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"Like Lambs To Slaughter," Observations On The Real Lessons Of Keynes

Tyler Durden's picture




 

From the management of a global currency war to the 1998 Committee to Save The World, QBAMCO provides an all encompassing escape into the reality our current - and future - monetary (and inflationary) world. While Brodsky and Quaintance do not expect a breakdown in global monetary oversight, they do expect fiat currency debasement to continue to mask the driver of real economic malaise and contraction - global bank deleveraging; and they do expect this process to lead to a popular loss of confidence in today’s major currencies as savings instruments – perhaps beginning in the global capital markets in 2013.

 

The big macro questions:

Will global central banks raise rates, withdraw bank reserves or tighten credit policies in any way before the global economy experiences significant price inflation? No.

 

Will they continue threatening to tighten? Probably.

 

Will they continue to de-lever bank balance sheets via bank reserve creation? Absolutely.

 

Will global central banks continue to be significant net purchasers of physical gold in 2013 and beyond? Bank on it.

 

Will big global wealth holders convert increasing amounts of fiat currency into physical precious metals, resources and other beneficiaries of global price inflation? Highly likely.

 

Will Western financial asset allocators figure out what all this implies for stocks and bonds in 2013? We think so, probably after a significantly higher-than-expected CPI print.

 

Higher global goods and service inflation is a tail event currently unforeseen by the great majority of investors and unexpressed, or expressed improperly, in the great majority of investment portfolios. And yet we see it as a lock, perhaps asserting itself in 2013.

 

February marks QBAMCO’s sixth anniversary and we are grateful for the interest our views have generated. This piece addresses the following issues:

Currency War – Theory & Practice: We argue one should not necessarily mistake rotating currency devaluations presently for the threat of a belligerent global currency war. Monetary authorities are likely to continue managing the timing and magnitude of discrete, coordinated relative currency weakness so that the appearance of a stable global monetary system remains intact.

 

Cause for Concern: While we do not expect a breakdown in global monetary oversight, we do expect fiat currency debasement to continue to mask the driver of real economic malaise and contraction – global bank de-levering; and we do expect this process to lead to a popular loss of confidence in today’s major currencies as savings instruments – perhaps beginning in the global capital markets in 2013.

 

Lambs to Slaughter: We do not expect an overt crash in global stock, bond and real estate markets, or one that would last very long. They are already crashing in real terms and there is a well-structured mechanism in place to support nominal pricing. Any future flight of public sponsorship would be met with central bank credit support working through bank intermediaries. For those not part of the support mechanism, however, the monetary market put does not necessarily argue in favor of investing broadly in implicitly levered financial markets.

 

The 1998 Committee to Save the World & Centralize Global Economic Control (and their Legacy Beards): We think the smart play is to bet with these guys and the power of their institutions.

 

Reasonable Contrarianism: The pain of holding an inflationary bias over the last six years has been intense, and the pain has only increased exponentially over the last two years. The good news is that we believe for the first time there are important macroeconomic events signaling a fundamental shift in the global monetary system is finally approaching. We expect discussion of Fed, ECB and BOE inflation and/or nominal GDP targeting to become louder and more frequent in 2013, and we expect markets to begin adjusting asset prices accordingly.

 

The Pain Trade: All the Sturm and Drang in the financial press about a revival of the US housing market is bologna. We provide a short idea.

 

Bad Science: On February 1, a large multinational bank published a report that called the end of the bull market in gold, claiming; “the 2011 high will prove to have been the peak for the USD gold price in this cycle.” While no one knows the future and the dollar price of gold may rise or fall, we are quite certain gold’s future path will have nothing to do with the arguments included in this report. Sadly, it was a case study in false identities leading to wayward causations and, in our view, a diametrically wrong conclusion.

 

The True Lesson of JMK: The most important takeaway from John Maynard Keynes many views is that sometimes change for change’s sake is necessary to jumpstart popular confidence.

The Play: We think that what will eventually (or soon) occur will be the rare occasion when return-on-savings trounces return-on-investment, implying precious metals will outperform the great majority of financial assets (except for shares in precious metals miners and natural resource producers).

 

Full article below:


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Mon, 02/11/2013 - 19:17 | 3235012 yabyum
yabyum's picture

As some one who dabbles in miners, the last few years have been harsh. I hope that a few of them will do better as PM's go higher, take the profit and buy the metal....my hope anyway

Mon, 02/11/2013 - 19:18 | 3235024 Say What Again
Say What Again's picture

Q.E.D.

Mon, 02/11/2013 - 19:20 | 3235028 ebworthen
ebworthen's picture

+1 for using "Sturm and Drang" authors.

Gold was on sale today, just bought another ounce of 999.9.

Fuck you Ben Bernanke.

Mon, 02/11/2013 - 19:40 | 3235067 Shell Game
Shell Game's picture

H/T ...my favorite peaceful civil disobedience.  :)

Mon, 02/11/2013 - 23:36 | 3235601 augustusgloop
augustusgloop's picture

sturm & drang indeed. love that the gold sale coincided with the currency war convention & on the heels of Venezulan currency re-valution & argentinian chaos. 

 as if the captain of the titanic burning were burning lifeboats in the mid-atlantic one icy midnight.

Mon, 02/11/2013 - 19:21 | 3235031 davidsmith
davidsmith's picture

 

Will they continue to de-lever bank balance sheets via bank reserve creation?Absolutely.

 

Will global central banks continue to be significant net purchasers of physical gold in 2013 and beyond? Bank on it.

 

Will big global wealth holders convert increasing amounts of fiat currency into physical precious metals, resources and other beneficiaries of global price inflation? Highly likely.

 

 

 

 

 

These being, of course, the principal means of corporatist, fascist looting.

Mon, 02/11/2013 - 19:23 | 3235032 Venerability
Venerability's picture

Since I cannot believe he actually has "readers" or "followers," I now think that Princess Dennis's sole function is to provoke people into throwing slippers at their television sets, occasionally causing them to shatter.

Clearly, the Princess now works for television hardware providers.

Or maybe Cirque du Soleil.

Mon, 02/11/2013 - 21:15 | 3235317 disabledvet
disabledvet's picture

Thanks for a good laugh. I think the big question is in fact "have the Banksters really pulled off the scam of the Century." EMPIRICALLY Wall Street was off loading their securitized product on us unsuspecting taxpayers FULL BORE from 2005 on. THEN they get the Fed to bail out EUROPE instead of say "saving Lehman Brothers." THEN they go hat in hand "this time for the reach around" and demand all regulations "off limits." the question that needs to be asked is "who benefits when gold prices start to hiccup and suddenly there is a wiff of deflation in the air?" and of course the answer is the Fed and what Andrew Jackson immortally called "that Den of Vipers." what assets do we as Americans have left if gold, oil and real estate start to deflate? And the answer the bank would give...OUTRAGEOUSLY..."is debt yielding 1-2%." the President will give his Big Speech tomorrow night...is the best that we can get is "I'll arrest the Republicans who do this"? Cuz if so then to paraphrase General Jack Ripper "Mr Wall Street...we cannot have a Bankster Gap!" in other words Mr. President...find a good old fashioned war all is hot blooded Americans can rally around. I really don't see what the problem with bombing Assad back to the stone age is here. "throw us a bone" Mr President. Flex some Generation Kill muscle...

Mon, 02/11/2013 - 22:57 | 3235512 Lucius Corneliu...
Lucius Cornelius Sulla's picture

The guy totally lost me on his trade $20,000 for an ounce of gold devaluation.  Not as wacky as the $1T coin, but definitely taking a ride on the crazy train.

Mon, 02/11/2013 - 19:29 | 3235045 Canadian Dirtlump
Canadian Dirtlump's picture

So, go all in with precious metals and see your wealth get the boots laid to it until the casino finally crumbles..

 

I hope that will happen because I have a small safe full of silver at the bottom of a lake in the banff area.

 

Mon, 02/11/2013 - 19:54 | 3235081 DavidPierre
DavidPierre's picture

Just another day in a rigged casino.

Not enough commentary to document the volume of the COMEX contracts during the days when the spot prices for gold and/or silver are driven sharply lower.

In fact, I would venture to guess that the Le Met Cafe is one of the few places where that type of information is openly discussed.  I suspect that the vast majority of market participants have no clue why that kind of data matters in the first place. It is clear that the vast majority of writers that comment on the PM sector have absolutely no idea that there is a difference between selling a contract for gold, and selling real bullion.

Every time I read something to the effect that speculators were selling gold because of some bad news item in the economic news, I roll my eyes because it is very likely that some prop desk trader for a big bank is really trying to spook the market with a dump of paper contracts.

 

So today we get the usual fun and games from the COMEX to start off a monday. On the surface no doubt it looks bearish as hell, and I am sure there will be a flurry of market experts to tell us today that specs were selling for a variety of scary reasons. In more than ten years, I do not ever recall reading a widely distributed commentary that stated the market went lower because specs on the short side were trying to destabilize the market.

Not even once.

No matter how many contracts were dumped in a 5 minute time span, no matter how obvious the intent, the 'experts' always imply that it is long side specs who are folding the tent.

This morning the only thing I want to see is how many contracts have been unloaded to trigger this selloff. See, late last week we get the news that the COMEX margins were reduced. The last few times that has happened there has been an immediate and severe selloff created within a session or two. This kind of event is planned. It is now part of the Cartel playbook. Create an event to draw in new specs, and then create a reaction shortly thereafter to trap these specs and cover some shorts.

For anyone that has become discouraged and hanging by a thread to their positions, this continuous grind must be very difficult. The fact that lows are always retested, severe selloffs are frequent, gains are reversed within a session, and intense volatility is the order of the day - all of this contributes to fatigue and encourages the longs to give up and sell. Anyone on margin will face even greater pressure to put up more money or just book a loss and dump positions. Which is exactly why this goes on month after month.

The flip side to this is that the dips have not been able to gain any traction because the shorts are in trouble. The flurry of contracts dumped one day must be bought back the next day. And there are patient buyers willing to accumulate on the dips, so presenting any opportunity of a lower price is just going to encourage heavy buying. Again, whatever volume of contracts are dumped in the early trading today, you can bet that much will be bought back within a session or two. That is the real key to understanding this market that you will not find discussed within the pages of the Financial Post.

A few thousand new longs came into the market last week. Now they are looking at a declining chart courtesy of a barrage of fresh shorts strategically placed to carpet bomb the sector at the open, and bearish commentary as per usual from the clueless media. So a few more contracts will be dumped here, shorts are covered, the sector is held in lockdown, and the HUI is back testing the lows.

http://www.lemetropolecafe.com

 

Mon, 02/11/2013 - 21:38 | 3235371 unrulian
unrulian's picture

thanks...+1

Mon, 02/11/2013 - 23:12 | 3235540 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Or maybe ... gold is over priced and in a bear market!  All this conspiracy bullshit is just that ... bullshit!  There is a very simple calculation for the price of gold.  In 1913 gold was $20 per ounce.  Since then a dollar has the purchasing power of 4 cents priced in 1913 dollars.  1/.04 = 25.  25 * $20 = $500 an ounce.  So gold currently has a $1600 / $500 = 320% speculative premium on a dollar devaluation.  Therefore a 320% inflation premium is already priced into gold.  For a comparison, Venezuela just devalued their currency by 50%.  What one thinks about how much inflation there will be is completely speculative.  That hardly makes gold underpriced.

Tue, 02/12/2013 - 02:05 | 3235930 Venerability
Venerability's picture

I wish you'd start understanding Venezuela's actions for a change.

Its behavior is no different than Japan's has been - except that nobody trades Bolivars on international currency markets.

But like every devaluation, this one was meant to help EXPORTERS - which in Venezuela's case means exports of Oil. It is part and parcel of several other dramatic moves to help its Oil sector in recent weeks.

 

 

Tue, 02/12/2013 - 02:31 | 3235958 StychoKiller
StychoKiller's picture

Hmm, yer calculatin' assumes there's linear relationships involved.  Check yer premises.

Mon, 02/11/2013 - 19:59 | 3235102 geminiRX
geminiRX's picture

I hope it wasn't lake minnewanka...

Mon, 02/11/2013 - 20:59 | 3235267 WmMcK
WmMcK's picture

Minnetonka, Minnehaha, well somewhere in Minnesota.

Frostbite Falls, perhaps.

Mon, 02/11/2013 - 19:48 | 3235082 spinone
spinone's picture

Deflation and continued money printing, will keep inflation low, stocks juiced and ammunition for PM suppression for the foreseeable future

Mon, 02/11/2013 - 23:24 | 3235567 Lucius Corneliu...
Lucius Cornelius Sulla's picture

In a deflation gold will fall just like every other commodity.

Mon, 02/11/2013 - 19:50 | 3235087 Joe moneybags
Joe moneybags's picture

Certainly since March 2009, my market calls have been shitty.  I admit this to myself and any relatives who may have listened to my opinions.  But I don't try to rationalize them with "I've been wrong for two full years, but this year, or maybe next, will prove me right and forever validate me as the Genius that I am."

These QBAMCO people have no better future vision than you or me.

Mon, 02/11/2013 - 20:34 | 3235116 medium giraffe
medium giraffe's picture

""lead to a popular loss of confidence in today’s major currencies as savings instruments"

Finger on the fucking pulse there, eh lads? I think even the most fatuous shitbrain has noticed that it's costing him more and more to buy a Mars Bar these days, and it probably hasn't taken him until 2013 to figure it out.  

They don't think there will be a bond and housing crash, unless there is one??

They've been bearish for 6 years, getting severely kicked in the balls for the last two, and now might finally be right eventually at some point maybe it looks like probably?

And the most valuable thing they can squeeze from JMK is that sometimes, well, you just have to have a tinker about a bit, yuh know?!

Someone was paid actual money to bless us with these staggering insights?

Are they taking the piss?!

Mon, 02/11/2013 - 22:30 | 3235461 hairball48
hairball48's picture

+1 Loved it!! "fatuous shitbrain" ROFLMAO!

Mon, 02/11/2013 - 20:07 | 3235118 q99x2
q99x2's picture

Central banksters have already financially taken over the world and are mixing every sovereign nations money with every other nation. I think that it is a crime of treason but maybe not. It has to be some kind of crime to be taxed by England and the EU. If you don't pay the tax the bangsters throw into jail so it does not matter much anyhow. Taxes are a great rallying point so maybe if more comes out on how the US citizens are being taxed by the EU the better.

Mon, 02/11/2013 - 20:20 | 3235149 Lewshine
Lewshine's picture

""We think so, probably after a significantly higher-than-expected CPI print"".  ...AND EXACTLY WHO IS GOING TO COME CLEAN AND GIVE US AN HONEST CPI PRINT??? OH THAT'S RIGHT, IT'S BEN BERNANKE, THAT HISTORICAL MOUNUMENT OF INTEGRITY. DIE!

 

Mon, 02/11/2013 - 22:05 | 3235419 youngman
youngman's picture

What was interesting today is that most of Asia is shut for the SNAKE holiday.....so they knew very little volume......but stocks had a very low volume day...but the PM stocks I watch are CEF, PSLV, PHYS....all had pretty good volumes...normal in fact......so to me the war is being fought in PM´s right now...the players thought they could get an open field with the Asians out....not to much...the chairs on the titanic are now being stolen....

Mon, 02/11/2013 - 22:37 | 3235469 hairball48
hairball48's picture

The Fed and the banksters have so fucked up and distorted markets that NO "cpi" is worth spit, except:

The CPI one makes for one's self, using one's own "actual" income and expenses. Use your own rent/mortgage/taxes/insurance for shelter. gasoline, food, etc. Easy info to come by with credit card staements, saving receipts, blah blah. There's your "CPI"

Fuck Bernanke, The Fed, BLS and the rest of the fucking liars in gov't

Now I feel better. 

Mon, 02/11/2013 - 22:38 | 3235472 Spitzer
Spitzer's picture

These guys met in person with FOFOA.

Mon, 02/11/2013 - 22:47 | 3235492 khakuda
khakuda's picture

These guys are very thoughtful, but I have a couple issues. If they think there could be a windfall profits tax on gold and don't believe there is enough physical for all the claims, why on earth would you own anything but physical? The rest can be stolen or taxed away by governments. Sorry about your mine assets, they are "ours" now. And, your gold etf has a new 90% tax rate. It's only fair they say as they steal it.

Tue, 02/12/2013 - 01:10 | 3235854 moonstears
moonstears's picture

From the "New Official Black Book of United States Coins" 1975 edition, pg 13...

"Gold has recently traded in the free market above $68 per ounce and predictions are...may go as high as $100 per ounce"

Tue, 02/12/2013 - 01:37 | 3235892 Fishhawk
Fishhawk's picture

@medium giraffe:  you did not understand what the man said about the bond and housing crash:  the crash is not like a car accident, sudden and violent.  The crash has been going on in real terms since 2007.  What the man said was that the banksters will not allow a crash in nominal terms, ie, priced in fiat.  They will have Fannie and Freddie buy up all the mortgages in the US (whoops, already did that) and then keep inventory off the market to maintain the pretense that there is a market.  Hell, they might just have JPMorgan (the wet works team for the Plunge Protection Team) start buying houses at above market prices; they are already doing that with bonds, and see how it has kept the bond prices up?  No problem as long as you can print all the money you need...

The sheeple have already noticed that the money is no good; foreigners have already noticed that the US bonds are no good.  We are essentially at that point where the central banks are all buying each other's debt, in the same fashion that the big 4 US banks are all buying each other's credit default swaps.  In nominal terms, the fiat ponzi is going great guns, which means that the interest on the debt (the bankster cartel skim) is rapidly approaching unpayable levels.  The debtors will have to default if the dollar is not inflated severely.  In real terms, the economy has been deflating since 2003, and only the printing press remains to keep up appearances.  

The Play suggested is clear enough, and pretty obvious, since we all know how the fiat experiment ends.  The trick is to survive the deflationary phase long enough to still have some assets to deploy in metals, miners, and resource/energy companies.

Fishhawk

Wed, 02/13/2013 - 12:18 | 3240386 medium giraffe
medium giraffe's picture

"The trick is to survive the deflationary phase long enough to still have some assets to deploy in metals, miners, and resource/energy companies"

Amen to that.

Ok, see what you are saying - was in rant mode.  Yeah, I agree with that one, just a slow slide into oblivion at the hands of fiat devaluation.  It's certainly not widely appreciated how far reaching this devaluation is and how long we've been on this ride, even if the murder weapon his been found by most now.  Like stocks, we're keeping the party going in a very nominal way as the alternative is no alternative at all.  It took my some time (and cash) to adjust to the new normal when fundamentals stopped affecting prices unless the news was advantageous to the greater game.  The reason for the rant really was it looked to me like they were trying to pass off the usual 'this might happen, unless it doesn't' bullshit 'advice' that seems the norm these days.  Cheers for the reply Fishhawk, thanks amigo. :)

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