"Do You Believe In Miracles": IceCap Asset Management Monthly Letter

Tyler Durden's picture

From IceCap Asset Management

Do You Believe In Miracles?

The odds of winning were slim and none. Avoiding embarrassment was the real objective, but then something happened. Momentum changed and the rag-tag bunch of American college hockey players shocked not only the Soviets and their 1980 Big Red Machine, but the entire sports World.

When seemingly faced with the impossible, America always perseveres and finds a way to win. After winning the global economic game for the better part of 100 years, America is once again on the ropes and no one is giving her any hopes at winning, or even surviving for that matter.

America’s debt levels are disastrous. It has no money to pay future pensions and healthcare. Economic growth is anemic. Meanwhile, more Americans than at any other time in history reply upon food stamps. And to make matters even more dire, it is only the decision to print trillions of new dollar bills that is holding everything together.

Just as America’s rock is about to hit its American bottom, you must ask “Do you believe in miracles”? And, the short answer is – yes.


Unfortunately, there’s also some bad news. This upward surge in USD does not reflect a surging US economy or an improving fiscal condition. To see the canary in the American coal mine, look no further than Chart 1.

Ultimately, once the effects of money printing and the poor handling of debt levels has played itself out in Europe, Britain and Japan, the US too will bare the brunt of its similar strategies. For now however, the US is last in the long line of financial heart ache.

To fully understand how the global debt crisis plays out however, investors must be willing to step outside of their own domestic  economy and financial markets, and view the World from an independent perspective. Unfortunately in financial analysis, all too often  investors become one or two dimensional at best. To really up your investment game, you need to broaden your perspective and see  through the daily grind of financial pomp and circumstance.


While we disagree with recent conjecture that central banks will one day soon put an end to their money printing ways, one thing is certain – the effect on emerging markets will not be kind. While much discussion is focused on US domestic financial markets, the American withdrawal of liquidity will have a severe effect on emerging markets.

To further expand your financial horizons, one must also be contemplating the effect of Japan’s newly embraced money printing  programs. Whereas America has committed to printing $2.67 billion a day to help create a few jobs, the Japanese have taken money printing to an entirely new level. Their program has one goal – significantly decrease the value of the Japanese Yen.

Think South Korea and other Asian exporting countries are happy with Japan’s attempt to drastically cut the value of the Yen? Not a chance. You can be certain that as the Yen continues to weaken, South Korea and others will also attempt to debase their currencies. And just to be clear, there is nothing like a good old currency crisis to help nudge money to safer areas.

Understanding how these dynamics play out is the key to correctly forecasting the long-term direction of financial markets and why ultimately the US Dollar will strengthen relative to the Euro, Yen and British Pound.


Full presentation below

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ozzz169's picture

Saddest thing is the asshole politicians in Washington, and the lame stream media will praise that they are doing the right thing... just look how low are bond yields are and how high are stock market is. 

draug's picture

"America always perseveres and finds a way to win" - that's hopium defined right there. "We perservered againt the odds at one instnance in history, therefore we will continue to perservere against all odds in perpetuity."

bank guy in Brussels's picture

This was a lightweight superficial presentation from IceCrap

- It says Europe is a mess ... no shite, Sherlock

- It claims that because Europe, UK, Japan are a mess ... the US dollar and treasuries will boom, as the least dirty shirt in the closet

No mention at all of how the US dollar is quickly losing its role as the reserve currency, with half the world setting up direct currency swap lines bypassing the dollar ... with corresponding rejection of the increasingly toxic US Treasuries

In other words missing the big elephant in the room, the theme that is the core of Jim Willie's fire and brimstone rants ... the dollar as reserve currency is ending, the petro-dollar is ending, and with that the US Treasury bond tower is in danger of collapse too ...

It's not enough to just say 'the euro is a mess, so the dollar and Treasuries will be great!'

ZerOhead's picture

“Do you believe in miracles”? And, the short answer is – yes.


And 77% of Americans believe in Angels. So there's no need to worry then since the Angels will undoubtably bring us that miracle...


willwork4food's picture

Youse got a problem with my Angels?

eatthebanksters's picture

My dad once told me that," The cream always rises to the top", to which I responded," Yeah, well shit floats too!"

t0mmyBerg's picture

The piece reads as if it was written by someone for whom English is a second language. 

Interesting point about the petrodollar system, but part of the reason it is collapsing is that we are importing much less oil and so there are fewer dollars sent abroad to be recycled.  Smaller supply of dollars abroad should be dollar positive.  Set that against the attempt by some to trade without going through dollars which would be dollar negative.  Someone big like China and Australia going outside the dollar system will ultimately result in war.  Just ask Saddam.

Socratic Dog's picture

Umm, Ibelieve China/Australia have just gone outside the dollar system for their trade.

The Alarmist's picture

Cue Barry Manilow ...

"It's a miracle,

a true-blue spectacle,

a miracle come true, Ooh!

Ooh ooh ooh!"

Hulk's picture

Hot Chocolate, you sexy thing (I believe in miracles)...


smlbizman's picture


i prefer my miracles from jefferson starship...

RopeADope's picture

Reminds me of Fed research papers which cherry pick data and extrapolate ad infinitum.

BigJim's picture

 "America always perseveres and finds a way to win" - yup, as demonstrated in Viet Nam

F22's picture

Perhaps a more appropriate quote would be Winston Chruchill "You can always count on Americans to do the right thing....after they've tried everything else."  I'm afraid that this time, "everything else" will include printing and denial until the dollar collapses....maybe then a majority will come to their senses.  I doubt there's much chance it will happen before then.

JustObserving's picture

Hey, US unfunded liabilties are $123.46 trillion today and not $60 trillion as you state.  They grow at $6.9 trillion a year.

Even Richard Fisher of the Dallas Fed had them at nearly $100 trillion in 2008.

Kotlikoff has them at $222 trillion.

Where do you get $60 trillion?

Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four—over 25 times the average household’s income.

Richard Fisher, President and CEO of Dallas Fed, May 28, 2008




smlbizman's picture

especially the gazintas.......like 2 gazintas 6....

The Alarmist's picture

Well, they aren't really entitlements; they're just sort of vague commitments to maybe take care of people or something like that, so we don't have to show them on the balance sheet as unfunded liabilities.  The debt is only $12 Trillion ... I know you think it is $16T, but we also don't have to count the other $4T that we borrowed from the Trust Funds.

So get over it already.

kennard's picture

Even the $12 trillion will only need to be repaid in newly-printed and inflated "dollars". Health care will be down-graded and rationed. Social security eligibility will be phased-up to age seventy-two. The CPI will replace steak with rice & beans: it's healthier. No one will need to work. The PRC will handle our defence and government.

What's not to like about that?

The Alarmist's picture

Well, I guess it's not so bad if they toss in a pack of Beano.

RopeADope's picture

You up your game by using funny math.

BigJim's picture

Sorry if this is a stupid question - but over what time period do these unfunded liabilities come due?

I mean, my mortgage is multiples greater than my annual income, but paying it is spread over 20 years, so it's not really a problem. 

MrBoompi's picture

They could fund SS by simply increasing the salary cap and we could cover more people for half the money by passing single payer. But the wealthy cant have everything if they don't take everything. The unfunded liabilities argument is complete horseshit. Like you say, if I put down 10% on a home mortgage, does that mean I've created an unfunded liability?

Anonymous peon's picture

Or they could just shitcan the whole fucking ponzi scheme.

Black Markets's picture

Newsflash:: Unfunded liabilities will not be funded.


They will simply re-write the entitlements 5 minutes before the country needs to cough up.

It's called 'brinkmanship', it's how you get the political capital to effect change.


Anyone relying on the unfunded entitlements is a dumbass. They are a mirage, and will disappear as soon as someone tries to touch them.

spinone's picture

Unfunded liabilities are like bank deposits.  As long as nobody wants them, they're fine.

Same with house values.  As long as everyone doesnt' sell their house, they don't go down.

Same with the S&P500.  It keeps going up as long as the currency is debased.

Its like Schrodenger's cat.  You don't know the value of what you have until you open the box.

Black Markets's picture

They're bad fucking news because they give people the illusion of security.


In reality anything that is unfunded is not going to happen. The government isn't going to default on its bonds whilst they can simply screw the little guy out of his medicare.

People need to make provisions on the assumption that all of the unfunded liabilities are going to be revoked as soon as anyone needs them.


They are nothing but empty promises, designed for crowd control and nothing more. There is no point pricing in the unfunded liabilities because they are not redeemable.

BigJim's picture

I see where you're coming from, but I think you're wrong.

Yes, the US government won't default on their bond obligations - at least, not nominally. So QE will continue.

But no, they won't default on SS, because there'd be a revolt - too many of the voting sheep rely on these handouts, and I don't see the majoritarian puppet show being suspended anytime soon - there are simply too many guns in private hands out there. If they suspend 'democracy', then there WILL be a revolution. So the farce must be maintained, the sheep must continue to believe that 'they' are the government.

So here's what I think will happen. Barring some technological game-changer, they will continue to deficit finance their obligations. More capital misallocation will occur. We'll get poorer. Inflation will start ticking up. They'll keep changing the definition of steak until it means catfood, to hide the rise from CPI calculations, but eventually no one will be fooled anymore and they will start taking more of our property as collateral in an attempt to sterilise the inflationary effects of the ballooning money supply. This probably won't be in the form fof outright confiscation but via taxation.

This is why I think owning large amounts of land or any other easily tracked asset is going to be very costly. It's too easy for the government to steal. 

aerojet's picture

Old people aren't going to revolt.  They're going to grouse and complain, but they have no ability to revolt.  Most of them can't be more than ten steps away from a toilet.

McMolotov's picture

Its like Schrodenger's cat. You don't know the value of what you have until you open the box.

"Yo! Schrödinger! Why's your box smell like ass?"

lotusblue's picture

Jubilee  ?  Lets see Dallera strong arm these payments !

kaiserhoff's picture

I would love to "reply upon food stamps."

Where do I sign up?

Peter Pan's picture

I, for one, do believe in miracles. How else do you explain the US economy having such a charmed existence despite its incredible debt, incredible deficits, incredible wars, incedible obesity, incredible unfunded liabilities, incredible wealth disparities?

Yes, it is a true miracle that not only the USA is still standing, but a miracle that the rest of the world continues to allow itself to be  fed useless dollars as part of this process of propping up the unsustainable imbalances we are witnessing.

BigJim's picture

Reading your post, I was rendered incredulous by its naivety... until I read ...a miracle that the rest of the world continues to allow itself to be fed useless dollars...

Well played, sir. 

Hedgetard55's picture

ICECAP = shit for brains douchebags. Listen to them and lose everything.

McMolotov's picture

"I believe in miracles! Where you from, you sexy thang?" — Paulie "Special K" Krugman

Seasmoke's picture

And Herb Brooks is still dead. If he comes back , now that would be a miracle.

Hedgetard55's picture

Brothers, hop into the Nikkei... they are doing what Ben did to us for four years... transferring wealth from the middle class citizens to the stockholders... free money... take advantage of it... and yes the yen will depreciate, cutting into real gains, but even if denominated in dollars you will still make money becuase the boyz will frontrun the BOJ and juice the Nikkei way before the yen depreciation affects prices. My Japan fund is running like a scalded dog... fuck the average Jap... all your savings are belong to me, Nipponese motherfuckers... payback for Pearl Harbor.

CrashisOptimistic's picture

Why would the yen fall?

Everyone else is printing, too.  Why is Japan printing any more depreciative than US or England printing?

Stop thinking in terms of currencies.  Think in terms of calories or joules, because in the end those are the only yardstick.

Hedgetard55's picture

Well, it has fallen 10% in the last few days, but maybe you are right and it comes roaring back, even though the BOJ is determined to go full retard, you make EVEN MOAR MONEY.

adr's picture

Yeah, think how rich you'll be when a half litre Kirin draft costs one trillion Yen.

wcvarones's picture

Look at the bright side: we're all going to be millionaires!

The Alarmist's picture

Damn! I was kind of hoping to finally make it to Billionaire.

monopoly's picture

Good article. If correct, it looks like we will never be able to short stocks again and we have to continue to be patient with gold, silver and the miners. Not sure if it will play out the way they envision. What happens if our society continues to implode at the rate it is currently? Do investors really want to put money in a dying capitalist environment? Are those on food stamps and disability going to tell the govt. "please, no more checks, it is time for me to do my share for America". I think not. We have an aging population, including me, no manufacturing basis anymore and companies have learned how to make more profits with less full time employees with 0 benefits. That is not going to change. And we have idiots running the country. Tough case for our "Hockey Team". Do agree we will be the last ship to sink, but the Icebergs are out there. Be careful.

But I am not changing anything. Like what I got and somehow just cannot force myself to buy AMZN NFLX of CMG. Call me cautious.

adr's picture

The earnings aren't real, the sales aren't real, the profits aren't real even the tits of the CEO's wife aren't real. Her ass probably isn't real either.

Corporations are only solvent from a specific point of view of not counting certain tings, double counting others, subtracting losses, adding 30 year gains from bonds righ now, pre booking sales, and many other accounting tricks that make it look like a collection of fucking retards with no skills are running a multi billion dollar enterprise.

The economy is now 100% perception. If a company is percieved to be solvent, this perception will allow it to borrow indefinitely.

Do you really believe Herbalife is a profitable corporation? Do you really believe they sell 1/100th of what they claim? I've done the numbers and it is impossible.

LuLu Lemon? Somehow selling that amount of product through just over 100 stores, not possible. Kevin Plank at Under Armour must not have a very good CFO. UA is in thousands of doors with 10x the invnetory Lulu can create, yet Lulu's market cap is double Under Armour. Total bullshit.

The #1 volume product checked out at Dick's Sporting Goods in 2010 was worth $20 million retail for the year. That is a lot of ground for the rest of the products to make up to bring in a couple billion in revenue. It really isn't possible. Again the revenue is all fake. The number reflects booking all shipped inventory as sold. Actually booking about half the sale, then booking the rest if the product actually does sell to a consumer.

Lmo Mutton's picture

No problem, I got it.

Now where is that $250 Trillion platinum coin I left leaying around here?

geewhiz's picture

Rome kept bouncing around for a long time before it finally died. Who knows if there will be a mass awakening back to freedom or a transition from Huxley to Orwell. America was once strong, she might die hard, humans are fickle, anything can happen.

adr's picture

The next president will try and convert America to the religion of The Force after watching Star Wars VII in a desperate bid to remain relevant to the younger generation. Like Constatine he will try to unite the two competing visions of America and keep the republic together for a short while longer.