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Grant Williams: Why The Smart Money Is So Nervous Now
Submitted by Adam Taggart via Peak Prosperity,
If you drop anybody into any momentous period in history, it’s really tough to perceive it at the time. It’s only when you look back on these things with the benefit of hindsight that you really see how historic they really are. But for many people right now who can forget the narrative and can forget what they're being told by various interested parties, if you can stand back far enough and take a practical look at what’s happening, I think it’s much easier to see certainly how far from normality things are today.
So believes, Grant Williams, portfolio and strategy advisor for Vulpes Investment Management, and proprietor of the economic blog Things That Make You Go Hmmm.
In this weeks' podcast, Grant and Chris discuss the growing anxiety they see among experienced investors. More and more, those who have made long, successful careers in money management are realizing that the system has morphed into a strange beast they no longer recognize, nor trust. Fear of epic, perhaps historic, dislocations in price when the current market reverses is causing more and more of the "smart money" to sell out now and seek safe harbor:
We don’t know how it will end, but something has to give. It’s a question of what it will be. Because when you start playing with the forces of nature you can suppress them for a while, but they will eventually overwhelm you. We’ve seen this constantly throughout history. I’m a big reader of and a big follower of history because I think the answers to everything lie in there somewhere if you pay attention to the signals.
So, for example, the central banks interfering with the natural price of capital by suppressing interest rates and fixing somewhere where they really shouldn’t be you at that point, have interfered with every single transaction on the face of the planet. And so if you interfere with every transaction that happens on any given day anywhere in the world you are going to get transactions that are not natural. And if they’re not natural at some point they will revert to where they ought to be and I think we’re starting to see that. We saw that in Switzerland, we saw the natural forces reassert themselves once that peg was removed, and it was incredibly violent. And it moved the idea of hyper-volatility back into the public conscious.
Imagine what happens when the Fed does the same thing and says “Hey you know what we promised you for the last six years? Well we can’t fight this thing forever. We’re out”. Imagine the volatility that’s going to unleash. And at some point, this has to happen. Sure, plenty of people can make hay while we go along and they can close their eyes to what they may instinctively know is true and they can buy the markets and they can chase the trend and they can follow these things up. But at some point, it’s going to turn around and bite them. When that happens, if you’re not prepared for it or you’re still fully invested, there will be no way out. Not in the time frame you need and not at the prices you want.
What we risk is a switch in the market, a real switch -- which is something that obviously the central banks and governments of the world are desperately trying to avoid happening. When that occurs, we will see how this new world works in the opposite direction. And it’s going to work similar, except for the fact that you’re going to have a bunch of people looking to sell alongside the robots. And when markets are going up it’s very, very easy to product more stock. People can issue more shares, there’s always new stock if you want to buy it. But if instead you want to sell stock, you need a bid -- and this is something people often forget: sometimes there are no bids. And where there are no bids, you can’t sell. The first bid you might see may be down 20, 30, 40%. Guess what? The robots may well start hitting those; so you’re going to see incredible dislocations in markets once the wind changes direction and markets head the other way.
A tremendous number of people talk to me about how the financial system is broken -- and they mean that in the worst possible way, in that this doesn’t work anymore. And when we do get this resumption of natural forces, people are genuinely concerned about what happens at that point because what do you do with an entire financial system that doesn’t work anymore? They’re very afraid about the steps that will be taken to counteract the amount that has built up by the interference over the last six years by outside agencies that have as I said corrupted -- and I use that term in the true sense of the word -- that have corrupted price signals all around the world. The financial system that we’ve all grown up with and that every economics text book talks about doesn't exist anymore. This reality is not going to be obvious to everybody until it just stops working. And very, very smart people are very, very nervous about that.
Click the play button below to listen to Chris' interview with Grant Williams (54m:21s)
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Everything is fine. Knucks said monterrey nay isn't overfished. All is well in the world
I am completely against the 'smart money' coin phrase, as it gives undue credit to their financial prowess. Now if you want to call it what it actually is... insider money with a touch of smarm.
Lucky if connected, sux if you're not.
There's an entire industry full of people who still believe that we have, or should have, private markets. We don't, private debt and financing has now migrated to public and quasi-public balance sheets. The key difference is that while private debtors (individual and corporate) can in fact become uncreditworthy and need to do things like earn revenues and profits and stay "solvent", these public entities do not. These quasi-public entities also have a key advantage in that they show up to the table with an unlimited supply of chips to play with. The remaining private entities can only try to join this game by exchanging claims on their assets in return for their own access to these free chips, no need any more for arcane notions like employees and products and market share and profits. The entity issuing the chips is the same entity that exchanges those chips for ownership stakes in discounted future cash flows of these enterprises, but these days that is just for optics. In fact they are simply opening a spigot into the flow of free chips they themselves issue, and the formerly privately-financed entity is now just a pass-through. Since many of these still retain a brand impression of prior success in the productive deployment and growth of private capital, in the short run this flow continues. Investors get the impression they own a private enterprise with an entrepreneurial incentive to grow capital but in fact they have simply purchased an access point to the free supply of chips.
No one can doubt the value of the unlimited chips because there is no remaining basis for comparison, with all economic blocs now in the "unlimited chips" business. There used to be "money good" collateral (shiny stuff) but they have financialized the trade and control the price of this as denominated in their free chips so it's pointless.
By it's nature this new system will continue to concentrate the supply of chips upwards until there is one guy remaining at the top with all of the chips. This is the only remaining fly in the ointment, and they are ramping repressive measures on the "non-chip owning" population to protect that one guy for a while longer. In reality it's probably a couple of thousand guys, when the crisis began there were 800 billionaires in the US and now there are 1600 so the process is working quite effectively.
Hal - Very concise summary. We're in the eye of the hurricane. The winds are beginning to pick up in other direction. I would NOT be trying to time the market perfectly when to get out.
Also, some of you other fellow small business guys should make sure and have at least three months operating/home savings for expenses. Make hay while the sun still shines a little.
Shouldn't that read "Grant Willians, the EX-publisher of the Things that make you go hmmmm letter"? I'd actually already forgotten his name.....
He is still publishing it. Click on the link above. You have to pay to see it.
So the selfishites are printing themselves money while we starve to death. What's to understand?
my co-worker's mom makes $87 an hour on the laptop . She has been without work for 8 months but last month her pay check was $15653 just working on the laptop for a few hours. try this website... www.globe-report.com
I guess you don't have to be very smart to start getting nervous.
Fuck this shit! I am going to the bar to spend what little fiat I have left on shots and meet some hot cougar! Worked last night...
Don't let pictures of mr. Yellen spoil your party.
Sure hope shes not at the bar I am going to. I am sure she will buy everyone drinks thought since she can just print that shit up
Explains all the scratches...you should get those looked at.
Eeeewwww, Dude! That looks like puss leaking from the Band-Aid onto you collar!
Yay toxoplasmosis!
I put most of my available cash into PMs. Does that make it smart money or dumb money? Only one way to find out!
Probably dumb money in the short-term, smart money longer term. I'm in the same boat, substantially invested in PMs. The financial markets are going to work great for people until they don't, y'know?
Based on that, I don't see being invested in PMs as intrinsically dumb, more of a hedge against the events which are around the corner, and as long as you can stay liquid, don't loose too much sleep over it.
From your mouths to God's ears as I am a galley slave in that very same ship. I am certainly not losing any sleep either though I am concerned enough to be moving my assets around in such a way as to reduce my target profile. I think it is going to get ugly but as to when that ugliness fully rears its head, I can't say.
the usa ain't switzerland
Mores the pity.
That's right, its not. When the Fed runs out of rope, the only way out will be World War III. Only a war of such magnitude can possibly provide full employment, bid up wages, and inflate away the vast sandpile of accumulated debt. And I believe that the pieces of this war is being set up now with the rise of the Caliphate.
The Government is who is engaged in Financial Repression...not the banks.
As soon as you understand this patent absurdity then you'll understand why everything is up while everything is down.
There are some data points (energy production, cloud computing, war on terror) but the Song Remains the Same: the only "policy" is forcing markets to pay for everything at the expense of an honest...let alone "non-absurd"...rate of risk.
There has never been a problem of return in pretty much any market going on 6 years now...but the only way to insure against risk at this level...of the Government itself...is with gold and/or silver.
Simply put the stupendous liquidity being generated from pretty much every source imaginable is not being allowed to flow to the economy at large.
Too much debt. Too many "forced" obligations/complexity.
The problem remains plain old fashioned default. Investors in my view aren't thinking big enough.
Who has the problem if Detroit and now Chicago go bankrupt? Not Wall Street...
If you are into drones check out this site http://pickyourdrone.com/
Not sure what the mystery is. This can/will continue as long as the market accepts debt-backed fiat currency as money.
"How did you go bankrupt?" "Two ways, gradually and then suddenly" -Ernest Hemingway, from The Sun also Rises.
Articles like this are neither insightful nor helpful. So, market verterans like Grant Williams say it cannot go on. But it does. At some point, the market will prevail. We accept that. When is the dam going to burst? Gimme a date, a month, a year.
"Predicting the future is easy. Its the timing that is so hard." - me, from Here
Dont worry smart money you have ecb qe comin in march and then its the ussa's turn for qe 4
Not sure if everyone catches the significance of this article (and a bunch of similar ones floating around).
One one side we have predictions of a stock market meltdown, and just to be clear, these people evidently mean U.S. stock market.
In the other corner we have the "rocky" of analysts Martin Armstrong claiming the U.S. stock market will have worldwide, safe haven seeking funds, pouring into it as sovereign bonds go bad starting Oct 2015.
Who will be proved right (and who will subsequently wriggle out of their bad call so as to live and fight another day)?
In the end, there can be only one.
I have been fascinated by antiques auctions lately. Record prices are being fetched for everything from paintings to collector automobiles...The wealthy ARE still heavily invested in this market, but the soaring prices for ANYTHING not paper shows the 1% can feel the wind picking up. Little guys like me?...Pay off your debt, keep some cash on hand, if not metals at least get your hands on something unlikely to lose 50% of its value overnight. For those of us who survive this, its gonna be the sale of the century eventually.
Smart Money? Oxymoron. The smart money isn't in PAPER MARKETS unless it is SHORT paper!
AWWWW Let Me Play You A Sad Song On The Worlds Smallest Violin (Full song)
http://www.youtube.com/watch?v=-2XwzmQbuTw (0:36)
TD Ameritrade site will be down, I know that! FORGET ONLINE ACCESS to sell.
"Fear of epic, perhaps historic, dislocations in price when the current market reverses is causing more and more of the "smart money" to sell out now and seek safe harbor."
Gosh... I guess that means I am very smart. I've been very smart for about a whole year now.
This is aneecdotal. So Smart Money is with the pundits that manage them for their bets ? The tragedy lies with muppets who hand over money to Financial Advisors etc who are as clueless as everyone else. This is a deformed market with odds worse than controlled risk environments like casinos. FAs are still feasting with snake oils dumped upon trusting muppets and this keep the game going.
Smart money is buying guns and ammo. Thanks to micristamping requirement, you cannot buy new semi autos in Calif. Price is through the roof on existing guns.
Same with the .223 and 5.56mm ammo. Outlawed by Obama until works through the courts. Price through the roof again.
Guns and ammo make PM returns look sick.
Doesn't seem as bad as the last time. I still see plenty of both 5.56 penetrating and .223 available. I am thinking of picking up some 7.62x54R just to have it - I don't own an AK but it might be a good investment.