Elliott's Paul Singer Reveals The Thing That Scares Him Most

Tyler Durden's picture

When it comes to market experts with decades of insight, we will pick soon to be Second Admiral of his own sovereign navy (comprising of privateered Argentinian schooners, Belize catamarans, and soon, Greek Made in Germany submarines), Elliott's Paul Singer, over those of any fly by night TV talking head, or "information arbitrageur" whose only 'alpha' in the past decade was courtesy of expert networks. The same Paul Singer whose outlook on what the next crisis may look like we posted yesterday.  It is the same Paul Singer, who three weeks ago was a headline speaker at the Archstone Partnerships annual meeting, in which speech he laid out not only the biggest threat facing America - namely the arrogance of the United States "by not realizing that in today's world... you have to be attractive as a country [because] capital will go where it's welcome", but more importantly, the thing that keeps him up at night: "The thing that scares me most is significant inflation, which could destroy our society."

In other words, one of the best and brightest investors in the world, is most terrified by the one thing that every central-planning dispensing economist says will never happen: hyperinflation. Our money is certainly not on the economist theoreticians who could never foresee the second great depression their lunatic policies drove the entire developed world into.

Extracting the key parts from Singer's speech. Highlights ours

Let me make a few comments and observations on the current investment scene. I said before that every once in a while things really are “different this time,” and I thought of a metaphor earlier that might be useful to illustrate an important point. Let’s do a thought experiment: Let’s make believe we are in 1960 and sitting in Germany, and we are a group of German investors and businesspeople, about the same ages as the people here today. The group would be people who had seen the most astonishing changes in the underlying conditions of investing and growing capital—a complete evaporation of savings from 1914 to 1923; complete destruction of society; and a complete change in governance from 1943 until after the War. Keep that image in your mind when you come back to 2012 in New York City today and realize the basic terms and conditions of everybody in this room have not really changed over your entire career. There have been booms and little crashes, you’ve made money and lost money, some people were wiped out and others became wealthy, but the elections come every four years, power is transferred peacefully, and taxes go up or go down.

 

It concerns me that we might be entering a period—we have to think about this possibility—when the basic terms and conditions of owning capital, making a rate of return, and keeping the money you earned might be in the process of changing. Charles Krauthammer said some time ago that most of American political life is between the 40-yard lines and that this crowd, which has been elected for another four years, is kind of at the 30-yard line. I had thought about it at the 10-yard or 5-yard line, but Charles is more mature than I and I’ll accept what he said. But I’m very concerned about class warfare generated from the top, about the possibility of an extended period of lacking strong economic growth. I think economic growth could be easily achieved in the United States at greater levels, and I’m quite concerned that the current prospects, beyond the so-called “fiscal cliff” and a deal on taxes and spending cuts, will be an extended period of low growth and possibly a recession, the continued bashing of money and success and very large tax increases.

 

I want to call to mind a micro choice that I think is relevant. If you lived in the upper Midwest, you’d know the difference between Indiana and Illinois. You would know Indiana welcomes jobs and businesses, and finds ways to work with businesses; and Illinois is on a slide to Hades. Illinois—and I suppose Michigan, too—is doing everything possible to support unsupportable expenses, structures and make thing miserable for taxpayers.

 

By the same token, I think America—and this goes beyond President Obama’s administration—has been quite arrogant for a long time by not realizing that in today’s world, where many countries around the globe can turn out products and services more cheaply than America, and where America has lost so many industries and jobs to other countries, that you have to be attractive as a country. Capital will go where it’s welcome. It is subject to an understandable rule of law, regulation, fair and attractive taxation, and the quality of life. I’m afraid of that, because when you look at the sweep of the booms since the Internet boom and monetary policy, and the extremism that has become embedded in current monetary policy, the United States, Europe, the U.K. and Japan, you do see extreme monetary policy.

 

They say this is not massive money printing, but first they are wrong; and second, monetary authorities in the United States did not see the crash coming and the unsoundness of the financial system. In fact, right up until the crash they were saying that nothing like what happened could ever happen. So money printing and zero-percent interest rates, which have distorted the economic recovery and the landscape in the United States and Europe, have become a substitute for sound, pro-growth, fiscal regulatory tax policy. As a result, they say they are not concerned about inflation. This monetary policy, $3 trillion of bond buying in the United States, $3 trillion in Europe and another $2.5 trillion to $3 trillion in Japan, is unprecedented. It is not the case that they know the ultimate inflationary potential when this low-velocity money gets back into the system and acquires some velocity. If and when people lose confidence in paper money because of repeated bouts of quantitative easing and zero-percent interest rates—it could happen suddenly and in a ferocious manner in the commodity markets, in gold, possibly in real estate—interest rates could go up at the long end by hundreds of basis points in a very short time.

 

I’m quite concerned as a money manager that we have to manage money, not just for the boundaries of what’s in front of our faces—maybe we’ll have a little tax increase or not, the fiscal cliff, or the stock market might go up or down 10% or 15%—but for a basic shift. The thing that scares me most is significant inflation, which could destroy our society. Frankly, in my view the recent election has diminished the probability of a strong resurgence of growth, and I’m quite concerned. Others are concerned about the course of the next 12 to 24 months in terms of growth, taxation, regulation and social unrest, a resurgence or larger version of bashing anyone who has made money or makes money and not paying their fair share.

Or, perhaps, the developments over the past several months were geared with precisely this outcome in mind: because there is nothing quite like "social unrest" to resolve decades of untenable economic and monetary imbalance build up...

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trav777's picture

actually, after seeing that all you do in there is spam with nonstop sophomoric profanity, I decided that the risk/reward ratio on a work machine was simply not worth it.  Sorry, expected more out of you than puerile blather.

fuu's picture

That chat has gone down hill since the irc days.

chumbawamba's picture

Aw, shut up, you stupid nigger.

chumbawamba's picture

Surely your boss, Cass Sunstein, is not going to get his panties in a bunch over a few ethnic slurs crossing over the federal government's inside wire?

chumbawamba's picture

We need that alcoholic chick from Colorado who was always stoned on wine and exposing her breasteses...what was her name?

-Chumblez.

centerline's picture

Funny.  I forgot all about her.  Name will come to me later.  She popped up on a few sites I used to visit a couple of years ago.

Dave Thomas's picture

I'm never on chat when the really good shit happens.

Hulk's picture

Velobabe.

Fight club is back Bitchez!!!

 

Umh's picture

You sound like my ex-brother-in-law "breasteses" ......................

 

 

breast is plural already.

candyman's picture

Yea the front line is back, should be an interesting game from here.

Xanadu_doo's picture

its an Xmas/Kwanzaa/Chanukah/Festivus miracle!

Bitchez.

Seer's picture

Welcome back, I think...

I'm only 6 weeks behind you vis a vis "seniority" here, but I've been touting the same message of growth being the problem since I arrived.  180 from you on your xenophobia though...

trav777's picture

you will yield.  I am not xenophobic...soon as you figure that out, you will be somewhere

akak's picture

So then it would be with benevolence that you would march all the darkies into the gas chambers?

Ruffcut's picture

Horseshit times a bazillion.

It can only happen if "they" want it to happen. Only if it is an advantage, unless intensely insane, would any one do this or not see it coming.

Alot of us saw this, years ago.  Nothing burger juices of stink.

The greed of the system has made it a global profiteer campaign and fist fucking of middle class amerika.

Seer's picture

Do you really think that they can make unicorns appear?

Don't you get it that this is the last place the they want to be, juggling exploding grenades?

TPTB ARE TBTB because of their ability to maintain stability.  Don't confuse their function with their ability, especially in light of the fact that they are now up against the physical realities as imposed by physics/mother nature.  Their Golden Goose -growth- has stopped laying.  There is no way out: war will be the distraction (because the servants will be demanding more crumbs), until it is discovered that our "masters" have turned on "us" (not like they've ever been on any side other than their own, but the myth is about to be upended- total game over).

GCT's picture

SEER they make unicorns appear everyday on TV!  What else does one need!

grid-b-gone's picture

+1 TPTB work within the penumbras of the status quo. When the entrenched have lost power in history, it can be argued that they almost always lost control of the status quo.

It makes sense. They need to know which strings to pull behind the scenes to make their desired outcomes come to fruition. It takes time to create and maintain the structure that makes that possible.

Change, especially rapid change, does not leave enough time to make adjustments to the power structure.

We are seeing this in Europe with more stories of wealthy people leaving. Normally, they would have worked behind the scenes using contacts and political influence to effect change. Each new decision to bail indicates the entrenched are no longer confident they have the ability to determine their own destiny in that location.

mumcard's picture

I don't think TPTB have lost control at all.  I think this is a normal step in the cycle.  They start the wars and consolidate their power even further each time.  They throw their smoke bomb and abra cadabra *poof* they're gone.  They always reappear though. It's a cycle of shearing and slaughtering the sheep.

Maybe in the next iteration they'll make sure there is no internet and all the historic economic texts will be lost or locked away (to prevent future fight clubs).

Captain Kink's picture

What if there are no TPTB?  Would that make it scarier?  What if no one is in charge?

I think there are factions with very long horizons that vie for power and "control", but I think not a one of them has any fukking clue as to what is coming.

Dark Ages, Bitchez. But not for some time, I think. Our hyperinflation or currency/debt collapse or whatever other form it takes will just be the beginning.  We are in the very early stages of the slide.  like the first inning was 1973, now it's the top of the 6th. Things will be get really nasty around the seventh inning stretch.

mumcard's picture

But anyone paying attention knows that the Rothschilds have been behind almost every major war in the past century.  Their minions were behind the economic collapses as well.  This is a cycle and trust me they have planned for it even if they didn't plan every consequence.  They'll be high and dry watching the chaos unfold, as always.  Then they'll step in and start all over again.

Chupacabra-322's picture

Keynesian economics advocates deficit spending while the school of Milton Friedman/Greenspan advocates money printing.  Historically we're at the highest levels of doing both.  The reality is we're bankrupt and the restructureing is already either in the works or done. 

Silvergood's picture

Its over folks......  Spread the word and get all the physical silver before its too late.  This system is beyond broke.

real's picture

i want to kill Santa clause no seriously those dumb fucks ringing their bells and grabbing youngsters possible reasoning

Jafo's picture

They knew that the crash was coming.  If not, then why did they have that "closed session" of the congress: you know, the one that had all the congressmen gagged and unable to talk about that which they had been gagged about?

kahunabear's picture

Is he saying we shouldn't trust these guys? That they don't have our best interests at heart? That they have been 100% wrong in the past? Balderdash! Ha.

Seer's picture

That and he's a genius so we should all hand over our wealth to him to "manage."

SmoothCoolSmoke's picture

Wasn't Bernie Madoff a "genius"?

sbenard's picture

I couldn't have said it better

Winston Churchill's picture

The herd is getting restless.

One Pop, and there goes the stampede.

Strider52's picture

Or one badly-timed battery-operated coffee-grinder in the middle of a cowherd.

semperfi's picture

"The thing that scares me most is significant inflation, which could destroy our society."

You fear cuz you don't own enough gold & silver.  Go shopping man. 

Proofreder's picture

There will be significant "social unrest" just as soon as price inflation overcomes the EBT card allotment of $135 or so monthly per mouth. Presently there is a lot of slack in the system allowing many cards entry into the growing black market, but as real hunger grows, desperate folk responsible for feeding their children will stop at nothing to obtain food. Only hunger-driven social unrest will manifest as roving gangs or chanting crowds. Mob rule soon come following the first hunger riot. Wonder which city will be first. Or twenty-first?

trav777's picture

your imagination is overactive

tickhound's picture

DUUUUUUDE... Welcome back, dickhead. ;)

ali-ali-al-qomfri's picture

Kinda got into the Walking Dead series as it is foreshadowing of the growing zombie hoard looking for food, (ZH being a radio broadcast warning of the carnage) so I’ll say Atlanta goes down first, no disrespect to Atlantas

mumcard's picture

I think it'll be someplace there are browns and blacks, like LA. 

GCT's picture

You forget Proof they can increase those digital dollars in a keystroke.  Those not on EBT may be the ones that riot.

mumcard's picture

Self reliant types will buckle down and try to bear it like they always do.  It's too bad there is no community left among these folks.  And if hyperinflation hits and a loaf of bread costs a million fiat dollars that ebt card will be worthless anyhow.

Renewable Life's picture

The Amazing part ISN'T that their is going to be massive inflation, it's the fucking balls and arrogance of these bastards at the Fed, thinking they are going to "manage" this shit!!!!!

It's just completely maniacal at this point!! I mean, in what fucking world do you think 9 trillion in printing over a 6 year period, is going to have manageable consequences!!! It's suicidal at best and sociopathic at worst!!

This author nailed it!! Who gives a shit about taxes or the stock market, if gas is at $15 a gallon and bread at $10 a loaf, it's going to be open warfare in the streets of America, Syria style!!! Only 2-3% of the American population is hedged with PM's, land, or commodities to offset the kind of hyperinflation that could be coming!!! Which BTW will rapidly infect rents, food prices, and energy like the plague!!! This shit might make the "tulips" and the Weinmer Republic look like child's play!!!

Bernanke things when the avalanche of money they have printed all over the planet comes off the sidelines, he's going to raise interest rates fast enough??? It's just mind bending???? WTF do they think they will do, raise interest rates to 7% overnight to stem the flood on the liquidity side, and decimate the bond market???? You lower interest rates slowly, you raise them fast! If they don't, the avalanche will bury them with hyperinflation before they can even make their next move!!!

It's gonna be epic on the proportions of Rome!

trav777's picture

I NO RITE?

It's not as if there have been multiple hyperinflations or outright currency collapses in the past century, or even few decades that we can study for evidence on how societies deal with them.

Seer's picture

"This shit might make the "tulips" and the Weinmer Republic look like child's play!!!"

Might?

It's all of the worst rolled in to one.  That is, "worst" if one idolizes the bad premise that is perpetual growth on a finite planet.

We're not going to be able to maintain the existing infrastructure let alone grow it (and or any "alternate" BIG replacement).

The consolation will be that the New World Order will be canceled: TPTB may want it, but without the ability to extract more and more physical resources it ain't going to happen.  Now it'll be up to "us" to figure out how life is to work...

Iam Yue2's picture

Actually Commerzbank have been banging on about inflation in the Eurozone for the past six months, per, from this recent report which
concluded that it does not matter who wins in Italy, because nobody is going to be able to restore competitiveness;

"the course is therefore set for the euro zone to shift towards an “Italian Monetary Union“: not all peripheral countries are likely to be able to restore their competitiveness through reform, which is why they are still reliant on an expansionary monetary policy from the ECB. The Monetary Union will be characterised by a depreciating currency and higher inflation rates, showing parallels to Italy in the 1970s and 1980s."

bobthehorse's picture

The system will eventually crash.

But war is on the way.

My advice?  Become a hobo.

That's what I'm going to do.

I plan to live in a school bus and eat chili.

Peace.

Proofreder's picture

Did that in the '60's A great adventure, don't think it would work today. Perhaps with a couple of Pom-Poms mounted roof side.
Or good paint.
Pax

trav777's picture

abandoned storage containers are in a buyer's market

Jason T's picture

pays to read history. thing is, stocks would go up too... especially if bonds collapse.