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An "Austrian" Bill Gross Warns: "The Days Of Getting Rich Quickly Are Over... Getting Rich Slowly May Be As Well"

Tyler Durden's picture





 

If readers ignore the rest from the latest monthly insight from Bill Gross of PIMCO, they should at least read the following insight which we agree with wholeheartedly: "our PIMCO word of the month is to be “careful.” Bull markets are either caused by or accompanied by credit expansion. With credit growth slowing due in part to lower government deficits, and QE now tapering which will slow velocity, the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume. Perhaps the whisper word of “deflation” at Davos these past few weeks was a reflection of that.... don’t be a pig in today’s or any day’s future asset markets. The days of getting rich quickly are over, and the days of getting rich slowly may be as well. Most medieval, perhaps." Where have we read this recently? Why in An “Austrian View” Approach To Equity Prices in particular and the bulk of Austrian economics in general. Which means that following the TBAC, i.e. the committee that really runs the US, none other than the manager of the world's largest bond fund has now moved over to the Austrian side. Welcome.

From PIMCO

Most ‘Medieval’

In days of old
when knights were bold
and ladies most beholden
straw seemed like silk
and water, milk
and silver almost golden

Not so sure about that limerick – it was probably a cruel world – those days of old. Yet much of it was fascinating and in some cases surreal. The relationship of “man” and God, for instance. Or better yet … “man,” animals and God. Unlike today, when most believe that animals were put on this Earth for humanity’s pleasure or utility, most people in the Middle Ages believed that God granted free will to Adam, Eve and all of His creatures. Animals were responsible in some strange way for their own actions and therefore should be held accountable for them.

Accountable? Well yes, animals were actually put on trial for their misdeeds. They might actually be considered “evil.” Beetles that munched on church pews, pigs that dined off of late evening drunkards, locusts that ravaged harvest wheat – all were viewed in a similar fashion much like their human counterparts – thieves, adulterers and murderers alike. Sometimes the animal would be brought before an actual court, sometimes (as with insects) tried in absentia. In the case of ravaging pigs, for instance, there might be a full judicial hearing with a prosecutor, defense and a robed judge who could order a range of punishments, including probation or even excommunication. No bad little piggies went to heaven, it seems. Often, there would be an actual execution with a hog being hanged by the neck until it was dead. The pork chops followed shortly thereafter, I assume. There was no Humane Society in 1500. Somehow I thought those “medieval” times needed a more reality-based ditty than the one cited above, so here’s a modern-day “Chaucer’s” attempt:

In days of old when pigs were bold
and people very prayerful
a locust might be canonized
and drunkards had to be careful.

Now on to the world of investing, me Lords and Ladies, which by the way is full of little piggies feeding at the trough, scaredy “cats” afraid of their own shadow, and ostriches sticking their heads in the sand. And too, history will record that capitalism and its markets are a dog-eat-dog world. If so, we’ve currently got a menagerie to rival anything in those “days of old.” But let’s stick with the piggies for the following Investment Outlook. Hopefully the prose will be better than the previous poetry.

I find it fascinating the number of ways that investors approach the “value” of securities and other investments such as commercial real estate or homes. Many of them are legitimate and form a solid foundation in academic research or even common sense. “Natural” interest rates, P/E ratios, cap rates, risk and liquidity premiums, and even real estate’s “location, location, location” are ways to fundamentally price an asset. Add to that the emotional influence of human nature and you have a pretty good idea as to why prices go up and down; not necessarily a pretty good idea as to when they will go up and down, but at least the why part is partially visible.

But lost in this rather complex maze of why is the function of credit and credit expansion in a modern, financial-based economy that it dominates. Asset prices are dependent on credit expansion or in some cases credit contraction, and as credit goes, so go the markets, one might legitimately say, and I do most emphatically say that! What exactly do I mean by “credit?” Well, money in all its multiple forms. Cash is a form of credit in my definition because you can use it to buy things. Bonds are credit. Stocks are credit. Houses and real estate can be considered credit when they are securitized and sold to investors in mortgage pools. In our modern financial economy, credit is anything that can be transferred on a wire or a computer from one account to another and ultimately be used as the basis for spending money on things such as groceries or airplane tickets.

And so when an investor tries to think about “prices” for these various forms of credit, it is necessary to get behind the winds of credit itself, to see what causes credit to behave like a mild South Seas breeze or a destructive typhoon in the China Sea. Credit creation or credit destruction is really the fundamental force that changes P/Es, risk premiums, natural interest rates, etc. For most investors that may be hard to understand, but that is where the little piggies come in.

Imagine you are on that South Sea island with only two people. Each of you owns half of the island, grows your own food and has four little piggies for bacon and chops and all of the good stuff that people like to eat. Things are copasetic; the local “economy” is doing fine, but one day your other buddy figures out a way to make a new crop that you don’t have. She’s the island’s entrepreneur, so to speak. Well, being jealous and perhaps a tad greedy, your previous buddy refuses to share the secret. But she will offer you a future share of her harvest for one of your little pigs – there being no money, credit or anything of the sort on the island. You love that bacon, but the lady is living higher on the hog, so to speak, with that new “crop,” so you agree on a deal – one pig for one year’s harvest of her future “crop.” Despite the lack of a “stock market,” “crops” are now trading at a P/E of 1 X pigs. One pig equals one future year’s worth of your ex-buddy’s bountiful harvest. Well the months roll by and one thing leads to another, and for some reason you want some more of your neighbor’s “crop.” Maybe it’s marijuana and the island has just legalized it for medicinal purposes. Let’s just say. And let’s say you’re willing to part with another pig for another share of medicinal “weed.” Neighbor, sensing enthusiasm, says, “No, it’ll cost you three pigs,” which is all you have, but you’re feeling high and certainly very hungry so you say OK. This funny smelling “grass” now sells at 3 X pigs, or a pigs-to-“grass” P/E ratio of 3/1 and everybody’s happy. Until … well … to get back to the real world, those piggies have really been credit or cash substitutes all along, and now in order to keep this system going you need more pigs or more credit in order to continue. But you’re out of pigs. A funny thing now happens in this capitalistic South Sea island and mainly to the price of marijuana. It traded last year at 3 pigs to 1, but since you’re out of pigs and credit, the price collapses. Grass goes to zero because there is no more credit; you have no more pigs to pay for it.

So for those of you who don’t live in Washington State or Colorado or others who are a little miffed at this example, let’s just put it this way. P/Es of 3 or P/Es of 15 or P/Es of 0 are intimately connected to the amount of available credit. So are interest rates. If there was only one dollar to lend and someone was desperate to have it, the interest rate would be usurious. If there was one trillion dollars of credit and no one was eager to borrow for some reason or another, then the rate would be .01% like it is today and for the past five years in my personal money market account. The amount of credit and its growth rate are critical to asset prices, and of course asset prices in our modern economy are critical to growth and job creation and future prospects for investment. We have a fiat/credit/debt-based economy that depends on the continuous creation of more and more credit in order to thrive and some would say – even survive. We need those pigs and more of them. And they need to circulate and be traded – what some would call “velocity” – in order to keep the economy growing. Our South Sea island economy never did change until the new crop was discovered, but concurrently, not until the pigs started to be traded for it.

And so? Well, to use the U.S. as an example, we officially have 57 trillion dollars’ worth of credit (stocks not being part of the Fed’s official definition) and probably 20 trillion more in what has come to be known as the “shadow” system. But call it 57 trillion because the Fed and Chart 1 do.

 

It used to grow pre-Lehman at 8–10% a year, but now it only grows at 3–4%. Part of that growth is due to the government itself with recent deficit spending. A deficit of one trillion dollars in 2009–2010 equaled a 2% growth rate of credit by itself. But despite that, other borrowers such as households/businesses/local and foreign governments/financial institutions have been less than eager to pick up the slack. With the deficit now down to $600 billion or so, the Treasury is fading as a source of credit growth. Many consider that as a good thing but short term, the ability of the economy to expand and P/Es to grow is actually negatively impacted, unless the private sector steps up to the plate to borrow/invest/buy new houses, etc. Credit over the past 12 months has grown at a snail’s 3.5% pace, barely enough to sustain nominal GDP growth of the same amount.

Is there a one-for-one relationship between credit growth and GDP? Certainly not. That is where velocity complicates the picture and velocity is influenced by interest rates and the price of credit. But with QE beginning its taper, and interest/mortgage rates 150 basis points higher than they were in July of 2012, velocity may now negatively impact the equation. MV=PT or money X velocity = GDP is how economists explain it in old model textbooks. Actually the new model should read CV=PT or credit X velocity = GDP but most economists are classically trained to the Friedman model, which viewed money in a much narrower sense.

So our PIMCO word of the month is to be “careful.” Bull markets are either caused by or accompanied by credit expansion. With credit growth slowing due in part to lower government deficits, and QE now tapering which will slow velocity, the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume. Perhaps the whisper word of “deflation” at Davos these past few weeks was a reflection of that. If so, high quality bonds will continue to be well bid and risk assets may lose some luster. In any case, don’t be a pig in today’s or any day’s future asset markets. The days of getting rich quickly are over, and the days of getting rich slowly may be as well. Most medieval, perhaps.

And too, stick with PIMCO. Believe me when I say, we are a better team at this moment than we were before. I/we take the future challenge faced by all asset managers with close to a sacred trust. Not the one that the ancients granted to animals, but a more modern one embraced by the relationship of client/fiduciary and the need to be held accountable, sort of like the pigs and locusts in days of old when knights were bold.

Most ‘Medieval’ Speed Read

1) Asset prices depend on credit creation and expansion.

2) The U.S. and other countries create less credit from the public standpoint as their deficits decline.

3) 3–4% credit expansion in the U.S. may not be enough to maintain
3% growth, especially if asset prices go down and velocity is affected.

4) Don’t be a pig in a highly levered global marketplace.

There is risk out there.

 


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Wed, 02/05/2014 - 14:07 | Link to Comment Sterling Rod
Sterling Rod's picture

Funny what a bad year can do to even the BIGGEST insider

Wed, 02/05/2014 - 14:07 | Link to Comment icanhasbailout
icanhasbailout's picture

Never fear! The days of getting rich dishonestly are here to stay!

Wed, 02/05/2014 - 14:09 | Link to Comment TruthInSunshine
TruthInSunshine's picture

"Why work or do anything constructive for a living when you can just bet on Twitter or Facebook or Zynga or Lululemon?"

- Ben Shalom Bernank

p.s. You have their back, remember this, Janet.

Wed, 02/05/2014 - 14:21 | Link to Comment jcaz
jcaz's picture

Blah- was fairly interesting until he got the "sacred trust" part-

Dude, the bloom is off the rose- we know what you are, and why you do what you do-  don't throw ethics into the equation, you'll just get stomped.

Wed, 02/05/2014 - 14:37 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Maybe nuance is exceed Boris, but is not entire monetary regime and financial system base on "trust"!? Fruit of labor of citizenry is not "sacred"!? When Boris is trust counter-party and entrusting for hold treasure, is not this trust "sacred"!? Abuse of trust, is not sacrilege?! When abandon morality and obfuscating of language, is not this end of trust? End of current monetary regime? End of transactional efficiency?

Boris is recommend long on mattress manufacturing.

Wed, 02/05/2014 - 14:38 | Link to Comment James_Cole
James_Cole's picture

Something every American should read and understand, would clear up a lot of the inane arguments out there:

The amount of credit and its growth rate are critical to asset prices, and of course asset prices in our modern economy are critical to growth and job creation and future prospects for investment. We have a fiat/credit/debt-based economy that depends on the continuous creation of more and more credit in order to thrive and some would say – even survive. We need those pigs and more of them. And they need to circulate and be traded – what some would call “velocity” – in order to keep the economy growing

now it only grows at 3–4%. Part of that growth is due to the government itself with recent deficit spending. A deficit of one trillion dollars in 2009–2010 equaled a 2% growth rate of credit by itself. But despite that, other borrowers such as households/businesses/local and foreign governments/financial institutions have been less than eager to pick up the slack. With the deficit now down to $600 billion or so, the Treasury is fading as a source of credit growth.

Wed, 02/05/2014 - 14:42 | Link to Comment Derezzed
Derezzed's picture

The Days Of Getting Poor Quickly Are Coming... Getting Poor Slowly May Be As Well

Wed, 02/05/2014 - 16:00 | Link to Comment WarriorClass
WarriorClass's picture

CT Collectivist Gun Grabber Ruthlessly Skewered By Sipsey Street Irregulars:

http://americandictators.blogspot.com/2014/02/mike-vanderboeghs-2nd-lett...

Wed, 02/05/2014 - 14:42 | Link to Comment redpill
redpill's picture

Bill Gross is going slowly mad.  No wonder El-Erian left.  Soon Gross will be reciting Col. Kurtz lines.  I watched a snail crawl along the edge of a straight razor....

Wed, 02/05/2014 - 14:48 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Boris is go mad fast!

Wed, 02/05/2014 - 15:57 | Link to Comment Derezzed
Derezzed's picture

I watched a snail crawl along the edge of a straight razor. That's my dream. That's my nightmare. Crawling, slithering, along the edge of a straight razor . . . and surviving.

The horror! The horror! 

Wed, 02/05/2014 - 14:52 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Critical to growth is only one thing, hard work*. Labor is one component cannot remove and still have growth. You are can remove transactional efficiency, clever investment vehicle, credit mechanism, exotic derivative, tax and spend scheme, redistributive method, but you are never can remove labor. Never, never, never. Financial sector is build on back of labor of citizenry and if financial sector ("bankster") is destroy or abuse labor of citizenry, it is for game over. You are can sheer sheep many time, but if skin sheep, you are only can do one is time.

Take away labor and there are nothing to abstract.

* labor is key for growth, but productivity and efficiency is multiplier effect. Remember any number is time 0, is give 0, no matter how is large multiplier.

Wed, 02/05/2014 - 14:59 | Link to Comment James_Cole
James_Cole's picture

Critical to growth is only one thing, hard work*

Whos 'hard work' though? Lots of empires have done quite well off the backs of slaves. 

Wed, 02/05/2014 - 15:08 | Link to Comment stormsailor
stormsailor's picture

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot. francisco

Wed, 02/05/2014 - 15:12 | Link to Comment James_Cole
James_Cole's picture

Whats with all this idiotic ayn rand bullshit again. Is preschool out for winter break or something?

Wed, 02/05/2014 - 15:33 | Link to Comment stormsailor
stormsailor's picture

OH LOOK, JAM CUNT JUST SHOWED UP.

Wed, 02/05/2014 - 15:36 | Link to Comment James_Cole
James_Cole's picture

OH LOOK, JAM CUNT JUST SHOWED UP.

Yep, as I suspected - the preschoolers are back on zh! When will parents do their job and lock-up the computers from their pests. 

Wed, 02/05/2014 - 15:47 | Link to Comment akak
akak's picture

Oh look, James Nadler is back on ZH.

Getting riled up by all the "radical freedombug extremists" again, eh James/Jon?

 

PS: Fuck Tinkerbell Gross and the Treasury Bill he rode in on.  The man virtually defines the word "parasite".

Wed, 02/05/2014 - 15:53 | Link to Comment James_Cole
James_Cole's picture

radical freedombug extremists

Nope, just the usual coterie of goofballs.

Wed, 02/05/2014 - 17:34 | Link to Comment stormsailor
stormsailor's picture

LITTLE NATTIE BOO-BOO JAMES COLE IS A KOO KOO

Wed, 02/05/2014 - 14:32 | Link to Comment Leopold B. Scotch
Leopold B. Scotch's picture

So let me get this straight... If you never saved the pigs in the first place, you are screwed?

Tell me again why Benji and crew are so hateful towards those who save?

Wed, 02/05/2014 - 14:43 | Link to Comment Remington IV
Remington IV's picture

Don't forget DDD and those scam  stocks

Wed, 02/05/2014 - 15:05 | Link to Comment Hippocratic Oaf
Hippocratic Oaf's picture

CNBS just used your pig pic.

I'd sue.

Wed, 02/05/2014 - 16:48 | Link to Comment ugmug
ugmug's picture

most people in the Middle Ages believed that God granted free will to Adam, Eve and all of His creatures.

God gave Adam and Eve free will..but not.. free reign!

Hence the forbidden tree placed in the middle of the Garden of Eden to make the distinction between free will and free reign. 

Wed, 02/05/2014 - 14:32 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

No kidding. To see even the Baron of Bowl Cuts despair is indicative of some serious butthurt, or a genuine fear.

 

In the back of my head I still think he's upset that Janet Yellen ( Kenny Rogers jr. ) took the crown of the "sweetest Monastic Haircut" in the theater of economics and finance from him.

Wed, 02/05/2014 - 14:40 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Dear Mr. Dirtlump,

You are make many rapid culture reference and Boris is cannot keep up! What is Kenny Rogers? What is Baron of Bowl Cuts? You are refer to popular American sport? In Calgary, you are play 10 pin or 5 pin?

Sincerely,

Boris

Wed, 02/05/2014 - 17:38 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

I could swear you are my twin brother trolling me.

As a child in Lethbridge I grew up 5 pin bowling at a house called "holiday bowl." My father was a coach, and I still have his polyester french blue bowling shirt hanging in my closet ( still looking freshly molded 30+ years later he was a member http://mbaofa.ca/ ). As time wore on a 10 pin house opened called "top 10 bowling center" (it's a great place to spend your spare time). Synthetic lanes. I started bowling 10 pin then. I've not bowled in a number of years but still have at my ready disposal a pair of dexter sst2 left handed shoes, my main ball was a 16 pound Brunswick danger zone black ice, and an ebonite clear wolf as a spareball.

My Kenny Rogers of course refers to the famous pic here of Janet Yellen with a beard. In an odd twist my Father was not musical but for some reson was compelled to learn how to play the gambler by Kenny Rogers on the piano / Organ.

Regarding bowl cuts, in a pathetic move it was only about a month ago that I tried beet soup. I grew up helping my mom make beet jam though, so that is that.

 

In other news my kids like playing with a large wooden globe we have asking me where certain people live. I frwquently have to point out to them where baba yaga lives.

Wed, 02/05/2014 - 17:42 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Leftbridge is sound like quaint village with plentiful amenity for recreation and fine epicurean delight. You are have beer, spudnut, and ample supply of beet! Maybe is nice place for grow old and die!

Wed, 02/05/2014 - 18:25 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

Lethbridge in fact has a large retirement community. I have mentioned that in the coulee where the original sick's brewery stood ( the original home of pilsener ) is now speckled with large retirement condos.

 

If you're every in the 403 area code let me know and you'll be walking on rose petals.

Wed, 02/05/2014 - 16:53 | Link to Comment FlipFlop
FlipFlop's picture

All wrong!!!!

Socialist do not understand a duck.

Look at new business models. People are getting very rich very quickly.

You just do not get it. The quasi right wing idios shouting sometjing else just do not get it. It is not just valuation mirage, it is cash flow.

You cannot see it? Look around before everyone thinks you are clowns.

Wed, 02/05/2014 - 14:13 | Link to Comment stormsailor
stormsailor's picture

the market has gone nearly vertical since 10 am.  seems like the pump still works quite well.

Wed, 02/05/2014 - 14:15 | Link to Comment 1stepcloser
1stepcloser's picture

So getting poorer faster is the new rage!

Wed, 02/05/2014 - 14:21 | Link to Comment Levadiakos
Levadiakos's picture

I want Bill Griffiths job. Work an hour day, tell us every 5 minutes where the Dow is and make $200K

Wed, 02/05/2014 - 14:15 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Seems Bill Gross heard a different rhyme than the one I remember.

In days of old
When knights were bold
And rubbers weren't invented
They wrapped a sock
Around their cock
And babies were prevented

Wed, 02/05/2014 - 16:10 | Link to Comment akak
akak's picture

In days of old

Our money was gold

And banksters were thereby hobbled

But then men like Bill G.

Gave us fiat money

And on bankster cock eagerly gobbled.

Wed, 02/05/2014 - 14:17 | Link to Comment HRamos_3
HRamos_3's picture

Just STFU and BTFD...

Wed, 02/05/2014 - 14:17 | Link to Comment Jason T
Jason T's picture

it's all fractal bitchez!  home economy..own it and you'll be wealthy!!

Wed, 02/05/2014 - 14:23 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Sell Herbalife kelp shake packets to friends and family members using the Girl Scout Cookie sales model.

We're all going to be rich, bitch!

Wed, 02/05/2014 - 14:36 | Link to Comment BandGap
BandGap's picture

It's being done as I type this -

http://www.visalus-store.com/

 

Wed, 02/05/2014 - 14:28 | Link to Comment Sean7k
Sean7k's picture

Let's look at this a different way: think of Keynsianism and The Austrian school as two opposing dialectics, neither operate as perfect systems, thus yielding the synthesis- crony capitalism. Plenty of blame to go around, but a unique system for the transfer of wealth from the slave class. It gives us something to fight about and debate over who's wrong or who's right.

Like our political systems, we end up in ever increasing acrimony, blaming the other guy, but never realizing any change from the paradigm.

What we are failing to challenge is the concept of law and how it works to control and imprison us. Without law, we have no state, no taxation, no prisons, no standing armies. Social benefits are derived from social agreements, rather than social coercion. 

Trade and exchange needs neither economics, politics, banking nor law to function and benefit us all.

Science would be the result of innovation driven by individuals, not dictates of the Elite.

Arbitrage would be a function of scarcity and distance rather than several people in discussion in an office whom control the exchanges.

Education would be knowledge driven, not propaganda created ignorance.

There are zero perfect worlds or systems, but to actually choose to be part of an enslavement process that is eternal in design and function seems the epitamy of mental illness. Liberty, responsibility and survival of the fitest seems demonstrably better than this hellish alternative.

Wed, 02/05/2014 - 15:44 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

There are zero perfect worlds or systems, but to actually choose to be part of an enslavement process that is eternal in design and function seems the epitamy of mental illness. Liberty, responsibility and survival of the fitest seems demonstrably better than this hellish alternative.

Education would be knowledge driven, not propaganda created ignorance.

Sean7k -If only we chose to learn history's lessons?

Wed, 02/05/2014 - 16:19 | Link to Comment Sean7k
Sean7k's picture

If only we choose to eliminate law in governing structures. History is tough enough to determine with all the rewrites, exceptions and lies. You have to attack the machinery of slavery.

Wed, 02/05/2014 - 14:29 | Link to Comment Carl Popper
Carl Popper's picture

Billy Boy is an interesting read. I got annoyed by him when he was on the wrong side of the long bond trade twice, and the second time he blatantly talked (ranted) his book and dissed the USA.

I have firgiven him. Be more subtle when you talk your book, dude.

Wed, 02/05/2014 - 14:30 | Link to Comment stormsailor
stormsailor's picture

go long porn,  isn't there an etf for that

Wed, 02/05/2014 - 14:33 | Link to Comment Dr. Engali
Dr. Engali's picture

Nobody thought to breed the pigs?

Wed, 02/05/2014 - 15:07 | Link to Comment Temporalist
Temporalist's picture

When the P/E for the weed futures went to 3 pigs she should have sold her share back to the weed farmer and taken the 3 pigs back.

Or just hypothecate bitchez!

Wed, 02/05/2014 - 14:34 | Link to Comment youngman
youngman's picture

The girls Scouts need to sell Marijuana laced cookies and sell them in Denver....make a killing...

Wed, 02/05/2014 - 15:00 | Link to Comment stormsailor
stormsailor's picture

or just set up their cookie sell booth in front of the mj store. lol

Wed, 02/05/2014 - 14:34 | Link to Comment viator
viator's picture

"IMF and other model-driven forecasters"

I wonder if it's the same people who do the bogus global warming forecasts?

Wed, 02/05/2014 - 14:34 | Link to Comment Sufiy
Sufiy's picture


CNBC: Thomas Demark Calls For Risk of 60% Crash In S&P 500

Thomas Demark is calling that the next two - three days will be critical and if the markets go down they can unravel very quickly. If today's weak ADP report can be taken as any guidance the coming up Jobs Report can be weak as well. We think that his call is very extreme, but Taper Pause is becoming the reality with every sell off in the market. Thanks to Bernanke, Janet Yellen has her FED Chair Crisis right at the start of her reign. Gold is fighting the gravity and market manipulators at the $1270 level and once it will close above it the mother of short squeeze in Gold will arrive.

 

http://sufiy.blogspot.co.uk/2014/02/cnbc-thomas-demark-calls-for-risk-of...

Wed, 02/05/2014 - 14:39 | Link to Comment Millivanilli
Millivanilli's picture

Gross can suck a fucking dick. He knows, as does anyone with knowledge of the exponential function, that we are in the the last doubling phase of the ponzi.   The only way out is to SHAFT THE SUCKERS who put their life's savings into the system.   My only question is whether the SUCKERS are going to sit idly by as they are told by the shiney teevee anchor, YOU ARE FUCKING BROKE, THE PEOPLE WHO STOLE YOUR MONEY ARE RICH AND FREE FROM PROSECUTION.

Wed, 02/05/2014 - 14:39 | Link to Comment syntaxterror
syntaxterror's picture

Just buy stawks you dumb fucks. Jeez.

Wed, 02/05/2014 - 14:40 | Link to Comment viator
viator's picture

I wonder how much of that $55,000 billion credit got to small businesses?

Wed, 02/05/2014 - 14:38 | Link to Comment Handful of Dust
Handful of Dust's picture

El Erian jumped ship while he i sahead...took his millions....where?

Wed, 02/05/2014 - 14:41 | Link to Comment Iam Yue2
Iam Yue2's picture

The entire system, in which Gross is a significant actor, is predicated around the notion of wealth preservation, as opposed to wealth distribution.

Gross thinks that people other than said wealthy care about the squalid game; that they will be crying in their soup tonight, at the thought of not being able to get rich slowly.

Go crawl back under your stone Bill.

Wed, 02/05/2014 - 14:43 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Gross admition: "So long, Suckers!"

Wed, 02/05/2014 - 14:57 | Link to Comment NOTaREALmerican
NOTaREALmerican's picture

You can still get rich the old fashion way:  by lieing or cheating.

Or, or course, by leaching off a good Big-Gov scam.

That's not socialism, that's an investment in our children's future!

Wed, 02/05/2014 - 15:25 | Link to Comment withglee
withglee's picture

What exactly do I mean by “credit?” Well, money in all its multiple forms.

Money has only one form: "a promise to complete a trade". The certificates or accounting entries representing  these promises are commonly traded in simple barter (i.e. after step (1) Negotiation;,steps (2) Promise to trade and (3) delivery on promise happen on the spot).

"Credit" is a figment of capitalist imagination. On it's face, it means that some capitalist will deliver on a promise a trader makes should the trader fail to keep it. But with capital leveraged 20 to 200 and more times (and public called on to help when the capitalist fails), this so-called backing is pure fiction.

the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume.

All economies are based on trading promises. It's normal. These models  are only applicable to mismanaged Mediums of Exchange (MOE). Proper MOE management makes modeling and forecasting useless. What is also normal is that all economies treat governments as responsible traders ... in fact the most credit worthy traders enjoying the lowest interest. The exact opposite is true. Governments are perpetual deadbeats. They just keep rolling over their trading promises instead of keeping them like responsible traders do. Rollovers are "DEFAULTS".

Asset prices are dependent on credit expansion or in some cases credit contraction, and as credit goes, so go the markets, one might legitimately say, and I do most emphatically say that!

With an understanding of "proper" MOE management, such a statement is senseless. Since it is "traders" who create this so-called credit, it is traders who do the expanding and contracting. They will promise when they are confident they can deliver. The will not when they can't see a way to deliver. It's the most basic concept of a trade. Dropping money from helicopters or refusing to "loan" it is not proper management of any MOE. It is just a plain and simple farming operation maintained by the financial farmers. Their success depends on their ability to control the trading environment which fundamentally changes the facts on which trading promises are made. They are about making traders shoot at moving targets. Proper MOE management would drive such practices to extinction. No laws required.

there being no money, credit or anything of the sort on the island.

It's impossible to envision an island where trading promises don't exist!

Most ‘Medieval’ Speed Read

1) Asset prices depend on credit creation and expansion.

All prices depend on trader's perception. With money in absolute free supply (i.e all trading promises certified with INTEREST collection corresponding to trader propensity to DEFAULT), there is no such thing as credit creation and expansion.

2) The U.S. and other countries create less credit from the public standpoint as their deficits decline.

In a properly managed MOE, countries don't create credit. Rather, traders make trading promises which are freely certified (i.e. become exchangeable money with guaranteed zero inflation). Countries' deficits never decline until they ultimately default. Untll then, they just rollover their trading promises.

3) 3–4% credit expansion in the U.S. may not be enough to maintain
3% growth, especially if asset prices go down and velocity is affected.

This is probably the most ridiculous aspect of popular thinking of the management of the MOE ... that being that "credit expansion" leads to growth. Responsible traders won't make promises they can't see clear to delivery ... regardless of so-called "credit".

4) Don’t be a pig in a highly levered global marketplace.

Be a pig if you want to, but deliver the bacon. Fail to deliver and your trading promises will incur very high INTEREST collections to reclaim DEFAULTs from your irresponsible class of trader.

There is risk out there.

Almost all the risk comes from purposeful uncertainty. When you have the financial farmers gaming the marketplace, and you have bouncing leaks called INFLATION, INTEREST, and restrictions on trade, unnecessary risks become the rule, not the exception. By unnecessary I mean "artificial". It's what financial farmers create ... an uncertain trading frame.

Todd Marshall
Plantersville, TX

 

 

 

 

Wed, 02/05/2014 - 15:53 | Link to Comment Al Capowned
Al Capowned's picture

He hasnt heard of Bitcoin then...

Wed, 02/05/2014 - 16:32 | Link to Comment syntaxterror
syntaxterror's picture

YellenCoin is the new BitCoin. Amazing 'growth' guaranteed!

Wed, 02/05/2014 - 16:02 | Link to Comment Baldrick
Baldrick's picture

hey bill! i know you read the hedge, and i just want you to know that your pimpco ads have started appearing on my pages so i have been clicking like crazy. not for your benefit though - Tylers! thanks!

Wed, 02/05/2014 - 16:36 | Link to Comment island
island's picture

Ah -- so you won't be able to get rich off the PHANTOM economy (i.e. betting games and/or feasting on the labor of others).  Good.  Maybe we can go back to have an economy based on REAL goods and services, that serves "the small people" rather than the 1%.

Wed, 02/05/2014 - 16:48 | Link to Comment janus
janus's picture

always awesome stuff from Mr. Gross.

he's gonna have to be very nimble -- though nimbleness is hobbled by that kind of AUM and that particular asset class -- but, if there's anyone who can manage it, it's the bard o' the bond from out newport-ways. 

let me put it another way:  if i had a pile and i wanted it to stay solid (and i didn't have plans on converting the whole to gold bullion), would i park it in cash (to be later cyprused or argentined or maduroed) or leave it to the bond king?  no question about it...gross has more integrity in his toenail than the whole of banking's swine-herd (the fact that he's flat-out brilliant doesn't hurt either).

here's a dedication, Mr. Gross:

http://www.youtube.com/watch?v=zUpTJg2EBpw

janus

Wed, 02/05/2014 - 22:00 | Link to Comment stormsailor
stormsailor's picture

a wells fargo bank investor talked to my wife today. was pitching her a portfolio, largest percentage to wells fargo adv assett alloc c (looks like a shell company all invested in each other),  eaton vance national muni (top 10 percent of their holdings are in,  detroit muni bonds, hahahhahahhahahhah)  washinton mutual c bonds,  you know, the bank that went out of business.  he did have 11% going to pimco total return c, that was okay.  and natixis loomis sayles strat inc c looked very diversified and pretty solid.   franklin income c,  jeebus 99.5 percent of their investments are in junk bonds.  american funds high income tr c,  looked like all momo stalks.

 

 

 

 

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