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 http://business.outlookindia.com/article.aspx?283882. 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.

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Wed, 02/20/2013 - 21:05 | 3261805 delivered
delivered's picture

The well informed, experienced, knowledgable, and objective professionals/leaders will tell it like it is (just like in this article). The puppets, adhering to their masters, poorly educated, in-experienced, corrupt, and inept, will tell it like it isn't and spin the current situation in the most positive fashion possible (through the vast media resources available). Really enjoy these types of articles from knowledgable people but unfortunately, most don't stand a chance of getting heard in today's socialized market. But let's face it as it really doesn't matter if it's a person that is overleveraged and lived beyond thier means, a company, or a government, in the end, excessive leverage and debt backed with no real assets will eventually collapse.

Just a matter of time and pressure with the collapse now as even event that may be considered relatively small or insignificant could bring the entire system down. Will it be the poor start to the year for the likes of Wal-Mart, other discounters, and fast food joints (already complaining that higher gas prices and the increased taxes are taking a bite from their target market's wallets), another currency devaluation or series of devaluations (i.e., Venezuela), a Euro member bolting unexpectedly, another corrupt bailout of an insolvent financial company, or something even smaller. When deck is stacked ever so higher with a base that is getting weaker and weaker, it only takes the slightest breeze to bring it tumbling down.

 

 

Wed, 02/20/2013 - 21:06 | 3261806 Never One Roach
Never One Roach's picture

The fellow on business news tonight even said so, "retail space couldn't be better."

He maintained a straight face also.

Here is more along the lines of what I am seeing:

 

Reno's retail vacancy rate at 18.52%; lots of space up for grabs 3:13 pm, Feb 15, 2013 | Written by Yvonne Beasley http://blogs.rgj.com/renorebirth/2013/02/15/renos-retail-vacancy-rate/ And then you have Office Depot and Office Max merging....very bullish for office space? Jobs?
Wed, 02/20/2013 - 21:08 | 3261808 Conman
Conman's picture

And lets not forget Walmart's little sales issue.

Wed, 02/20/2013 - 21:38 | 3261869 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Well said.

Wed, 02/20/2013 - 21:10 | 3261816 trollin4sukrz
trollin4sukrz's picture

I doan know where you live but Spokane, Wa. is looking alot like Detroit. Crime is going off the charts as well. Time to bail b/4 the last store closes.

Wed, 02/20/2013 - 21:10 | 3261809 knukles
knukles's picture

I demand to likewise be paid a bazillion dollars of somebody elses money for ruminations such as these, for I have been making here since the inception, the birth of this tantalizing, august tome, deploring the future state of the world with no monetary reward in exchange.
Damn it, if this is truly the egalitarian society so said to be by the powers that be, I should be rewarded commensurately
Millions taken 24/7/365.

But oh fucking no.
Thus, the wheels are falling off.
We fall short of our (and Knukles') noble goals and aspirations.
Tragedy.
Pure tragedy.
Makes one want to pray to the great God Hermaphroditie

Wed, 02/20/2013 - 21:12 | 3261818 trollin4sukrz
trollin4sukrz's picture

Are those tits real?

Wed, 02/20/2013 - 21:25 | 3261842 Stoploss
Stoploss's picture

Why is it every time i see the word bazillion, the national debt clock flashes before my eyes??

Wed, 02/20/2013 - 22:19 | 3261963 Cosimo de Medici
Cosimo de Medici's picture

Personally, I'm fine with it until I see "dodecabazillion" or "ba-da-ba-da-bingazillion".  That would certainly qualify as Everett Dirksen's "real money" and be cause for alarm.

Wed, 02/20/2013 - 21:13 | 3261823 Blond Viking
Blond Viking's picture

“Annual income twenty pounds, annual expenditure nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

 

- Charles Dickens: David Copperfield (1849) 

 

 

 

Wed, 02/20/2013 - 21:19 | 3261830 Dr Paul Krugman
Dr Paul Krugman's picture

Does the market represent reality?  No.  Reality is represented by all indicators in the economy - UE, stocks, rates, (not gold), housing....leading indicators.  We have to use them as a basket to understand the entire market.  So even though stocks are up, it does not mean that we have fully recovered, because unemployment is still high.  We need all of them in sync and we don't have that yet.

This is why we need to do more and find the recovery.  We need to end the depression now for the betterment of tomorrow.  If we don't then tomorrow will be that much more dire.

Wed, 02/20/2013 - 21:29 | 3261849 dolph9
dolph9's picture

There is no "tomorrow."  There never was.  That's what you cannot understand because you are part of a system that insists that there always will be.

It's no different than an empire wanting to expand and conquer the world, or a billionaire who wants to become a trillionaire, or a person who wants to live forever, etc. etc.

Limits are real!  Limits in fact, define every conception of reality there is.  Accept it.

Wed, 02/20/2013 - 22:03 | 3261930 nmewn
nmewn's picture

You still standing by your "shoulda been a two trillion dollar shovel ready jobs stimulus" call?

That might have got you to retirement...the rest of us...not so much.

Wed, 02/20/2013 - 22:19 | 3261962 bnbdnb
bnbdnb's picture

Just end your epiphony and kill yourself. Problem solved.

Wed, 02/20/2013 - 23:22 | 3262126 Clowns on Acid
Clowns on Acid's picture

"This is why we need to do more".....who is "we" ya interloper...?

Thu, 02/21/2013 - 04:13 | 3262491 Brit_Abroad
Brit_Abroad's picture

I never know whether I should green or red arrow such entertaining statements.

A bit like MDB...questions, questions. What to do ?

KRUGMAN YOU DOUCHE !!!!!

Wed, 02/20/2013 - 21:21 | 3261835 dolph9
dolph9's picture

Collapse is not "tail risk", collapse is reality.

It's like going through your whole life believing that death is a tail risk!  Of course it isn't, right?  It's a 100% guaranteed reality.

Thu, 02/21/2013 - 02:11 | 3262408 Central Wanker
Central Wanker's picture

You can still buy insurance against 100% certain collapse at the price of a tail risk.

Isn't it wonderful :-) 

Wed, 02/20/2013 - 21:24 | 3261841 kito
kito's picture

all is well....just relax and join the crowd.....sony is popping with its new playstation 4, htc has a hot new phone out,  google has their new virtual reality glasses coming soon, stop fretting over silly things....

 

http://www.google.com/trends/hottrends

Thu, 02/21/2013 - 02:50 | 3262448 IridiumRebel
IridiumRebel's picture

If your gonna buy a pair of 1600 dollar glasses that can spout of a positive Yelp review on the restaurant your looking at across the street I say kudos, sir. Kudos. You are living the dream. I will, however need to upgrade my 42" Panasonic. It is like 5 years old now.....

Wed, 02/20/2013 - 21:25 | 3261843 jballz
jballz's picture

Zero hedge,

Where stock market emos go to cut themselves and share their poetry of despair.

:(

Lol.

Wed, 02/20/2013 - 21:43 | 3261881 ebworthen
ebworthen's picture

WallMart Street, where Elmo's go to play pedophile with our children and grandchildren's future, with the help of Ben "Big Bird" Bernanke.

Thu, 02/21/2013 - 01:04 | 3262321 jballz
jballz's picture

That is so sad. You should write a song.

I cried today too.

:(

Thu, 02/21/2013 - 02:45 | 3262441 IridiumRebel
IridiumRebel's picture

I'm sad. I will now buy a McMansion and place my dwindling paycheck into this most noble stock market where my wealth will find infinite gains because on a long enough timeline......

Wed, 02/20/2013 - 22:15 | 3261957 Ned Zeppelin
Ned Zeppelin's picture

Be sure to check back in After The Fall so we can emo you to death with the I Told You Sos.

LOL.

Thu, 02/21/2013 - 01:08 | 3262328 jballz
jballz's picture

That is so sad. You should write a song about it.

:(

I cut myself today too. To see if I could still feel.

I told you so,
I told you we were doomed
I told you the green shoots would never bloom
All those dead presidents didn't bring us riches
I told you so
Zero hedge emo bitchez.

:(

Yes I am mocking you.

Thu, 02/21/2013 - 03:18 | 3262466 IridiumRebel
IridiumRebel's picture

jballz? Alls well swell yet uncertain
So tick off the seeing and hurtin'.
Little bitch little bitch let me in
Net fantasies, a pansy dancing close to those
Who understand but disband when the invisible hand lands
Is that your masters finger in your butt ya fucking puppet?
Muppets love you. Goldman Sachs of shit are legit in your eyes
You're fed what's said then led astray ashtray baby head
Smoke on to the plastic filter as you smolder in his mouth.
He sucked you. You let it happen....you happened.
And now you're nothing but saliva; drool.
Jballz, you fool.

-emoticon

Thu, 02/21/2013 - 03:23 | 3262469 ebworthen
ebworthen's picture

jballz,

Creativity: 2/10

Reasoned rejoinder index:  0.01/10

Wall Street dipshit who will be jumping when his delusions evaporate index:  10/10

Sorry, you didn't pass, but make sure it is from 10 floors or higher.

Wed, 02/20/2013 - 22:31 | 3261993 SmallerGovNow2
SmallerGovNow2's picture

suck my ballz...

Wed, 02/20/2013 - 23:43 | 3262185 gwar5
gwar5's picture

ZH because we get to look over the Bernank's shoulder as he destroys the rest world as we know it.

 

Thu, 02/21/2013 - 01:36 | 3262366 Savyindallas
Savyindallas's picture

go to hell-asshole

Thu, 02/21/2013 - 02:12 | 3262412 jballz
jballz's picture

 

:(

 

yes, the anger helps the pain.

you should write a song about it.

you could call it

"Im the Angry ZeroHedge Emo, Bitchez."

 

:(

Thu, 02/21/2013 - 03:25 | 3262471 ebworthen
ebworthen's picture

Timmy?  Jamie?  Blankfein?  Pisani?

Thu, 02/21/2013 - 02:40 | 3262432 IridiumRebel
IridiumRebel's picture

JBallz

Another dude coming to pick a fight amongst the stock market bears when he knows that the whole thing is a house of cards but needs anonymously reaffirm it to himself so that he may feel better not if but when it collapses.

Maybe your an insider and will know when the design reaches the end. Maybe you will be nimble. Maybe. The simple psychological fact that you are here to pick a fight shows how uncertain you are and thus we know your hand. I hope you're nimble. I am mainly cash as this unicorn sick of market has almost fully blown its load. The hedgies are taking profits. May go to 15 or 16, but the fundamentals are hogwash. Math is certain. The computer model will fail and we will join here with our poetry and Fuck You's.

Thu, 02/21/2013 - 04:25 | 3262501 jballz
jballz's picture

 

I predict you spent Dec 31st 1999 in a concrete bunker with 7 years of tuna and a wind up shortwave radio.

 

It's not about bears, or bulls.

It's emoooooos.

 

:(

Bernanke. Waa.

I don't know I like the site but don't you all get tired of the fucking whining all the time? 

Bernank. Meh.

 

You knwo who is a fucking puppet?

Bernank. 

But you all sit and watch him like good little consumers, you play right into it.

like...

Emo bitchez.

 

Wed, 02/20/2013 - 21:26 | 3261848 ekm
ekm's picture

As I've been saying over and over and over and over:

 

GOV + FED + PRIMARY DEALERS HAVE BOUGHT UP EVERYTHING.

Nothing left to trade. Good bye markets....bye, bye...........

Wed, 02/20/2013 - 21:34 | 3261862 trollin4sukrz
trollin4sukrz's picture

Are you shittin me? Nothing left to trade? I will trade 5 .22 shells for a blowjob in about 5 more weeks if this shit keeps going like it is.

Wed, 02/20/2013 - 22:14 | 3261955 Boozer
Boozer's picture

Paid $42 for 500 lr22 last week!  Previous box $33...box before that in the 20's.

You get the idea.  Also one box per customer when available.  Forget 5.56/.223...

cannot be found anywhere in Ct.

Wed, 02/20/2013 - 22:28 | 3261988 EINSILVERGUY
EINSILVERGUY's picture

those who want to play will have to pay

bulkammo.com has 9mm and 5.56.  I had to pay over $500 for 1000 rounds of 9mm.

 

I figured better to have it and need it and not. Won't matter how much it costs if you need it

 

 

 

Wed, 02/20/2013 - 22:34 | 3261998 King_Julian
King_Julian's picture

In VA, going rate is $1/rnd of 5.56. Six months ago it was .30/rnd. Best ROI I ever got.

Wed, 02/20/2013 - 22:26 | 3261982 HowardBeale
HowardBeale's picture

I'll give you four. Five next time, if you're good.

Wed, 02/20/2013 - 23:30 | 3262146 S.N.A.F.U.
S.N.A.F.U.'s picture

I think trollin4sukrz's intended meaning was that trollin4sukrz would pay for a service, but then again, sometimes these things work out better than expected: http://www.youtube.com/watch?v=t4Ycbm1OfaI#t=22m03s

Thu, 02/21/2013 - 01:34 | 3262363 Savyindallas
Savyindallas's picture

Damn  =blow jobs used to cost 30 or 40 22 shells. Ammo is truly the new gold

Wed, 02/20/2013 - 21:30 | 3261857 jackinrichmond
jackinrichmond's picture

great article, but i'm not sure if i agree with his thoughts on gold though .. (from the link in the article)

"There is nothing intelligent to be said about gold. Nobody can tell you the right price for an ounce of gold. People will tell you it should go up or go down. To make any intelligent statements about investments you have to know what the right price is. You can’t do that with an asset like gold, which doesn’t produce any cash flow. So you can buy it out of superstition or ignore it because you are an atheist but you cannot buy it with an analytical foundation."

..if you lease your gold, does it not create a cash flow ?

..don't people argue about the prices of all commodities, stocks and bonds ?  that's the essence of price discovery.

..i'm not sure what he means by 'right price' (of gold)..  the price is determined by the buyer and the seller.. isn't that the 'right' price?

Wed, 02/20/2013 - 21:58 | 3261917 Water Is Wet
Water Is Wet's picture

+1, he's just another dickhead with an opinion, and he seems very dedicated to "cash flow," i.e. he is a well trained rent-seeker.

Wed, 02/20/2013 - 21:31 | 3261858 disabledvet
disabledvet's picture

There is nothing wrong with pausing and pondering just how much money actually is being made in times like these as well. That's what falling gold prices really means...that money MEANS something. While sure...we can laugh at the debt people incur...but we have MARKETS in debt now! Forgot "the value of your gold" for a moment and ponder the significance of "nobody knows the value of their house right now." One could argue the entire planet is based off the price of what people claim "that house over there is worth." But what if they were not only wrong in 2008...but are even MORE wrong today? Japanese property values have declined in actual yen terms 90 PERCENT off the bubble high...20 YEARS AGO. http://www.youtube.com/watch?v=xR9HuRUUTbs

Wed, 02/20/2013 - 21:49 | 3261873 trollin4sukrz
trollin4sukrz's picture

I have a simple plan for the future. Move in to any abandoned mcmansion with a fireplace and burn all the available wood from the inside walls until the roof starts to sag and then move to the next. Easy to stay warm for a shitload of years while eating the pets. Learn to cook cat over an open flame.. what could be simpler? Remember to buy your salt from Costco.

Wed, 02/20/2013 - 22:13 | 3261953 MisterMousePotato
MisterMousePotato's picture

I gave you an up arrow ... and I am very fond of cats. In actuality.

Thu, 02/21/2013 - 02:34 | 3262427 Notarocketscientist
Notarocketscientist's picture

Don't forget to have a PISS AND SHIT IN THE CORNER party. 

Wed, 02/20/2013 - 21:34 | 3261863 scatterbrains
scatterbrains's picture

If I were Japan I'd be afraid niggas are conspiring.

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