The Bordeaux Effect

Tyler Durden's picture

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

I have seen it before. God willing, I will see it again. A world that is dislocated, on a different axis, where the economy is doing one thing and the markets are doing something else that is not connected. After almost forty years on Wall Street I have seen a great many imbalances. None quite like this one though; none as distorted.
As political nonsense becomes the world's normal banter; the official language in the Press is little more than printed or spoken noise.
It is all caused by the Fed's outpouring of money into the system which has caused carnage for savers, investors and has pushed the equity markets past anyplace that the economy can rationally support and caused bond compression that is frankly, dumb. The employment numbers on Friday are a good indicator of the real economy; a real unemployment rate of 11.6% that has been fictionalized by the amount of people no longer in the work force so that the data is seriously skewed towards political fantasy.
The world will return to its senses once again either driven by some "event" or by the Fed beginning some sort of withdrawal. In the meantime the markets are beginning to back-up some as moved by becoming accustomed to the continuing flood of money. It is rather like a fine Bordeaux. One meal, two meals, a week's worth of meals and the experience is marvelous but if you drink it every night for dinner the magic begins to dissipate. It is no longer special; it is something expected, it is just the normal fare.
Rational reactions become irrational when confined to an irrational world. We live in such a world at present. The money created must go somewhere and so it does which causes the soaring markets while not improving the American economy enough to justify it. If nothing else we have all now gotten to see what the unlimited creation of little blue and green pieces of paper does to the world. The outcome, so long wondered about by any number of economists, has now been proved but I fear the magnificence of the Bordeaux is wearing off and may turn to vinegar before it is all consumed.
"Irrational exuberance" has returned and in a bigger way than before. It is not this market or that market but all of the markets that have been afflicted by the new money that has been created. It is too much paper and a trash bin that has grown no larger and so it spills out and blows about in the wind. Japan has now joined the fray and so there is no region left on Earth where they have not learned the trick of mixing water with pulp and calling it money.
It may be an "event" but it may just be the "Bordeaux Effect" that turns the ship one night as we are all sleeping.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Arrowflinger's picture

Mad Dog 20-20 will be $150 per bottle?

GetZeeGold's picture



Corn whiskey moonshine.....get some sugar before it goes off the charts.

duo's picture

if you're using cane sugar, you're making rum instead.

BandGap's picture

Try Spike Your Juice and a 64oz of Welch's Grape Juice. A half gallon of fun in less than a week.

SheepDog-One's picture

Sleeping? Who can sleep anymore?

Must take a lot of Bordeaux.

SWRichmond's picture

The world will return to its senses once again either driven by some "event" or by the Fed beginning some sort of withdrawal.

The Fed is the "bad bank" and cannot withdraw.  When it implodes, it will take USD and all USD-denominated paper assets with it.  That is its' purpose.  The signal will be when the asset-stripping of real assets by the "member" banks has started to taper off and become less profitable.  This is what you should watch for.

DeadFred's picture

That leaves "the event". Man-made or natural. You can feel it coming and it feels close so I shy away from natural. If man-made there will be front running. I'm wondering if the sell-off of PMs when everything screams BUY is part of that front running. Soros says he's not expecting gold to drop and if Soros's mouth is moving he's both lying and talking his book. Hold tight if there is a drop, it won't last long.

mind_imminst's picture

Exactly SWRichmond, as things look right now, the FED cannot withdraw, anytime soon, if ever. I can't believe how many people speculate that the FED is going to "ease up on easing". There is a Bordeaux effect going on an the FED is going to solve it by just "drinking more Bordeaux", exponentially more Bordeaux.

fonzannoon's picture

exactly. no one sleeps anymore.

Pharming's picture

And yet one more analogy...

"Bordeaux Effect" = "Lengthy marriage with violent spouse"

Great in the beginning, laughing, love, glow around each other, then it changes...the newness wears off...things happen.  You begin to feel like something is not right, how can they treat me like this? then sexless, boredom, and when will it ever end. 

Only thing to pull you out of the depression?  Wake up.  Your vision is warped, it was your initial vision of this love affair...the lust that was incorrect.  It's time for a divorce from this sexless marriage.  End the fed.  She is not what she appeared to be in the beginning.  She is a heartless beeeeatch... Get out while you still can.

francis_sawyer's picture

That's just about the time that [internet porn/bitcoins] come along...

Pharming's picture

Porn / of the same.  Imaginary.  Hahaha.  Either way, you must get out of this toxic marriage and get back to reality.

Flakmeister's picture

Thats why you have mix in some DRC every now and then....

Edit: seems at least one person got it...

SheepDog-One's picture

Mark gets it wrong, lot's of little pieces of paper weren't created, just more decimal places added on a screen....and any moron could tell you more added zero's make a number look bigger, but that's all that's been done here. 

It's really like a Bordeaux bottle filled with warm flat 3.2 beer, even backalley winos wouldn't drink it.

A Nanny Moose's picture

What is the historical price of the real thing in ounces of gold?

NoWayJose's picture

And the end result of too much Bordeaux is always that you wake up the next day with a hangover, and realize you are just pissing it away...

Bicycle Repairman's picture

"The world will return to its senses once again either driven by some "event" or by the Fed beginning some sort of withdrawal."

Not this time.  Returning to senses is not on the menu.  It's inflate or war.  Or inflate, then war.  During the war many will be rendered senseless.

SheepDog-One's picture

Good news though, earlier article says 'inflation' is expected to come in much cooler than 'expected' we're having our MD 20/20 and drinking it too! Goodbye, brain cells.

Sandy15's picture

There is video tape of Obummber's speech in March or April of 2009, were he said 'you will not be able to judge the economy based on stock market moves'.  This caught my attention because I trade the market, but NO one in the Lame stream media asked him about it.

SheepDog-One's picture

We've been thru 4 decades of 'markets' being nothing but 1 bubble pump and burst to the next....nothing new about this except it's the biggest bubble ever.

Die Weiße Rose's picture

I am afraid this patient has gone way beyond some "Bordeaux Effect"

in fact these are the symptoms of advanced stage cronic addiction 

with compulsive and damaging behaviors....

we need more,more QE more stimulus more Debt more floods of Debt

to overcome our addiction to stimulus and Debt.

Give me more,give me more,then I will pay you back,

just give me a few trillions more and then all will be good.

I promise...



IamtheREALmario's picture

The money created must go somewhere and so it does which causes the soaring markets while not improving the American economy enough to justify it.

The way I understand it, the money that is created out of debt is supposed to DISAPPEAR when it is paid back. A bank creates a billion dollar loan and then when the principle is paid off it just disappears because it never really existed except as edbt. The same should apply when the Fed buys the loan, paying the bank 1 billion dollars plus some negotiated amount for the future interest. The billion dollars of principle is supposed to "POOF" away because it did not exist before the loan was created.

The US government never pays back its debt. They just roll it over. So, the majority of the NEW money coming into the system should be coming from the trillion plus dollars Obummer spends in excess of tax revenues plus the increase in consumer and commercial debt.

However, I am wondering if when JP Morgan sells some of its poorly performing portfolio to the Fed, they just keep the principle and buy stawks with it instead of making the money go away as it should.

The Abstraction of Justice's picture

Economics is bollox, mainly because it cannot quantify currency. Economists say 1 - 1 = 2, which translates as your argument above, debts owed between two parties of the same value, sometimes cancel each other out, and sometimes add together. No wonder with maths like that all the banks are insolvent.

shovelhead's picture

Terminal cirrhosis is the result of swimming in a vat of Bordeaux.

Stuck on Zero's picture

Terminal neurosis is the result of swimming in a vat of bankers,