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El-Erian's Summary: "Virtually Every Market Is Trading At Very Artificial Levels"

Tyler Durden's picture


"In order for central banks to achieve their ultimate economic objective - which is growth and jobs - they have to push investors into taking more risk than is justified," is the somewhat chilling warning that PIMCO's Mohamed El-Erian gives in this excellent interview with the WSJ. "Central banks are operating through the wealth effect and animal spirits," El-Erian says peeling back the truth onion, as they prop up asset prices to "artificial levels, in virtually every market." Worries over the central bankers of the world withdrawing easy money policies too early are "unwarranted," he notes, adding that he suspects, "they will most likely stay too long and they will consciously make that mistake." Critically, though, he sends a message that appears to fit with many of our recent discussions (most recently here) that "if these levels aren’t validated by the fundamentals, then investors will get hurt."



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Tue, 04/16/2013 - 19:49 | 3458688 Seasmoke
Seasmoke's picture

How do you say, NO SHIT, in Arabic

Tue, 04/16/2013 - 19:54 | 3458694 thismarketisrigged
thismarketisrigged's picture


wow, i really thought these prices were actually fair value for stocks. i didnt see any artificial inflation in this great stock market.


its all up on the '' great'' fundementals we have had of late 




i just hope this crash happens soon, but from what we have seen too often with every down day followed by a monster up day, its going to be tough as long as ben is the head of the fed

Tue, 04/16/2013 - 20:02 | 3458751 zorba THE GREEK
zorba THE GREEK's picture

When every game is rigged, soon no one will show up to play. 

Tue, 04/16/2013 - 20:07 | 3458776 Manthong
Manthong's picture

But also, how do you say SHERLOCK in Arabic?

Tue, 04/16/2013 - 20:31 | 3458867 BigJim
BigJim's picture

 Interviewr: "will we see a QE3?"

Er, what? When did this come out? 

Tue, 04/16/2013 - 20:46 | 3458931 espirit
espirit's picture

WSJ rerun from 2011.  See page 2 posts for link.

Tue, 04/16/2013 - 21:50 | 3459124 Ahmeexnal
Ahmeexnal's picture

Bitcoin trading artificially high today:

Sadly, thousands of argentines, cypriots, greek, spaniards, italians, french, dutch, and other people who bought into the bubble over $250 after being deluded by BTC trolls have now lost all their life savings.

Wealth transfer from the sheeple to the oligarchs, one bitcoin at a time.

Tue, 04/16/2013 - 23:58 | 3459528 TraderTimm
TraderTimm's picture


Yeah, we get it - you don't think bitcoin has a place in our government-dominated world.

The best part is -- that isn't up to you.

Wed, 04/17/2013 - 09:24 | 3460380 ATM
ATM's picture

?? ?????

Tue, 04/16/2013 - 20:12 | 3458793 howenlink
howenlink's picture

Long Playstation and Nintendo.

Wed, 04/17/2013 - 06:19 | 3459945 Greyhat
Greyhat's picture

Long taxes! :)

Some cash demand for paying taxes seems to be enough to break bot dominated "markets".

Tue, 04/16/2013 - 20:14 | 3458804 HD
HD's picture

"When every game is rigged, soon no one will show up to play."

The WWQE wrestlers show up. Fundamentals are the ropes and gettin' a beat down.


Wed, 04/17/2013 - 08:37 | 3460177 Imminent Crucible
Imminent Crucible's picture

You gotta understand the difference between a game and a show.  The wrestlers are paid to show up and "play". The Fed has destroyed our capital markets by paying the primary dealers to show up and pretend to be battling each other, when it's all about taking your money to cover the craters in their balance sheets.


Tue, 04/16/2013 - 20:45 | 3458927 lotsoffun
lotsoffun's picture

so wrong and been proved for 5 years now.  the game is rigged, just like power ball and mega whatever.  the primary dealers borrow for zero - and check out the interest rate on your student loans and credit cards.  that's not what they are advertising as 'recovery'.  so check out the interest rate on your 'recovered' mortgage and auto loan.

the primary dealers are into play everyday and there is basically no way but up.  and eventually the muppets get in, because it is all looking just so good.  and right now - they've been told not to sweep the table.  too much.  but i bet if you did a look at who sold the last few days - and then who bought back cheap, was it the muppets?  primary dealers make money on volatility, not everyday up.

can you really believe the last few years statistics like - gs, ms, bac, jpm, c made profit EVERY SINGLE TRADING DAY OF THE QUARTER FOR 4 QUARTERS??  really.  wow - what genuis bunch.

wake up.


Tue, 04/16/2013 - 19:50 | 3458696 Stoploss
Stoploss's picture



I think you have to scream it to get the proper effect.

Tue, 04/16/2013 - 19:59 | 3458701 razorthin
razorthin's picture

Here's how you write it anyway:!

Tue, 04/16/2013 - 20:23 | 3458835 B2u
B2u's picture

Press the lower right speaker to hear how to say it.

Tue, 04/16/2013 - 20:47 | 3458938 razorthin
razorthin's picture

Thank you.  My mother bore me head to floor and rendered me incapable of reading universal symbology.  Fortunately, I can program lower level languages.

Tue, 04/16/2013 - 19:58 | 3458741 prains
prains's picture

How do you say, NO SHIT, in Arabic


Smelly Snackbar, Smelly Snackbar!

Tue, 04/16/2013 - 20:15 | 3458810 stocktivity
stocktivity's picture

Hey El...what you're saying is "It's all Bullshit!!!"   I've been saying that for a lot longer than you.

Tue, 04/16/2013 - 20:24 | 3458841 dcohen
dcohen's picture

U say, "La lo zaki", which means something similar to "No shit smartass".

Tue, 04/16/2013 - 20:40 | 3458894 Kirk2NCC1701
Kirk2NCC1701's picture

?? ????  The Arabic for 'No joking' got replaced by these question marks.  So sorry.

Tue, 04/16/2013 - 23:52 | 3459504 yogibear
yogibear's picture

It took him this long to state the obvious.

Tue, 04/16/2013 - 19:53 | 3458690 razorthin
razorthin's picture

"if these levels aren’t validated by the fundamentals, then investors will get hurt."

Jesus, Mohamed.  Wasn't that stake in the ground long ago??

Tue, 04/16/2013 - 20:17 | 3458818 DeadFred
DeadFred's picture

Dang, they trot El Erian out to spout his stuff when they want little guys to sell so the inside money guys can buy cheap. I want to see something that says the big money guys are scared.

Tue, 04/16/2013 - 22:07 | 3459172 NoDebt
NoDebt's picture

Lot of company insiders cashing out recently and very few buying.  Not that they're much smarter than anyone else, but it's looked on as a signal by many.

What I know is that people sell for many reasons.  But they only buy for one.

Wed, 04/17/2013 - 01:33 | 3459699 Common_Cents22
Common_Cents22's picture

yep, flush out gold, flush out little guy, then Ben will slap a turbo on the money pump.   to the moon alice!!!!

Wed, 04/17/2013 - 08:41 | 3460184 Shizzmoney
Shizzmoney's picture


I want to see something that says the big money guys are scared.

This wont happen until a bank CEO is killed, or a bank is bombed.

If you are talking about market "risks" to big money, ain't happenin'.  That's why they pay off their cronies in government via lobbyists and stocks - to get their bailouts.

Tue, 04/16/2013 - 20:48 | 3458943 insanelysane
insanelysane's picture

But the new fundamentals include Banksta Ben and infinite QE so there is validation.  The Fed can stop QE but can never unwind it.  At least not this century.

Tue, 04/16/2013 - 19:55 | 3458716 scatterbrains
scatterbrains's picture

So the spin is  Mr Bernank is doing everything he can to create jobs and it's not that he's pumping stocks up to help his buddies dump out at higher levels.  So when it all comes crashing down after the connected have unloaded first of course,  we're all suppose to be thankful that nice man Mr. Bernank tried his best for us. 

Tue, 04/16/2013 - 19:55 | 3458721 TheMonetaryRed
TheMonetaryRed's picture

And what are the fundamentals of gold? 

Needed by whom for what at what price?

The party's over. 


Gold to $900

Tue, 04/16/2013 - 20:05 | 3458768 espirit
espirit's picture

...and that would put spot silver at what?  Considering the everpresent >60 to 1 ratio...

It'll never fuckin' happen.

Tue, 04/16/2013 - 20:18 | 3458825 TheMonetaryRed
TheMonetaryRed's picture

1. Silver has already gotten clobbered badly. 

2. There is no such thing as an "ever-presernt > 60 to 1 [gold/silver] ratio"


SIlver goes to $18 dollar and sits at or below $20 for a while. 



Tue, 04/16/2013 - 20:34 | 3458877 espirit
espirit's picture

Central Banksters' Wet Dream.

Tue, 04/16/2013 - 20:44 | 3458917 TheMonetaryRed
TheMonetaryRed's picture

I'm pretty sure that Cental Bankers barely even notice the silver market, much less care about it except that it's a component of GSCI. 


Oil is the dominant global commodity. 

Tue, 04/16/2013 - 20:08 | 3458781 Croesus
Croesus's picture

HAHA...joke of the day.

Gold can be $10,000 or $100. It doesn't matter. What matters, is whether or not you have any. 

"Needed by whom for what at what price?" <-- Ask a Central Banker.

Only ownership and perception matter.

Tue, 04/16/2013 - 20:09 | 3458782 Dishonesty Fatigue
Dishonesty Fatigue's picture

Needed by the same people who needed it 3000 and 300 years ago.

At any price - if that price is just a number on a piece of government toilet paper.

Tue, 04/16/2013 - 20:54 | 3458968 TheMonetaryRed
TheMonetaryRed's picture

No, not any price - a price that used to be about $1800 and is now about $1300 - or that used to be about 20 barrels of oil and now is about 15. 



Tue, 04/16/2013 - 21:37 | 3459086 Dishonesty Fatigue
Dishonesty Fatigue's picture

So what? A movie ticket used to cost $5 and now it costs $15, but the movies aren't any better than before. A gallon of milk used to be $1 and is now $4, but it's the same milk. A shirt that was $50 yesterday is on sale for $35 today, but the shirt is the same. Price is very different from value, and value changes very little over time, up or down.

Tue, 04/16/2013 - 20:09 | 3458788 vulcanraven
vulcanraven's picture

Production costs>spot price


good game sir

Tue, 04/16/2013 - 20:14 | 3458801 ebworthen
ebworthen's picture

Keynesian money printing/saver punishing central bankers heads to $0.

Tue, 04/16/2013 - 20:13 | 3458803 Pancho Villa
Pancho Villa's picture

Gold to $900

Think so? Then you absolutely must buy DGLD.

Tue, 04/16/2013 - 20:15 | 3458816 ebworthen
ebworthen's picture

Gold at $1,369 right now; lucky in China and lucky in bed.

Tue, 04/16/2013 - 20:17 | 3458817 seek
seek's picture

That could happen. But doubtful.

If it does and physical is available for sustained duration at that price, it means the average single family home will be selling for $45K, and while they won't repeal the minimum wage,  the average workweek will be 15 hours at best.

About 9 months after that happens, I guarantee you'll be missing a zero on that price.

Tue, 04/16/2013 - 20:39 | 3458899 TheMonetaryRed
TheMonetaryRed's picture

Gold is a global commodity. It should not and does not have any special relationship with American house prices. 

Tue, 04/16/2013 - 20:46 | 3458934 Kirk2NCC1701
Kirk2NCC1701's picture

Are you a total air-head, or do you have to work at it?

Tue, 04/16/2013 - 20:56 | 3458975 TheMonetaryRed
TheMonetaryRed's picture

Are you a buyer at $1350 or are you a talker?



Tue, 04/16/2013 - 20:34 | 3458873 FieldingMellish
FieldingMellish's picture

The correct view is $1 is now 1/1376 oz. Gold just is. 170000 tonnes growing at about 1.2% per year. Its the dollar that is fluctuating in value.

Tue, 04/16/2013 - 20:40 | 3458906 TheMonetaryRed
TheMonetaryRed's picture

Okay, then USD to 1/900 oz of gold. Since you can't buy fewer things with gold than you can buy with Bitcoins, who cares? 

Tue, 04/16/2013 - 20:49 | 3458939 FieldingMellish
FieldingMellish's picture

But $ can be created in infinite amounts at will and are being done so currently. That is why it has been decreasing in value for 100 years against more stable items such as gold.

Tue, 04/16/2013 - 21:13 | 3459025 TheMonetaryRed
TheMonetaryRed's picture

No, USD can't be created in "infinite" amounts, only statutorily regulated amounts. Of course there's dollar inflation. So what?  The question is whether gold is a good inflation hedge at THESE prices and it's not. Gold has simply gone to a price that's far above the price inflation would otherwise put on it. 


Gold's brand is tarnished. The bubble has popped and gold is going to $900 or below. There won't be a "bullion run" (whatever that means) and there won't be central bank chaos. Gold longs will lose money - end of story. 

Tue, 04/16/2013 - 21:23 | 3459053 Ness.
Ness.'s picture

If Gold is tarnished, as you say, why would Germany demand their bullion back?  Sentimental value?  This isn't an old T-Shirt we're talking about.  

You must be new to this.

Tue, 04/16/2013 - 21:32 | 3459082 TheMonetaryRed
TheMonetaryRed's picture

Why would "Germany" demand their bullion back? What part of "Germany" are you talking about? The Bundesbank? Deutsche Bank? Angela Merkel? German Masonic temples? Whose bullion and demanded from whom? 

Tue, 04/16/2013 - 22:02 | 3459167 Ness.
Ness.'s picture

Ok dipshit, I'll play.  Fuck tiny little old Germany and their demands.  


How about..


Romania has demanded for many years that Russia return its gold.

Venezuela demanded the return of 90 tons of gold from the Bank of England.

Iran, Lybia, Ecuador

Mexico wants their's back from England..

Fuck, even Texas wants the shiny stuff..

Russia hasn't been shy about buying..





Tue, 04/16/2013 - 22:11 | 3459190 NoDebt
NoDebt's picture

@Monetary Red:

"No, USD can't be created in "infinite" amounts, only statutorily regulated amounts."

You're talking about physical currency (printed by the Treasury) which is a small portion of the dollars out there.  The ones-and-zeroes dollars that the Fed creates in banks' reserve accounts are not subject to any statutory limitation.

Wed, 04/17/2013 - 08:45 | 3460195 Imminent Crucible
Imminent Crucible's picture

It's always a fool's game to argue with a fundamentally dishonest person.

Wed, 04/17/2013 - 11:49 | 3461159 JimBowie1958
JimBowie1958's picture

Why would "Germany" demand their bullion back? What part of "Germany" are you talking about? The Bundesbank? Deutsche Bank? Angela Merkel? German Masonic temples? Whose bullion and demanded from whom? 

Only liars, frauds, cheats and swindlers ask such easy to answer question in order to distract, confuse and distort the known FACTS.

You have essentially made what you are well known now.

Tue, 04/16/2013 - 20:44 | 3458925 Kirk2NCC1701
Kirk2NCC1701's picture

"Gold to $900"

Doesn't anybody think more than 1 step ahead, or in more than 1D?

If it drops any lower, the currently stretched supply lines will lead to a full Gold RUN on bullion.  Especially if it drops below the Marginal Cost (to miners) at ~ $1150-1200. 

/And you do have a vague idea of what a bullion run will lead to, right? /s

Wed, 04/17/2013 - 03:56 | 3459846 yourfather
yourfather's picture

Gold could go to 900, but guess what, it will never go tonzero. Ask any russian, jth korean, iranian, zimbabwean, what does ut feel like to have a worthless currency.  Over a long enough time period, every fiat currency will go to zero. Us dollar, down 95 percent in purchasing power. Gold may go down, but only fiat can go to zero. Buy the dip. Buy for the long term. Buy for your grandkids, not to get rich.



Wed, 04/17/2013 - 07:03 | 3459986 samcontrol
samcontrol's picture

buy not to get rich,,,ok good advice..

but how do i get (stay) rich?

Tue, 04/16/2013 - 19:56 | 3458726 asteroids
asteroids's picture

Eh? Now you complain? Could it be that even you can't make a profit in this market? Do us a favour, just have PIMCO sell EVERYHTING tomorrow and raise cash. That'll fix things

Tue, 04/16/2013 - 20:02 | 3458758 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

This stuff is for the cool kids who only listen to other cool kids and never anyone else. You know the cliquey asshole types, you know the ones you can say something until you are blue in the face and they won't agree with you until the one semi-free thinker in the clique says it.

Tue, 04/16/2013 - 20:13 | 3458805 ebworthen
ebworthen's picture

"You know, fanny packs are pretty useful."

Tue, 04/16/2013 - 20:07 | 3458771 orangegeek
orangegeek's picture

Call me crazy, but I think this sounds fucking bullish!!!

Tue, 04/16/2013 - 20:10 | 3458778 ebworthen
ebworthen's picture

Isn't central banks, trying to push investors into risky assets without the underlying jobs, income, or economy to support it just a different form of drug pushing?

They are at it ass-backwards; reduce risk to individual investors and increase it for institutional investors, not the other way around.

If capital doesn't come from the supply side or the consumer/worker it is an inescapable bubble blowing tactic of "screw investors, reward institutional speculators".

Distill what the FED and other central banks are doing down to it's essence and that is all it is.

Tue, 04/16/2013 - 20:08 | 3458779 buzzsaw99
buzzsaw99's picture

"if these levels aren’t validated by the fundamentals, then investors will get hurt."

Um, isn't that the entire point of financial markets? Insiders get rich, gut the infestors?

Tue, 04/16/2013 - 20:12 | 3458794 Yen Cross
Yen Cross's picture

 This guy? lulz

    lawn darts middle eastern style.

Tue, 04/16/2013 - 20:27 | 3458846 buzzsaw99
buzzsaw99's picture

Pimpco, the only bond fund that actually shorts bonds. LMAO

Tue, 04/16/2013 - 20:31 | 3458871 Yen Cross
Yen Cross's picture

 Long live the Viking Buzz!

Tue, 04/16/2013 - 20:13 | 3458802 surf0766
surf0766's picture

It is CYA time.   Watch, one by one all the super optimistic asshole shouting green shoot crap will begin saying shades of the truth to cover their lies .


Tue, 04/16/2013 - 20:27 | 3458852 MrNude
MrNude's picture

Yeah these suckas don't want to be left standing out infront of everyone when the music stops and only the angry crowds are left, we've seen it already the smart ones who already angling and positioning themselves slowly out of the way.


Tue, 04/16/2013 - 20:14 | 3458811 realtick
realtick's picture

this is in response to Lance Robert's thoughtful article about gold's drop and to Business Insiders annoying arrogance

EVERYONE Should Understand That Business Insider Is A Lame Fed Mouthpiece

Tue, 04/16/2013 - 20:23 | 3458832 KingTut
KingTut's picture

If the National Inquirer is a tabloid for people who've pretty much figured out they're not real smart, then BI is a tabloid for the ones that still think they're smart.  Both are total crap, only one is honest about it.

Tue, 04/16/2013 - 20:21 | 3458828 Dr. Engali
Dr. Engali's picture

Investors are going to get hurt? Listen up El... We no longer have investors. With the big casino in the cloud we have renters, gamblers, and poverty for the remaining sheep.

Tue, 04/16/2013 - 20:22 | 3458831 ebworthen
ebworthen's picture

My friend Larry Kudlow saying the drop in Gold prices is a good sign for the economy, just like in the 80's and 90's.

Larry, Larry, Larry.

This is not the 80's, and thank God not the 90's.

$16 Trillion in upayable debt is not the 80's or 90's.

Peter Schiff rips through Larry's hopium.  I like Larry, he's a positive thinker, but when he veers into the mustard seed and green shoots unicorn fields I have to call him on it.

Tue, 04/16/2013 - 20:25 | 3458842 Dr. Engali
Dr. Engali's picture

Larry is a positive guy because he gets paid well to be positive.

Tue, 04/16/2013 - 20:26 | 3458854 fonzannoon
fonzannoon's picture

Absolutely. I'd take it a step further and just say Larry is totally evil. He knows the deal. He knows where this ends, and yet he keeps herding the lambs to the slaughter.

Tue, 04/16/2013 - 20:30 | 3458866 Dr. Engali
Dr. Engali's picture

You're right Fonz. I have no respect for that guy.

Wed, 04/17/2013 - 08:52 | 3460212 Imminent Crucible
Imminent Crucible's picture

"Today’s subprime loan problem is nothing compared to the credit crunch and banking failures of the early 1990s."

~Larry Kudlow, November 26, 2007

Kudlow isn't naturally unreliable. It takes practice to get to his level.

Tue, 04/16/2013 - 20:28 | 3458855 Its_the_economy...
Its_the_economy_stupid's picture

When Diamond Jim Brady was asked while playing a game of Bunco at a saloon, "Don't you know this game is rigged? He replied "I know. But it is the only game in town!"

Tue, 04/16/2013 - 20:30 | 3458865 ShrNfr
ShrNfr's picture

The interview is from 2011. The WSJ fucked up! Here is the interview dated 2011. It is the same one the WSJ has up at the moment:!85F75B51-F954-46E1-861D-EC47CC278296

Tue, 04/16/2013 - 20:43 | 3458911 espirit
espirit's picture

+1 Nice catch.

Tue, 04/16/2013 - 22:16 | 3459197 ShrNfr
ShrNfr's picture

Somebody else caught it and passed that along to me. Credit goes to somebody else. I am just mentioning it.

Tue, 04/16/2013 - 20:53 | 3458955 Schmuck Raker
Schmuck Raker's picture

Hey Tyler, your "our recent discussions (most recently here)" link is AWOL. Kaput. Broke like a bank.

Tue, 04/16/2013 - 20:55 | 3458974 tony bonn
tony bonn's picture

'..."if these levels aren’t validated by the fundamentals, then investors will get hurt."'

i hate to break it to you, honeybunch, but that's the whole purpose...

Tue, 04/16/2013 - 21:14 | 3459024 saveUSsavers
saveUSsavers's picture

Mob Boss Bernanke killed the yield curve, it should be a CAPITAL CRIME for FINANCIAL TERRIORISM.

As Chris Whalen said, " this is DEFLATIONARY...Grandmas buy presents, pension funds and banks ARE SAVERS TOO ! "

MOVE TO SIDELINES until Bernanke is stopped.


Tue, 04/16/2013 - 21:17 | 3459035 cdskiller
cdskiller's picture

El-Erian may be right (especially since I agree with him), but to quote him as some sort of "expert" demeans zerohedge. This man is a liar and an idiot and has been so for over a decade. He has been a staunch defender of the risk management practices and instruments and models that created the crisis that led to such inane central bank responses and the desperate attempt to artificially inflate markets. He is the definition of the disingenous douchbag.

Tue, 04/16/2013 - 21:22 | 3459046 wisefool
wisefool's picture

I kinda picked up that vibe too when he mentioned that "The USA is taking the path of paying creditors less than they deserve"

Who are the creditors of the USA? and what did we promise to pay them?

Tue, 04/16/2013 - 21:28 | 3459070 toros
toros's picture

How F'ed up is the economy that the FED thinks they need to print this hard at a stock market high?

Tue, 04/16/2013 - 21:34 | 3459085 CURWAR2012
CURWAR2012's picture





Tue, 04/16/2013 - 21:39 | 3459095 davhay
davhay's picture

FUCK YOU EL-ERIAN!!!!! Growth and jobs is not the number one prioity! Stealing everything we have is the ONLY PRIORITY!!!

Tue, 04/16/2013 - 21:45 | 3459111 ekm
ekm's picture

Today my old boss who still shows up at work after retirement accepted what I've been telling him and told me:


Kris, I no longer ask how the market did today. I only ask what did the Fed do today to control the market (he's got a lot of physical gold in a private vault and is worried now)


My response to him was: We are only one presidential executive order away from mayhem.


Tue, 04/16/2013 - 22:21 | 3459209 Pandorable
Pandorable's picture

If this is so obvious---and it is---why are we allowing it to happen? This is a much greater threat to the economies of the world than unemployment rates.

Tue, 04/16/2013 - 22:44 | 3459264 GoLeafs
GoLeafs's picture

At 5:32 he actually says, "this is a very fluid and exciting time for investors..."?  Is he referring to the fluid leaking from my orifices from getting screwed over?

Tue, 04/16/2013 - 22:56 | 3459304 RopeADope
RopeADope's picture

So the Eccles building is full of fedophiles?

Tue, 04/16/2013 - 23:15 | 3459379 jtz5
jtz5's picture

Couple of questions...most likely stupid questions as I am not very familiar with inner workings of the Fed.

Does the Fed Charter from 1913 expire at year-end and require Congress to renew it?

If so, why couldn't the government just say we are not renewing the Fed Charter and that 4+ trillion Fed balance sheet just disappears? I mean what would happen if the Fed just defaults after buying all these MBS and then the US Govt assumes responsibility for those mortgages and the banking system is nationalized?

Wed, 04/17/2013 - 00:05 | 3459540 ekm
ekm's picture

And then, what would happen next? How would they let go the money they make from legal insider trading?

Wed, 04/17/2013 - 00:16 | 3459574 wisefool
wisefool's picture

It would likely play out like the nixon shock.

Wed, 04/17/2013 - 02:54 | 3459792 JR
JR's picture

Jesse in his Le Café Américain wrote today that “using leverage in these markets is a dangerous strategy.

“This piece on leverage and market manipulation came out a few weeks ago. Philip Byrne reminded me about it, and he is right…

“This is from Phil Byrne:

‘The best thing about yesterday is that the Fed gave us a glimpse of the future. Those people who owned gold with leverage were waiting to have their throats cut – almost begging for it.. The best part is that this market operation has created instability where they once had stability. Nobody will take a levered position against them anymore – not on the stocks short side and not on the levered long gold side.

‘Here’s what I wrote to clients a couple of weeks ago:

Market Manipulation

The price of gold is a good segue into explaining how the markets are being manipulated.

Anyone who has read about the Japanese martial art known as Judo knows that the basic tenet of the art is to use the attackers leverage against him. Instead of picking up one’s opponent and throwing them down, Judo experts redirect the force created in their opponent’s attacks to knock them down. It’s the same in the markets.

‘We’re not the only investment firm that understands the problems in our economy and markets. Since 2008, a lot of work has been done to understand the problems in the world and this work has led to bets on the market – oftentimes with leverage such as selling short a stock, buying a put option, or borrowing money and buying gold.

‘Whenever investors use leverage, they leave themselves vulnerable because leverage turns small losses into big losses – it’s the reason why Lehman Brothers is no longer around. Knowing this, the Fed and its agents wait for these traders to place leveraged bets, and then the Fed’s agents forcefully take the other side of the trade. This is why we include charts of the VIX – they represent leveraged option trades.

A year ago, US corporate earnings growth was slowing meaningfully, Japan was recovering from a nuclear disaster worse than Chernobyl – one that continues to get worse – and at the same time, southern Europe was at the point where nobody would buy their debt and traders were making extreme bets against European markets and the European currency.

‘All it took was a promise by Europe’s central bank to “do whatever it takes” to prevent bankruptcy and the markets reversed in a huge way. Anyone betting against the European central bank incurred heavy losses. Later in the year, the Fed, then the Bank of Japan did the same thing with similar rallies.

‘The market has figured out this strategy which is why nobody is willing to bet against the world’s central banks in a meaningful way any longer. It’s the reason why markets are going up despite the tremors we face such as Cyprus, Italy, Spain, Portugal, North Korea, China, Japan, Argentina, and economic stagnation in the US.

‘Without speculators to crush, the Fed’s ability to keep the markets moving higher is seriously compromised.

‘Gold was the final bet against the Fed
– they’ve won and by winning, they’ve lost!’"

Philip M. Byrne, CFA
Chief Investment Officer

 Jesse’s conclusion today: “I think that quite a few economists and pundits might be in for yet another rude surprise (again) in the not all that distant future, because it looks like a sea-change is coming, slowly but surely.”

Wed, 04/17/2013 - 07:04 | 3459896 falak pema
falak pema's picture

I like what Jesse writes as he has an ethical handle to his analysis of markets and his historical references are very balanced. Consequences, consequences consequences of what's hidden in the FED cupboard...and in Congressional acts.

About the CB manipulation and the current mood of political moral value easing as in the Stock act detoothing  by Obama, I wrote this yesterday (I am not drawing my punches on ideology so take it at face value, as on this issue you and I are not on same page) :


For those who follow the market today like it was the face of Hope, Truth and eternal youth one gets the feeling that in your own ideological prison, as seen thru that libertarian prism, you can't see the market for what it is :  the apparent face of Dorian Gray. While the true portrait of Dorian Gray is hidden in the FED cupboard.

This physical Gold downward plunge act like some of us have pointed out, and Chris Martenson has so graphically touted here on ZH as on BI,  is a narrow market fact, drowned in paper money waterfall owned by the PDs and all controlled ad hoc by the FED fiat strategy; so pervasive it can make black look like white 'cos a herd stampedes fast in a narrow width PM gulch. Too much fiat ammo around.

A small PM truth hidden under the huge rock of a big fiat market lie, looks like a bigger lie than the one which remains a family secret, never to be pronounced in the open. How did you expect it to survive once abandoned like Caesar's staid wife?

Sometimes the blinkers have to come off like in the streets of towns where they run like the tea party was open house. 

It is... but with tragic consequences as cause and effect is a global boomerang these days that can hit anybody anywhere; blindly and very unkindly as its become such a perverted, wicked world. Gold and pursuit of happiness in Bostonian streets both get bruised and burned. 

Gold Drop Transfer Taxpayers To Banks - Business Insider

RE : Markets at artificial levels: here are signs that Germany may be written down from triple A status. Rumours flying...

Morning Markets April 17 - Business Insider

CAC 40: une possible dégradation de l'Allemagne crispe.

Wed, 04/17/2013 - 03:52 | 3459839 devo
devo's picture

There is no investing, just trading the fed minutes.

Wed, 04/17/2013 - 04:39 | 3459867 willien1derland
willien1derland's picture

Now, if the illustrious Mohamed El-Erian links his current market perception/realization with the current wealth inequality perhaps he can actually make a TANGIBLE MACROECONOMIC ASSESSMENT...POLARIZATION of CAPITAL reduces monetary velocity & actually impacts the REAL ECONOMY...just sayin'

Wed, 04/17/2013 - 07:07 | 3459981 Tic tock
Tic tock's picture

The FEd and the financila markets are one side of the coin, the perception and general econoimc malaise - the reason why this isn't getting better - is because pretty much every economy is largely dependent on what happens with Govt. spending. ..the US problem is not that it's bankrupt, like Europe, its because the there is no trust, no willingness to trust' in govt. policy - Homestead security, false-flags, income inequality, MERS, Oil-Spills, Fracking, Drought, Taxes, - the so-called real economy, is in tatters...and this is corporate issue, not a financial one. Fed is just fucking things up even further. This all stems from SCOTUS - openly stating that Washington is mercenary outfit. There's no two ways about it, that's exactly what they said.

Under those circumstances, only the the biggest players will move - and they did, the Banks own the most assets and they're raping the system.

Fed is a Bankers Bank - its annoying, it's common money, the state will smack you if don't use it even though its only being given to a few people, but that's always been the case. Though the calibre of those people was remarkably different. It's the SCOTUS ruling that's made US Govt. a failure - and it is, who takes it seriously? Not because of a few odd remarks, but, well, its not a government, it's a shop, maybe.

Printing dollars won't help anything, it's like driving a faster car. Even putting regulations on the banks won't help - look good for MSN- the core issue is who-is-running-the-country - 'anyone with enough money is a bit fucking general.  ...but you know, the wierd thing is that these CEOs', Bernanke, the President, The Joint-Chiefs, Directors of the Corporations, all these educated people- what like have read books- four years of talking shop, $85Bn a month, it's still not enough either money or time. It isn't about money, they're Banks, it's about trust...and it has evaporated, everywhere.

(/Rant over) 

...mind you, it's typical illuminati thinking - "we live by a moral code, the animals don't"

Wed, 04/17/2013 - 09:43 | 3460479 optionsman
optionsman's picture

To El Erian: why dont you speak of debt repudiation as one way to deal with debt overhang in the new normal? To the Fed: investor base is getting narrower and shallower given all the shenanigans going on in the "markets", who will the "smart" money sell to when the Fed cant do any more QE?

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