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Jeff Gundlach On The Fiscal Cliff Circus And Why Investors Should Hold Cash Through 2013

Tyler Durden's picture


From the sheer hypocrisy of a fight over a few billion dollars when faced with trillion dollar deficits and the eventual austerity that will be forced upon the US, DoubleLine's Jeff Gundlach expounds on his growing concerns at markets where fundamentals "are trumped by policy decisions," and while he does not believe that bond markets are bubbly at the moment, the impact of an inevitable recession could be devastating given valuations. His subtle suggestion to keep powder dry through 2013 and into 2014 (as deploying money at that future point will make all the difference), follows from his view that he does not see much value in US equities and suggests great care be taken in US bond markets (focusing on low volatility funds) as he looks at Japan's dismal record (and hyperinflationary possibilities) and reflects on the US that "the issue isn't the fiscal cliff. The issue is the fiscal crisis that the United States has been looking at for the past several years."


Gundlach on how to invest in this environment:

"One thing is clear that this is the beginning of an attempt to bring the fiscal deficit under control or at least start to address it. When you raise taxes and when you cut spending, whatever the combination is going to be, you will have headwinds for the economy. The economy is really being supported--this isn't just in the United States, it's in Japan, the ECB and Britain--the economy is being supported by quantitative easing that is allowing for a massive budget deficit and money printing exercises to go on...


As you address the fiscal problems, you are going to have weak economic growth. What that means is that you are in an environment that is going to have further trouble in terms of investment returns that are in areas that are based on economic growth and areas that do relatively well like bonds... Broadly speaking, I think that investors should be looking for lower prices on most risk assets in these developed countries with the exception of Japan…Investors should be looking for the potential inflationary consequences of all this money printing exercise and the place to look for that is Japan..."

On whether Japan is foreshadowing for what will happen in the U.S.:

"Possibly... I certainly think that Japan is the pace car here. They started out 20 years ago with their zombie bank problem and they've tried various things to get the economy going. Now there's some political change afoot in Japan and they are definitely in the place to look. Japan is in a uniquely bad position. The United States is not in as bad as a position as Japan."


"Ultimately, when you start to look at all this money printing which may continue, Ben Bernanke has said forever basically that yes, at some point, one has to worry about inflationary consequences. I've been saying for years though, that investors who are focusing on the near-term on inflation are way too early and that's still the case in the U.S."

On whether investors should get more disciplined and look at fundamentals:

"The fundamentals are always important but it does get trumped by policy decisions when policy decisions are so radical as has been the case in recent years... There seems to be diminishing returns on the various rounds of quantitative easing. It's almost like a half-life of a radioactive particle. The first quantitative easing brought 50%, the second brought a little more than half of that, the third half again, the fourth less than half again.


It just seems that the idea of a Pavlovian reaction when you see quantitative easing that you should go out and buy risk assets--it has worked four times, but it doesn't seem like you are getting much bang for your buck any more... I would point out that gold, for example, hasn't done much of anything in the last couple of rounds of quantitative easing. It seems that the fundamentals are starting to exert themselves more powerfully against the backdrop of endless quantitative easing, so it's possible that the market support is close to finding its limit. This is why I think that investors should be holding cash and buying risk assets at lower prices once the fundamentals assert themselves."

On whether we're in a credit bubble:

"I don't think there is a credit bubble at this point in time actually. The most powerful fundamental, which is really artificial thanks to the central banks, is that there is a zero interest rate in place in this massive market of government guaranteed securities and therefor by extension, very high quality bonds. It pushes people by necessity into other investments. I don't believe that until there are cracks in the credit quality structure of the credit system that you are going to see a substantial selloff in the credit markets for high yield bonds, non-guaranteed mortgage securities, emerging market debt, so I don't really expect that is going to happen."


"The real killer is going to be the next recession. And there will be one. The policymakers are trying hard to have it both ways... Ultimately as you address the fiscal situation, you're going to run the risk of a recession.  When the next recession comes, it's going to be a real killer because what exactly is going to be the policy response.  It will be policies in terms of raising taxes and cutting spending that help to bring on the next recession I think, so I don't think it's very plausible that you're going to just turn around and go back to the old method of pumping up the economy with debt... Next recession comes.  So the next recession probably is going to be somewhat cleansing, which means that you're going to see things repriced lower."

On where to put your money if not prepared to do short-term trading:

"You've got to survive with virtually no return if that's the way you look at things. I actually recommend that for many investors. I think the small amount of money that you might make by trying to push it here as we get closer and closer to the end game where this thing might tail out--the amount of money you might make will be dwarfed by the amount of money you might lose when things reprice lower.


Put it another way, if you just stay in cash and earn a small return or stay in a low risk investment and earn a middling single digit return--the money you might be able to make as we move into late 2013 or early 2014 with repricing, the amount of money you might make if you are able to deploy the money at that point will make all the difference. People always want investments to go up like a line... That's just not reality. You make 80% of your money in 20% of the time in investing and you have to be patient…I see some values in some of these foreign markets. I don't see a lot of value in the U.S. stock market and I think you have to play it safe in the U.S. bond market with funds that are really dedicated to having low volatility."

On fiscal cliff talks:

"Something is going to get done, it looks like, between John Boehner who has now blinked a little bit going with the million dollar tax bracket and the president going with the $400,000 tax bracket. They're getting close, but this is all just a big circus really. We have a $3.6 trillion spending going on at the federal government and they're taking in $2.3 trillion dollars. So the shortfall is $1.3 trillion and what we are talking about with the million dollar increase is about $20 billion of revenue that would be brought in. At the $400,000, you're talking about maybe $35 billion. So this is just masking a huge fiscal issue. The issue isn't the fiscal cliff. The issue is the fiscal crisis that the United States has been looking at for the past several years and this is sort of a down payment on finally some fiscal reform." 


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Tue, 12/18/2012 - 23:11 | Link to Comment Manthong
Manthong's picture

Keep that cash to take advantage of the miracle of compound interest.

Tue, 12/18/2012 - 23:18 | Link to Comment CPL
CPL's picture

Here, hold this bag through 2013.


No fuckin way we want it.

Tue, 12/18/2012 - 23:21 | Link to Comment fonzannoon
fonzannoon's picture

Gundlach translated: I hope that shit sandwich tastes good because we have a whole lot more of it to eat. 

i just can't agree with his conclusions. short term sure. but the market drops and the debt does not disappear...that leaves us with a complete currency crisis. not a buying opportunity.

Tue, 12/18/2012 - 23:23 | Link to Comment CPL
CPL's picture

Ta da!  That's the magic trick.


Pretty funny that people will fall for it too.

Tue, 12/18/2012 - 23:46 | Link to Comment Max in St Moritz
Max in St Moritz's picture



Magic?  Let me tell you what's magical...  the fact that Bernanke was able to break the compound interest function on our debt.  

That's magic. 

Tue, 12/18/2012 - 23:48 | Link to Comment Big Slick
Big Slick's picture

Can the author tell me how to earn middle single digit interest rate on a low-risk investment?

There's a lot here that doesn't jibe.

Tue, 12/18/2012 - 23:56 | Link to Comment Max in St Moritz
Max in St Moritz's picture



High quality corporate bonds. 

Wed, 12/19/2012 - 01:44 | Link to Comment Michaelwiseguy
Michaelwiseguy's picture

What's with it with all these fucking gun grabbing British Red Coats on American TV airwaves like Piers Morgan, trying to take our guns away from us?

I'm glad I don't watch CNBC with that British cunt and cocksucker on it anymore.

The MSM is Now the #1 Enemy of the American People.

By their deeds you shall know them.

Larry Pratt, Executive Director for Gun Owners of America, beat that cocksucking Red Coat Brit Piers Morgan down this evening. I didn't watch it live, just got the links from Daily Paul. Waiting for complete Youtube link.

These Elitist Fascist Feudalistic Marxists want the entire population of the planet disarmed so they can run roughshod all over the populace. We already figured this out. That ain't going to happen pal.

Wed, 12/19/2012 - 01:48 | Link to Comment SafelyGraze
SafelyGraze's picture

by now you have all probably seen the professor guy doing the periodic table of videos in the gold vault of the bank of england

"I've never seen so much gold; in fact, I've never seen so much of *any* element"

yo professor! meet carbon!

you might not have seen his testimony before the congressional libor committee

Wed, 12/19/2012 - 02:30 | Link to Comment Michaelwiseguy
Michaelwiseguy's picture

About that Richard Simmons video, 50 years ago people were fit and didn't need mega doses of exercise, Why don't they address the causes of why people are un-naturally fat today, and it's not because they eat too much.

On another issue;

Tits and Ass Holes

That, ladies and gentlemen, are the two requirements for being a reporter today. You need a bimbo all done up to distract you from the news, or a "tough" woman who asks some emotional questions while squinting at the camera ever so slightly just to catch your gaze so she can look into your soul!

You know what I mean...

Then you have these dicks acting completely disrespectful to their guests and their views. Just like that O'Really douche, they get people on just to yell at them. Um ok, I thought you wanted to have a conversation, you screaming pink monkey!!! STFU!

Anyways, it has become clear what types of people these people are. They're full of shit. (Commenter from Daily Paul)

Wed, 12/19/2012 - 02:56 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

When I first read this headline I thought I was reading a sarcastic Zero Hedge article, but no, they are serious.

Japan's Deflation Battle - Why This Time is Different:

Wed, 12/19/2012 - 03:19 | Link to Comment Michaelwiseguy
Michaelwiseguy's picture
The Zionist-controlled Western media fueling culture of violence: Mike Harris
Wed, 12/19/2012 - 03:45 | Link to Comment Michaelwiseguy
Michaelwiseguy's picture

This Jeff Gundlach is amazing. I'm watching it again.

Wed, 12/19/2012 - 06:33 | Link to Comment Harlequin001
Harlequin001's picture

Why would anyone want to hold cash through 2013 when they are going to print so much more of it?

Why not just get in early and buy pm's?

Makes sense, does it not?

Wed, 12/19/2012 - 08:01 | Link to Comment GetZeeGold
GetZeeGold's picture




How much cash do you want for that gold bitchez?

Wed, 12/19/2012 - 09:17 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Interesting that Grundlach talks about manipulated markets but when it comes to gold all he has to say is "it hasn't done much this year"

Well, Jeff, like the other financial market and key commodity markets, gold (silver) markets are completely manipulated too. 

Either Grundlach is not aware of the pervasive continuous COMEX/LBMA Market Rigging or he just isn't ready "to go there" on Mainstream Media.

My bet is he knows but ain't saying ....

Sun, 12/23/2012 - 17:05 | Link to Comment Lord Koos
Lord Koos's picture

Yeah it's hard for the gold market to respond to QE4 because they smashed the shit out of it pre-emptively.  His comments about inflation worries being premature may have some merit though -- even though there is serious inflation in food products, a lot of other assets are feeling deflationary pressure. Keeping some power dry in the form of cash in the near term, like the next year and a half or so, doesn't seem like a bad idea to me.  Holding gold is a long term deal. 

Wed, 12/19/2012 - 18:59 | Link to Comment hooligan2009
hooligan2009's picture

i like tits and asses and i dont like male cocksuckers :)

Wed, 12/19/2012 - 04:26 | Link to Comment noname
noname's picture

you like Pratt are freaking idiots


Wed, 12/19/2012 - 18:57 | Link to Comment hooligan2009
hooligan2009's picture

i think the red coats are very very glad that Piers Morgan is in the USA...i bet that he was allowed to use the fast track exit door.

Thu, 12/20/2012 - 01:56 | Link to Comment djCandi
djCandi's picture

"These Elitist Fascist Feudalistic Marxists want the entire population of the planet disarmed so they can run roughshod all over the populace. We already figured this out."

Mwiseguy - What ain't gonna happen is you doing something about it with guns. There are 300,000,000 guns in the US now, and they _already_ ran roughshod all over the populace for at least the last 6 years. It's over and your guns didn't help. Use your brain, do some work, organize your community to elect someone who will make a difference.
Standin' there all pissed off with a gun in your hand does fuck-all.

Wed, 12/19/2012 - 00:52 | Link to Comment Big Slick
Big Slick's picture

Max, I should have been more specific... What 2-year high quality investment in the mid single digits?

I find Gundlach's ideas self-cotradictory in a formulaic kind of way.  Like THE SPHYNX in 'Mystery Men' (Stiller is always great)


Wed, 12/19/2012 - 03:36 | Link to Comment bunnyswanson
bunnyswanson's picture

Invest in a legal marijuana growing enterprise.  Or move to a state where it legal and become authorized to grow it and sell it to dispersaries.

Wed, 12/19/2012 - 09:00 | Link to Comment fockewulf190
fockewulf190's picture

Betcha big tobacco gets into big weed eventually.

Wed, 12/19/2012 - 11:35 | Link to Comment shovelhead
shovelhead's picture

Far more money to be made in the illegal weed business.

Tons of California & Colorado weed end up in the North & East where wholesale prices are still very high.

Cheaper than dirt Mex shwag is still doing fine too.

Grannies who used to grow daffodils are now packing elbows for sale.

Wed, 12/19/2012 - 08:05 | Link to Comment samcontrol
samcontrol's picture

@ big.

Ask your banks for Phoenix autcalls with APPLE , get a Brazilian bond, a few high paying dividend stocks, agnc, arr, vale, ve, fte , tot, bp, and VOILA you have a double digit cash flow.

Wed, 12/19/2012 - 08:09 | Link to Comment samcontrol
samcontrol's picture

oh and one more thing Big, buy an apartment for daily rental in Miami.

Wed, 12/19/2012 - 08:20 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

jeff likes japan, because they are worse off then the rest and 20yrs down the road of debasement..he says buy there, me thinks he means I need out and muppets need to buy my book.

little things like nuclear disaster and earth quakes just make japan that much better for investment..brilliant.

Wed, 12/19/2012 - 00:33 | Link to Comment Mr. Magoo
Mr. Magoo's picture

"The real killer is going to be the next recession"

When are these brain dead morons going to realize we have never recovered. If it wasn't for Govt pumping money in to system like Military and construction contracts, unemployment EBT, food stamps and all the other handouts people get including loading up on credit card debt we are already in a world of shit when the Govt stops writing checks and when the dollar completely dies then we are going to see real problems

Wed, 12/19/2012 - 09:48 | Link to Comment Shizzmoney
Shizzmoney's picture

I think when he says, "the next recession", he means the next recession for people like HIM, those who make a shit ton of money and hold assets and stocks.

For the REAL economy, we've been in a recession for about 5 years now.....maybe more. 

And THAT recession will eventually bring the dollar down.

Wed, 12/19/2012 - 00:35 | Link to Comment kito
kito's picture

When the tsunami of all tsunamis hit, everything will be reset, including the price of pms......sorry but that is how it's gonna roll.....hold physical dollars....too much is not enough......there are way too many digital dollars in every nook and cranny of every market, including's all going to get crushed....the physical dollar is as rare as anything else out there........

Wed, 12/19/2012 - 10:53 | Link to Comment odatruf
odatruf's picture

Physical dollars because paper and ink are so dear?

You think that converting so many zeros and ones into coupons is going to be any kind of barrier to the people running the show?

Tue, 12/18/2012 - 23:39 | Link to Comment vast-dom
vast-dom's picture

laughable. the fed monetizes at 80bill per MONTH and they are haggling over 200bil in YEARLY revenue by fleecing people making 400k or more? 

ponzi planet solution: have fed print up tax revenues while they're at it.


don't listen to this guy. i say to you all: SHORT THE PLANET!

Tue, 12/18/2012 - 23:40 | Link to Comment game theory
game theory's picture

haha...0.0002% will eventually pay off...the "long run" seems especially long lately.

Tue, 12/18/2012 - 23:55 | Link to Comment CPL
CPL's picture

Next step, 100 yr bonds.

Wed, 12/19/2012 - 08:07 | Link to Comment samcontrol
samcontrol's picture

infinite bonds already exist , watchyou talkin about

Wed, 12/19/2012 - 12:28 | Link to Comment CPL
CPL's picture

Until someone admits it in the media or a press release it's only rumours.

Tue, 12/18/2012 - 23:17 | Link to Comment BLOTTO
BLOTTO's picture

I wonder what the Queen she tours the BOE vault with Phil and inspects the Gold.


She does NOT just start her mini-austin and go out in public for just anything fuckin ole thing...





Tue, 12/18/2012 - 23:24 | Link to Comment JustObserving
JustObserving's picture

Turk: “Yes, absolutely.  And isn’t it curious that somehow they got the Queen of England to go through the bank vault to proclaim how much gold is actually being stored there in the Bank of England?  The unfortunate thing is we don’t know how much of that has been double, triple, or even quadruple times hypothecated and re-hypothecated?....


“So the propaganda machine is well-oiled.  It has been for quite some time.  But let’s put it this way, Eric.  It’s the anti-gold propaganda machine that is well-oiled, and they are going to continue coming out with the anti-gold propaganda.


They are going to continue imposing their will on governments to stop the imports of physical gold.  But people are waking up around the world.  Not only individuals, but there are a lot of central banks now that are clamoring about bringing their gold back to their country.  


After all, gold is a pillar of sovereignty of any country.  If you don’t have control of your gold, you don’t have control of your sovereignty.  This is the point you and I have made before with regards to Germany’s gold, but it’s true for all countries around the world.”

Tue, 12/18/2012 - 23:24 | Link to Comment CPL
CPL's picture

Rumour is she's been doing a lot of little tours around the government since that.  Spot checks.  She's still the Queen.

Tue, 12/18/2012 - 23:17 | Link to Comment illyia
illyia's picture

I love it when when someone - anyone! - tells the truth...

Tue, 12/18/2012 - 23:21 | Link to Comment mayhem_korner
mayhem_korner's picture



A down payment on fiscal reform?  What fiscal reform is he imagining that will actually rectify the situation?  And, by the way, if we want to talk about fiscal reform, can we start with the actual annual values that include the growth in future liabilities (i.e., GAAP-based accounting)?  The U.S. does not run a $1.3T deficit per year - it's about three times that.

This is all NOISE.  It is political posturing.  Boehner is rationalizing that his "amended" Plan B is the best solution because it keeps tax rates in place for the greatest number of Americans?  That has nothing to do with solving any structural fiscal's about appeasing the voting blocs and nothing more.

This ship can't sink! 

I assure you, she can, and will.  She's made of iron.

Wed, 12/19/2012 - 03:00 | Link to Comment Kickaha
Kickaha's picture

GAAP has been permanently replaced by "Fraudulent Accounting Principles", better known as FAP.

Everyone is just FAPing away out there in financial land. 

Tue, 12/18/2012 - 23:22 | Link to Comment surf0766
surf0766's picture

"this is sort of a down payment on finally some fiscal reform." No it isn't. They do not have the courage to do the right thing.

Tue, 12/18/2012 - 23:23 | Link to Comment unirealist
unirealist's picture

Doesn't matter.  They'll still manage to crush gold/silver until Dec 31.  Just like last year.  Can't have gold being the best-performing investment vehicle of the year.  By 12/31 you'll see that gold is up only 1-2% for 2012.


Tue, 12/18/2012 - 23:35 | Link to Comment prains
prains's picture

On whether this is a BOHICA moment in your life:



Tue, 12/18/2012 - 23:35 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Japan foreshadowing US? lol. So far we are following in their footsteps into a perfect biflationary storm

Tue, 12/18/2012 - 23:37 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Comatose Americans will follow Japan down the rabbit hole. Juat can't resist that siren song. faith is a wonderful thing. But iron-clad misplaced faith can lead to hell

Tue, 12/18/2012 - 23:39 | Link to Comment game theory
game theory's picture

This seems to me to be a huge mistake to listen to this advice. The gov't is printing cash and spewing it't contractors, food stamps, gov't workers, student loans...just a tsunami of money. You have to be a hermit like me to not be getting some of that free money.  

Cash gets less valuable every moment. Waiting until the end of 2013/14 will destroy the value of savings even more. Real estate in DC is in the early stages of a bubble as the early recipients of this counterfeiting (gov't workers and lobbyists) are bidding up land assets there.  What assets will reprice lower in two years? Even metals are not safe.  The only thing guaranteed to deflate is my morale (since apparently any GS crony can rewrite the rules whenever they want). Thank heavens for Irish whiskey.  

The fed is committed to inflation and the gov't is committed to never closing their deficit. Invest in whatever it is that suits you...but don't hold cash and don't wait.

Tue, 12/18/2012 - 23:40 | Link to Comment Dre4dwolf
Dre4dwolf's picture

Im looking for the most volatile stock, and im going all in, IDk what this guy is talking about.


The Federal Reserve is going ALL IN with my money for me anyway, if im forced to hold devaluing paper, I might as well gamble the hell out of it.

Wed, 12/19/2012 - 00:16 | Link to Comment Pharming
Pharming's picture

Why do I have this thought in my head (after reading your post) of a WWII pilot diving his P-51 that's shot up on fire screaming, "Fuck you Bernank!!!!" as the plane tears a huge whole in the Japanese carrier?

Wed, 12/19/2012 - 00:21 | Link to Comment Dr. Engali
Dr. Engali's picture

Three observations. 1) it was funny to see how fast they cut him off when he mention the tea party and out of control spending.
2) Of course a bond guy is not going to see a credit bubble... He has bonds to sell you. The way I see it everybody is buying bonds right now... nobody (enmass) is buying gold. I think I know where the bubble is. Which leads me to... 3) a paper pushers comments on inflationary pressures and gold. As a debt junky gold is even more destructive to him than it is to an equity junky, so I take those comments with a grain of salt. They can pressure the paper price of gold all they want, but eventually reality will overtake fantasy and the paper markets will have one price while the physical will be another story entirely.

Wed, 12/19/2012 - 01:28 | Link to Comment jimmyjames
jimmyjames's picture


You're right--gold has never- at least up until to this point been about the $/printing-same for the bond market-there was no printing or QE until the 08 crash and yet gold/bonds weare on a tear and other than noise-they still are-


Tue, 12/18/2012 - 23:51 | Link to Comment xtop23
xtop23's picture

I'll pass on holding FRN's, thanks. Seeing as how TPTB has seen fit to provide me with an attractive entry point today, I put those worthless faces to work.

Tue, 12/18/2012 - 23:53 | Link to Comment Hohum
Hohum's picture

If the Fed can keep the interest rate declining throughout 2013 (for example, the Freddie Mac primary mortgage market survey is now 3.32% and was near 4% at the beginning of the year), the year will be ok.  If rates stop declining, the financial climate will change rapidly.

Wed, 12/19/2012 - 00:21 | Link to Comment Kreditanstalt
Kreditanstalt's picture

For the better!  The manipulations will have to end...

Wed, 12/19/2012 - 00:09 | Link to Comment Pharming
Pharming's picture

How many licks does it take to get to the depression center of a recession Tootsie Roll Pop.  The world may never know...

Wed, 12/19/2012 - 00:25 | Link to Comment Big Slick
Big Slick's picture

The answer's THREE.  A cartoon owl told me so.

Wed, 12/19/2012 - 00:13 | Link to Comment infinity8
infinity8's picture

best line: "bolstered by guardrails of debt".

Wed, 12/19/2012 - 00:20 | Link to Comment Kreditanstalt
Kreditanstalt's picture

When you raise taxes and when you cut spending, whatever the combination is going to be, you will have headwinds for the economy.

Ridiculous.  Every dollar saved from the clutches of government via tax cuts, and every dollar NOT spent by the same bodies, is one more dollar released to the real economy. 

Where it might be spent prudently and do some good.

Wed, 12/19/2012 - 00:27 | Link to Comment Big Slick
Big Slick's picture

I'm telling you, this Gundlach guy reminds me of The Sphynx


Wed, 12/19/2012 - 00:34 | Link to Comment dark pools of soros
dark pools of soros's picture

right but money is like water... it can get stuck in the clouds and leave people to panic on the ground

there will be pain



Wed, 12/19/2012 - 00:26 | Link to Comment ZeroAvatar
ZeroAvatar's picture

I wish to thank the silverdoctor link to the ThunderRoad December report.  Gundlach is stating the same thing, in far fewer words.  The gist of the report, is that this is a "Speculative bubble like no other" (This link is to the also-referenced Kurt Richebach report of the same name.)


This is a bubble of 'Money', itself.  A quote of Rober Rubin puts it all in perspective: (Rubin, Former Clinton Sec. of Treasury, Ex-Goldman Sachs/Citi,

Bilderberger, Co-Chair COUNCIL ON FOREIGN RELATIONS!) (paraphrasing) " I have a disproportionate amount of my assets in 'cash', and should allocate more away from $$$.  It is 'absolutely prudent' to PREPARE FOR THE WORST(!)


My interpretation is to allocate more towards P.M.s.  Gundlach sees the coming hyperinflationary-depression shitstorm , and is making at least a prudent recommendation (GET OUT OF THE MARKET!)


But to be 'holding cash' through 2013 into 2014 may end up being disastrous.

(Note: Myself, along with another poster today, believe Silver will drop to low $20's.)It MAY, at THIS time, be prudent to wait for 'the collapse', in order to profit from the drop.  In that aspect, I agree with Gundlach.  Basically, if you're IN SILVER now, just hold.  IF YOU"RE LOOKING TO BUY,

'ease' in, dollar average (down?)  (I actually DO have a crystal ball, but have not as of yet been able to 'activate' it.)

Wed, 12/19/2012 - 10:33 | Link to Comment Non Passaran
Non Passaran's picture

I'm with you on PM's: I'll hold onto what I have (as collapse can happen any time) and the cash I've saved I'll use to buy more if prices drop 10+ pct.

Wed, 12/19/2012 - 00:23 | Link to Comment GittyUP
GittyUP's picture

Printing isn't working so well... No risk on signals since qe4. Deflationary recession coming to a theatre near you.

All risk assets including gold will plunge. Bonds rally. USD rally.

The trigger will be minor slowdown caused by tax hikes and spending cuts.

It won't crash but a Japanese multi year contraction. Corporate balance sheets are strong so they can hang on for a long time but equities will slowly price in contraction. Also there will be many bright spots still as energy prices come down helping consumers and corporations. But still not enough to overcome the government macro deleveraging.

Definitely tough time to invest. I'd stick with ultra cheap income real estate 10% caps+ so even if rents lower still making 7% unlevered. Much much more levered. Also private mortgage market is prob pretty good if you do your own underwriting. China is going to be the buy of the century on next big leg down on global macro concerns as they will emerge more consumer driven.

Wed, 12/19/2012 - 00:25 | Link to Comment otto skorzeny
otto skorzeny's picture

+1. outside of food(which I am not noticing that big of a jump in) everything seems to point to the Fed's arch-enemy DEFLATION

Wed, 12/19/2012 - 11:23 | Link to Comment DosZap
DosZap's picture

+1. outside of food(which I am not noticing that big of a jump in)  

Where u live?, ANY meats, grains, and products that use them are OFF the charts.

And I live in Texas. Oatmeal has gone up 27% in the last 6 months, Meat(any kind), has doubled,and contiures higher.

Utilities are up, water is up, all basic needs and services are going up, and I do not mean 5-10%.

Gasoline is the only thing dropping, in my AO.

Wed, 12/19/2012 - 03:30 | Link to Comment Assetman
Assetman's picture

You are correct in that money printing isn't have the desired effect on economic growth.  

At the same time, I'm convinced Ben Bernanke invents new 'desired outcomes' for the next round of QE-- just to see if he can fool the rest of us.

Do you know what QE1 was intended to do?  Bernenke flatly stated it was initiated to get banks lending again.  Yeah, that's a real laugher.

The one real economic effect from QE is that it has allowed the housing sector to 'recover'.  One wonders, though, whether directing tons of money in a sector that was overlevered, overbuilt and overpriced only a few years ago is the best place to pour massive amounts of capital today?

Yeah, probably not.  But at least housing prices have stabilized and structually dislocated mortgage processors and builders can get their temporary jobs back.

I think the Fed is committed (as in, they ought to be committed) to insure that inflation should be a positive number-- and they really don't care if they overshoot by 600 basis points.  The rationale (employment) is just a ruse-- because when inflation expectations are already at the high end of a 5 year range-- and the Fed introduces ANOTHER round of unsteilized asset purchses, well... you really can't use price stability as a rational mandate anymore.

That doesn't mean that inflation expectations cannot head directly back to zero.  It has over the past 5 years-- and the Fed has responded aggressively with even more easing.  But since this fall, the Fed is playing a totally different game.  It's one of ensuring positive nominal GDP growth at all costs-- even if real GDP growth is negative.  In another sense, if the Fed needs to finance even higher governement deficits to offset private sector deleveraging (the big deflationary headwind) - they will expand the balance sheet with as much QE as is entirely necessary to meet their "growth" goals.

QE-infinity is no laughing matter to this FOMC.  If $85 billion in monthly asset purchases doesn't convince you that the Fed is going all-in (after 3 years of money printing already), they can easily go higher.

And they will.  You might get +2% nominal GDP growth and -3% real GDP-- but this is a desired outcome.  I think the bigger risk is if real growth is +3%, because that might well translate into inflationary pressures that cannot be contained.  I don't see that happening until 2015 at the earliest.  There is too much private sector debt to unwind.

All I am really doing here is following the Fed.  Rest assured, it's going to take a very long time for unemployment to get to that 6.5% threshold.  With an employment to population ratio so low, the Feds can invent any higher unemployment rate number they want.  Employment is really the only remaining mandate they have left.  Luckily, it can be fudged.


Wed, 12/19/2012 - 10:54 | Link to Comment SamuelMaverick
SamuelMaverick's picture

Downside of real estate is that you become a fixed target at the whims of local government as a source of income as they deem 'necessary'.  A couple of property tax increases and you are SOL.

Wed, 12/19/2012 - 00:23 | Link to Comment otto skorzeny
otto skorzeny's picture

I'm noticing all of the cash I'm getting from my bank/ATM (and I mean ALL of it) is seemingly crisp and uncirculated(like the kind that you have to count 2x to make sure they are not stuck together) and this has happened within the last 2 months. is this cash that has sat uncirculated in vaults for years and maybe recently there is a much larger demand for physical money-almost like a mini bank run?

Wed, 12/19/2012 - 00:41 | Link to Comment David99
David99's picture

ZH is only doing good job and reporting correctly. Tyler is a real true person though I have never met him. FED+BOE+ECB+BOJ are the biggest manipulators and JPM +GS +20PD's act on their behalf in this Ponzi Casino. It is all rigged Ponzi Casino. JPM & GS do maximum manipulations from London as no regulators are looking what is going on daily. London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Wed, 12/19/2012 - 00:50 | Link to Comment David99
David99's picture

Don't buy any thing at these high levels as crash is coming. FED, ECB, BOE, BOJ are just pumping but for how long?

Wed, 12/19/2012 - 00:57 | Link to Comment HANKREARDON

smart.  why is he not on the gov payroll?

Wed, 12/19/2012 - 01:00 | Link to Comment Sovereignbeing
Sovereignbeing's picture

Regardless of the giddiness on financial TV about economic recovery and a rising stock market along with the diversion of the Fiscal Cliff, the debt continues to grow. Nobody can now stop it. It is constant talk, drivel, chatter and illusion all day long. At the end of the day NOTHING changes the trajectory that we are on. The solution for us is simple: just keep on stacking and make sure you have a full pantry.

Wed, 12/19/2012 - 01:10 | Link to Comment brokesville
brokesville's picture

1. stay out of debt and you may survive

Wed, 12/19/2012 - 01:11 | Link to Comment HANKREARDON

I can't rememeber, are we supposed to buy this guys funds or not?

Wed, 12/19/2012 - 01:35 | Link to Comment I am a Man I am...
I am a Man I am Forty's picture

yeah, just hang in cash with bernanke at the printing press, great idea

Wed, 12/19/2012 - 01:39 | Link to Comment walküre
walküre's picture

Meanwhile in LaLaLand .. S&P RAISES ratings on Greek sovereigns SIX NOTCHES to B-

Say what? You can't make this shit up.

We are now officially in the Twilight Zone. Any guesses how much longer it takes before EVERYONE wakes up and realizes the whole thing is so fucked up, it's going to collapse into one gigantic financial black hole?

Cash, PMs, livestock, canned goods, tools, fuel, friendly neighbors and a close knit network of trusted friends and family who see it my way.

Wed, 12/19/2012 - 01:50 | Link to Comment David99
David99's picture

Don't buy any stock at these high levels as crash is coming. FED, BOE, ECB, BOJ are pumping but for how long?

Wed, 12/19/2012 - 02:34 | Link to Comment realtick
realtick's picture

CFPGH Public Signals - Short Gold Since Mid September

Wed, 12/19/2012 - 04:28 | Link to Comment Mr. Hudson
Mr. Hudson's picture

Interesting chart. If gold drops below 1662, where is its next resistance?

Wed, 12/19/2012 - 02:53 | Link to Comment Number 156
Number 156's picture

Whats the point? Even if you want to try to pick up the pennies in front of the steamroller, the algos will have already beaten you to it.

Wed, 12/19/2012 - 03:36 | Link to Comment gwar5
gwar5's picture

Inflation in US is still about 6%, which means GDP is also bullshit and is negative in real terms; and real unemployment is about 15%. All per Shadowstats.


We are not Jimmy Carter bad yet, but only because of invisible duct tape. Cash and USTs are just a false sense of security, IMHO.

The Asian Pac dump-the-USD movement is leaving the station fast. Obama's alternative plan a month ago to stop it was kicked to the curb and he was totally humiliated on his trip to Asia, all of which was blacked out "unexpectedly" by the MSM.  I don't remember ZH saying anything either, may have missed it.

Others adopting the A-P plan: Aus, NZ, S. Africa, Singapore, Malaysia, Thailand, Indonesia, and I think S. Korea or Japan. Among the others already know with the Chi-Coms -- India, Russia, Brazil, and Iran, et. al.

The world is choosing sides against Western banks. I don't trust USDs. Looks like the war has begun to sort it out.





Wed, 12/19/2012 - 05:02 | Link to Comment Who is John Galt
Who is John Galt's picture

Gwar. Good post. I was not aware of the correlation.

Wed, 12/19/2012 - 04:32 | Link to Comment Mr. Hudson
Mr. Hudson's picture

It's fiat vs. gold. The Central Banks have the world's armies in their hip pocket. What will you do? Throw your gold bars at the military when they ban our guns? Cash will be scarce, and cash is legal tender. Gold may pay off in the long haul, but will take a serious hit when things get worse.

Wed, 12/19/2012 - 04:38 | Link to Comment Rick Blaine
Rick Blaine's picture

Is this dude a robot?

Wed, 12/19/2012 - 04:49 | Link to Comment ak_khanna
ak_khanna's picture

Countries around the world are taking on more debt without any fruitful attempts to curb their expenditures. This has resulted in a much more fragile and artificially held up financial system which is on a much shaky ground than it was in 2008. In 2008 companies failed due to excessive leverage and debt and now countries are likely to default because they took on the same bad debt on themselves. 

There is no economic recovery because all the efforts of politicians, government, central banks etc are focused on saving banks instead of targeting job creation which is the only way economy can recover.

Wed, 12/19/2012 - 06:10 | Link to Comment David99
David99's picture

FED is the biggest criminal on this planet.

ZH is only doing good job and reporting correctly. Tyler is a real true person though I have never met him. FED+BOE+ECB+BOJ are the biggest manipulators and JPM +GS +20PD's act on their behalf in this Ponzi Casino. It is all rigged Ponzi Casino. JPM & GS do maximum manipulations from London as no regulators are looking what is going on daily. London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Wed, 12/19/2012 - 07:59 | Link to Comment negative rates
negative rates's picture

We needed to default in 08 in order to have a balance approach today, we didn't then, and so now there is no balanced option. Just because you get voted into office, dosen't mean you are qualified or capable of doing the job, these people are niether, and it shows.

Wed, 12/19/2012 - 08:34 | Link to Comment Ian56
Ian56's picture


In a breathtaking display of cynicism, Barack Obama more or less proposes Mitt Romney's platform to resolve the Fiscal Cliff.


He has demonstrated with absolute clarity that he is on the side of large Corporations and not on the side of ordinary Americans.



WASHINGTON -- President Barack Obama, with his latest fiscal cliff offer, proposes extending the Bush tax cuts for everyone earning less than $400,000 a year, and paying for it by increasing taxes on the middle class and cutting Social Security and Medicare.

Obama's offer would allow the payroll tax holiday to expire, meaning middle class workers will see smaller paychecks in 2013. Economists have warned that the recovery is too fragile to risk a broad tax hike on workers. It would also gradually reduce Social Security, pension and disability benefits seniors are due to receive, taking a small bite up front, but building up to much larger cuts over time.


Obama's latest proposals to resolve the so called "fiscal cliff" sound more like Mitt Romney's platform every day.

N.B. The tax rates for those making more than $400,000 is a red herring. It affects a trivial amount of revenue.




HSBC settlement - a slap on the wrist shareholder penalty of 5 weeks of revenues.


William K Black quite rightly asks on Huffington Post "Why did Obama save a criminal enterprise like HSBC?"

Why didn't Obama take away HSBC's US banking license?

Why didn't he put some HSBC execs in jail?


Monsanto - why are about a dozen ex senior Monsanto employees are now in positions of influence in government?


Why is Monsanto getting carte blanche in the latest Agriculture Bill?

“The Farmers Assurance Provision” is the title of a rider, Section 733, inserted into the House of Representatives 2013 Agriculture Appropriations Bill. Somehow, as a farmer, I don’t feel the least bit assured. It allows carte blanche for Monsanto not to have to obtain FDA approval before planting."


Why aren't Joe Corzine and Jamie Dimon in jail over the MF Global theft from client segregated accounts and other frauds?


Why weren't Goldman Sachs executives prosecuted over the slam dunk case of lying to Congress?

Matt Taibi on the subject - plenty of evidence to prosecute Lloyd Blankfein CEO of Goldman


Money laundering by the big banks is endemic, there have been several cases.

Obama has quite clearly told the big banks that they are above the law. When you encourage bad behavior you will get more of it.


Continued at :-

Wed, 12/19/2012 - 08:50 | Link to Comment Quinvarius
Quinvarius's picture

There is only one thing that moves markets; easy money and easy credit.

Easy money is the 800 lb economic gorilla.  Pointing at the broken 2 wheeled tricycle, that our economy has become, which the gorilla is riding around on, is not going stop the gorilla.

Wed, 12/19/2012 - 11:38 | Link to Comment Nobody
Nobody's picture

To those who wish to know where to invest their hard earned funds, try agricultural land.
Depending on where you buy, the rate of return is somewhere between 2 and 7% before taxes.
Nearby, a teachers' pension fund just purchased 22,000 acres of prime Mississippi delta land for $5300/acre. Rental income $200/acre.
Downside, worldwide economic collapse or the Fed raising the rate (ala 1980).

Wed, 12/19/2012 - 11:58 | Link to Comment hooligan2009
hooligan2009's picture


C + G + I + (X-M)

is now

C + G + ...F... + I + (X-M)

where F is the amount of injection by the Fed, which is now net of foreign central bank intervention, like the Japanese Governments soon to be announced purchases of (to them) foreign bonds.

BoJ (on Mof) instructions will likely purchase a further US$20 billion a month (Y1,85 trillion) of Treasuries on top of the Fed's recently announced $40 billion a month.

This will facilitate the financing of US taxpayer profligacy.

Japan will crash first (bug will hit the windshield) and start repatriating proceeds from its US Tresuries, then the US will crash.

The same will happen with Japanese government holdings of European and Australasian government bonds.

Wed, 12/19/2012 - 12:03 | Link to Comment shovelhead
shovelhead's picture

Taxpayers saving banks are doing "God's Work".

If you die for God, you go to heaven.

See? It all works out for the best.

So shut up, pay up, and let the theologians work out the details.




Sun, 12/23/2012 - 04:05 | Link to Comment Khannea
Khannea's picture

I see I see in my crystal ball a US totally transformed a few years down the road.  

I see a US hunting down tax revenues and progressive tax rates. I see millions of relatively rich trying to permigrate (permanent emigrate) , turning in their US passports in a record  race to the finish. I see a war on tax refugees as the US will try to plug a tens of trillion dollars a year defecit hole. I see the US disallowing Americans to turn in their passports.

I see US banking authorities grabbing foreign banks and nationalizing, willy nilly assets of 'tax traitors', tying up assets in many year court cases.

I see tax bills tied to electricity and internet - either pay your taxes due or they cut off your energy and internet.  

I see states seceding trying to crawl away from this collapse. 

Is Obama the 2.0 Gorbatsjov ?

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