"I got in on the ground floor and I ate a lot of dirt"

 

Tue, 11/27/2012 - 22:20 | 3016230 Papasmurf
Papasmurf's picture

I think leaving too late is more problematic.  When you leave too late, you can't wait things out.

Mon, 11/26/2012 - 22:37 | 3013274 chump666
chump666's picture

China, huge risk.

Shanghai just tested 2000 for the nth time, awaiting the commies to start buying again.  Something bad is brewing there...real bad

Mon, 11/26/2012 - 23:38 | 3013409 Fred Hayek
Fred Hayek's picture

Hell, never mind China, what about Japan? My god, terrible demographics, finally failing to have a trade surplus, a savings rate now nearly as bad as here in the U.S. and sovereign debt that's 240% of GDP while the likely new premier has said he wants to increase inflation to 3% no matter what it takes. I'll tell him what it'll take. It'll take down the bond market as who will want a 1% JGB with 3% and rising official inflation?

Oh, and they still have something just short of trillion dollars of U.S. treasury bonds. Think they won't be tempted to dump that merde when the SHTF?

Tue, 11/27/2012 - 05:02 | 3013679 Seer
Seer's picture

You're on top of it!

Japan is the link.  It is the point at which it all tips.

Jared Diamond in his book "Collapse" noted how the loss of a key trading partner can bring down a civilization.

For the US Japan is that key trading partner.

Japan's footing, which has always been on a slippery slope (an island with few resources applicable to an industrial nation), is being tipped by China.  Thus the sequence is initiated.

It's one big game of Dominoes, and there are ONLY Dominoes: ALL will fall.

Mon, 11/26/2012 - 22:46 | 3013289 BLOTTO
BLOTTO's picture

Why would 'they' pick on the inteligent rare owners of gold and silver when their are so many billion grazing brainwashed zombies out there?

...

We arent wrong... We are not the zombies... We are not easy prey.

...

Not to mention, but they love gold and silver too...for the past 10,000yrs or so...

Mon, 11/26/2012 - 22:47 | 3013299 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bernanke is going to blow this sorry assed mother fucker Inker out of the water.

Mon, 11/26/2012 - 22:53 | 3013310 Bay of Pigs
Bay of Pigs's picture

Inker gonna get it in the sphincter?

Tue, 11/27/2012 - 07:07 | 3013743 Seer
Seer's picture

Conjures up a picture of Bernanke with the caption: "I think, therefore I ink."

Tue, 11/27/2012 - 22:32 | 3016256 Papasmurf
Tue, 11/27/2012 - 04:57 | 3013681 Seer
Seer's picture

"But a pick-up in growth requires higher consumption, and the only way to get that is through higher incomes, which must come from profits."

MORE, MORE!  Faster and faster the pace must go...  It's the way of the exponential function.  Rocket ride in to the sun...

Tue, 11/27/2012 - 05:06 | 3013687 SmittyinLA
SmittyinLA's picture

I remember that photo, it was the cash horde of the Mexican mafia's main Chinese meth supplier, Chinese /Mexican immigrant Ye Gon.  The cash horde was allegedly to "fix" Mexican elections-which had already occurred-not ours which were coming up.

Strangely enough LA Eme's main meth supplier (and world's biggest meth peddler) Ye Gon was picked up in Maryland of all places and "Guantanamoed" never to be heard from again.

Ye Gon was also "the source" of the DOJ money laundering investigation of casino owner and Romney donor Sheldon Adelson, strangely enough the DOJ didn't investigate any of the other casinos that "whale" Ye Gon gambled at and weren't Romney donors.

Mexico is still waiting for the extradition of their Chinese citizen meth kingpin Ye Gonna, going on 4-5 years now.

 

Tue, 11/27/2012 - 08:12 | 3013774 StychoKiller
StychoKiller's picture

Perhaps, he was "rehypothecated..."

Tue, 11/27/2012 - 08:40 | 3013815 proLiberty
proLiberty's picture

"...profits grow as a per cent of gross domestic product is income becomes more and more unequal because the ownership of capital is extraordinarily uneven...."

While down from its peak, when private savings is combined with 401ks, the average American holds a surprising amount of stock.  Indeed, the longer we have the abomination known as ZIRP, the more people flee bonds and bid up the share price of dividend paying equities.  So, for me the above claim is irrelevant.

 

 

Tue, 11/27/2012 - 09:53 | 3013983 sessinpo
sessinpo's picture

Another so called smart person realizing what I have said for months. Cash is king because of the debt overhead, deleveraging. You got  a mortgage, they want cash. You got a car loan, they want cash. You got credit card debt, they want cash. You got a student loan, they want cash. As as with the 1930s, PMs also declined as PMs were sold to raise cash to cover prior mentioned debts or margin calls in the various markets. Having a small portion of you assets in PMs is still a good idea for the worst of times still to come. And as history has shown, it wouldn't surprise me is mining stocks are one of the few assets that do well.

Who cares about his name. It's about survival. Will you be talking about Ben Inker when you're looking for your next meal?

Tue, 11/27/2012 - 11:15 | 3014230 marginnayan
marginnayan's picture

"So that's where the dry powder is Maria - in the smartest investors' hands."

Did you mean CNBC's Maria Bartimoro when you said Maria?

Is Maria Bartimoro going to interview Ben Inker? LOL.

 

 

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