This page has been archived and commenting is disabled.
Paul Singer Warns "The Consequences Of Monetary Manipulation Are Unknowable"
Excerpted from Paul Singer's Elliott Management letter to investors,
The world believes it is in a sweet spot. There is global consensus that central banks know what they are doing and are in control, and that if economies falter, a bigger dose of QE or ZIRP or NIRP (negative interest rate policy – we just made that one up) will keep it from getting out of hand. Additionally, there seems to be a universally held belief that the U.S. is unquestionably the safe haven for the foreseeable future, that its financial crisis and long recession are behind it and that China has complete control over its own destiny. It may not surprise you to learn that we either disagree with or remain unconvinced about every one of the foregoing propositions.
Conditions in the global economy are clearly abnormal. The policymaker response to those conditions is extraordinary, with minimal focus on an all-out push for higher growth. Instead, the primary focus is on boosting “inflation” with repeated doses of bondbuying, stock-buying and super-low interest rates. We cannot appreciate why policymakers are not jumping up and down clamoring for structural pro-growth reforms and policies, and why there is a compliant consensus that the only policy that is possible is more monetary easing. Apparently, most politicians are happy to leave the hard economic and policy decisions to their central banks instead of introducing legislation to properly address the world’s economic problems. It is impossible to assess what will change or destroy the consensus that current policies will hold the global economy and financial system afloat forever, but when assessing the scope and shape of risks to our assets, it is most useful to match them to the size of the aberrations which could cause reversal or surprise. Today, those potential changes are strikingly large.
We have frequently said that real deflation (price and credit collapse, not a tiny downturn in aggregate prices or “insufficient” inflation) is impossible. Governments are too alert to that possibility, have no compunction about debasing their currencies and will simply not stand for seriously-falling prices. The issue of real inflation, at the other end of the spectrum, is deemed by just about everyone but us, plus a few beleaguered stragglers and fellow travelers who “didn’t get the memo,” to be a non-issue into the future as far as one can peer.
We are a little bit more simpleminded than the consensus-buyers who are looking just ahead. They think there is slack in the global economy, workers do not have pricing power and inflation is something that governments always will need to boost and push just to reach their (arbitrary) targets. We, on the other hand, are most focused on the combination of the trustworthiness of governments to protect the value of paper money (which has never been lower than at present), plus the structural impediments and barriers to smoothly functioning growth, innovation, entrepreneurship and private-sector job creation. Confidence in policymakers and central bankers today should be low or nonexistent, but confidence has not (yet) been lost. Leadership in the developed world is weak and confused, except for President Putin (although his is not the kind of strong leadership that we have in mind as a model for bringing the developed world out of its torpor).
It is for this reason that we are not complacent, because we can easily imagine a transition from the current post-2008 context to a different and scarier environment. Recent abrupt and intense trading shakeouts give some hint of the potential power and violence that resides in modern, over-leveraged, technologically wired markets, and confidence in paper money and central bankers can be lost at any moment. When it is, and what that development will look like, are mysteries. The difference between “us” and “them” is that we are trying hard to figure out what is essentially unknowable and impossible to ascertain, while most people are just shrugging and accepting the current calm as a given.
Government action is obviously a more powerful contributor to the trading context in many areas than ever before, and it is also true that a good amount of government action is increasingly arbitrary, ideologically driven and arguably lawless, even in the most developed countries. This factor is hard to quantify and mitigate in risk management, but traders who wish to preserve their capital “no matter what” need to take it into account in their trading and risk controls.
These are the considerations that are front and center in our strategic assessment of the trading landscape: trying to make sure that a sudden loss of confidence in paper money, or in any of the major markets in which we trade, does not unacceptably jostle our portfolio; keeping dry powder for the inevitable moment when the next flood of distressed securities becomes available at reasonable prices; and being cautious and visionary about the regulatory landscape in order to be cognizant of regulatory directions as well as where regulators are focusing today. Our mix of strategies is a good one, and we need to keep making the research and analysis process more and more robust. This effort is key to making sure that the next trading crisis does not surprise us in major ways.
In the last few years, thanks to QE and ZIRP, the common investor has made very good returns despite the lack of solid growth in the global economy. Such an imbalance between economic growth and good investment returns for both stocks and bonds is abnormal and unsustainable for extended periods of time. We at Elliott aim to make at least some money in every environment, with a combination of activities emphasizing complexity and manual effort, including activism. Thus, a period such as the most recent few years masks the benefits of exerting the effort (and accepting the costs) to hedge rather than not, and to try to make things happen rather than passively ride the wave. We are certainly not complaining, but merely observing these factors, and further speculating that the time may be near when complacency in the stock and bond investing community may be seriously jostled. We design our positions so that they will, in most cases, be governed more or less by their own idiosyncratic paths, even in periods of disruption. We of course recognize that events and resolutions will be affected in various measures by macro developments, and that liquidity considerations in adverse market conditions will impact even completely uncorrelated positions.
One very clear implication of the diminished liquidity in markets due to the withdrawal of a great deal of position-taking capital is that the punishment for being wrong has become more severe. We suppose the other side of the coin is that aberrations which can create attractive trades can also be larger and more compelling, given the reduced participation from Wall Street prop desks.
...
Markets are not getting more efficient; indeed, the press of money and zero-percent interest rates doth not efficiency make. People should have learned that lesson in 2006-08, but they did not (much to their ultimate peril, we think). And here we are again.
- 15985 reads
- Printer-friendly version
- Send to friend
- advertisements -


Too much nitrous often just blows the damn engine up.
<Watched any fiat drag races lately?>
Currency wars bring out the worst in central planning.
People should have learned that lesson in 2006-08, but they did not.
Most PEOPLE learn from experience. Central Bankers, not so much.
People do not learn from 'experience' but from consequences; and if there is one thing Central Bankers and politicians both have insulated themselves from -it is the consequences of their own actions. And since they avoid consequences like the plague, we always get more; meet the new boss, same as the old boss. "The consequences of monetary manipulation are unknowable"??? Was that line stolen from the Central Bank of the Weimar Republic, or the court of Louis XVI?
yup you are right. Bankster gangsters will plan another 2008, to wipe out the baby boomers good and proper.
According to this guy [who is very accurate] ==> http://bit.ly/1fMcakI even if inflatoin comes in violently, there will be HUGE gains and profits made in commodities.
Plus the fast that ENERGY right now is a BUY, some of those stocks will skyrocket soon!!!
I want a intros kit! The wize old racers replies "what have you got against rod bearings"
Dup
https://www.youtube.com/watch?v=ftoiPpacpbM
Unknowable?
Unmanageable is truer to the reality on the bridge now in alarming resonance with currency and asset volatitliy.
I've been awaiting the unknowable for a lifetime.
The consequences might be 'unknowable' in the nitty gritty specifics. But they are pretty easily predictable in the general sense: they will be bad. Very very bad.
Yes, forgot the /s tag. When I wax poetic about the unknowable, i speak of true magic, first contact, mind-bending shit. This will be like a swift kick to the nuts, a dizzy hallucination without the life altering consequence. But perhaps a few currently asleep will take notice.
Falak, you have a good point;
Ludwig von Mises from
'The Dictatorial, Anti-Democratic and Socialist Character of Interventionism'
"The issue is always the same: the government or the market. There is no third solution."
This guy Paul Singer, or whoever, is a terrorist. Things are going fine....we can't have a stance from a fringe lunatic derail the world!
Tyer needs to get on this one http://www.bloomberg.com/news/articles/2015-02-04/the-755-condom-is-the-...
Venezuelans who already must line up for hours to buy chicken, sugar, medicines and other basic products in short supply now face a new indignity: Condoms are hard to find and nearly impossible to afford.
“The country is so messed up that now we have to wait in line even to have sex,” lamented Jonatan Montilla, a 31-year-old advertising company art director. “This is a new low.”
Jeebus, next thing you know they'll be whining because they have to line up to be shot.......
He made up NIRP? I thought it was ZH.
or just about anybody else - BUT them! the fact that you have to claim authorship over someting that has been out - shit - at least a year - means they don't know shit and sure as heel never coined NIRP. btw this article was a total POS.
I agree.
So can we stop with the idiot articles from the self-promoters who keep claiming they know what is next?
Every fucking loser come lately has an opinion on econimic policy. Shut up asshat, let the bankers, who, oh you know, been doing it for over 100 years, do it. They are the experts, they know what they are doing.
The dollar is stable and is even more strong now, I really appreciate that. And with low oil prices things are looking even better. Might even go down to that new hipster joint and spend some appreciated dollars! How about that ZH haters.
Are you serious or just a glue sniffer ?
I think he shares MDB's mothers basement.
America is #1, we have the best military, and a world reserve currencey. Every other country looks up to us, we are the only Sueprpower left. America rules the world and always will.
All week we’ve had Bloomberg, the FT, The Economist, Goldman, the WSJ and truckloads of advice and analysis on just what is happening and what can be done about it. And, NOW, as if this avalanche of propaganda was not enough, a manipulation report from the ultimate manipulator, Paul Singer.
Billionaire Zionist, Paul Singer, who has made his fortune as a vulture buying up insolvent debts for a song and later cashing in by force; Singer who is now consolidating “his fortune at the expense of the Argentinian people, while already setting his sights on Spain.”
“The fact is,” Mark Gongloff wrote July 31 on Huffingon Post, “that one conservative American billionaire and a handful of American judges have just pushed Argentina, a nation of 43 million people with an economy bigger than that of the Netherlands or South Africa, into defaulting on its debt. It's a move that threatens not only chaos for the Argentinian people, but potential chaos for other countries hoping to borrow money in the future."
"’This is America throwing a bomb into the global economic system,’" Columbia University economist Joseph Stiglitz told The New York Times on Thursday in a front-page story about the battle.
http://www.huffingtonpost.com/2014/07/31/paul-singer-argentina_n_5637491.html
Ah yes, Huffington Compost
Indeed. "But can he buy up his own debt?"
And the answer of course is no.
Argentina still owe money? Argentina no pay.
Sorry.
singer might not be an altruistic guy, but hey....? isn't this the creative destruction that ZHers are suppose to believe in?
That is one big pile of shit.
http://www.youtube.com/watch?v=-JFfN5pKzFU (0:09)
Didn't he get eaten elsewhere in the movie and become a part of another pile of shit?
Singer should know that the consequences of monetary manipulation are fully knowable. He got his ass handed to him on a platter by Argentina, one big ass currency manipulator.
those who we're screaming from the high-hills that we were blowing an internet bubble were tarred & feathered. same thing happened with housing. unsustainable debt @ the private & public sector is only another example of how people immunize themselves from common fucking sense. wanna take the other side of my position? no problem. answer me 1 fucking question (since EVERY highly intelligent person I have ever known OR met the last 6+ years CANNOT answer thus far. ready, here we go:
HOW THE FUCK DOES IT MAKE SENSE TO PURCHASE YOUR OWN DEBT WITH MONEY THAT DOES NOT EXIST?
1-step further, how is that non-inflationary? how does that not add to the $$$-supply? when answering? do NOT give me this shit about "the $$$ is sitting on the banks balance sheets and not moving" --- HORSESHIT - the fed is financing the deficits of the US government and that $$$ is flowing out thru the public sector and into the private. if we take in "x" and spend "x times 1.5", that extra piece HAS TO come from somewhere because it's sure as hell going somewhere (ie. free shit crowd).
so I graduated college 15 years ago. my school then was $25,000 a year when I left. today, it's north of $50,000 a year. so, according to MY math, that's a CPI of 100%. sooooo, u can either follow the way I do math or the way steve LIEsman does math where "there's no inflation, anywhere"
funny thing is that all these fed guys who say "there's no inflation anywhere" are all professors at universities. guess what? their kids don't pay to go to the college they teach at so maybe according to THEIR math, there is no inflation because increasing a payment from $0 to $0 is COMPLETELY non-inflationary.
I think its non inflationary because...the money created for the most part is parked in the bond and stock market...the money does not make it into the economy in a large amount because rich people hord...not allowing to much into the system and also many stock holders are 401k and IRA's that money is also to a large extent traped in equities because you can't draw until you retire. also inflation will only exsist if they is demand growth but as we have seen demand is dead because real wages do not budge. creating dollars or supply of dollars does not create demand for dollars. classical economics says supply creates its own demand but in reality its actually demand that creates supply...so without wage growth demand for dollars is not present...no strong demand no inflation...so the newly created money stays in the asset classes for now. inflation through demand push is not apparent nor shall it be. they got rid of QE then they tanked oil prices to keep this shit show going its an act of last resort..I truely think we are basically out of options...greed has brought us here...greed can't save us but greed will bury us.
of course it is inflationary, "with a long and variable lag."
we just haven't gotten to the end of the lag yet.
and**** GAAP**** S&P p/e is 140 and THAT'S not inflation?
"Paul Singer Warns "The Consequences Of Monetary Manipulation Are Unknowable"
History tells us that the consequences are: theft, destruction, guillotines.
The banksters need to repay us.
My guillotine is ready.
You gave me an idea. Doesn't work for me, living out here in the extreme boonies where I live, but maybe for the rest of those "who get it" out there.
Someone should find a really great stylistic artist, and pay them to create some very simple but compelling image of a guillotine. Perhaps in black and white with a single drop of red blood dripping off the blade, maybe with some simple crosshair marks near the outer edges of the symbol.
Then, people can make big copies and hang them on their homes, as a symbol saying "I get it, you soon you'll get yours, predators".
Seems like someone needs to create a single, easily identifyable symbol that expresses the sentiment that "some of us get it, and we know who you are, and what to do with you when we get a chance". Then, the more of these symbols people see on a daily basis, the closer everyone knows the day is getting close.
Anyway, nice idea, nice daydream, but I suspect sanity will never catch on. I guess insanity is much easier... in the extreme short term. Sadly, apparently most people cannot (or will not) see beyond the very short term.
Keep that blade sharp!
Actually, all should first erect a Liberty Pole in their front yard, and then build a guillotine in the back.
The banksters need to repay us.
"Keep that blade sharp!"
Leave it dull...and rusty...and not too heavy so it takes a few whacks.
Sorry coundnt read past the first paragraph. Faulty logic. Slight of words. Use of a bad context to pile shit on. I call it framing the debate.
The world believes in a sweet spot? BS the world cant even make up its mind about the shape of a football.
"...It is impossible to assess what will change or destroy the consensus that current policies will hold the global economy and financial system..." in ransom to Central Banks, BIS & their ilk...
A global strike of a good portion of the honest labor would force everyone to do it themselves for once. Then they would get it or starve. The bankers have made it clear your labor has no value when measured in fiat. To that the proper reply is. Do it yourself. I would rather starve than make diner for the boot stepping on my face. We aint there yet.
Ever notice the ones that claim they know whats best never worked an honest day?
"Government action is obviously a more powerful contributor to the trading context in many areas than ever before..." Particulary when the aforementioned 'governments' are busily preparing for an all out shit storm...
'The Latest US Invasion Of Iraq Begins: US Military Search And Rescue Teams Arrive In Northern Iraq'
It Begins: Canada To Send Military Equipment To Ukraine
Chairman Of Joint Chiefs: US Ready For "Military Response" In Ukraine
etc & so forth...
The consequences of monetary manipulation are NOT unknowable! They are right in front of your freakin eyes!
But who would you believe the FED would say, us or your lying eyes?
This guy reminds me of the phrase "too clever by half." How can you say the system is f*cked and then say "but we're not complaining"? You've just admitted what you are, now we're just negotiating the price...
What do you mean the consequences of monetary manipulation are unknoweable. Its been attempted thousands of times in world history and the result is always the same, financial disaster and loss of credibility of the currency. Now what's so hard to understand about that? Maybe Mr Singer is so busy manipulating currency himself as he did in trying to force Argentina into bankruptcy that he did not have time to realize that he was doing the same thing as the government he was praying upon.