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The Cycling Of Money

Tyler Durden's picture





 

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

“Money may not buy you happiness but it certainly will let you be unhappy in nice places.”
 
                         -The Wizard
 
In one sense the trajectory of money is similar to what recently occurred with Lance Armstrong which is that he admitted to doping. The financial markets have been living on the drugs provided by the world’s central banks and that has been more and more and ever more money pumped into the system. We have become addicted to the stuff and never mind that more pieces of green and blue paper decrease the value of the currency because, with the possible exception of gold, there is nowhere else to go and so the global slosh of capital keeps driving the markets higher; all of the markets.
 
“It takes money to look this cheap.”
 
                     -Dolly Parton
 
Many point to the rise in the markets as a sign that conditions are improving but this is not the case. If things were getting better then the fundamentals would be telling a very different story but they are not and when one answer doesn’t make sense then another answer must be found. All of our current run-up has an explanation; just not the one that is commonly presented. The explanation is simple enough; the wide open spigot of printing and creating money which must go somewhere because it gets invested and does not lie placidly on the floors of the bank vaults. If you consider the financial progress of the United States you see a limping dog and not a Greyhound that is springing to new all-time highs. The continuing bond compression and the new highs in equities are not based upon any improving financial conditions, not at all, but they solely rest upon the green ink that has been loosened upon the world and must be used somewhere and so it has.
 
“Dance like it hurts, love like you need money, work when people are watching you.”
 
                       -Dilbert
 
In Europe it is even more obvious. The economies in Spain, Italy, Cyprus, Portugal and Ireland are worsening, unemployment is rising and the financial conditions of these countries are deteriorating and yet sovereign yields are falling, most are able to fund in the markets and the Europeans are waving the flag of improved conditions. This, however, is not the case. They would like you to believe this is the reason of course and the spin everything possible in that direction but it is not the truth. In Europe there are just two factors that buoy all of the recent run-up and that is the Draghi promise, yet untested, and the cycling of money which is on the constant search for yield and appreciation and so, as time distances us from our last financial crisis, as safe credits have been pushed to no-yields and as riskier credits have compressed to almost no yields and as equities have forged their way into higher ground the hunt continues for yield and appreciation and it has reached European sovereigns and banks as one of the last places left to go. There is a term for this and it is the “cycling of money.” It fills up one pot, goes on to the next, fills it up and then arrives at the next container. There is no good reason why equities are back at their all-time highs until you realize just how much capital has been pumped into the system. Now the stock markets are where they are and there is no denial and fortunes have been made and lost as usual but if you lose sight of the reason for all of this then you may not do so well when the central bank spigots are gradually turned off. That will be the moment to run for the hills because the flood waters of the Fed and the other central banks have been all that has been floating the Ark.
 
“The governments in Europe sit in the rain and inform everyone that it is sunny. They make up numbers and provide debt to GDP ratios that can only be found in a Hans Christen Andersen fairy tale. The tires are punctured, the transmission is shot, the motor was stolen by the Greeks and yet they assure us that the car will be running momentarily. Politically they are the largest bunch of pimps on Earth and make no apologies for it. Then there is the negative side.
 
                       -Princess, The Sage
 
Now one can make the argument, and it is an interesting argument academically, that why can’t the central banks, who currently have a total of $14 trillion in assets/liabilities, have $41 trillion or $140 trillion on their balance sheets. In other words, why can’t this game keep going on forever? Relative values would stay the same afterall and it would only be intrinsic values and absolute values that would be suspect. The answer is a matter of faith. The Great Game is run on faith and, when lost, the capital filled balloon of the marketplaces will get pricked with such a great whooshing sound that no other noise will be heard or appreciated. So far, as indicated by the markets, so good; and I and my clients have reaped the rewards but soon, quite soon in my estimation, the air at these lofty heights will become harder to breathe, the trudge will be more difficult and the reasons we are here will become more difficult to find and rationalize. It may be the March 1 imposition of automatic spending cuts in the United States or it could be Greece and the rest lining up for more money which gets refused by some nation or it could be a bank failure somewhere but someone or something will show up with pin in hand. You can count on it and then be prepared to run as fast and as far as your legs will carry you because it will not be quick or far enough. What the markets give they can take away and when lofty heights have been attained almost solely upon the printing of paper then the downward slope will be the furious rush of some waterslide in Disneyland.
 
Since our last financial crisis I have spent a lot of money on Grand Marnier, large houses, women, yachts and fast cars. The rest I just squandered.

 


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Mon, 01/28/2013 - 09:24 | Link to Comment Cookie
Cookie's picture

When will this guy contribute something new apart from crap quotes

Mon, 01/28/2013 - 09:28 | Link to Comment TotalCarp
TotalCarp's picture

I know, its getting ridiculous. Thank you, Capt. Obvious. he really has been re-writting the same article for way too long..

Mon, 01/28/2013 - 09:36 | Link to Comment kridkrid
kridkrid's picture

In his defense, there really is only one article to write. His crime is making the point seem insightful. Credit/debt money, loaned into existence, with interest attached... Aggregate debt increases until the cost of maintaining debt overwhelms the underlying economy... Collapse. There. 23 words.

Mon, 01/28/2013 - 09:47 | Link to Comment TotalCarp
TotalCarp's picture

True that kkridd.. But a guy like Martin Armstrong at least manages to weave the story from a diff angle every time. Even as i do admit that he is quiet mad. 

Also what grant is missing in his stories is the explanation of money flows and understanding these is the absolute key to understanding how the world will progress from here on. He is a bit like a 17th century sea captain who has a compass but no maps or knowledge of currents and depth charts.

Mon, 01/28/2013 - 09:54 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

Can we get some mafuckin reggie middleton up in this bitch?

All this bear shit is muddin up my monday ramp.

http://www.youtube.com/watch?v=GTG7TPlvpMI&list=PL1766AE15B0D5E361

Mon, 01/28/2013 - 09:58 | Link to Comment Muppet of the U...
Muppet of the Universe's picture

http://www.youtube.com/watch?v=3Q9rewnLFYw&list=PL1766AE15B0D5E361

I SEE EVERYTHING, and I see nothing.  FEEL ME?!?

Mon, 01/28/2013 - 09:32 | Link to Comment news printer
news printer's picture

It's called free speech

U may like it or not

It's normal; sometimes news is hot

and sometimes not

 

Fogt Ersal Jorperson

Mon, 01/28/2013 - 09:33 | Link to Comment alfred b.
alfred b.'s picture

 

    ...some people DO need to be reminded over and over again; and besides it's also a tactic from MSM:  if one repeats often enough, it becomes truth!

 

Mon, 01/28/2013 - 09:36 | Link to Comment francis_sawyer
francis_sawyer's picture

Just like money... If you keep counterfeiting it for yourself & then using it to buy $33 million mansions in the Hamptons (& throw lavish parties for your cronies), pretty soon people think it's worth something...

Mon, 01/28/2013 - 11:31 | Link to Comment Haole
Haole's picture

He even essentially stole his last sentence from George Best who said "I spent a lot of money on booze, birds and fast cars. The rest I just squandered." 

Mon, 01/28/2013 - 09:25 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Money has been stripped of it's value due to doping charges.

Mon, 01/28/2013 - 09:33 | Link to Comment Sudden Debt
Sudden Debt's picture

So do what Armstrong did! DENY AND BLACKMAIL THE WITNESSES!

and cry on Ophra that you did it for your son...

Mon, 01/28/2013 - 09:35 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

What's the subject again?

Mon, 01/28/2013 - 09:46 | Link to Comment Sudden Debt
Sudden Debt's picture

not a cycling fan he? Where have you been on this planet these last few months? :)

Mon, 01/28/2013 - 09:55 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I've been watching American idle.....sponsored by the New Generation ASIC Bitcoin Miner.

Mon, 01/28/2013 - 09:31 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

He's almost like a martyr.....almost.

Mon, 01/28/2013 - 09:29 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Obvious man, is that you?  I can't figure out the whole bonds thing either, aside from a simply broken market mispricing the true cost for capital.  The Fed is the only buyer of western bonds, yet yeilds keep going down.  Broken market, perps walking, and nothing has chnaged.  Oh well, I guess that even the most poorly designed planes will glide for a while once the engines run out of fuel, but then airplne engines are complicated, just ask Jamie Dimon.

Mon, 01/28/2013 - 09:32 | Link to Comment Sudden Debt
Sudden Debt's picture

DON'T WORRY KIDS!

DRUGS ARE GOOD FOR YA! DO DRUGS!

Mon, 01/28/2013 - 11:00 | Link to Comment Spastica Rex
Spastica Rex's picture

Avoid non-recreational drugs, however - those'll kill ya.

Mon, 01/28/2013 - 11:57 | Link to Comment Sudden Debt
Sudden Debt's picture

don't worry, they can't afford those

Mon, 01/28/2013 - 09:32 | Link to Comment francis_sawyer
francis_sawyer's picture

I'm sure all the time spent that wasn't spent in the Sodomy Dungeon this past week in Davos was spent conniving on which institution to paint the next bullseye on... Tune in next week to see who gets voted off the island...

Mon, 01/28/2013 - 09:36 | Link to Comment falak pema
falak pema's picture

the zeitgeist of the Oligarchy age : fleece the sheep and then pay thru your bloated Caymanista nose to look and dress cheap! 

Blankfein would support that he even supports gay marriages; anything to appear in the avant garde of the socially correct swingers. 

How to wash away the stench ? Last whispered words of Lady M  seen floating ghostily  in lonely corridors: out out damned spot! 

Ultimate stop Bosworth field and then : a horse, a horse...my squigly out-of-water neo-con crony-cloned-and-honed mega-margin-groomed and tool-bonered Squid for a horse. I'll even take a unicorn if I can't get the real stuff! 

Mon, 01/28/2013 - 09:43 | Link to Comment Mercury
Mercury's picture

In one sense the trajectory of money is similar to what recently occurred with Lance Armstrong which is that he admitted to doping. The financial markets have been living on the drugs provided by the world’s central banks and that has been more and more and ever more money pumped into the system.

Come on Oprah, get Ben on the couch and give him the treatment.

Mon, 01/28/2013 - 09:50 | Link to Comment wisefool
wisefool's picture

Bernake is going to need to drop water out of those helecopters if TD's water slide is expected to work in the current north american drought.

"Oh what a tangled web we weave when first we practice to deceive"

http://en.wikipedia.org/wiki/Walter_Scott

Mon, 01/28/2013 - 11:18 | Link to Comment wisefool
wisefool's picture

To my junker, I was not bashing the Tyler(s). The waterslide is the sardonic image on the post on the list page. With that clarified, I wear drive by junks without rebuttal as an honor.

Mon, 01/28/2013 - 10:03 | Link to Comment dollarcoaster
dollarcoaster's picture

The only way I see this environment in the future, is: Comparative advantage will be taken to extremes, or already is; money will be sucked in by large institutions at a rate faster and faster, leaving the middle ground of economies bare. Like someone said, when we destroy middle class, we destroy democracy. aapl 120B in cash?

Mon, 01/28/2013 - 10:04 | Link to Comment dollarcoaster
dollarcoaster's picture

The only way I see this environment in the future, is: Comparative advantage will be taken to extremes, or already is; money will be sucked in by large institutions at a rate faster and faster, leaving the middle ground of economies bare. Like someone said, when we destroy middle class, we destroy democracy. aapl 120B in cash?

Mon, 01/28/2013 - 10:05 | Link to Comment dollarcoaster
dollarcoaster's picture

The only way I see this environment in the future, is: Comparative advantage will be taken to extremes, or already is; money will be sucked in by large institutions at a rate faster and faster, leaving the middle ground of economies bare. Like someone said, when we destroy middle class, we destroy democracy. aapl 120B in cash?

Mon, 01/28/2013 - 11:35 | Link to Comment CaptainSpaulding
CaptainSpaulding's picture

"Money get back. Im alright Jack, Keep your hands off my stack"

  - Roger Waters, The Floyd

 

Mon, 01/28/2013 - 10:37 | Link to Comment astoriajoe
astoriajoe's picture

I quite liked the dilbert quote.:)

Mon, 01/28/2013 - 11:20 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The wealthy worldwide control about $40 trillion in hot assets. Central banks must cater to them for fear that they will attempt to convert their assets into PMs.  If that happens it's game over.

 

Tue, 02/05/2013 - 08:33 | Link to Comment xialala
xialala's picture

It should be retitled as "Cycling of quotes". It takes a lot of talent to make a nice topic sound cheap.

 

Anyways, since last financial crisis, I have spent a lot of time on Grand Marnier, large houses, men, yachts and fast cars. I wont mind too much to read some crap like this.

 

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