This page has been archived and commenting is disabled.

Elliott's Paul Singer On How It All Will End: "Badly, We Guess"

Tyler Durden's picture




 

Some less than pleasant observations from the billionaire founder of Elliott Management, Paul Singer, extracted from his periodic letter to clients.

AMERICA’S LIABILITIES

The budget deficit for the latest fiscal year (which ended on September 30) was reported to be around $700 billion. However, this figure would be many times higher if the government’s unfunded entitlement programs were included. Even before taking into account liabilities stemming from the Affordable Care Act (ACA), which cannot even be calculated yet because so many of its assumptions are either erroneous or outright fabrications, and because many of its provisions keep getting delayed by the Administration for purposes of political advantage, the present value of the future obligations of the federal government is currently around $92 trillion. These obligations have been growing by over 10% per year since 2000, during which time nominal GDP has risen just 3.8% per year. At this rate, the federal government will owe an estimated $200 trillion on the entitlement programs by 2021 (again, excluding the effects of ACA) and $300 trillion by 2025.

These numbers are not fantasies. At present, there is no acknowledgement by a large portion of the American political establishment that this insolvency even exists. Nor have the leaders of this establishment made any concrete progress toward restoring solvency by taking up serious proposals to rein in unpayable promises. Quite the contrary: Politicians and policymakers continually tell people that such entitlement obligations will be met – a claim they must know cannot possibly be true.

Recently, we had a conversation with a mainstream economist who told us that the government is not actually insolvent because the long-term entitlements are not really liabilities that need to be counted, any more than the military budget for the year 2030 needs to be counted. This assertion is incorrect. Military spending, like any other form of discretionary spending, can be cut quickly and arbitrarily, as Washington recently made clear. And such spending is in exchange for goods and services delivered at the time the money is spent. In 2030, the government can buy many more tanks, or many fewer, than it is buying today. It has not promised to buy any amount. In fact, aside from military entitlements such as veterans’ health care, there is no obligation to spend any money at all on the military in 2030. By contrast, entitlements represent concrete governmental promises that are being made today about future spending – promises on which people are being (falsely) told that they can rely. And at the time the money is scheduled to be delivered, the recipient is delivering no goods or services. Only someone who has never run a business could say with a straight face that such obligations are not really liabilities and need not be included in the accounting.

High inflation (or hyperinflation) is one way that devious or clueless policymakers attempt to deal with unpayable promises. It is devious, because without formally imposing a tax, it takes money from savers and investors and pays it to borrowers and voters. It is clueless, because the cycle of government handouts and demands for more benefits is like a game of “chase the tail” – because it dissipates the real value of promised benefits, it brings the ultimate prize no closer while destroying the value of money and dissolving societal cohesion in the process.

The U.S. is in a “warm-up” phase on this score at present. The promises made by U.S. politicians are huge. Absent reform, they will lead to societal ruin. But so far, there has been no collapse of the dollar – possibly because there is no alternative fiat currency against which it can collapse. Gold is trading at $1,300 per ounce, not $5,000 per ounce. The $100 million co-op apartment in New York and the £100 million flat in London are thought of as oddities, not “coming attractions” for the evaporation of the value of paper money. Wage inflation is small (even though labor markets for desirable skills are tighter than most people think), and the arithmetic of government statistics (jobs, growth and inflation) is distorted and dishonest almost beyond measure.

There is something missing in investors’ reasoning that leads to their current complacency, and that is an understanding of the circularity of confidence in a fragile system. Since the system is fundamentally unsound, all it would take is a loss of confidence to set off a collapse in the purchasing power of money, a major currency or the global stock and/or bond markets. “Risk off” today still means buying U.S. Treasuries, but this may not be the case at some unpredictable but abrupt future turning point in market psychology. Markets are fast and self-reinforcing today, creating facts rather than reflecting them. We believe investor confidence today is unjustified. The leaders of the Developed World have chipped away at the solidity that would ordinarily justify confidence in their leadership, markets and currencies, such that confidence can be lost at any moment. If confidence in a sound system is unfairly lost, then countertrend forces can act to stem the panic and restore stability. But a justified loss of confidence in an unsound system would generate much more damage and be, for a period of time and price, unstoppable. That result is what governments have risked by their poor policies, their lack of attention to the risks posed by the inventions of the modern financial system, and their neglect of the fiscal balance sheet. Since this combination is relatively new, particularly the enormity of Developed World debt and obligations, as well as the complexity and extraordinarily high leverage of the financial system (especially given the size of derivatives books), there is no way to tell exactly how it all will end. Badly, we guess.

* * *

KE=1/2*M*V2

For those who did not recognize the above formula, you are in good company. It is the equation showing that kinetic energy is a function of mass and velocity, but that the relationship is not linear: A doubling of velocity causes a quadrupling of kinetic energy.

What is the relevance to financial markets and trading? We believe some of the same elements are present when financial leverage rises beyond certain levels. Any complex portfolio contains expectations about maximum expected price movements and possible losses, together with assumptions about the dispersion of returns and correlation. Obviously when markets turn adverse, if those assumptions turn out to be overly optimistic, then losses ensue. Capital represents a cushion against losses, a cushion that is very important to the investor, but even more important to the system as a whole. When leverage goes up, it takes smaller and smaller perturbations in prices, correlations and volatility to generate serious losses requiring palliative action. But as leverage increases among key market players, the possibility of large losses and involuntary liquidation behavior creates contagion from one player to another, a kind of chain-reaction effect as losses occur too quickly for reflection and sellers become price-insensitive, causing larger losses – and even failure – to spread from one firm to another. Extreme leverage removes the cushion and the robustness of structure, and it is the proximate cause of disequilibrium. As with kinetic energy, excessive leverage is nonlinear, subject to tipping points, and can cause (and did cause in 2008) massive and abrupt systemic failure.

This nonlinearity of leverage is a function of similar positioning and contagion. We do not believe that the system today is any safer than it was when it failed in 2007 and 2008. Global leverage is up, not down, contrary to the popular misconception. Private debt is unchanged from 2007 levels, but public debt has risen globally from $70 trillion to $100 trillion. It appears that a number of major American financial institutions have de-risked  themselves somewhat, although this is impossible to discern from publicly available filings (which is why rumor and conjecture will govern the way markets perceive large financial institutions in the next market crisis). European financial institutions still maintain more leverage and bigger derivatives books than their American counterparts, as well as large holdings of sovereign debt that they were coerced into buying as part of the “save-the-euro” panic.

In fact, the global financial system is arguably less safe than it was in 2008. The unquestioned creditworthiness of the Developed World governments ended the most intense phase of the 2008 crisis, as the financial system was ultimately all but guaranteed by governments. A catalyzing force for the next crisis might be a failure of confidence in one or more of those major governments or in China. Such a failure alone could cause major stress in markets, as either currencies or bond markets could experience sudden collapses. Also potentially impactful is one of the major lessons of 2008: It is wise to move assets and sell claims and securities immediately if a debtor or counterparty is perceived to be in trouble. This maxim could make the next market crisis play out on a hair-trigger, with a stressful lead-in and then a simultaneous rush to the exits.

Those who think the scenario above is an exaggeration should ask themselves the following question: After decades of advancements in human knowledge and purported innovations in the global financial system, why did 2008 turn into the worst financial crisis since the Great Depression? The answer is that the system was unsound, largely due to excessive leverage and the complexity of financial instruments. In the 80-plus years since the 1929 crash and the subsequent Depression, there clearly have been a large number of geopolitical and financial events, yet none of them caused financial collapse until 2008. Of course, we understand that a combination of public and private errors and misconceptions led to the financial crisis, but it was the unfettered use of leverage that made the episode pass over the line into systemic collapse.

We do not think policymakers have learned anything much from the financial crisis, but that fact can truly be demonstrated only as time passes. In our view, monetary policy extremism has papered over (no pun intended) the lack of fundamental reforms that would enable the Developed World to grow faster and more sustainably with financial institutions that are solid and robust enough to withstand the next periods of economic and financial stress. We believe the world’s financial institutions are still essentially dependent on governments, but the Developed World governments themselves are hopelessly insolvent. The insolvency may not be manifested in a market reaction tomorrow or even next year, but the numbers are obvious and compelling, not conjectural or  fanciful. Markets focus on something when they want to, not when “visionaries” think they should.

It is important to note that mass human behavior cannot be modeled or predicted with any degree of precision. When forces are brought to bear that suggest a possible shift in direction of mass human behavior (examples include oppression, tyranny, economic underperformance, inflation, incentives and disincentives), there is no way of telling if, how or when such forces will actually result in a change of vector.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 04/29/2014 - 20:45 | 4710183 Rican
Rican's picture

Then their guess is as good as mine.

Tue, 04/29/2014 - 21:02 | 4710237 0b1knob
0b1knob's picture

< ...in tears.

< With a wimper not a bang.

How this ends.   Bonus points if you recognize the source of the first choice.

Tue, 04/29/2014 - 21:13 | 4710294 813kml
Tue, 04/29/2014 - 21:49 | 4710425 Soul Glow
Soul Glow's picture

John Boehner?

Tue, 04/29/2014 - 23:03 | 4710704 aVileRat
aVileRat's picture

Paul Singer, are you a closet Brony.

;)

China or BOJ are going to prob. start the suck. One is inflating to hell, the other is in a zero-policy vortex kickstarted by that tax killing consumption.

Edit: Hmm.... looks like Hong Kong is just getting the party started at the open.

 

 

Tue, 04/29/2014 - 21:52 | 4710446 smlbizman
smlbizman's picture

i still have checks left in my book....so i still am good, right?

Tue, 04/29/2014 - 22:00 | 4710482 Chief KnocAHoma
Chief KnocAHoma's picture

Please!!! I've been hearing this end of the world bs for over 10 years now. If I had anymore pm I wouldn't be able to carry it in a semi.

Bottom line ... No one knows the day or hour. It will end ... But for the time being enjoy yourself, your family, friends, life. There is not one damn things we can do to change the course, so toga party bitches and do the best you can.

Worry not, for that emotion draws from your heart. Fuck tptb and live your life!

Cheers mate! See you on the other side.

Tue, 04/29/2014 - 22:06 | 4710499 fonzannoon
Tue, 04/29/2014 - 22:16 | 4710533 Hulk
Hulk's picture

Thanks fir that fonz, I watched a couple hours of alan last time you posted the link. Interesting guy and I had never heard of him !!!

Wed, 04/30/2014 - 00:13 | 4710859 chumbawamba
chumbawamba's picture

Your Hulkness,

Also check out Robert Anton Wilson.

And call me!

-Chumblaya.

Wed, 04/30/2014 - 01:34 | 4710976 ThirdWorldDude
ThirdWorldDude's picture

Thanks for the heads-up, Chumba!

Just the other day I watched a profound 1987 Libertarian Party Q&A session with RAW and Karl Hess. Highly recommended to all my far-out friends: Subversion for fun and profit.

Also, check out Manly P. Hall. He's in the same ranks as Alan Watts, albeit a tad more metaphysical and cryptical... kinda like the Carl Jung of esoteric thought.

 

[Edit:] Hail Discordia!

Wed, 04/30/2014 - 07:56 | 4711285 tip e. canoe
tip e. canoe's picture

it's a wonderful day when you wake up to RAW & Watts in the hedgerow.

youboob back at ya:

RAW - Everything Is Under Control

A History of Tinfoil in 26 Minutes

Wed, 04/30/2014 - 01:02 | 4710926 BringOnTheAsteroid
BringOnTheAsteroid's picture

Call me ignorant Fonz, but I didn't have a clue what he guy was talking about.

Never waking up after you go to sleep is the same as waking up before never going to sleep. WHAT THE FUCK ????????? The financial system is easier to understand than statements like that.

That one statement may have invented a completely new term - "non-transitive non-equality" 

Can't we just die and cease to exist for eternity. Is that really too hard to grasp, is it really too much to ask. Imagine having to talk to your fucking family for the rest of eternity, jeezaloo, I'd rather go to hell, hang on, that would be hell.

Wed, 04/30/2014 - 01:07 | 4710935 chumbawamba
chumbawamba's picture

There is no such thing as death, there is no such thing as beginning or end.  Once you get to the "end" you are merely back at the beginning again.

What I interpret Watts as saying here, at least on the surface, is that "death" is simply "birth" into a new existence.  You don't die, you just transition.

At least some people believe this.

I am Chumbawamba.

Wed, 04/30/2014 - 07:28 | 4711239 Bemused Observer
Bemused Observer's picture

The light at the end of the long tunnel at death DOES sound sort of 'birthlike'...

Wed, 04/30/2014 - 07:49 | 4711273 GubbermintWorker
GubbermintWorker's picture

Or that light at the end of a tunnel could be a train.

Wed, 04/30/2014 - 09:13 | 4711514 agstacks
agstacks's picture

The Bhagavad Gita says, 

"Never the spirit was born; the spirit shall cease to be never;

 Never was time it was not; End and Beginning are dreams!

Birthless and deathless and changeless remaineth the spirit forever;
Death hath not touched it at all, dead though the house of it seems"


Some other good quotes from Yogananda-

"Our real self, the soul, is immortal. We may sleep for a little while in that change called death, but we can never be destroyed. We exist, and that existence is eternal. The wave comes to the shore, and then goes back to the sea; it is not lost. It becomes one with the ocean, or returns again in the form of another wave. This body has come, and it will vanish; but the soul essence within it will never cease to exist. Nothing can terminate that eternal consciousness."

"When you reflect that this world is filled with death, and that your body, too, has to be relinquished, God’s plan seems very cruel. You can’t imagine that He is merciful.

But when you look at the process of death with the eye of wisdom, you see that after all it is merely a thought of God passing through a nightmare of change into blissful freedom in Him again. Saint and sinner alike are given freedom at death, to a greater or lesser degree according to merit. In the Lord’s dream astral world — the land to which souls go at death — they enjoy a freedom such as they never knew during their earthly life.

So don’t pity the person who is passing through the delusion of death, for in a little while he will be free. Once he gets out of that delusion, he sees that death was not so bad after all. He realizes his mortality was only a dream and rejoices that now no fire can burn him, no water can drown him; he is free and safe."

"The word “death” is a great misnomer, for there is no death; when you are tired of life, you simply take off the overcoat of flesh and go back to the astral world."

“The ocean of Spirit has become the little bubble of my soul. Whether floating in birth, or disappearing in death, in the ocean of cosmic awareness the bubble of my life cannot die. I am indestructible consciousness, protected in the bosom of Spirit’s immortality.”

Wed, 04/30/2014 - 07:51 | 4711276 tip e. canoe
tip e. canoe's picture

The Houseboat Summit: February, 1967, Sausalito, Calif.
Featuring Timothy Leary, Gary Snyder, Alan Watts and Allen Ginsberg

THE LEISURE SOCIETY: PUZZLES AND PARADOXES

Watts: The thing is this: what we are facing, what's going to happen is this...if we do not encounter the final political catastrophe of atomic war, biological warfare and wipe the whole thing out, we're going to have a huge leisure society--where they're going to reverse taxation and PAY people for the work that the machines do for them. Because there's no other solution to it.

In other words, if the manufacturer is going to be able to sell his products, the people gotta have money to pay for the products. All those people have been put out of work by the machines the manufacturer is using. Therefore, the people have got to be paid by the government--CREDIT of some kind, so they can buy what the machines produces--then the thing will go on.

So this means that thousands and thousands of people are going to be loafing around, with nothing at all to do. A few people who are maniacs for work will go on...

Leary: I think what you're defining, Alan, is...

Watts: But that's the kind of situation we're moving into. IF we survive at all.

http://terebess.hu/english/watts6.html

pretty prescient, yes?

Wed, 04/30/2014 - 00:19 | 4710870 Okienomics
Okienomics's picture

"Wouldn't be able to carry in a semi"

I can help with that, send your address.

Wed, 04/30/2014 - 05:02 | 4711122 Chief KnocAHoma
Chief KnocAHoma's picture

251 Fuckoff Street
AR15, LA 69696

Wed, 04/30/2014 - 03:49 | 4711070 Canoe Driver
Canoe Driver's picture

"There is not one damn things (sic) we can do to change the course."

In a sense, the cause of the whole ongoing collapse, or at least the single greatest cause, is this pernicious attitude that nothing can be done. Of course each person can change the course of history. When many band together, more can be changed, and it can often be changed faster. It is the blind concentration on going forward with one's original "life plan," graduate, get married, buy a house, have kids, etc., which, in the face of rapidly changing realities, is, by definition, psychopathic, and therefore destructive.

Tue, 04/29/2014 - 21:36 | 4710391 Pounder
Pounder's picture

Like tears in rain. Time to die.

Tue, 04/29/2014 - 21:48 | 4710420 Four chan
Four chan's picture

androids dreaming of electric sheep?

Wed, 04/30/2014 - 05:23 | 4711131 N57Mike
N57Mike's picture

"I've seen things you people wouldn't believe .... attack ships on fire off the shoulder of Orion..... Sea beams glitter near the Tannerhauser Gates, now all these things will be lost in time, like tears in the rain" (ending scene of Blade Runner, Philip Dick).

Wed, 04/30/2014 - 07:01 | 4711211 Snidley Whipsnae
Snidley Whipsnae's picture

Blade Runner... Best sci fi film ever, imho.

Tue, 04/29/2014 - 20:46 | 4710185 lordbyroniv
lordbyroniv's picture

4th Turning..........bitchez !!

Tue, 04/29/2014 - 21:10 | 4710281 booboo
booboo's picture

"It is important to note that mass human behavior cannot be modeled or predicted with any degree of precision. When forces are brought to bear that suggest a possible shift in direction of mass human behavior"

I do not hold out much hope that when it all begins to unravel that humanity will rise to the occation. We left Mayberry on a rocket sled trying to shed the smell of pies on the window sills and main street and ended up in a rented room on the corner of Crack and Broke street with a chinese landlord. Fuck you fucking fuckstick politicains and the K Street whores you ride home on at night, I hope your children get cornholed by gongjo infected gorillas.

Tue, 04/29/2014 - 22:17 | 4710539 Hulk
Hulk's picture

very well put booboo...

Wed, 04/30/2014 - 07:10 | 4711224 Snidley Whipsnae
Snidley Whipsnae's picture

Unfortunately, we're not in Mayberry any longer. Instead of Barney having 1 bullet he is now carrying an assult rifle with hi cap mag... And there are a lot more Barneys than Andys.

 

 

Tue, 04/29/2014 - 21:16 | 4710299 813kml
813kml's picture

My ass still hurts from the 3rd Turning, go long lube.

Tue, 04/29/2014 - 20:48 | 4710191 NoDebt
NoDebt's picture

Funny, I was just having a very similar discussion with another board member in the thread about the 3-tiered Treasury market.  I stand by what I said there, because it's pretty similar to what I'd say in response to this article.

Tue, 04/29/2014 - 20:53 | 4710204 Grande Tetons
Grande Tetons's picture

Did the words pompous, shitbag or obvious enter the discourse? 

Tue, 04/29/2014 - 21:19 | 4710312 NoDebt
NoDebt's picture

No, no, of course not.  I would never call Fonz any of those things.  Not to his face, anyway.  ;)

Paul Singer.... eh, I wish I got paid as much as him to to explain in technical detail which way the wind blows.  Strangely, I live in a world where more is demanded from me than just my opinion.

Tue, 04/29/2014 - 21:23 | 4710329 fonzannoon
fonzannoon's picture

LOL

Tue, 04/29/2014 - 21:24 | 4710339 Grande Tetons
Grande Tetons's picture

LOL! 

Tue, 04/29/2014 - 20:50 | 4710194 1stepcloser
1stepcloser's picture

I miss my old doomer porn prior to 08.

Tue, 04/29/2014 - 20:52 | 4710201 Reaper
Reaper's picture

You can fool most of the people for a time. You can't fool all of the people for all of the time. The prodigal bank and its government always run out of the people's trust.

Tue, 04/29/2014 - 21:03 | 4710245 Shad_ow
Shad_ow's picture

...and money.

Tue, 04/29/2014 - 21:35 | 4710387 CrimsonAvenger
CrimsonAvenger's picture

The trick is to fool them long enough for them to drop their guard. Then you kick them in the nuts and run.

Tue, 04/29/2014 - 20:59 | 4710225 Seasmoke
Seasmoke's picture

2008.

That's all I say to people now. I know in 3 seconds , if they are awake or most likely not.

Tue, 04/29/2014 - 21:02 | 4710235 Grande Tetons
Grande Tetons's picture

I always ask...hey..anyone around here know what culling the heard means? 

Fuckers end up going back to chewing their collective cuds. 

Tue, 04/29/2014 - 21:08 | 4710270 Dr. Engali
Dr. Engali's picture

9/11 answers that question for me.

Tue, 04/29/2014 - 21:18 | 4710309 813kml
813kml's picture

Ask someone at 7-11 about 9/11 and you might have to call 911.

Tue, 04/29/2014 - 21:22 | 4710322 Grande Tetons
Grande Tetons's picture

https://www.youtube.com/watch?v=ZcoweoZ6jpM

Nice post! That is a keeper. 

I got that Ozzy tune in my head because of your earlier post. Thanks! 

Tue, 04/29/2014 - 21:27 | 4710352 813kml
813kml's picture

Excellent choice of Crazy Train, I think we'll soon be moving on to War Pigs.

Tue, 04/29/2014 - 21:48 | 4710426 Dr. Engali
Dr. Engali's picture

Good choice of music tonight boys. Allow me to make a contribution.

Welcome to the Machine

http://youtu.be/9qEsTCTuajE

Wed, 04/30/2014 - 06:29 | 4711182 negative rates
negative rates's picture

And in your case, NOT!

Tue, 04/29/2014 - 21:00 | 4710226 Dr. Engali
Dr. Engali's picture

We all know it will end badly, I just wish it would end.

Wed, 04/30/2014 - 06:30 | 4711183 negative rates
negative rates's picture

So you are not going to be in class tonight?

Tue, 04/29/2014 - 21:03 | 4710238 fonzannoon
fonzannoon's picture

This guy manages money, and he sends this stuff to his clients? 

Does he at least put a P.S. "anyway until the financial system completely implodes we like bristol myers, chevron and cheesecake factory, and of course GM.

Tue, 04/29/2014 - 21:11 | 4710286 Oldwood
Oldwood's picture

Anyone who manages money for a living has partitioned their minds, like so many sales people do. Work is work, sell, sell, sell. We have always been pretty good at rationalizing what we do for a living as being somewhat outside of our moral boundaries.

Tue, 04/29/2014 - 21:13 | 4710295 fonzannoon
fonzannoon's picture

no kidding, this guy must know his clients don't read anything he sends them.

Tue, 04/29/2014 - 21:18 | 4710313 Oldwood
Oldwood's picture

If people were interested in facts and reality, we likely wouldn't have the market we have today. His clients probably don't care what he thinks as long as he makes them money. As I say, our moral boundaries and a bit vague when it comes to making money.

Tue, 04/29/2014 - 21:29 | 4710346 NoDebt
NoDebt's picture

I write my firm's quarterly report to our clients.  We don't buy those reports as a service and slap our name on it, like so many firms do- we roll our own.  Other than being worded a little more calmly and nicely, it's really not all that different from the opinions I post on ZH.  Stagnant economy, Fed-induced market gains, "muddling through" policies across the globe, the fiction of the Chinese juggernaut.... I've covered a lot of ground in the last 3 years since I was tapped to author it.

To my knowelge, no client has ever read it.  They flip straight to the next page that summarizes the quarterly gains in their portfolio.

 

Tue, 04/29/2014 - 22:44 | 4710658 Groundhog Day
Groundhog Day's picture

now if you can just share how you make the quarterly gains....thats all i'd like to read

Tue, 04/29/2014 - 22:52 | 4710662 NoDebt
NoDebt's picture

Last year was easy.  As soon as we cleared the Jan 1 "fiscal cliff" hurdle everyone knew it was game-on.  We pushed all the chips onto the table.  This year is a game of inches.  Three yards and a cloud of dust.  We have plenty of dry powder on the sidelines since August.  Thinking long and hard about if and when to deply it.  

Wed, 04/30/2014 - 01:03 | 4710724 slightlyskeptical
slightlyskeptical's picture

Really, what the hell else can you send to clients? I summed it up a few years ago that either we have to get real systematic change that would be very damaging to their investments or just accept as the norm the extreme ongoing printing from our governments. Most went with the latter, the others, defensive and cash has not been their best friends, but in the old norm they have still done ok. I will admit I have not embraced the new norm personally. That's why when you advise people on investing you have to abandon short term feelings in lieu of solid long term stategies which can include periods of large temporary losses.

I am from the old Nick Murray school. He advocated investing only in stocks ("be an owner, not a loaner") and using only diversified managed funds to do so. 40% Large Blend, 40% Small Blend and 20% International (I use 6-7 funds). In retirement have 2 years of income in cash and equivelants, so that you can draw on that during large downturns in the market.  His thesis is that we will always have inflation and that owning assets is the only way to keep up after taxes and also that you can't time the market either.  And that despite it's issues that the world always advances in the end "optimism is the only reality". Hasn't been disproven yet in my lifetime.

FYI..I know none cares but I just did the hypotheticals. Under the above system your original $100,000 (started 6-30-1999) is now worth about $178,000. Income taken under the hypothetical started at 6% of portfolio ($6,000) and increased each year by 3%(to keep up with inflation) to finish at $10,900 this year, still equal to about 6% of the portfolio. Lots of assumption but not bad considering the timeframes.

Tue, 04/29/2014 - 21:49 | 4710429 seek
seek's picture

Honestly it's a little more complicated an nuanced than that.

A big part of my business is forecasting for clients (which include companies like Singer's, as well as actual producers in the end market I follow.)

I've had repeated discussions with internal economists and forecasters inside Fortune 500 companies. With rare exceptions, they know we're fucked. I know we're fucked. But none of us know when, exactly, the fucked-ness hits. None of our forecasts stop in Q3, 2015 with hatched-out blocks in the spreadsheet after that with an asterisk denoting the world ends as we know it.

The thing is, you just can't do shit with that particular piece of information -- "we're fucked" -- other than lay in personal supplies for when it happens. You're a Fortune 500 co, you can't just go "whelp, we've seen the future and it's fucked, we're closing our doors now." No, you look at the forecast and you've got sales now, and you have with 95% (and declining) confidence sales next quarter. So you do what you've done before, order material, schedule the factories, and produce goods. These days (meaning post 2008) the producers are on a hair-trigger and run with zero-margin inventories so they can slow or shutdown factories in a heartbeat so they don't get burned like they did in 2008, but the factories are still running.

So every day, we collectively wake up, notice the world is still there, silently say "fuck, it still hasn't happened" to ourselves and proceed onwards with status quo 2.0. And that is how you end up with statements like Singer is making.

Tue, 04/29/2014 - 22:22 | 4710553 centerline
centerline's picture

+1.  Everyone keeps playing the game, whatever that means.  It is just how survival works... same for business as anything else.  And that, in itself, is a great deal of momentum.

Tue, 04/29/2014 - 22:27 | 4710575 kridkrid
kridkrid's picture

Nice post. Best I can remember seeing on this topic.

Tue, 04/29/2014 - 22:27 | 4710576 Oldwood
Oldwood's picture

So we keep selling tickets on the Titanic, knowing it WILL sink, but just not quite when. People are going to get fucked here. Almost everyone will get fucked here, because an industry has grown up around the corrupt gaming system called "the market", and everyone involved rationalizes that its not wrong because everyone knows its risky, that its rigged, that it will eventually murder their financial ass. Pretty much the same a tobacco companies justify selling cigarettes. I mean hell, there are warnings printed right on the package right? WE will never see a simplified and just taxing system either as there are just too damn many tax accountants and lawyers and financial planners out here to ever let it change. Corruption stays put as long as it is profitable and our government will make sure it does.

Tue, 04/29/2014 - 22:49 | 4710681 seek
seek's picture

I think the crux of all of this is: "what else can/do we do?"

The entire system -- globally -- is so broken now we know it will collapse. The problem is there's no way to fix or replace it until it collapses, because that very corruption and vested interest prevents it. It's not that it can't be fixed, it's that it requires so much consensus that's actively blocked in order to be fixed as to be completely undoable until after a collapse.

One company or even a handful can't correct this even if they wanted to. I'd argue we're well beyond corruption being profitable, the parasites have killed the host here, it's dying now and will die, but it's just not dead yet. And those parasites have awoken to the fact and searched for a new host and are now frantic as they learned there isn't one.

This goes so far beyond just the financial markets the magnitude of what will happen is just unimaginable.

Tue, 04/29/2014 - 23:19 | 4710768 Greenskeeper_Carl
Greenskeeper_Carl's picture

interesting that all those people in larger companies are so aware of it, they do a good job of putting on a happy face for the public, thats for sure. Personally, I feel like this is going to take a lot longer than people think. I don't buy into the 'war any day' business over ukraine or syria. I don't think the american public is going for it, thankfully. But Im waiting to see what happens to the economy when interest rates creep up a little. The average american consumer cannot afford a 30 yr mortgage at 6.5 or 7%, which means home prices must come down considerably if/when that ever happens. This will wipe out the illusion of net worth for many people. Markets will slump downwards, and everyone will look to the fed and gov to 'do something' They can't go much further down with interest rates, but they can print moar money. It will work until it doesnt, I just think that time is a lot further off than many on here seem to think. No country wants a gold standard, which cant be printed to oblivion,and there isnt really a viable fiat alternative(china is looking shaky, and europe is a shitshow), which is why i think we will be able to get away with these shenanigans for a good while longer. I look at Japan, and by any rational analysis, it seems their country, currency, and economy should have completely collapsed by now, yet there they sit, muddling along. Gotta burn up the middle class slowly, the frogs won't stay in the pot otherwise

Tue, 04/29/2014 - 23:33 | 4710804 seek
seek's picture

It's really a mixed bag. There's still true believers even today, but I can assure you that in the bowels of most large companies where the forecasting is going on, there are people that would completely blend in here if they spoke their minds. I have to imagine it's something like being gay in the 1950s: everyone pretends they're "normal" but after some ritual discussion that takes place, there is a big reveal that yes indeed, they too are doomers.

The housing market is another one that's already dead. Forget about 6.5% interest rates, it's much like the discussion last week about a university education being unaffordable with normal paying jobs, the same is true in most markets with homes, and it's about the principal, not the interest. To rescue the banks they pushed housing prices back up, and that had completely killed any realistic chance at the middle class sustaining home ownership. Just look at the percentage of cash purchases and you'll see that housing is just as fake as a market as any of the others.

 

Wed, 04/30/2014 - 00:01 | 4710844 Gamma735
Gamma735's picture

Let me tell you how Super Credit Cycles have ended in the past...  War.  This credit cycle has so many international connections that the war that springs from this will truly be a global conflict.  What sets off the spark?  Who knows.  When? My guess is around 2016-2018 based on the last time this happened it took ten years 1929(Finanical Crisis) 1939 (Invasion of Poland).  The new reserve currency will be with who ever wins the next global war.   Only the Banksters will place bets on all sides and come out ahead.

Wed, 04/30/2014 - 05:58 | 4711154 Mitzibitzi
Mitzibitzi's picture

I don't think it will be quite as long as that, myself. Or not the far end of your timescale, anyway:

While I fully agree that the present world bears startling similarities to that of the 1929-39 period (and where it doesn't, it looks largely like 1900-14) - back then most of the world was still operating some kind of asset backed currency - gold, mainly. Not true today.

Now, me, I think TPTB have looked at previous fiat currencies and their inevitable collapses and thought to themselves,

"Haha! BUT, the trouble has always been that the fiat regimes have had to operate in a world filled with other regions that were on a gold standard, or some other inconveniently solid and unprintable money. What we need is to get EVERYBODY on fiat, then there isn't that island of stability that wealth-conservators can head for when we're forced to print up some walking-around money! So long as nobody goes grazy, all that CAN happen is that each unit of currency will gradually decrease in absolute value BUT will stay in relative balance with all the others. We'll allow just enough periodic imbalance to let us shear the sheep from time to time by manipulating it."

Then, when the inevitable flaw in that plan revealed itself - there'll always be some greedy asshole that will print more than his share - there was a great scratching of moneyed heads and gnashing of teeth and somebody finally worked out that they'd missed something; you can't HAVE a Reserve Currency, if you want the all-fiat plan to work. It gives too much leverage to the owner of it, compared to everybody else. And then, I'm sure, it was also noticed that the US, owner of said Reserve Currency, wasn't strictly speaking playing by the agreed on fiat rules, either. They'd constructed the Petrodollar, which is backed by something tangible, so long as people need oil.

Wed, 04/30/2014 - 00:02 | 4710848 Oldwood
Oldwood's picture

so are you saying that if a number of larger firms anounced that they were going all cash, out of the markets, there would be no change? My impression is that the only reason the market (such as it is) is  where it is based on irrational desparation. Fundamentals be damned. Its hard to believe these markets could tolerate much of any defection without major damage to its "confidence". I think people are in because they want to make money and they can only do that for any length of time if the market is moving up. They dont want the market fair and honest because there is no money in it. AND ITS NOT THEIR MONEY THEY ARE GAMBLING WITH. Its muppet money, right. Silly people trying to make money from and for nothing.

Tue, 04/29/2014 - 21:15 | 4710297 Grande Tetons
Grande Tetons's picture

Fonz, I sense a change in tone in your posts lately. Are you less convinced that we are going to see the SP at multiples higher from here? If so, what gives? Curious. 

Tue, 04/29/2014 - 21:33 | 4710362 fonzannoon
fonzannoon's picture

Yes I am definitely less convinced. I would not rule it out, but I am less convinced. This flattening of the yield curve is a big big deal. It is not at all what the fed wants. The market has figured out that 3% was the cap, and there is no growth, so people are piling in, and I mean piling in, to UST's. The short end of the curve is coming up because the fed wants people to believe they will raise rates and the long end of the curve is compressing because there is so much demand and everyone is calling bullshit on the fed's ability to raise rates. 

So either the fed starts using it's "unconventional tools" to start pushing the long end back up, or we watch the 30 year etc. come crumbling down, which would negatvely impact stocks, bigtime possibly. Think about Japan when the Nikkei collapsed as everyone piled into JGB's. That is not a foregone conclusion, but it is on the table right now.

Tue, 04/29/2014 - 21:44 | 4710404 Dr. Engali
Dr. Engali's picture

I agree with your assessment and the continued break down of the momos tends to confirm this. As you know I've rotated clients into mega caps earlier in the year and I'm now raising cash. With stocks in this trading range there seems to be no upside without moar QE and It appears that the fed is prepared to sacrifice equities in order to exit QE. This of course will force a mad rush for treasuries solving their printing problem. The flattening of the curve and the recent treasury rally tells me that "the smart money" knows this to be the case and are front running the fed's move.

Disclosure: this could all turn on a dime and so could I if the fed decides to print moar.

Tue, 04/29/2014 - 21:48 | 4710419 fonzannoon
fonzannoon's picture

How awesome is it Doc that zirp has allowed them to sacrafice equities without harming the index? That is mindblowing. On the flip side mega caps are like a small island that people have swam to, but the damn tide keeps rising. If we are right and the smart ones start swiimming towards the big island in the distance (bonds, cash) and everyone follows then it's fucking curtains.

https://www.youtube.com/watch?v=wEKkJHSO8A0

Tue, 04/29/2014 - 21:51 | 4710440 Dr. Engali
Dr. Engali's picture

It is pretty damn amazing. I never would have thought this a couple years back.

Tue, 04/29/2014 - 21:56 | 4710458 fonzannoon
fonzannoon's picture

"I never would have thought this a couple years back."

you and I have been here too fucking long because we have said that too many times already.

Tue, 04/29/2014 - 22:07 | 4710504 Dr. Engali
Dr. Engali's picture

I hear you brother. I'm feeling a little dark and pissed off tonight. This shit's wearing on me.

Tue, 04/29/2014 - 22:51 | 4710685 Bay of Pigs
Bay of Pigs's picture

Breathe deep Doc...

And take a vacation to Maui sometime.  :)

Tue, 04/29/2014 - 22:10 | 4710514 seek
seek's picture

Sometimes I stand back in awe at their ability to find new rabbits to pull from the hat.

That moment does fade though, when I realize the supply of rabbits may be bigger than I imagined, but it is not infinite.

Tue, 04/29/2014 - 22:15 | 4710530 fonzannoon
fonzannoon's picture

4 years and 9 weeks on here and you are still sane. Nice job by you man.

Tue, 04/29/2014 - 22:23 | 4710558 seek
seek's picture

Sane might be a stretch. Sustaining the levels of cognitive dissonance that exists between here and my professional life does take a toll.

I just remind myself daily that this shit eventually ends with either the reset or death, and I find either notion strangely comforting. It's the not knowing which is the better one I should be rooting for that fucks with my head. Every so often I'll indulge in freegold oligarch fantasies with a pet micro-giraffe and a half dozen women fawning over my aging ass, but those moments are fleeting.

Tue, 04/29/2014 - 22:26 | 4710574 fonzannoon
fonzannoon's picture

"Every so often I'll indulge in freegold oligarch fantasies with a pet micro-giraffe and a half dozen women fawning over my aging ass,"

LOL...good for you. I'm down to a lawn chair and pink flamingo lawn ornament with a meister brau and a ballgame on the radio while everyone leaves me alone for an hour.

Wed, 04/30/2014 - 03:03 | 4711039 Serenity Now
Serenity Now's picture

I would LOVE a mini-giraffe!  Do they make those really?  I'm gonna look it up.  :)

Wed, 04/30/2014 - 03:07 | 4711042 Serenity Now
Serenity Now's picture

Aw, why would you trick me like that?  Oh well, my pet giraffe dream was fun while it lasted.  ;)

Wed, 04/30/2014 - 07:36 | 4711254 Snidley Whipsnae
Snidley Whipsnae's picture

"new rabbits to pull from the hat"... 

It is amazing to me as well. 

We're now so far from what was considered 'normal' that to find comparisons is to look at tulip manias or mechinations of John Law, Weimar Germany, etc... none of which really dovetail with what is going on now.

One thing has changed for me... I used to be amazed occasionally... now I am amazed almost daily. 

Tue, 04/29/2014 - 22:19 | 4710528 NoDebt
NoDebt's picture

You're not the only ones.  The sugical precision of slicing off just the MOMO names has been astounding.  As you know, I went cash-heavy back in August last year.  Yeah, I missed the blow-off top of the final quarter to some degree, but I figured when the correction came it would hit everything indiscriminately to a greater or lesser extent.

Wrong, wrong, wrong.

Fortunately, our portfolios are built value-heavy by design.  Remember, I do "slow money", so this is part of the game.  

I'm beginning to look at the market purely through the lens of yield (I don't want to say I'm ignoring "risk-adjusted yield", but I sort of am).  Everyone wants it, nobody knows where to get it.

That being said, this is the first sign of "sector rotation" within the equity market (as opposed to the overblown bond vs. stock "great rotation") I've seen since.... I had more hair, I guess.  What that tells me is that the big boys are settling in to this situation for the long haul.  

Tue, 04/29/2014 - 21:56 | 4710462 Latitude25
Latitude25's picture

Despite tapering the FED's balance sheet is still rapidly expanding.  Therefore tapering is only a distraction.

http://www.cnbc.com/id/101497635

Tue, 04/29/2014 - 21:49 | 4710431 MachoMan
MachoMan's picture

Isn't this the default course?  The whole currency meltdown/rising rates scenario is more of a one-off event, no?

Tue, 04/29/2014 - 21:56 | 4710464 fonzannoon
fonzannoon's picture

Yes, if we get that scenario it only happens once. How you been man? I enjoy your posts, have not seen much of you lately.

Tue, 04/29/2014 - 21:04 | 4710241 J Pancreas
J Pancreas's picture

Post-collapse world will look like pre-collapse world in terms of need: pussy, oil and water. Long sleazy back alleys, Exxon and non-pig infested water.

 

Fartbook and crAPPL, not so much.

Tue, 04/29/2014 - 21:03 | 4710243 FredFlintstone
FredFlintstone's picture

The last chapter of the most popular book in the world says it will all end badly. This is not news.

Tue, 04/29/2014 - 23:31 | 4710798 TheReplacement
TheReplacement's picture

Looks like Satan downvoted you.

Tue, 04/29/2014 - 23:53 | 4710836 RafterManFMJ
RafterManFMJ's picture

It's been a while since I've read it, but doesn't Bilbo get back to the Shire with a side arm that detects Orcs, and a nice chest full of silver?

Sounds like 'winning' to me.

Tue, 04/29/2014 - 21:07 | 4710264 Oldwood
Oldwood's picture

Awe, come on. All of the highly educated government economists say things are going swimmingly and the only thing holding us back are the doomers threatening impending doom. This is a CONfidence based economy, so come on, lets get with the plan! Roll a doobie, uncap that brewsky and buy, but, buy.

Tue, 04/29/2014 - 21:09 | 4710276 Cabreado
Cabreado's picture

The Paul Singers of the world are failing not only themselves, but everyone else.

Neglecting the host that made them wealthy, and offering nothing more than wimpy letters -- that is pathetic.

Step up to the plate, all ye of influence and control, or go away.
You are running out of options, too, and are part of the problem.

Tue, 04/29/2014 - 21:58 | 4710473 Soul Glow
Soul Glow's picture

Fuck the system - Buy Silver

Tue, 04/29/2014 - 22:03 | 4710490 fonzannoon
fonzannoon's picture

I started out on here with Mr. Lennon Hendrix yelling at me to fuck the system and buy silver, and I liked that guy. Then others along the way said the same thing. I see no proof that buying silver is fucking the system. I own silver. I am not selling it. But silver and the system can go fuck itself. There is more to life than silver.

Tue, 04/29/2014 - 22:06 | 4710500 Soul Glow
Soul Glow's picture

He meant well.  Never sold out at least.

Tue, 04/29/2014 - 22:09 | 4710508 Dr. Engali
Dr. Engali's picture

Buy lead. Fuck the system :). I liked Mr. Lennon Hendrix too. It's to bad he left.

Tue, 04/29/2014 - 22:10 | 4710516 Soul Glow
Soul Glow's picture

People were always asking me, did I know Tyler Durden.

Tue, 04/29/2014 - 22:17 | 4710537 Dr. Engali
Dr. Engali's picture

Never met the guy but I did talk to Dr. Paul Krugman before.

Tue, 04/29/2014 - 22:21 | 4710551 Soul Glow
Soul Glow's picture

A Dr and a Mr.  How literate.

Tue, 04/29/2014 - 22:28 | 4710561 Dr. Engali
Dr. Engali's picture

Back where I grew up we lived not too far away from the arsenal. Jobs were pretty scarce at that time (I just got out of Highschool). About that time there were a lot of changes going on in the military and our local arsenal was an area where they transferred munitions to be dismantled. You would not believe how many people scrambled for that job. It was like somebody threw a turkey leg in the center of Walmart. I thought they were crazier than hell, but people were desperate and took what they could get .

Tue, 04/29/2014 - 22:12 | 4710523 Latitude25
Latitude25's picture

Some people leave courtesy of ZH censors.

Tue, 04/29/2014 - 22:19 | 4710540 Soul Glow
Soul Glow's picture

You will carry on.  You will bring the fight front and center in your own way.  You will debate family, loved ones; friends and flings.  You will pass the knowledge to unsuspecting horses and make them drink the water whether they like it or not - and this because they are thirsty and will die otherwise.  You will spend days alone and nights drunk, wondering when the inevitable crash will happen.

Then you will wake up one day and realize it is all a dream.  You were sent here, by god, to be a part of the greatest happening that ever was.

Welcome to Fight Club.

Tue, 04/29/2014 - 22:24 | 4710557 chumbawamba
chumbawamba's picture

Habakkuk 1

O Lord, how long shall I cry, and thou wilt not hear! even cry out unto thee of violence, and thou wilt not save!

Why dost thou shew me iniquity, and cause me to behold grievance? for spoiling and violence are before me: and there are that raise up strife and contention.

Therefore the law is slacked, and judgment doth never go forth: for the wicked doth compass about the righteous; therefore wrong judgment proceedeth.

Behold ye among the heathen, and regard, and wonder marvelously: for I will work a work in your days which ye will not believe, though it be told you.

I am Chumbawamba.

Wed, 04/30/2014 - 00:11 | 4710858 Central Ohio
Central Ohio's picture

Nice.  God is working.  

Tue, 04/29/2014 - 22:24 | 4710564 Latitude25
Latitude25's picture

Thanks for the kind words.  For some people the quest for truth never ends until death.

Tue, 04/29/2014 - 23:29 | 4710795 forwardho
forwardho's picture

For far more, the quest for truth has lead to their deaths

Wed, 04/30/2014 - 00:44 | 4710905 Soul Glow
Soul Glow's picture

+1

Let us keep fighting, even under pseudonyms.

Tue, 04/29/2014 - 22:23 | 4710554 Edward1290
Edward1290's picture

The good ones were kicked off.......I come back here looking for Trav7777, Mako, Cheeky and Francis amoung others.........the good ones are gone........Makes me sad that they are gone....ZH is a shell of its former self......

Its good to see MachoMan posting again......he is in the top 10 for sure........

 

Tue, 04/29/2014 - 22:31 | 4710596 Dr. Engali
Dr. Engali's picture

Yep it's definitely not the same. Once the original Tyler sold out this place went down hill.

Tue, 04/29/2014 - 22:35 | 4710617 Soul Glow
Soul Glow's picture

This is Fight Club!  We are in the fight of our lives!  We made the rules to break.  We made the mold to take down the system.  We will achieve what no one has achieved before.  We will be the history book.  Let light shine upon those who part the clouds.  But most of all, don't worry.

We have front row seats for this Theater of Mass Destruction. The Demolitions Committee of Project Mayhem wrapped the foundation columns of ten buildings with blasting gelatin. In two minutes, primary charges will blow base charges, and those buildings will be reduced to smoldering rubble. I know this because Tyler knows this.
Tue, 04/29/2014 - 23:29 | 4710796 Greenskeeper_Carl
Greenskeeper_Carl's picture

what kinda did it for me on deciding rather this place really was 'different' or not was a little while back, jim quinn wrote a great piece on google about them from dumping his sight from google ads over what was posted. Basically bullshit, and they didnt like his message on the burning platform. It was a scathing article, and very telling about who google really works for, check it out if you didnt read it. But anyway, it seems nearly everything written by Jim Quinn for that sight gets posted on here, but not the one going after google, tyler doesnt like it. Guess what lights up on ghostery everytime i ome on here, surprise surprise, its google ads. So they may talk on here about how they can't stand all these compaines, but tylers sure will take their money

Wed, 04/30/2014 - 06:38 | 4711188 negative rates
negative rates's picture

Trust money, sweet.

Tue, 04/29/2014 - 22:31 | 4710599 Soul Glow
Soul Glow's picture

Be the world you wish to see.  Write for those that are in name only.  Write for the Legands, be a Legand.

Tue, 04/29/2014 - 23:26 | 4710785 forwardho
forwardho's picture

Please don't forget LongSoupLines.

That dude turned expletives into a fucking art form.

Now we are besieged by basement dwellers who won't wash their first stinky finger

Wed, 04/30/2014 - 03:15 | 4711046 Serenity Now
Serenity Now's picture

I loved Mako.  I always suspected he might be Hypertiger, but who knows.  Loved Trav777.  He explained things in a way that I "get" and just "know" but have a hard time explaining here.  Also liked Cheeky and Francis.  B9K9 was great, too.  EKM, too.  Lots of good posters are gone.  

Wed, 04/30/2014 - 08:01 | 4711292 kridkrid
kridkrid's picture

Mako still posts from time to time. I forget his new name, but it's usually pretty obvious that it's him. As soon as he writes about the liquidation of unfunded liabilities...

Tue, 04/29/2014 - 21:16 | 4710303 intric8
intric8's picture

This seems apropos. From ~ 1895:

“We will surround our government with a whole world of economists. It is for this reason that the science of economics is the chief subject of instruction taught by the Jews. We shall be surrounded by a whole galaxy of bankers, industrialists, capitalists, and especially by millionaires because, actually, everything will be decided by an appeal to figures.”

Tue, 04/29/2014 - 21:24 | 4710341 nmewn
nmewn's picture

Thats a rather long way of saying, they have no idea WTF they're doing but they're going to continue doing it until it crashes.

Clearly bullish.

Tue, 04/29/2014 - 21:57 | 4710467 Soul Glow
Soul Glow's picture

Doing what everyone else is doing is logical until everyone realizes the conga line was following the idiot in the room out the door and into oncoming traffic.

Tue, 04/29/2014 - 22:02 | 4710472 Oldwood
Oldwood's picture

The financial industries are a huge part of our economy and they MUST make money. They will no quit and go home. They will keep on doing exactly what they have been doing and it doesn't matter if the markets are broken, rigged or about to blow to high heaven. They are in to the end because they have no place else to go. Brokers make money by keeping the money in the markets. All of these retirement funds have to be in it up to their necks. They MUST have returns. Does anyone think they will stay in business or keep their jobs if they put their money into bank CDs at .75%? This is a death spiral and nobody is going to pull back, if anything they are going to go all in. After all, when it does blow, how will they have been able to see it coming, right? And most importantly...its not their money. For all those who lost their clients money in the last bust, how many took any blame? Even Bernanke didn't see it coming. Right?

See no evil, hear no evil, speak no evil...but I do smell a bit of sulfur.

Wed, 04/30/2014 - 03:20 | 4711049 Serenity Now
Serenity Now's picture

Yep.  I always think about the line in the movie, "The International," where the bad guy says to his son (while playing chess), "If you can't find a way out, go further in."

PS--That movie is about international banking, btw.  Pretty good movie.

Tue, 04/29/2014 - 21:50 | 4710432 Latitude25
Latitude25's picture

GDP is not increasing at 3.8% per year.  It is actually declining while money and credit are going up exponentially.

https://www.youtube.com/watch?v=wx87Hv2WdwY

The GDP numbers are falsified by the governement but energy consumption gives a better indication of real GDP.

Any creditor nation would have to be insane to invest in US paper.

Tue, 04/29/2014 - 21:52 | 4710445 Soul Glow
Soul Glow's picture

Insanity abounds.

Tue, 04/29/2014 - 21:51 | 4710437 Soul Glow
Soul Glow's picture

So when are GDP and the Fed's minutes going to be leaked?  Blankfein?

Tue, 04/29/2014 - 21:58 | 4710470 Oreilly
Oreilly's picture

It's the old "Market can remain irrational longer than .... " take on what's happening.  True value of fiat currency is what people will pay for it, and a market based on same currency will last as long as it will last.  I get the feeling from reading the article that Singer feels confidence should have dissipated a while ago, but since it didn't/hasn't therer's no way to predict when it will.  And given that everything has gotten worse since the near collapse of '08, when confidence does finally go the results will be uprecedented and upredictable.

None of this really helps you make a plan, except in the most general sense of the word.  Have as much support on hand as you can, have as much invested in safe areas as you can, keep doing what gets you paid, try to stay sane and don't get in to debt.  That's not really a plan so much as it's a lifestyle, once started you don't go back to splurging just because some talking head, government official, financial guru or ZH poster tells you it's alright to.  My personal take is that I gave up trying to invest my way to security back in the wild "everyone's a day-trader" times of the '90s.  I get paid for what I do in good or bad times, although a true society re-set will likely change how I do it.  I wonder what Paul Singer would be doing if society re-sets?

Tue, 04/29/2014 - 22:04 | 4710495 f16hoser
f16hoser's picture

"Badly" you say? WOW Paul; you're a Fucking Genious! whooda thunked that?

Tue, 04/29/2014 - 22:09 | 4710509 Save_America1st
Save_America1st's picture

yep...and beyond that, thar be monsters, so everyone better get back, because it'll be dark soon.  And they mostly come at night....mostly...

http://www.youtube.com/watch?v=B436avtEXzs

Tue, 04/29/2014 - 22:09 | 4710511 D-Fens
D-Fens's picture

We live in a bizarro world but reality does intrude every now and then.

We've had three recent "wealth" cycles (92-01, 01-08, 08 to present) and three crashes, each one bigger than the one before.

Now, unless you believe the fantasy that growth is endless, money is limitless, and the Fed has abolished economic recession forever by creating dollars out of nothing and buying treasury bonds, then we are due for another leg down.

The price action in oil suggests we are close to the breaking point.  People can't afford these escalating costs.  I don't know how much more it can take.

Keep your eyes on the so called middle class.  They are just about able to afford servicing the debt.  Once they defect, it's game over.

Tue, 04/29/2014 - 22:17 | 4710538 Addibrux
Addibrux's picture

If you're still playing by the rules, you're poor. If you're still arguing right/left, you're a moron. If you're guilty of both, you're doomed.

Tue, 04/29/2014 - 23:18 | 4710765 forwardho
forwardho's picture

* And if you can see that the whole shitbag fantasy is held together with lies and imposed collective "belief" you should be raking it in hand over fist.

They trapped themselves with TARP, QE's ZIRP and twist. They CANNOT stop. Its like betting on a race thats already been run.

Tue, 04/29/2014 - 22:19 | 4710545 pupdog1
pupdog1's picture

Clinton, Greenspan, and Rubin were the key architects of deregulating the most toxic forms of derivatives.

It is important to remember that, given what is coming.

Tue, 04/29/2014 - 22:26 | 4710572 El Hosel
El Hosel's picture

It will end in Panic, Fear and over reaction...Exactly

Tue, 04/29/2014 - 22:28 | 4710586 elwind45
elwind45's picture

Anytime in the past we ever got close to balancing the Fed budget some dickhead (Reagan BUSH 1or2)decided to start a hot war or finish a cold one? The unbalanced budget and debt were laughed at pre-2008 and are now issues because of the pigment of the president and not a epiphany on the right. 2008 became axpersonal fight amougst bankers hedge fund managers and inv
estment banks and not your my or anyones debt levels? Or HANK PAULSON held a gun to our heads

Tue, 04/29/2014 - 22:33 | 4710605 Magooo
Magooo's picture

Big Oil is cutting capex -- because even with oil at 100 bucks they CANNOT make money

http://www.examiner.com/article/oil-and-gas-majors-now-cutting-back-u-s-shale-gas-fields

http://www.fool.com/investing/general/2014/04/23/total-sa-peak-oil-is-catching-up-to-big-oil.aspx

 

The price of oil is already too high and destroying growth so it cannot go higher (thereby encouraging exploration):

 

HIGH PRICED OIL DESTROYS GROWTH  According to the results of a quantitative exercise carried out by the IEA in collaboration with the OECD Economics Department and with the assistance of the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.iea.org/textbase/npsum/high_oil04sum.pdf

 

QE and ZIRP are the policy measures enacted to attempt to put the brakes on an end of world scenario.

 

Of course these measures only delay the inevitable ---  the end of growth -- the end of the world as we know it.

 

And don't hold your breathe waiting on renewables to save the day.... renewables may as well not exist:

 

Solar – After Trillions of Subsidies and R&D and this is what we get?

 http://reneweconomy.com.au/wp-content/uploads/2014/04/bernstein-energy-supply.jpg

 

The German Solar Disaster: 21 Billion Euros Burned

http://www.thegwpf.org/german-solar-disaster-21-billion-euros-burned/

 

Spain’s disastrous attempt to replace fossil fuels with Solar Photovoltaics

http://energyskeptic.com/2013/tilting-at-windmills-spains-solar-pv/

 

Lock and load people -- and stock away some more canned goods -- we are crashing landing into an ambush.

Wed, 04/30/2014 - 00:34 | 4710893 joego1
joego1's picture

ive got solar and an electric car, it works great on an individual basis.

Tue, 04/29/2014 - 22:34 | 4710612 TheAnswerIs42
TheAnswerIs42's picture

Ho Ho Ho!

What a Trip!

This guy get's paid what? Not picking on him personally but Jeebus, how hard is it?

Pretty soon they'll be people like Mauldin out there spoutin reality and getting the big buckz.

Even the Android sisters know. And that was 30 years ago.

http://www.youtube.com/watch?v=C1kU4_of4U8

 

Tue, 04/29/2014 - 22:41 | 4710645 Addibrux
Addibrux's picture

The vast majority of every group, tribe, state, nation, and empire, are the unenlightened, and the demise of all these due this fact.-Aristotle

 I'm fortunate to have learned this lesson early in life, regularly tied to my bed and beaten as a toddler. My application of predatory capitalism has been infinitely rewarding, with a dream retirement in four years, at 55.

 In hindsight, I'm saddened that I've taught my son the same ruthlessness, minus the beatings of course, but then I'm reminded of this quote by Aristotle, and this article instills me to remind him, step the fuck all over them, lest they do it to you first.

Tue, 04/29/2014 - 22:47 | 4710671 Soul Glow
Soul Glow's picture

No one is enlightened.

Wed, 04/30/2014 - 06:28 | 4711177 tip e. canoe
tip e. canoe's picture

what if Aristotle was the Fat Larry Summers of his day?

would this cause you to reconsider the wisdom of his writings?

Tue, 04/29/2014 - 22:46 | 4710664 elwind45
elwind45's picture

Áll the past crashes going back to 1800 have been done by very few people who arranged to get out together at everyones cost but theirs? The last three meltdowns were in no way organic. Since 1987 assets have been shifted into stronger hands in each back and fill and now are so concentrated it would be suicide at the top to ever completely back away! Consider the 2008 meltdown as a controlled burn in three different phases and the next one? The dollar strength will cause massive destablization of the BRICS. Shadow banking will continue its move to Europe along with all the income America produces. America is good to steal from until they finally figure it out? SHORT RATES WILL NEVER BACK UP TO HARM THE FEDS BALANCE SHEET OR THE GLOBAL DEVELOPED ECONOMIES!

Tue, 04/29/2014 - 22:47 | 4710667 kurt
kurt's picture

"Con, con, con, Confidence"

FUCK IT

Tue, 04/29/2014 - 22:48 | 4710677 lasvegaspersona
lasvegaspersona's picture

When it does end badly, those who largely caused it will simply say...all together now...who coulda seen it coming...?

See...it is THAT easy to be a world leader...

Tue, 04/29/2014 - 22:51 | 4710686 F em all but 6
F em all but 6's picture

History will show that the complete collapse of the USA was instigated b the US Supreme Court in the Legal Tender Cases. Debt based script is NOT constitutional money. The founders knew this and thought that they had protected us from its well established evils.

God damn fucking robed lawyers. LEGISLATING FROM THE BENCH!!! We were warned of the hell this shit would release. Daniel Webster warned us. The Chief Justice in the Legal Tender Cases, 79 U.S. 12 Wall. 457 457 (1870) along with justice CLIFFORD and FIELD and NELSON also warned us in dissent. For those that are interested, READ THE ENTIRE CASE and understand that its the fucking judiciary that sold the entire Republic down the river.

Quoting Justice Field

"The interference with contracts by the legislation of the several states previous to the adoption of the Constitution  was the cause of great oppression and injustice. "Not only," says (Justice) Story, "was paper money issued and declared to be a tender in payment of debts, but laws of another character, well known under the appellation of tender laws, appraisement laws, installment laws, and suspension laws were from time to time enacted which prostrated all private credit and all private morals. By some of these laws, the due payment of debts was suspended; debts were, in violation of the very terms of the contract, authorized to be paid by installments at different periods; property of any sort, however worthless, either real or personal, might be tendered by the debtor in payment of his debts, and the creditor was compelled to take the property of the debtor which he might seize on execution at an appraisement wholly disproportionate to its known value. Such grievances and oppressions and others of a like nature were the ordinary results of legislation during the Revolutionary War and the intermediate period down to the formation of the Constitution. They entailed the most enormous evils on the country, and introduced a system of fraud, chicanery, and profligacy, which destroyed all private confidence and all industry and enterprise."

To prevent the recurrence of evils of this character, not only was the clause inserted in the Constitution prohibiting the states from issuing bills of credit and making anything but gold and silver a tender in payment of debts, but also the more general prohibition from passing any law impairing the obligation of contracts. "To restore public confidence completely," says Chief Justice Marshall, "it was necessary not only to prohibit the use of particular means by which it might be effected, but to prohibit the use of any means by which the same mischief might be produced. The Convention appears to have intended to establish a great principle -- that contracts should be inviolable."

Tue, 04/29/2014 - 23:09 | 4710737 forwardho
forwardho's picture

Excellent points, many thanks for the posting of the actual dissent!

Tue, 04/29/2014 - 23:27 | 4710787 falconflight
falconflight's picture

100+

Wed, 04/30/2014 - 06:40 | 4711187 tip e. canoe
tip e. canoe's picture

not really surprising when you entrust the legal code to a simple majority of 9 attorneys (word-twisters in its original definition from the French) who all reside in the center of so-called Power and display their so-called Authority by dressing in Long Black Robes.

ponder the absurdity of that for a moment.

Tue, 04/29/2014 - 23:17 | 4710718 honestann
honestann's picture

What fundamentals are behind this situation?
  #1:  preference for short term benefits.
  #2:  fiat, fake, fraud, fiction leverage.

#1 is a willingness to accept much WORSE overall results in the long term in exchange for enjoying unearned good results in the short term.  This is why humans borrow in order to spend more on goods and goodies today with the understanding that they must spend less on goods and goodies in the future because they have to pay back the loans.  Since the payback includes interest as well as principle, borrowers are not just shifting spending from the future to the present, they are dooming themselves to a lower standard of living because now some of their earnings vanish into nothingness (in the form of interest on their loans).

#2 is what lets #1 get completely, irresponsibly and insanely overdone on astronomical scales, because there is NO LIMIT to borrowing when lenders can create unlimited fiat, fake, fraud, fiction, fantasy, fractional-reserve loans by tapping a keyboard.

-----

Note that #1 is not inherent or necessary.  Today, it seems like #1 is an inherent characteristic of the human species, but that is not true.  Some of us, myself included, never borrowed a penny... ever.  Not on credit cards, not for cars, not for home mortgage, not for anything... period.  We behaved that way because we understood the totality of the situation stated in #1, and decided we wanted a better OVERALL life, which requires living life efficiently.

But many of us also recognized we could live an even better life if we take that approach even further and save wealth (spend less than we earn --- gasp!!!).  We recognized that significant savings lets us take advantages of unexpected and unpredictable opportunities that arise now and then, reduce stress because we never worry about paying bills, and live happier because savings give us the liberty and freedom to do what we wish, when we wish (within reason).

Probably the main reason us "frugal folks" AKA "responsible folks" are so rare is because fiat lenders are completely unrestrained, and thus practice every conceivable type of propaganda, advertising, deceit, tricks, fraud and scams to entice people to borrow and spend, borrow and spend, borrow and spend.

Well, at this point in history, they've pretty much convinced everyone willing to get into debt, to get indebted out the wazoo.  Which is why, of course, the predators of this world are shifting their focus to ways to steal savings and retirement accounts from the tiny minority of us who have savings.  Hint to all those folks:  convert every asset to a physical asset like gold, silver, platinum... or productive machinery and supplies, and hide them where nobody can find them (which means, don't trust ANYONE to hold them for you).

-----

In summary, the article isn't wrong, it just describes the consequences that naturally flow from the fundamental causes, where are #1 and #2 above.

Do NOT follow this link or you will be banned from the site!