Cashin, Klarman, & Marks: "Un-abating Risks Of Collapse"

Tyler Durden's picture


One can spend all day watching financial media channels stuffed full of self-promoting index-hugging asset-managers and be left with the belief that all is well and that the market does indeed represent our reality... Or, as UBS' Art Cashin notes today (confirming what we first published a month ago - here, here, and here), there is more (well less) to today's global economy and markets than meets the eye or rests in the headlines. His excellent diatribe today reiterates our previous comments of investing icons such as Baupost's Seth Klarman and Oaktree's Howard Marks that "(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors."


Via Art Cashin,

Cautionary Comments From Investing Icons – Near legendary investor, Seth Klarman caused a good deal of buzz yesterday:

Investing today may well be harder than it has been at any time in our three decades of existence," writes Seth Klarman in his year-end letter. The Fed's "relentless interventions and manipulations" have left few purchase targets for Baupost, he laments. "(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.

Another icon causing a lot of buzz was Howard Marks of Oaktree Capital. Warren Buffet once said something like – Whatever Howard Marks writes, I try to read. Marks gave an interview which you can access at Here's a typical part:

The level of economic activity, anecdotal as you describe, is not an indication of health in the future. It is an indication of health in the present. The question is, what are the implications for the future? When you say restaurants are full and you can’t get a cab, there is no contravening the fact that the economy is doing well at the top. The problem is the people who are not in the upper strata; their incomes are flat to down, they are losing their overtime. The joblessness rate is up significantly and that excludes people who aren’t seeking jobs and are unemployed — their future is not good. The ratio of income from the top to bottom is higher than in the past, which itself is unhealthy.


In fact, restaurants were full in 2006 and early 2007 as well. So, don’t get carried away. The point the memo tried to make is that the world went through a period that is now about roughly 50 years old in which it levered up very substantially. Credit was available too freely, used aggressively, and people borrowed money to make expenditures. If you borrow money to take a vacation, a year later the vacation is over but you still have the debt. That is the status of the world today. The world borrowed a lot of money for expenditures, some of which were imprudent and today it is left with a hangover of debt and the current income, especially at today’s moderate levels, aren’t sufficient to amortise the debt. That is very worrisome and that is just one of the main things. You look all around the world and over-leveraging is the common thread.


Look at the average American. I have been telling my friends in Europe for several years that the average American has $1,000 in the bank, owes $10,000 on their credit card, makes $20,000 a year after taxes — by the way, I am exaggerating, these are not specific data but conceptual — and spends $22,000.

That is not healthy.

Anyway, there is more to today's global economy and markets than meets the eye or rests in the headlines. Then there's geo-political risk – let's not go there.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 02/20/2013 - 20:56 | 3261770 MrX
MrX's picture

this sums it all up nicely:

Wed, 02/20/2013 - 21:32 | 3261856 notbot
notbot's picture

One of my favorite lines from Klarman's letter is his dig at Krugman: 

To meet the annual cost of all its unfunded obligations, the U.S. government would, by  some estimates, need to take in an additional $7 trillion a year.  Yet all federal taxable income-- individual plus corporate, in its peak year of 2006--totaled only about $6.7 trillion, meaning that  these entitlements are completely unaffordable and can never be paid.


The sooner we acknowledge the full reality of our predicament and amend benefits and eligibility for these programs, the better the chance of limiting the uncertainty and potential social upheaval when the promised benefits fail to appear.


Worse still, today’s debt-service costs are artificially low because interest rates have been pushed down by QE, masking the mounting danger. One prominent economist bizarrely argues (twice weekly) that today’s deficits pose no danger because interest rates remain historically low, as if QE were not artificially driving down rates and as if markets are not both fickle and often wrong.

Wed, 02/20/2013 - 21:40 | 3261871 Manthong
Manthong's picture

What’s the problem?

We get 85 billion new rock solid digital underpinnings a month to shore up the system.

Stacked electrons have incredible nominal compressive strength.

Wed, 02/20/2013 - 21:53 | 3261905 Buckaroo Banzai
Buckaroo Banzai's picture

That's sly and all, but it's more fun to call Krugman an intellectually dishonest cunty-faced douchebag who enjoys getting tea bagged by winos in his spare time.

But that's just me.

Wed, 02/20/2013 - 22:38 | 3262010 DanDaley
DanDaley's picture

I applaud your sentiment, but I just hope the association of Krugman and the holy-of-holies disappears before my next visit there.

Wed, 02/20/2013 - 22:53 | 3262045 Anusocracy
Anusocracy's picture

But at least he is faithful to his completely miswired brain.

Wed, 02/20/2013 - 23:27 | 3262137 Osmium
Osmium's picture

+1 for the term 'cunty face'.  Not sure I have ever heard that before.

Wed, 02/20/2013 - 23:39 | 3262170 otto skorzeny
otto skorzeny's picture

Paulie W on Sopranos used to tell Christopher "Don't be so cunty"-always liked that one

Thu, 02/21/2013 - 02:59 | 3262454 dunce
dunce's picture

I think you are a bit harsh on winos.

Wed, 02/20/2013 - 21:46 | 3261885 SafelyGraze
SafelyGraze's picture

rukeyser ("wall street week") in his final episode was edging dangerously close to calling for viewers to leave their tv and start following him on a weblog/videolog


Wed, 02/20/2013 - 23:41 | 3262174 otto skorzeny
otto skorzeny's picture

rukeyser-that guy was awesome-remember watching him during tech bubble in 90s at 6:30 Fri night on WTTW.

Thu, 02/21/2013 - 03:06 | 3262461 dunce
dunce's picture

I really liked watching him also. After he was gone the show was a waste of time and opportunity. All they needed to do get someone with the same manner and philosophy. I have forgotten who they replaced him with, but then probably every one did because they were forgettable.

Wed, 02/20/2013 - 22:05 | 3261935 HowardBeale
HowardBeale's picture

The "Pray for an end to Faith" video is probably a fair representation of what is going to happen "on Wall Street" sometime soon... The only difference being, there will be lots of guns involved.

Wed, 02/20/2013 - 20:53 | 3261771 McMolotov
McMolotov's picture

Don't worry, Berstanke's a master abater.

Wed, 02/20/2013 - 20:53 | 3261774 Water Is Wet
Water Is Wet's picture

I read this on Business Insider earlier today.  Does that mean ZH is now mainstream?

Wed, 02/20/2013 - 21:06 | 3261807 Conman
Conman's picture

Sure if you discount the fact that ZH usually posts Cashin's stuff , then yes they are mainstream.

Wed, 02/20/2013 - 23:36 | 3262158 francis_sawyer
francis_sawyer's picture

You'll know when ZH is mainstream...


It'll be the day that francis_sawyer comments criticizing the mezmerizing plethora of 'jewry' in banking & MSM begin to be deleted...

Mainstream would NEVER tolerate anything published on that level...

Thu, 02/21/2013 - 03:10 | 3262464 lasvegaspersona
lasvegaspersona's picture

Drudge refers to ZH. That means that the most important consolidator on the planet has his eyes on ZH.

Thu, 02/21/2013 - 09:50 | 3262845 El
El's picture

Drudge refers to Alex Jones and InfoWars, too, so I'm not sure what that means.

Wed, 02/20/2013 - 20:53 | 3261775 derek_vineyard
derek_vineyard's picture

and rewarded by the system for doing so

Wed, 02/20/2013 - 21:41 | 3261875 unrulian
unrulian's picture

NO more ZH posting anonymity...

Creates the Internet Posting Removal Act. Provides that a web site administrator shall, upon request, remove any posted comments posted by an anonymous poster unless the anonymous poster agrees to attach his or her name to the post and confirms that his or her IP address, legal name, and home address are accurate. Effective 90 days after becoming law.

Not wanting to leave any bases uncovered, Silverstein includes that an “Anonymous Poster” means “any individual who posts a message on a web site including social networks, blogs, forums, message boards, or any other discussion site where people can hold conversations in the form of posted messages.”


Wed, 02/20/2013 - 21:58 | 3261915 Buckaroo Banzai
Buckaroo Banzai's picture

Well that makes sense. Why would you want to live in a world where ideas stand and fall on their own merits? It's much better to identify the source of any ideas, so you can go ahead and just attack the person instead.

"We don't even let them have ideas. Why would we let them have guns?"
-- "Uncle Joe" Stalin

Wed, 02/20/2013 - 23:01 | 3262061 Anusocracy
Anusocracy's picture

One of the great things of the Greek Civilization was the importance they placed on argumentation.


Wed, 02/20/2013 - 23:43 | 3262181 otto skorzeny
otto skorzeny's picture

IL is getting crazier by the day-at least I'll have a ringside seat for the collapse-it's a mad race between IL and CA

Thu, 02/21/2013 - 02:08 | 3262402 TruthInSunshine
TruthInSunshine's picture

That proposed Illinois legislation is a shot across the bow of the beginning of the great statist charge to dismantle information sharing and free expression of opinion on the internet. It's a thinly veiled, pure intimidation tactic to suppress dissent & the ability to mobilize movements and resist the power of government.

Be prepared to see the great race to shred the usage of the internet for anything other than mindless "entertainment" and the exposure to state-sponsored propaganda.

If there's one thing the elite can't tolerate, since it gives rise to movements that upset their corrupt apple cart, it's real freedom of expression and dissent, especially at the speed of fiber optic cable.

They are already freaking out regarding what's already begun in this regard, and especially discussion of or about the whos, whys, hows and wheres of their specific corruption [by "the plebes" who used to be completely in the dark & who had limited mechanisms to discuss these matters at the speed of near light], and they're going to do everything in their power to try and stamp this powerful trend out, using laws and actual physical infrastructure changes, as quickly and robustly as they can.

Thu, 02/21/2013 - 10:58 | 3263141 Stuck on Zero
Stuck on Zero's picture

A state becomes craziest just before it collapses.


Thu, 02/21/2013 - 11:31 | 3263310 tarsubil
tarsubil's picture

Haven't they tried to stamp out file sharing? What have they accomplished? Managed people's perception turning the free exchange of information into shameful. But those unplugged still do it. They get a couple scalps and get a young prodigy to kill himself but progress rolls on. They may make anonymous comments shameful in the eyes of the sheeple but they simply lack the ability to make that sort of regulation work.

Wed, 02/20/2013 - 22:22 | 3261971 NumNutt
NumNutt's picture

Oh well guess it is time to start spray painting anti government slogans on building walls........again.

Wed, 02/20/2013 - 22:44 | 3262024 SmallerGovNow2
SmallerGovNow2's picture

WTF, Illinios is USSR...  Fucking Nazi Bastards...

Wed, 02/20/2013 - 23:08 | 3262080 Desert Rat
Desert Rat's picture

Illinois...? Chicago...? DUH!?!?!

Thu, 02/21/2013 - 07:43 | 3262579 Tango in the Blight
Tango in the Blight's picture

I hate Illinois Nazi's!

Wed, 02/20/2013 - 23:44 | 3262188 otto skorzeny
otto skorzeny's picture

sponsor-IRA SILVERSTEIN-you can't make this shit up. how are they going to enforce it?

Thu, 02/21/2013 - 11:53 | 3263419 Overfed
Overfed's picture

Do a google search for that bill. No mention of it by any "Mainstream" 'news' site. Imagine that.

Wed, 02/20/2013 - 20:56 | 3261777 trollin4sukrz
trollin4sukrz's picture

 I have been telling my friends in Europe for several years that the average American has $1,000 in the bank, owes $10,000 on their credit card, makes $20,000 a year after taxes — by the way, I am exaggerating, these are not specific data but conceptual — and spends $22,000.


Hmm.. maybe I need to work longer than 6 months a year.. ?? Naww fVk that.. I still have credit cards I havent used yet.

Wed, 02/20/2013 - 20:54 | 3261780 dick cheneys ghost
dick cheneys ghost's picture

If you cant afford to go first class, charge it

Wed, 02/20/2013 - 23:46 | 3262191 otto skorzeny
otto skorzeny's picture

"Fuckin finance it!" Judge Reinhold in Ordinary People

Thu, 02/21/2013 - 11:54 | 3263431 Overfed
Overfed's picture

Ruthless People.

Wed, 02/20/2013 - 20:54 | 3261781 Calidreaming
Calidreaming's picture

Auntie em  -Its a twister , its a twister!

Wed, 02/20/2013 - 20:55 | 3261783 Desert Irish
Desert Irish's picture

It was a hell of a party in the 80's also until it wasn't....

Wed, 02/20/2013 - 20:59 | 3261790 Super Broccoli
Super Broccoli's picture

oh well who cares now, spain goes down tomorrow and it's going to be EPIC :-)

Thu, 02/21/2013 - 02:12 | 3262411 Legolas
Legolas's picture

+1 for the optimism

Wed, 02/20/2013 - 20:59 | 3261791 Conman
Conman's picture

Howard Marks clearly does not have a beard or phD in economics or else he wouldn't be saying such blasphemous things.

Wed, 02/20/2013 - 21:04 | 3261801 Water Is Wet
Water Is Wet's picture

Yep, if you don't have a PhD, then STFU!  No one cares what you think!  You don't know shit because you weren't taught shit, so shut the fuck up you fuckers and rabble rousers!

Wed, 02/20/2013 - 22:48 | 3262025 NoDebt
NoDebt's picture

I see your PhD in Keynsian Economics and raise you a PhD in Austrian Economics.  If there is an odds-on favorite who takes up the crown after the Keynsians are finally disgraced and banished to obscurity, it would have to be the Austrians, in my opinion.

Not all PhD's are idiots.  No more so than the general population.  So, like 98% idiots, 2% not idiots.

For the rest of us, I would say that you don't need a Meteorologist to know which way the wind is blowing.

Thu, 02/21/2013 - 01:44 | 3262380 Conman
Conman's picture

The fatal flaw is thinking that economics is a science. First clue is not getting the intended or theorized result ever

Wed, 02/20/2013 - 21:17 | 3261829 nmewn
nmewn's picture

Bartender!...get this man a drink on his tab...ah hell, get everybody set up!

I'm feeling generous ;-)

Wed, 02/20/2013 - 23:15 | 3262106 thomasincincy
thomasincincy's picture

"Tequila is good for the Soul" - Me

Wed, 02/20/2013 - 23:23 | 3262128 thomasincincy
thomasincincy's picture

and Beer.. we'll, I just love that

Do NOT follow this link or you will be banned from the site!