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Fire And Brimstone: John Mauldin Edition
Roughly five years ago, when we first started warning that the Fed's QE program, which we predicted will never end (five years later this is as true as ever), instead of leading to a virtuous economic cycle would result in a world where the labor force is increasingly converted from full-time workers to part-time labor, in which spending on growth capital is entirely replaced with such short-term shareholder friendly actions as dividends and buybacks, where the government is more broken than ever and where, courtesy of monetary policy, Congress can just tell the Chairman to "get to work" any time there is a crisis, and in which the record wealth disparity between the wealthiest few (0.6% control 40% of the world's wealth) and the poorest 99% (now that the middle class is on the path to extinction) will inevitably lead to a 18th century French outcome complete with guillotines, or worse, one of the more traditional financial pundits, John Maudlin, espoused the "Muddle Through" theory - in a nutshell, that all, even if at a far lowered output and standard of living, would be well, one which we (much to the chagrin of Cypriot - to start - depositors) refuted.
Some five years later, now that the prevailing mainstream media consensus has finally caught up with our "tinfoil" view, which for years was mocked by the same media, usually on an ad hominem basis, and even the Fed has realized (confirmed by the latest Jackson Hole symposium) it is in a trap as it understands it has to end the market's dependency on monetary heroin but has no idea how to do it without in the process undoing five years of central planning, we have seen some spectacular opinion flip flops take place. Which aside from the occasional headscratcher such as David Rosenberg going bull-retard (we once again wonder: just what does Ray Dalio serve in his cafeteria?) have been almost exclusively from optimistic to pessimistic, or as we call it, realistic. And as the case may be, such as with John Mauldin and his latest missive to potential clients, A Code Red World, a very deep and red shade of pessimistic.
Some extracts from the man whose Muddle Through has now become the Fumble Through and Through:
The arsonists are now running the fire brigade. Central bankers contributed to the economic crisis the world now faces. They kept interest rates too low for too long. They fixated on controlling inflation, even as they stood by and watched investment banks party in an orgy of credit. Central bankers were completely incompetent and failed to see the Great Financial Crisis coming. They couldn't spot housing bubbles, and even when the crisis had started and banks were failing, they insisted that the banks they supervised were well regulated and healthy. They failed at their job and should have been fired. Yet governments now need central banks to erode the mountain of debt by printing money and creating inflation.
Investors should ask themselves: if central bankers couldn't manage conventional monetary policy well in the good times, what makes us think that they will be able to manage unconventional monetary policies in the bad times?
And if they don't do a perfect job of winding down condition Code Red, what will be the consequences?
Economists know that there are no free lunches. Creating tons of new money and credit out of thin air is not without cost. Massively increasing the size of a central bank's balance sheet is risky and stores up extremely difficult problems for the future. Central bank policies may succeed in creating growth, or they may fail. It is too soon to call the outcome, but what is clear (at least to us) is that the experiment is unlikely to end well.
The endgame for the current crisis is not difficult to foresee; in fact, it's already underway. Central banks think they can swell the size of their balance sheet, print money to finance government deficits, and keep rates at zero with no consequences. Bernanke and other bankers think they have the foresight to reverse their unconventional policies at the right time. They've been wrong in the past, and they will get the timing wrong in the future. They will keep interest rates too low for too long and cause inflation and bubbles in real estate, stock markets, and bonds. What they are doing will destroy savers who rely on interest payments and fixed coupons from their bonds. They will also harm lenders who have lent money and will never be repaid in devalued dollars, if they are repaid at all.
We are already seeing the unintended consequences of this Great Monetary Experiment. Many emerging market stock markets have skyrocketed, only to fall back to earth at the hint of an end to Code Red policies. Junk bonds and risky commercial mortgage-backed securities are offering investors the lowest rates they have ever seen. Investors are reaching for riskier and riskier investments to get some small return. They're picking up dimes in front of a steamroller. It is fun for a while, but the end is always ugly. Older people who are relying on pension funds to pay for their retirement are getting screwed (that is a technical economic term that we will define in detail later). In normal times, retirees could buy bonds and live on the coupons. Not anymore. Government bond yields are now trading below the level of inflation, guaranteeing that any investor who holds the bonds until maturity will lose money in real terms.
We live in extraordinary times.
When investors convince themselves central bankers have their backs, they feel encouraged to bid up prices for everything, accepting more risk with less return. Excesses and bubbles are not a mere side effect. As crazy as it seems, reckless investor behavior is, in fact, the planned objective. William McChesney Martin, one of the great heads of the Federal Reserve, said the job of a central banker was to take away the punch bowl before the party gets started. Now, central bankers are spiking the punch bowl with triple sec and absinthe and egging on the revelers to jump in the pool. One day the party of low rates and money printing will come to an end, and investors will make their way home from the party in the early hours of sunlight half dressed, with hangovers and thumping headaches.
The coming upheaval will affect everyone. No one will be spared the consequences – from savers who are planning for retirement to professional traders looking for opportunities to profit in financial markets. Inflation will eat away at savings; government bonds will be destroyed as a supposedly safe asset class; and assets that benefit from inflation and money printing will do well.
Such fire and brimstone , such a dramatic shift in perception? Well, better late then never, right... But one wonders - why now?
This book will provide a roadmap and a playbook for retail savers and professional traders alike. This book will shine a light on the path ahead. Code Red will explain in plain English complicated things like zero interest rate policies (ZIRP), nominal GDP targeting, quantitative easing, money printing, and currency wars. But much more importantly, it will explain how what is in store will affect your savings and offer insights on how to protect your wealth. Code Red will be an invaluable guide for the road ahead.
Code Red will be available on Amazon on Monday, Oct. 28.
... and suddenly it all makes sense.
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Central bank policies may succeed in creating growth, or they may fail. It is too soon to call the outcome
Give me a freaking break.....it is too soon to call. Wake up Mauldin! It has Ben obvious from the start of this crap what needed to happen, debt destruction and the demise of those companies that chose to be crooks.
We are in a slow motion wreck and the damage will intensify as time goes on. I think we are maybe 3 years away from riots in the US. The poorest will grow more and more restless and ratchet up their response to all of this central planning, which will be more and more crime.
A lot of people called what was happening correctly - the iTulip guy Eric Jantzen and John Rubino called it correectly and made the right investment calls. That is the hard part.
Oh Great. Another Mauldin article. Can a Chris Martenson one be far behind?
Things must be getting slow in the doom and gloom world. Time to throw out another red herring aritcle to pull a some new desciples into the fold, to replace the ones who in frustration have left to rejoin society.
Start your own website dodo and publish what you think is of value. The rest of us value the content and the direction it has taken because reality resembles "doom and gloom."
"No one will be spared the consequences "
I beg to differ. I ain't got shit.
The criminals of the FedRes do not set or follow policy, they set and follow their own socialpathic code that requires that they continue to protect their empire of theft and continue to steal everything around them including the lives of people. They are evil incarnate.
Guillotines are made for the banksters and their treasonous pol puppets; a rope alone will just not do.
It's like a endless party with the Fed's endless booze and drugs. The 12 Fed presidents are the pushers.
They will keep supplying dope and booze until all of the people die of illnesses and overdoses.
It's guaranteed for the funereal homes (banksters) waiting near by.
Let's be frank: Mauldin isn't coming around; rather, he's gotten all the blood he thinks he can get out of this stone, and he's cashing in and going to ground. The move from 666 S&P to 1750 has rung many a cash register, and being long was absolutely the right thing to do for four years for anyone who wanted to make or preserve capital. And let's also be honest: even the gold bugs had dreams of making money, and have been shellacked since 2011, while equity holders have seen big gains. It may not be "fair and square", but beaten is beaten. No asterisks in this game.
Many build sand castles even though we know the tide is going to come in. Playing the game means making the most of what markets give. Some of us made a bundle off of Pets.com, even knowing that its business model was bogus and doomed to fail. He who dares, wins. If Mauldin gets out now, he has huge gains, and he is getting out at an all time high, which isn't even a day late. Maybe the market goes up more, maybe not, but he's better off than anyone who loaded up on the Armageddon trade earlier. His kudos is deserved. We're all going to die and time will leave each and every one of us meaningless, yet we all scream and fight while we can. Mauldin has done it better than most everyone here, and rather than saying he has finally woken up, it is more fair and honest to say he did it better.
It was Mauldin's character and inherent biases, (business and personal), and not his intellect that determined his market timing and preferred assets. It is much the same for the rest of us. Then there are the little random things that happen to one outside of one's portfolio that put the final touch to our investing (or devesting) strategy.
You can be very intelligent and not be rich because of the above factors. And for that reason I am never impressed by wealth whether it be inherited or earned.
Mauldin is nothing but a dilettante who spends his time repeating the obvious and bragging about who he is hanging out with this week while trying to sell investment ideas to the truly gullible. The core issues are that are simply that the USA and Europe are adjusting to their demographic disaster scenarios and like Japan trying to cover up the price discovery lower that it demands. None of this is ever touched by Mauldin. The QE mess isn simply to let us down more easily while we watch the inevitable shift of wealth to the younger less regulated counrties with unlimited cheap labor. The "market" will not crash but "correct" with the dollar denominated financial assets having less and less buying power over time. I've seen tis movie before.
The allies are forming against the Washington D.C. globalists and the Wall Street counterfeiters.
Long live the revolution.
"Economists know that there are no free lunches. Creating tons of new money and credit out of thin air is not without cost."
LMAOROF!
Nobel Prize winning Econmist Paul Krugman @ Princeton of moar tarp, moar deficet, moar, moar, moar fame, alumni of Michelle O whose roommate @ Princeton is running the Obummercare website with the daughter and son-inlaw of Valerie Jarrett.
RICO all banksters, IRS, DOJ, WH, Park Rangers and their political hoars.
You should learn how to spell whores. They are easily offended when you don't get their name right.
"... it is in a trap as it understands it has to end the market's dependency on monetary heroin but has no idea how to do it without in the process undoing five years of central planning"
There isn't.
The Nasdaq crashed 76%. The housing market crashed, along with the economy. Yin and Yang. Up and Down. Back and Forth. To and Fro. For each action, there is an equal and opposite reaction. The FED cannot get around the laws of math. Math is their undoing. Every cycle has a down phase.
"They failed at their job and should have been fired. Yet governments now need central banks to erode the mountain of debt by printing money and creating inflation."
Except they are creating more debt. The government is borrowing the money being printed. The IMF is now talking about government CONFISCATING people's wealth, so the government can borrow even more money.
"Central bank policies may succeed in creating growth, or they may fail. It is too soon to call the outcome, but what is clear (at least to us) is that the experiment is unlikely to end well."
There has been growth since June 2009. The "experiment" WILL not end well. The Nasdaq bubble did not end well, nor did the housing bubble. No boom has ever ended well. They ALL bust.
"... and assets that benefit from inflation and money printing will do well.
Until the government confiscates such wealth. as the IMF is now suggesting the government should do, so the government can continue to borrow more money from the FED.
We already see the way out of QE, namely privatization of federal State services and assets. Say goodbye to Social Security, medicaid, medicare (45% of federal spending) along with federal forest, mines, post offices, highways, monuments, museums, national parks, libraries, airports, power plants, etc. All being auctioned off to Wall Street. Privatization is the way out, and I think that is what many here have been calling for for quite some time, smaller government, less gov't employess, and more private sector control. So you should be happy with that. The collateral damage is austerity though, that is the risk/reward of capitalism. If you are a large enough private corporation to buy a national park or forest or provide former gov't services, good for you. If you are not, well, too fucking bad, at least you will have a smaller government, and your government should have less debt. That's a good thing. The real goal of the Federal Reserve is to guarantee the continual profitability of Wall Street and the personal incomes of the super rich. Auctioning off america, one piece at a time, to Wall St. will continue the efforts of that goal.
How many Muni's are bankrupt? Over 100. Now, along with stadiums, we can rename cities to the corporations that own them, won't that be fun. I already can't get enough commercialism. So say, instead of Atlantic City it can be Atlantic Citigroup. Oh yeah.
The other 55% of spending (DoD and bailouts) ain't goin' anywhere.
globalresearch.ca
it just goes against most people's nature to see the reality of our new normal (I just love/hate that phrase). most are loath and slow to see this ain't the America they grew up in. gone are the days when the government feared the press, when cooking the books was something done in secret out of desperation to keep afloat some moribund corporation, when we all felt that our corrupt politicians were still American's first and that they would always have our best interest at heart.
this Mauldin character is a professional pundit. he sees the hip success of other pundits like Max Keiser and Fabian and so in order to be relevant has adapted his zeitgeist to the tiimes. can he eat crow without complaint? we'll see.
http://youtu.be/HZCaSyid4m0
...and on a completely different note, gentle readers, yours truly will be travelling to Singapore next week to visit with my friends Marc Faber and Richard Russell and then swinging back to Texas for a bass trip with my sons on Lake Fork before heading off to New York for a meeting with various fund managers...