Felix Zulauf Warns Of "Another Deflationary Episode" As "The Mother Of All Bubbles" Pops

Tyler Durden's picture




 

"There is a valuation problem with most global equity markets - the most with the US," warns Felix Zulauf in the following brief clip, adding that sentiment "is extremely one-sided," but the classic bear-market-inducing recession, he notes, is not on the immediate horizon. Instead, he warns, other problems may be the catalyst for a correction in the US - specifically China's "mother of all bubbles", fragility in Asian banks, and balance of payments crises continuing in emerging markets. Zulauf suggests "you have to be short stocks, own US treasury bonds, and also buy gold as panic and risks go up."

 

Via WSJ,

 

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Sat, 02/15/2014 - 18:05 | 4440427 TeMpTeK
TeMpTeK's picture

Whos Bullish.?.... They print prices rise.. this isnt bullish... its BULLSHIT!

 

Sat, 02/15/2014 - 19:29 | 4440630 DOT
DOT's picture

Agreed.   Bullish it.

Sun, 02/16/2014 - 04:46 | 4441644 The Vineyard
The Vineyard's picture

Deflation deflation deflation.  Learn it, live it, love it.  Bitches.

Sun, 02/16/2014 - 09:32 | 4441829 new game
new game's picture

summation in 10 words or less: tuesdays burger today , bitchezz, = bad case of indigestion...

Sat, 02/15/2014 - 18:06 | 4440431 hamstercheese
hamstercheese's picture

I used to think a condiment was when you complemented a condom.  [off topic].

Sat, 02/15/2014 - 18:13 | 4440445 ShrNfr
ShrNfr's picture

No. they are what you serve at the open house for your condominium when you try and sell it.

Sat, 02/15/2014 - 18:55 | 4440531 NoDebt
NoDebt's picture

I thought it was that little white cake they put in the bottom of the urinal.

Sat, 02/15/2014 - 18:12 | 4440441 ShrNfr
ShrNfr's picture

Physical assets are not the asset of choice in a deflation.

Sat, 02/15/2014 - 18:49 | 4440506 BKbroiler
BKbroiler's picture

i was just thinking that.  gold deflates like everything else.

Sat, 02/15/2014 - 19:09 | 4440567 Peter Pan
Peter Pan's picture

If deflation turns into a rout I would think gold will shine when paper assets don't just deflate but actually evaporate.

Sat, 02/15/2014 - 19:15 | 4440592 kliguy38
kliguy38's picture

gold will perform VERY well in a deflationary collapse go back and look at previous ones.........miners were up 300% during the great depression gold also did fine......its called FEAR!!!!!!!!!! and loss of CONfidence.....do your homework

Sat, 02/15/2014 - 20:20 | 4440744 Soul Glow
Soul Glow's picture

Look no further than the crash of '08 - gold bottomed in the fall while equity bottomed in the spring, when the money printing ramped up.

It is true - gold does well during deflation, and considering the money supply is vastly greater than ever before and global debt is too, gold will shine like the star it is.

Sun, 02/16/2014 - 10:09 | 4441872 sessinpo
sessinpo's picture

Your statement is not accurate. Mine below clearifies that. Actual physical PMs decline during deflation. That is different from mining stocs.

Homework.

 

 

Sun, 02/16/2014 - 10:05 | 4441865 sessinpo
sessinpo's picture

I was expressing this about a year ago as inflationist could not grasp it with all the printing. It just made no sense to them that all the money printed disappears because of greater amounts of debt that overrides inflationary printing.

What good is it if you get an extra $100 dollars if you have also gotten $1000 more in debt? Sure, you may be able to make a few more interest payments with that $100 dollars, but you are in the cebt trap that. Eventually, the interest payments exceed your income.

Additionally, I also stated that even PM's would fall but would be a better investment relative to others. If history is to repeat, mining stocks should to well, better then the actual PM itself.

Cash will be king as people need to raise cash to service debt. Eventually the fiat currency collapses which is why a modest position in PMs is proudent.

Right now the size of the coming collapse makes food, guns and ammo the best investment, if you can fend off the government.

Sun, 02/16/2014 - 18:36 | 4443037 NidStyles
NidStyles's picture

When credit and debt are the only thing that is backing your currency it doesn't matter if the credit pumping itself stops as the interest will still accumulate and keep the currency in a constant state of devaluation.That sir is called inflation. When people are trying to raise cash as you put it, the government will be subsidizing and bailing out someone. They always do.

 

I swear you idiots need to learn more before trying to "school" anyone as you thought you were.

Sun, 02/16/2014 - 10:05 | 4441866 sessinpo
sessinpo's picture

I was expressing this about a year ago as inflationist could not grasp it with all the printing. It just made no sense to them that all the money printed disappears because of greater amounts of debt that overrides inflationary printing.

What good is it if you get an extra $100 dollars if you have also gotten $1000 more in debt? Sure, you may be able to make a few more interest payments with that $100 dollars, but you are in the cebt trap that. Eventually, the interest payments exceed your income.

Additionally, I also stated that even PM's would fall but would be a better investment relative to others. If history is to repeat, mining stocks should to well, better then the actual PM itself.

Cash will be king as people need to raise cash to service debt. Eventually the fiat currency collapses which is why a modest position in PMs is proudent.

Right now the size of the coming collapse makes food, guns and ammo the best investment, if you can fend off the government.

Sat, 02/15/2014 - 19:12 | 4440583 realWhiteNight123129
realWhiteNight123129's picture

ShrNfr you obviously do not know what you are talking about.

Deflation is one of the form when promises of future cash flows (debt and equities) are too abundant in connection with the circulation of present goods (goods and services and consumable commodities). 

If the money can not be printed, you should hold money (coins in the old system of XIX century, or ECB notes in Cyprus).

You should avoid financial asset and currency deposits in this configuration of fixed money. And you will be much better with wheat in a warehouse than with a bank deposit (ask the Cypriots about that). The fall in prices is very temporary for inelastic demand commodities, if there is a fall it is typically because of a total banking collapse. In XIX century you would see a fall for maybe 18-20 months, you are still better off than than with bank currency from a bankrupt bank. The best is obviously base money.

However in today´s system you are almost guaranteed to see the threat of delation fought with a devaluation of the currency. A devaluation of the currency through money printing has the following sequence: 

1. interest rates going lower

2. land price moving up

3. price of secutiries moving higher

4. Finally the base money enters the circulation and inflation picks up. (We are getting close to phase 4 in teh US after the China episode of imported deflation).

Anyway there are too many finanical assets (promises of future cash flows) in relation to GDP (goods and services and consumable commodities). 

 

Sat, 02/15/2014 - 22:19 | 4441058 gatorengineer
gatorengineer's picture

lets count it and score it they have been trying like hell to devalue the currency for a long time now...

 

1) interest rates going lower, not so much..

2) land prices moving up... Nope...

3)  Price of securities moving higher... well one for 4....

4)  Inflation picks up... NOPE.....

 

Goes back to Tyler 101, its flow......  they have to keep printing....  Best lesson I learned from Zero hedge...  They have to keep the flow up...

Sun, 02/16/2014 - 09:18 | 4441806 ArmyofOne
ArmyofOne's picture

The Spice must flow.

Sun, 02/16/2014 - 18:38 | 4443041 NidStyles
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The inflation has been low in the local region because it's being exported.

 

If any of you have actually ever traveled you would know that the dollar is losing ground against quite a few other currencies.

Sun, 02/16/2014 - 18:28 | 4443020 NidStyles
NidStyles's picture

If it were even a real deflation you might have a point. Unfortunately everyone throws that word around without actually knowing what it means.

Sat, 02/15/2014 - 18:13 | 4440446 q99x2
q99x2's picture

Deflation is good for people that don't have debt. Like me. And it will also keep the price of gold and silver from rising.

My student loans (in the future) will pay for a larger house. And, I'll be able to travel more often. Also the wealthy will become less wealthy because of debt and I will rise up through the middle class to become dictator of the world a lot sooner than otherwise.

Sat, 02/15/2014 - 18:23 | 4440457 Murf_DaSurf
Murf_DaSurf's picture

 

 

'Loans in the future'??

 

LOL, good one!  

Sat, 02/15/2014 - 22:21 | 4441065 gatorengineer
gatorengineer's picture

my mortgaged house deflates too much, I toss the keys back to the bank.

 

Your paid off basement residence is worth less......  who wins....

Sat, 02/15/2014 - 18:32 | 4440471 RafterManFMJ
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POP, YOU MOTHER******, POP!!

Sat, 02/15/2014 - 18:49 | 4440512 Anthony Migchels
Anthony Migchels's picture

As long as we don't get rid of the banks and their usury and wholly artificial boom/bust cycle, this nonsense is going to continue.

These suckers all own each other, it's one massive cartel.

http://realcurrencies.wordpress.com/2014/02/15/hate-the-state-but-the-ba...

Sat, 02/15/2014 - 20:21 | 4440755 Soul Glow
Soul Glow's picture

They aren't Masters of the Universe, they are masters of the paper universe.

Don't forget that.

Sat, 02/15/2014 - 18:53 | 4440518 buzzsaw99
buzzsaw99's picture

when they break out the charts grab your wallets. this mofo is clueless at best, disingenuous at worst.

U.S. margin debt as a percentage of GDP has now hit 2.6%, the same extreme as in 2007 at the peak and close to the all-time high of 2.8% in 2000...

IRRELEVANT! In 2000 and in 2007 the fed raised rates. The fed will never raise rates again in any significant fashion within our collective lifetimes. This bubble, bubble, toil and trouble fake market will keep doing what it's doing 4 EVAH. this thing is pets.com and enron put together times infinity. they will never pop this fucker. Party like it's 1999 because that's where the S&P is going bitchez.

Sat, 02/15/2014 - 18:52 | 4440521 ebworthen
ebworthen's picture

My only issue with the article is "...the unintended consequences of QE..."

I think it was intended.

Sat, 02/15/2014 - 18:54 | 4440524 trailsend
trailsend's picture

The end is nigh. I'm buying canned goods.

Sat, 02/15/2014 - 18:59 | 4440544 greatbeard
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>> I'm buying canned goods.

I'm canning my own out of my garden.

 

 

Sun, 02/16/2014 - 07:37 | 4441731 Disenchanted
Disenchanted's picture

The only cans I can find are dented...

Sat, 02/15/2014 - 19:00 | 4440547 BadDog
BadDog's picture

Deflation. I don't think that word means what you think it means. Disintergration more like it.

Sat, 02/15/2014 - 19:10 | 4440571 Anthony Migchels
Anthony Migchels's picture

Deflation, by the way, is a total disaster, for all involved.

It is bad for debtors and the whole world is drowning in debt. It destroys economic growth, because it encourages hoarding of money. Deflation means depression, the money supply tanked dramatically in 2008 and is still way below trend.

The Austrians have wreaked havoc with our economic common sense and their wholly bogus defense of deflation is simply outrageously intellectually dishonest.

Austrian Economics, Apostles of Austerity Defending Deflation http://realcurrencies.wordpress.com/2012/08/01/austrian-economics-apostl...

Sat, 02/15/2014 - 19:13 | 4440585 FredFlintstone
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What if you are sitting on a pile of loot?

Sat, 02/15/2014 - 20:32 | 4440790 hobopants
hobopants's picture

Deflation does not exist in a vaccuum, it is a force like gravity. Gravity is good because it keeps me grounded on the planet, but it would be bad if I jumped out of an airplane without a parachute. Deflation as a result of an efficient economy is a good thing as it reduces the cost of goods and adds value to savings. This is the same thing you see in ecology as diversity allows for the more efficent recycling of energy within a system.

Right now deflation is bad because it is the result of a credit boom caused by the supply side idiots you're so fond of. In a shit economy where no one is making any money, deflation and inflation are both bad, because they both act to reduce purchasing power, one from the value of the money, the other from the lack of it. But the disease is the crap economy created by the fed, excessive deflation or inflation are merely the symptoms created by the imbalance caused by intervention.

The economy is a complex system and subject to the same laws and interactions as an ecosytem, the highest order of understanding of any system, is the understanding of consequences. There is no "good" or "bad" there is only action and reaction. Energy was displaced in the system like pushing a air filled ball under water, the deeper you try and push and the more force you use the greater reaction you get back in return.

 

Sun, 02/16/2014 - 10:19 | 4441894 FredFlintstone
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Fond of supply side idiots? Assume much?

Sun, 02/16/2014 - 16:46 | 4442724 hobopants
hobopants's picture

Yabba dabba doo! Guess I do Fred. Probably a bit reactionary on my part. At my university I'm constantly having this deflationary argument with the apostles of krugman. I guess somewhere in my brain I formed an association between Deflation is Bad = Supply side moron. They often seem to go hand in hand.

Big fan of your cartoon by the way, but how did you find internet access in the stone age?

 

Sat, 02/15/2014 - 19:19 | 4440599 Stanley Lord
Stanley Lord's picture

"Deflation, by the way, is a total disaster, for all involved."

No it isn't, that is the meme the Fed puts out to justify intervention 24/7.

 

Sat, 02/15/2014 - 21:47 | 4440919 Deathrips
Deathrips's picture

Shit, thats the best they can do....really?

Let me try- Spoken by a proud multiethnic man with children behind him clapping

The USD is too strong after 100 years of ("debasement" redacted) value creation by the FED. The USD was created by the FED to save the blind american children from the deflation monsters severe anal raping. (Subliminally add "You will all respect this papers awesome ability to levitate, forward for the children".) It is soo strong that it will kill the global economy for good "IF" we dont print MOAR and save this fiat currency from having too much purchasing power.

 

It wont happen again baby I love you, let me give you some ice.

 

"Yes, its missing a /s/ tag...i know." (anyone adding this to the POTUS teleprompter gets a hall pass)

 

FUCK THE MONEY CHANGERS!!!

 

RIPS

 

Edit: this guys a tool he probably spent all week on this..i just though up the stupidest shit I could think of in 5 minutes. I constantly forget that the truth has no value.

Sun, 02/16/2014 - 10:16 | 4441886 SilverSavant
SilverSavant's picture

Deflation can be a huge problem for the banks, or they can buy things up after on the cheap.   So, be aware of the "after" and make sure there are no banker owners left alive after. 

Sat, 02/15/2014 - 19:25 | 4440619 fijisailor
fijisailor's picture

"The Austrians have wreaked havoc with our economic common sense"

Where've you been the last 100 years?  Hiding under a rock someplace?  Keynsian economics has driven the world to the brink of economic disaster with this inflation meme.

Sat, 02/15/2014 - 19:51 | 4440683 realWhiteNight123129
realWhiteNight123129's picture

The problem is not deflation, the problem is accumulation of bad debt in the first place. You can thank the idiots managing the system for this excessive accumulation. 

Either way excessive future cash flow promises (debt of finanical assets if you will) need to shrink in relation to GDP (present goods i.e. --- goods and services circulated in teh economy, that includes consumable commodities). 

If you wack the numerator (debt and bankruptcies) or push the denominator (inflation in GDP), you restore the balance. Eitehr way excessive promises of future cash will shrink in relation to present goods (which include gold).

 

The problem with resolving by devaluation first and later morphing into inflation is that you have moral hazard. In the XIX century the Bank of England forced the small people not to have bank notes but gold coins. This way during a bank meltdown, the small people would be unscathed, while the speculator, the overextended merchants, the imprudent bankers would be wiped off clean. The debt destruction would be swift, and new cycle would start. 

The problem of preventing deflation early (Strong in 1926) or Greenspan in 2001-2002 and Bernanke in 2008 is that instead of having a small deflation and a few bankruptcies, you keep accumulating bad debt and increasing total debt to GDP, which only guarantees a large problem down the road. 

Having a wipe off of banks at a relatively moderate total debt ot GDP helps prevent a total meltdown at a much larger debt to GDP. Your other alternative is to debase teh currency so much that you end up like Argentina. 

There are no easy ways out of debt, blaming the other side does not make your own alternative (theft of savers) a better way. At least in bust and deflation you do not have moral hazard and you get rid of imcompetent people. With the money spigot the incompetent people actually get more power while the guys which were trying to save their dollars, expecting that home price would finally come affordable to buy them with a decent level of equity as percentage of value get robbed to bail-out all the other idiots.

 

 

 

Sat, 02/15/2014 - 20:35 | 4440795 ThroxxOfVron
ThroxxOfVron's picture

"At least in bust and deflation you do not have moral hazard and you get rid of imcompetent people. With the money spigot the incompetent people actually get more power while the guys which were trying to save their dollars, expecting that home price would finally come affordable to buy them with a decent level of equity as percentage of value get robbed to bail-out all the other idiots."

That cannot be repeated often or loudly enough.

Recessions are natural healthy purges of accumulated incompetency and misallocation.

The imprudent and incompetent are supposed to pay for their imprudence and incompetence; it's how nature forces incautious and unkilled people to pay attention to what they are doing and learn things if they want to survive.

It is flat out evil to reward stupidity and hubris.

Sun, 02/16/2014 - 10:17 | 4441891 sessinpo
sessinpo's picture

And what about deflationary periods such as 1837 when US public debt was at a minimum?

Sat, 02/15/2014 - 23:26 | 4441241 andrewp111
andrewp111's picture

Deflation leads to world war. Been there, done that in 1933-1945. Want to have a repeat in an age of deliverable nuclear weapons? No wonder the Fed and all other central banks are desperate to avoid deflation at any cost.

Sun, 02/16/2014 - 01:33 | 4441472 TheReplacement
TheReplacement's picture

You mistake natural deflation due to efficiencies and man mad deflation due to anti-market policies.  One is good.  The other is bad.  Guess who gives us the bad ones?  Hint:  It isn't Austrians.

Sun, 02/16/2014 - 11:18 | 4442007 RaceToTheBottom
RaceToTheBottom's picture

ANthony, you should have used a sarc

Sun, 02/16/2014 - 18:42 | 4443054 NidStyles
NidStyles's picture

Deflation is the process that clears out the bad investments and the junk bonds/stocks. It's what keeps people honest, or at least forces them to come to terms with their artificial wealth. That is why it's a good thing and needs to happen on it's own accord to reduce the trauma and impact that it has on the general economy when pushed off for decades.

 

In other words, the Austrians got it right, and they are not trying to create a Utopian economy that can not exist in reality.

Sat, 02/15/2014 - 19:17 | 4440595 spellbound
spellbound's picture

"Mismanaged economies like Argentina?"

Managed economies, like everyone. Fixed it for ya.

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