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Billionaire Hedge Fund Manager Paul Singer Reveals The "Bigger Short"
First it was Gross, then Gundlach. Now billionaire hedge fund manager Paul Singer of Elliott Management has unveiled what he believes is the trade of this generation: being short "long-term claims on paper money, i.e., bonds." He calls it the "bigger short." First hinted at during the Grant's Spring 2015 conference, he now goes into excruciating detail.
Select excerpts from Paul Singer's latest letter.
The Big Short, of course, refers to short positions in credit in the period 2005-2007, more specifically structured credit. To be even more precise, it refers to subprime residential mortgage securitizations. It is also the name of a best-selling book by Michael Lewis about the housing and credit bubble. It was called the Big Short because many forms of credit were so overpriced that the risk/reward of taking on short positions before the financial crisis was extraordinarily favorable.
Today, six and a half years after the collapse of Lehman, there is a Bigger Short cooking. That Bigger Short is long-term claims on paper money, i.e., bonds.
History shows that it is fiendishly difficult to preserve the value of money which is backed by nothing but promises, because it is so tempting for rulers to debase their currency when they think it will help them repay their debts. The long-term preservation of the real value (i.e., the purchasing power) of fiat money and bonds is obviously of little or no importance to today’s creators of money – the major central banks – who currently can’t debase money fast enough for their tastes. Yet, the current prices of bonds are at all-time highs, and thus yields are at record lows, because the central banks are buying bonds with trillions of dollars of newly printed money, despite the facts that 1) the global financial emergency ended over six years ago and 2) the developed world has not suffered a renewed financial collapse or deep recession. The central bank actions are unprecedented under these conditions, and their policies are partially responsible for the sluggishness of the economic recovery in the developed world since the 2008 crash. Below we discuss why that is the case, and we set out a number of elements that lead us to the conclusion that the risk/reward profile of owning long-term high-quality bonds at today’s prices and yields is uniquely poor.
...
Our view is that central bankers have chosen, and doubled down on, a palliative (super-easy money and QE), which is unprecedented and extreme, and whose ultimate effects are unknowable. To be sure, the collapse in interest rates all along the curve, and a bull market in equities, “trophy real estate” and other assets, has had some effect on job creation. However, the effect is indirect, and in our opinion the benefits of complete reliance on monetary extremism are overwhelmed by the negatives and the risks. To begin with, such policies are inefficient in actually creating jobs and growth, and they worsen inequality: Investors prosper and the middle class struggles. The goal of leaders of developed nations and their central bankers should be more or less the same: enhanced growth and financial stability. But somehow the principal policy goal of both has become to generate more inflation. Both extreme deflation (credit collapse) and extreme inflation (which forces citizens to forego normal economic activities and become traders and speculators in a desperate attempt to keep up with the erosion of savings and value) are threats to societal stability, and we don’t actually think there is much to choose from between those extremes. But central bankers are completely focused on erasing any chance of deflation, and the tool to do so – currency debasement – is certainly near to hand. Therefore, the likelihood of deflation is highly remote. By contrast, the central bankers’ universal belief that inflation is easy to deal with if it accidentally overheats is arrogant and not supported by the historical record.
Furthermore, we fail to comprehend how owners of claims on money (that is, bondholders) can continue to ignore the fact that the goal of generating more inflation is aimed precisely at reducing the value of their capital. Central bankers obviously do not understand that the modern financial system is almost impossible to “manage,” and is fundamentally unsound as currently structured and leveraged. Given that reality, why should bondholders believe that central banks are capable of creating just enough inflation, and not a farthing more, in their current quest to rebubble-ize the world? We also question why bondholders believe that if inflation bursts its dictated boundaries despite central bank scolding, that policymakers can indeed, as a former Fed chairman and now immodest citizen blogger and incoming hedge fund advisor (Ben Bernanke) has said, cure it in “10 minutes.” We call to your attention the hand-wringing and agonizing now underway about raising U.S. policy rates by 25, 50 or 75 basis points over the next few months. Imagine the caterwauling in global financial markets if inflation surprises everyone on the upside and the right policy rate should be 2%, 4% or higher. Given the fragility of the financial system and its still-extreme leverage, even a few points of inflation and a few hundred basis points of increase in medium- and long-term interest rates could cause a renewed financial crisis.
Inflation is more or less a generalized diminution in the value of money. A bond is an instrument by which a promise to return, in the distant future, a fixed-in-currency amount of invested money is supplemented by periodic interest payments in the meantime. That’s it, and that’s all you get. Such interest payments are meant to compensate the investor for the use of his or her money, taxes (if any) and expected inflation. At currently prevailing interest rates in the developed world, if there is ANY inflation in the next 10 to 30 years, investors who buy or hold bonds at today’s prices and rates will have made a bad deal. And if inflation emerges from the stone-cold dead and walks, trots or (heaven forbid) gallops into the future, they will have made a very, very bad deal.
Equity values depend to an important degree on confidence that policymakers will continue to allow private enterprise, profits and private ownership of assets. But bonds, in our view, represent a greater leap of confidence. It is so much easier to purloin value from bondholders, and so tempting to rulers; in fact, the current leaders and policymakers have said in so many words that there is not enough debasement (that is, inflation) underway at present. You don’t need a weatherman to know which way the wind blows (according to Bob Dylan), but bondholders nevertheless continue to think, up to basically this moment, that it is perfectly safe to own 30-year German bonds at a yield of 0.6% per year, or a 20-year Japanese bond (issued by the most thoroughly long-term-insolvent of the major countries) at a little over 1% per year, or an American 30-year bond at scarcely above 2% per year.
Asset prices are skyrocketing because of massive public-sector purchases. The tinkering and experimentation that characterizes each round of novel central bank policy leads to more and more complicated unwanted consequences and convolutions. Central bankers are, in our view, getting “pretzeled” by all this flailing, yet they deliver it with aplomb and serene selfconfidence. Are they really taming volatility with their bond-buying, or just jamming it into a coiled spring?
* * *
Sometimes inflection points take a while to actualize, even when they are long overdue. For example, the unsustainable dotcom stock boom went on and on in the late 1990s, with the American stock market PE passing its all-time historical high in 1995, before topping out in March 2000 at a level twice the previous 1929 and 1972 peaks. All it would take at the present time for a collapse in developed-country bond markets to begin is a loss of confidence in paper money, central bankers or political leadership. Any combination of these could occur due to the market’s fear or projection of future increased inflation, which could bring about or accompany a self-reinforcing cycle of securities depreciation and other asset price and or wage/cost appreciation. Or perhaps a bond market collapse could ensue as part of a currency crisis in which one or more of the major currencies suffer an unexpected precipitous decline. Up to now, bond markets have acted more like puppets on a string. It would be a large and unpleasant surprise, shaking a lot of assumptions, if bond markets softened as QE continues to build and expand globally.
Current conditions are extraordinary. There has been no global deleveraging since the GFC; in fact, worldwide debt has experienced a further massive increase in the last six years. Long-term entitlement programs have not been pared down to accommodate reality. Derivatives have not lessened in complexity and have actually grown in global size. Moreover, the financial statements of global financial institutions have not moved from opacity to transparency. The ingredients for a renewed financial crisis are in place, as is a possible “surprising” transformation of money debasement into highly-visible inflation.
A good or great trade is not created by just the prospect of a big move in a direction. The ability of investors to engage in a superior risk/reward profile, and to finesse the question of when the expected move will occur, is what separates “just-ok” trades from great trades. It is the extreme overpricing of bonds, and the universal confidence (unjustified, in our opinion) of investors in central banks and in the current mix of perceptions about what is safe and what is not, that makes the Bigger Short into possibly a great trade. To be sure, while a great trade is not a guarantee, at current prices the bond markets of Europe, the U.S., the U.K. and Japan present precious little future reward and a great deal of risk. No investor’s actuarial requirements or investment return goals can possibly be met by today’s long-term bond interest rates, but investors are holding them nonetheless because they have been making money on their bond holdings persistently and seemingly inexorably for the last few years. The day when their perceptions are challenged and they change their minds, only to find that the exit door has been blocked by everyone else doing an about-face at the same time, is going to be one heck of a day for those who have positions in bonds, whether long or short.
The Big Short was compelling pre-2007 because the pricing aberration in a specific type of debt was so huge that it didn’t cost much to wait for the trade to go right (the precise timing being impossible, as usual). We became interested in The Big Short when we saw data that subprime mortgages were defaulting at high rates even while house prices were rising. Today, the Bigger Short is in a much larger marketplace, so it can be undertaken in whatever size one can stomach, and the cost of effectuating it during the waiting period is really low. However, the power of the herd on the current upward bond price stampede is beyond anyone’s control, so one can lose money waiting for the trade to work out.
In terms of directional trades representing extremes of value, the Bigger Short is in a rare category. It is certainly not riskless, because nobody can predict how much staying power policymakers can have when they are unconstrained and have a theory (as unnerving as their theory is), and when citizens are passive and complicit in what we regard as central bankers’ risky policies. Of course, not every trader or investor is in a position to actually short bonds, but our reasoning is equally applicable to the decision of whether or not even to continue owning medium- and long-term bonds at today’s prices and yields.
This analysis is not just about one of the more interesting asymmetries of risk and reward in market history. Rather, it is about leaders abnegating their responsibilities to their citizens (in the case of presidents, prime ministers and legislators), and other policymakers (central bankers) engaging in risky, extreme and untried policies to the point where they are in way over their heads and violating (by design) the moral compact between governments and citizens that is the basis of paper money. Central bankers like to protect their “independence,” but that is absurd in the current context. In what sense are central bankers independent if their extreme policies just give cover to political leadership to do next to nothing to restore sustainable levels of growth? Central bank independence is a concept meant to protect the value of fiat money against grasping politicians, not to empower central bankers to pick winners and losers, allocate credit and behave as if they are fiscal authorities. Certainly the Fed’s “dual mandate” to pursue both monetary stability and maximum employment ought to be replaced with a single mandate to focus on financial and price stability. It doesn’t matter that the other major central banks are engaging in similar practices (QE and ZIRP or NIRP) despite lacking a maximum-employment mandate of their own; eliminating the dual mandate would still be an important symbolic act aimed at pushing back against the arrogance of the Fed and forcing the President and Congress to face up to their responsibilities for optimizing growth and sustainable employment.
The central bankers of the developed world are the architects and enablers of a policy mix whose most powerful result is to further enrich the already well-off, which is clearly posing a challenge to the social fabric of the developed world. It is possible that this situation could worsen if central bankers, frustrated by their economies’ refusal to dance to their incessant piping, step up the pace of their bond-buying and possibly convert it to more direct forms of money-printing, which at some point is certain to ignite the inflation that they have been trying merely to kindle. Don’t fall out of your seats if inflation then burns right through the finely-tuned “target” and keeps on going. If this happens, we all may find out whether they indeed can, or have the courage to, stop inflation in “10 minutes.
We, as usual, agree with most of what Singer has said, with one exception - the same exception we noted in "So You Want To Fight The Central Banks? Then Short Treasurys." Here is the key part:
As central banks have scrambled to push risk assets ever higher in hopes of creating that elusive Keynesian inflationary "trickle down", they are limited in the security they can buy. In fact, most can only purchase government treasurys, which they have done en masse. This is known as QE.
According to BofA calculations, central banks now own $22 trillion in "assets" - almost entirely in the form of government debt (an amount greater than the GDP of the US and Japan combined) - which they have to buy in order to create the balance sheet liability, reserves, which primary dealers and the world's commercial banking system use to bid up risky assets.
Furthermore, according to Citigroup, the amount of debt monetizations in 2015 will be the greatest in history: so great is the scramble to reflate that central banks around the globe (most recently the BOJ's expanded QE and the ECB's brand new Q€) that the money printing academics have now gone all in.
As the chart above shows, the global financial situation is so grotesque, central banks will monetize all net debt issuance around the entire world just to push everyone into the riskiest of assets: stocks.
If there is still any question why nobody believes the fallacy of a "recovery", the chart above should be sufficient to prove to anyone that there is no self-sustaining economy in the world anymore just one massive printing orgy and a doomed attempt to reflate $200 trillion in global debt at all costs.
But back to the topic of QE: as central banks rush to issue reserves, they have no choice but to buy government bonds. Some $22 trillion of them as we noted above. And what happens when epic, epic amounts of government debt are purchased by central banks (just yesterday the BOJ monetized about $10 billion in debt in its daily POMO - and this happens several time per week)? Well, as we have shown since 2012, the bond markets freeze up because central banks soak up all the liquidity, but more to the point, bond prices go up and yields go down.
And this is where traditional economists #Ref! out. Because what is the fundamental prerogative behind QE? It is not to push the S&P to 2100, 3100, or higher. It is to stimulate inflation. The problem however arises when central banks just can't get enough of government Treasurys and their yields, as witnessed recently, go negative. In fact it was just a month ago when we showed that 53% of all global government bonds are yielding 1% or less!
And the punchline: what are bond yields? Well, in a normal world, they telegraph the market's long-term inflation expectations. However, in this parallel banana universe in which everything is planned by a few clueless academics, all they "telegraph" is that central banks are the first, last and increasingly (hi Greece) only buyer of sovereign debt. The irony is that the higher stocks go, not because they should but because central banks push them higher, the lower yields slide as central banks buy more bonds to inject more reserves, to push stocks higher, to blow an ever greater asset bubble across all asset classes: both bonds and stocks.
Even more ironic is that not a day passes without one clueless pundit after another appearing on TV and reading from the teleprompter like a stoned zombie that one must not fight the Fed (and central banks) and buy stocks while shorting bonds. And yet what are central banks buying?
Not stocks (at least not officially in the case of the Fed; only the BOJ and the SNB admit to openly monetizing equities).
The answer: bonds.
In other words by simple bond math, the more central banks monetize, i.e. buy, bonds in hopes of pushing stocks, and inflation higher, the lower yields go. Along the way you get such monetary abortions as ZIRP, NIRP and so on, but the math is clear: central banks hope to push up risk assets by kicking everyone out of so-called riskless assets. Which is precisely why bonds have performed so well in the past several years: everyone has been frontrunning central banks!
And the more central banks push, the more bonds they have to monetize. Indeed, as shown in the chart above, in 2015 central banks will inject a record amount of liquidity into the global market, surpassing even the year of the Great Financial Crisis! All this liquidity pushes stocks higher... and drives yields lower.
At the same time, and here we fully agree with Singer, the global economy continues to deteriorate as ever more zero-cost, money equivalent debt is piled up, debt which will implode the second yield shoot higher and lead to a global domino-like default wave while the rich get richer courtesy of their risk asset holdings, pushing class inequality to record levels and beyond, and leading other legendary hedge fund managers such as Paul Tudor Jones to hint that it all will end in either war or revolution.
So what do central bankers do? They have no choice but push harder, and do more of the same, as in the BOJ and the ECB, both of which have either launched or boosted their bond monetization program in the past year. End result: more than half of all global bonds traded under 1% recently. Why? Because bond investors know central banks will be there to buy these bonds.
And hence the biggest paradox: the more deflation there is, the more QE there will be, the lower the yields, the more deflationary signals, the higher stocks go, and so on, in the most paradoxical circular argument in monetary history. Of course, for the Fed to stimulate inflation, it has to step away from monetization altogether, but that would mean an uncontrollable collapse in bond prices, an epic "taper tantrum" and a surge in yields (see Bunds as of a month ago), and worse, a collapse of faith in central planning.
Central banks can not have that, which would mean they would promptly re-engage once more and double down on their bond purchases restarting the cycle afresh. And so on, and so on.
Which brings us to the other definition of Singer's bigger short: that of "long-term claims on paper money" which this complete sense, because Singer's real short is not on bonds, but the economic system as we know it: one built on trillions of obligations to the future, also known as debt, also known as paper money.
As such we are left scratching our heads: if Singer is really advocating shorting the entire closed monetary system, why short bonds? After all, you may be right, but... in what denomination do you get your profits paid out: Dollars? Worthless. Euros? Just as worthless. Yen? Yeah, funny.
The point is that for Singer to be right, and he will be right one day, one can't bet on a collapse of the current monetary system with hopes of being paid out in claims of the current monetary system.
It just doesn't work.
Which leads us to believe that the real message in Singer's latest letter is what is unsaid. Yes, bonds will crash, and stocks will explode in a hyperinflationary supernova, but the currency they are denominated in will become worthless the moment the claim is transferred. But one thing will remain: the thing that has stood the test of millennia, and has survived all man-made monetary crises to date. The one thing that will also survive the next market crash. That one item, of course, is what the former Fed Chairman and current blogger, called nothing but "tradition" (which he then admitted he does not really undestand).
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How sovereign bonds of bankrupt nations, that happen to be at or near all time highs, are not a flashing red sign of SELL, I do not know.
http://www.debtcrash.report/entry/i-bought-what
http://www.debtcrash.report/entry/debt-taken-on-by-fools
Hehe.
Got real collateral?
… the central bankers’ universal belief that inflation is easy to deal with if it accidentally overheats…
Sure, just axe the Venezuelans… They have a central bank, they have a ‘lil bit (100%) of inflation, they also have one roll of toilet paper per 84,000 people. So, what’s there to deal with? ;-)
Looney
and that is Obama's Dream From His Father
So much destruction that has been done by so few, to so many, for so long, that it could only have been coordinated by non-human demon entities masquerading as so-called leaders across the entire political/ judicial/ and law enforcement spectrum.
your spam on every single thread is getting old mr debtcrash.
Did they take yur jerb at the used auto lot?
i love how tylers conclusion is a plug for gold, without ever saying the word 'gold'
coz you know, that way the nice young men in their clean white coats aren't coming to take him away, hehe haha hoho.
"but of course..."
Is this the Yahoo SKF Kliguy?
Gold?
He's talkin' about chewing gum.
For god sake.
It’s not spam, unlike the ‘you can earn 7000 a month’ stuff. I post what I would have anyway, and link to my further thoughts. You have the option to do so or not.
I wouldn't under estimate human greed and power lust.... but I am inclined to agree with the sentiment in Jupiter Ascending... perhaps we are just a self managed farm for some alien race.....
This was a reply to Looney, Venezuela has 297 billion bbls. of oil, more than Saudi Arabia, just across the GOM from the US? Sounds like the 51st state...(no Israel jokes/snarks, please....)
"They asked me for some collateral. And I pulled down my pants."
Bob Dylan, 115th Dream
"Hehe.
Got real collateral? "
Mortgages/loans don't pay themselves.
Ore does not mine, refine and commoditize itself, nor forge itself into ingots and rails and beams, and autobodies, etc...
Oil does not leap out of the ground, refine itself, and pump itself into the gas tanks of SUVs.
Coal does not unbury itself by the thousand ton, hop rails, and go forth seeking the furnaces.
The forests do not cut themselves into lumber and erect frame homes or polish themselves into diningroom table and chair sets.
The fields do not clear themselves, till themselves, plant themselves, harvest themselves, or bring their fruits to market.
The only real collateral in the world is Human Productivity.
Robots do all those things.
‘Roboti’ derives from the Old Church Slavanic ‘rabota’, meaning ‘servitude’, which in turn comes from ‘rabu’, meaning ‘slave’.
So in that vein, I guess you are right
I agree. People will have to go back to the land, grow food and set up barter systems for trading everything. Maybe this is where bitcoin comes in....
Everything you list requires an end user/ buyer with cash/ credit. You don't pump oil if you don't need to sell it and you don't need to drive if you've no job. This is the definition of deflation; everything loses value as each day is a new price discovery. Loaves of bread will be ask/offer.
So if bankrupt countries r yielding nothing, what do bonds here trade at? There is nowhere to go except PM and government/Wall Street do not want that hence 30 year bonds trading at 2.8%.
Keep stacking that tradition, my friends, even if the Bernank can't understand it.
Correct there are other asset classes than over valued stawks, bonds, and real estate. Buy them and wait.
Because there is ALWAYS more printed money to prop up the Ponzi scheme. It doesn't have to rely on other investors. It relies on central banks that can print to infinity.
"whatever", I don't understand anything you said, but I do understand that I should max my student debt loans and stay in school many years and never have a full time job. Smoke more pot, have more sex. relax.
Timing is everything with shorts.
Fundamentals for Japan's debt screamed sell for many years, but that trade was nicknamed "The Widowmaker" for a reason.
So we're havin' smoked billionaire for dinner??
Sounds dry and boney.
Might need ketchup.
There was a Farside cartoon years back with two buzzards standing over a rotting carcass. One of them says to the other "Whew! Thank God for ketchup."
My dogs are hungry...aaand not too picky. They will eat just about anything... Lends a whole new meaning to the saying, "The country is going to the dogs."
;-D
Gold bitchez. Great article. Arrest Singer and redistribute his financial wealth into ... well you know the story.
I’m with you. It is more apt to compare precious metals to bonds than currency because it is more likely that it will displace much of the bond market as the preferred safe asset rather than as the medium of exchange. If on the off chance PM’s does become a medium of exchange it will fill both shoes.
quit it now.
What "wealth"? His large "claims on paper money" that will be worthless at some point...
http://blog.tenthamendmentcenter.com/2015/05/texas-senate-passes-bill-to...
more than half of all global bonds traded under 1% recently.
and the net present value of nothing is..., yup,
still nothing.
So the "Big Short" narrative started by Bill Gross with all his friends has lost steam and Singer picking up the ball to push their short positions. Problem is in the real world there is little demand for credit other than financial engineering projects like buy backs or PE firms buying out small firms for no cost so as to strip away the assets and fire people. Good luck and keep up the propaganda collusion.
Leaders abnegating their responsibilities to their citizens sounds so much better than leaders fucking the sheep up the ass with their financial tricks.
Hey Paul how'd that short on Argentina work out?
Are you serious, dude? Did you see how Argentina was dressed? Totally led him on, man...
Fuck off Singer.
I share your sentiment, as he is not writing anything original or new. In fact, it's Old News.
As I posted a month ago...
Sat, 04/25/2015 - 19:39 | 6030048 Kirk2NCC1701
I think we (at ZH) have established some time (weeks or months) ago, that in an economy where the CBs and the Deep State control everything that affects the markets... MOST CHARTS (Austrian Fundamentals) DO NOT MATTER.
ZH needs to ID the charts that DO matter in correlating the USD with The End, ie. The Reset of the USD as the GRC.
I humbly submit (once again) that the Litmus Test (Canary test) is the YIELD of the German BUNDS and US BONDS or Treasuries. For only when money no longer flows into Bonds, will that market and its Derivatives finally crash, and cascade into the Stocks.
If Tyler or anyone else has a better Indicator, I'd love to hear it, and the rationale.
I've been bugging Tyler to develop a ZH propietary Fraud Index (FIX) with dazzling charts.
I would think the German yields a better indicator than US treasury yields for various reasons but as for a better indicator, just spitballing, but how bout retail chain store closures and the labor participation rate? What about new home builds?
Sorry, I think the litmus test will be when you have a 10% stock correction, and simulataneously bonds sell off. That will be the sign that the central banks have lost control. The top chart is the most amazing to me. What happens is that the banks and bond holders are selling to the central banks into strength in the bonds, like today. They rinse and repeast when the bonds drop, they are turning around and buying US stocks as a carry trade. Hence you have bonds and stocks going up simulatneously, against a backdrop of horrendous news. This will likely continue until parity with the dollar euro.... When that unwinds then the market and bonds may simultaneously fall.
Indeed, the deep state will not sacrifice itself. It will sacrifice the rest of us as it achieves some (as yet unknown) kind of escape velocity. This is referred to as "The Breakaway Civilization." Not only is it a Deep State, it is a Dark Economy with an intensely Black Budget of its own, underlying all the utter nonsense and idiocy we hear and see today from bankers and their media shills.
Who are they, these Breakaway Citizens? Where are they? What have they done with the real wealth they have stolen? How much quicker do they intercept, delay, bet on, and release SWIFT transactions, than even do the banks and public-known Algos? The SWIFT, recall, was a CIA-acquired system, handed to the Black Budget contingent, who took it and ran with it (and the extra gold left MacArthur found after WW2), to fund ... space, secret finance, and absolutely world-class forgery (the recent gold-bond scandals in Switzerland, Italy, Spain....).
We could follow the money, ... but it went down a rabbit hole.
Refer to: Catherine Austin Fitts, Richard Dolan on the Breakaway Civilization and the Black Budget.
of course he does...
http://www.globalresearch.ca/argentina-a-case-study-of-israels-zionist-w...
...
Nisman, the Mossad and the US Embassy Connection
In his article, ‘Vultures, Nisman, DAIA: The Money Route’ (Pagina 12, 4/18/15), Jorge Elbaum, points out that chief prosecutor, Alberto Nisman, opened secret bank account in New York. As Elbaum told prominent figures in Argentina’s Jewish community, Nisman’s campaign to discredit the government’s joint investigatory commission with Iran and demonize the Argentine government was financed, at least in part, by New York’s vulture fund head, Paul Singer, who stood to make hundreds of millions in profit.
According to documents, cited by Elbaum, US embassy personnel and leading US Zionist organizations, including the Foundation for Defense of Democracies, led by Mark Dubowitz, as well as Abe Foxman of the Anti-Defamation League, fed Nisman fabricated ‘evidence’ and corrected numerous substantive and grammatical flaws in his report purporting to ‘demonstrate’ Argentine’s cover-up of the Iran’s role in the 1994 bombing. However, forensic and legal experts in Argentina have determined that Nisman’s claims lack any legal basis or credibility.
The entire ‘Operation Nisman’ appears to have been orchestrated by Israel with the goal of isolating Iran via fabricated evidence supposed to ‘prove’ its role in the 1994 bombing. The recruitment of Nisman, as a key Israeli operative, was central to Israel’s strategy of using the DAIA and other Argentine – Jewish organizations to attack the Argentine-Iran memo of understanding regarding the investigation of the bombing. Israel pushed US-Zionist organizations to intensify their intervention into Argentine politics via their networks with Argentine-Jewish organizations.
The vulture-fund speculator, Paul Singer, who had bought defaulted Argentine debt for ‘pennies on the dollar’, was demanding full payment through sympathetic New York courts. He had funded a special speculators’ task force on Argentina joining forces with Israel, US Zionist organizations and Alberto Nisman in order to manipulate Argentina’s investigation and secure a bountiful return. Nisman thus became a ‘key tool’ to Israel’s regional military strategy toward Iran, to New York speculator Singer’s strategy to grab a billion dollar windfall and to the Argentine right wing’s campaign to destabilize the center-left government of Kirschner-Fernandez.
...
Have fun, think I'll pass.
YES!
that thing left unsaid!!
+100, also for Tyler
In the event of a collapse we may see the strange phenomenon of bonds, real estate, stock markets collapsing but actual physical cash still being highly desirable for day to day transactions because gold is both a difficult concept for a dumbed population and it also lacks broad distribution to be a meaningful currency. Its value as an asset protector both against calamity and government's greedy fingers will still stand tall.
Which is why there is so much talk about eliminating cash.
"In the event of a collapse we may see the strange phenomenon of bonds, real estate, stock markets collapsing but actual physical cash still being highly desirable for day to day transactions because gold is both a difficult concept for a dumbed population and it also lacks broad distribution to be a meaningful currency. "
What you are describing is a broad based DEFLATION episode. A brutal convulsion of market-based asset repricing over-riding/over-ruling central planning/Central Banking interventionism.
Cash would be king -at least until the value of the Dollar itself collapses simply due to a lack of sufficient amounts in circulation to support general commerce.. Conceivably: nominal debts would be rendered meaningless to some extent or other.
There aren't 50 physical US Dollars in existance for each person living in the continental US. Still talking FRN here; 'honest US Constitutional money' minted coinage is even more scarce.
IF the pricing of all commerce in the domestic US collpased to a level commensurate with the actual currency in domestic abundance, price levels would collapse to something resembling the turn of the last century. A dollar -mere pocket change- would buy a cart of groceries again simply because that is how much of the exchange medium there would be to transact with.
"Cash would be King," for a moment or two, then it would be dust when there was so much less to buy with it. So, take your King and spend it wisely while you can--you will have to live off your acquisitions and sooner or later Food will be King.
As of July 2013, currency in circulation—that is, U.S. coins and paper currency in the hands of the public—totaled about $1.2 trillion dollars. Assuming 350 million in the US that $3500 per head. I think you could assume that perhaps half of that is overseas so say $1750 per person in the US. Not a very deep bank run. Interestingly enough there are about 6 billion ounces of gold in the world. Or put another way around $900 worth of gold per person on the planet.... Intersting........ never looked at it like this. I think they better start winding up the presses for physical money instead of just the electronic variant.... THis could get FUGLY quickly.
Singer can never admit that real truth, as he, like most of these fucks is all in the current paradigm. If he threw his money where it should be, into physical gold and silver, the price would blow up and he wouldn't be able to buy the type of quantity he would need.
That's where the little man can level the playing field at these prices. Stack.
Regardless, he's probably long GLD. Tosser.
"All it would take at the present time for a collapse in developed-country bond markets to begin is a loss of confidence in paper money, central bankers or political leadership." Ummm...are we not there right this moment?
Law and Order is for suckers...
He could have made the exact same arguments about JGBs 15 or 20 years ago, and he would have been precisely wrong all this time. There’s a reason shorting those bonds came to be known as the widow-maker’s trade.
These cocsker billionaires helping us manage our finances. How quaint and patriotic of Singer to tell us to sell our bonds so that we can help his huge leveraged short position make him a couple of million $
The market can stay irrational longer than you can stay solvent.
'Effectuate' your head up your arse, Singer.
Fuck Singer period.
Why oh why didn't you listen to Damon Vrabel... I dunno ten years ago?
In the meantime you stupid fucks have built your own tomb.
Enjoy your sleep.
When the bond vigilantes rise from the dead what will they look like?
So basically he's saying buy TIPS.
People have been writing this article for 20 years... about Japanese bonds, and Wall Street is littered with their rotting corpses. A bubble it is, but shorting bonds is pointless. They party creating a bubble, with the most to lose if it pops, is setting the market price with its purchases. The place to look is in the derivative trades, shorting commodities? EM currencies???
Aye, Matey! It's the bond-risk Risk-Multiplier that has us by the bills.
"one can't bet on a collapse of the current monetary system with hopes of being paid out in claims of the current monetary system."
Who is suggesting collapse? Your USD may buy your 1/5 as much in say 10-15 years, but it will buy you something. It is wise to remember that more than a few lost quite a bit shorting JGBs many years ago. The can kicking can go on for decades.
I once got my brains fucked out on Poydras. Bourbon?, not so much, it was Poydras,
Just so ya' know.
That explains a lot.
Miffed;-)
Miffed, there is not a single molecule in me that doesn't say, fuck you! You wanna act like a Siren? Go ahead. Just know that this old man from Aladamnbama ain't fallin' for it.
Take your pussy elsewhere.
I would suggest collapse; perhaps not collapse into absolute oblivion, but certainly collapse greater than, say, 4/5. I think I am not alone in that suggestion, when I look at the role of debt and debt derivatives for even just the top four US banks. These banks alone are not only TBTF, they are TBTSave as well, when the curtain is pulled back.
So, collapse? Yes. Let's say, 99.99%. $1 today to $10,000 tomorrow just for starters. Look back in wonder at economies gone by, and the weathy moneybags who flew away to [unkn.] in mortal fright.
"and thus yields are at record lows, because the central banks are buying bonds with trillions of dollars of newly printed money"
If bond yields are low because of Central Bank buying, then why was the following the typical pattern during QE 1, 2, and 3:
At start of QE or usually at the time if announcement, YIELDS ROSE.
At end of QE, YIELDS FELL.
Bond yields rose as investors front ran the markup in Equity market multiples, selling bonds to buy stocks. Likewise at the end of QE investors took profits and went to bonds.
Bond yields are where they are IN SPITE of the Fed, NOT BECAUSE of the Fed.
So everyone flew to junk where they could atleast find a modicrum of yield. A huge catalyst for the 2008-9 global financial meltdown was the universal binge of bad credit. A huge part of that bad-debt pile was the “don’t-ask-don’t-tell” high-yield bonds — a.k.a. junk bonds. Junk bonds are again at the forefront of a major collapse in the bond market...
http://www.globaldeflationnews.com/the-biggest-debt-bomb-in-history-and-...
I just don't get it yet! When is the White elephant in the room going to be exposed or talked about in the mainstream.
If the Equity Market is overbought and the Bond Market is overbought and you can't earn money in a savings account....why aren't people betting against the debt in Gold and Silver..... it is the most OverSold market out there. When everyone realizes paper is not the place to be..... OMG!!
Must be a conspiracy.
The wizard says,"Do Not Understand That."
I just want to know WHEN, WHEN, WHEN....so I can have plenty of popcorn ready.
This is totally wrong advise, 4 sure. PLASTIC is the future. No doubtaboutit...
IKindaDoubtIt.
Seriously, fuck paul singer. where was his outrage in 2009/2010 when all this madness started. My guess is that, based on his Fed sources he was long, or in his words, complicit in Fed policy. Drop the moral outrage paul, and just come out and say you are short and others should be, too.
Shut up Tom, go home. You're drunk.
Short testicular fortitude. The Market might climb but the US is flat outta balls.
This guy is a moron. The problem with shorting bonds is that they can be propt up. It doesn't matter if inflation is running 20% or 1000%, if the central bank has a bid in at a 1% yield, throw fundamentals out the door. The smarter play would be to short paper money itself, NOT the claims on said money. Even that has its problems. If everyone is printing, it makes it difficult to be certain that a currency bet will pay off. No, the most certain play is to sell fiat for anything of tangible value. Even stocks will probably due well in nominal terms.
Basically, we should all be going long gold in yen.
Just buy GOLD, physical. No third party risk. Keep things simple and stupid.
Using reverse psychology, maybe he is long bonds like most of Wall Street investors and he is trying to influence the Fed Reserve not to raise short term rates in Mid Jun which is most likely...
french revolution and the guillotine looks better and better everyday
The revolution rescued nothing, but instead had to be rescued itself from its own wretched excesses. Perhaps we can do it a little better this time.
Yes, but the French DID take out a hefty fraction of their bloodsucking nobility ..... and abolished the institutionalised nepotism called a "monarchy".
A Bloomberg Lady said "it's not Monopoly money" (the board game). But what if it is Monopoly money? I think it is. But the 'velocity of money' doesn't have to increase, businesses don't have to invest so much in expensive labor countries, people can work less hours on Obamacare guidelines, no more treating your house like an ATM; EU doesn't have to reform labor standards very fast or much at all, with those outside the unions scraping along under the table, subsidized, marginally employed and limping... many of the same games within Monopoly can persist with low inflation like in Japan for a long, long time.
Surely these monetised Bond Yields require Deflation to be valid ?
"Yes, bonds will crash, and stocks will explode in a hyperinflationary supernova, but the currency they are denominated in will become worthless the moment the claim is transferred."
All currencies eventually end. In the long run... etc. What matters now is that dollars-for-oil remains in force worldwide - just recall the black-market exchange rate chart from the Venezuela article earlier today: https://twitter.com/Wu_Tang_Finance/status/603609017458429952/photo/1 .
In a more perfectly dedollarized world, a world where something else has replaced the dollar as the IOU for oil, absolutely, the dollar becomes the least attractive currency and anyone left holding dollars will probably leap from the nearest upper-story window. Thing is, we aren't there yet (others currencies/economies will probably blow up first), and until then, dollars it is. Everyone wants dollars simply because everyone wants oil and for no other particularly important reasons.
...
The origins go back to 1994, when unknown persons bombed the Jewish Community Center in Buenos Aires. The investigation dragged on for two decades, led by Nisman. Suspects varied over time, according to the foreign policy objectives of the United States and Israel. The terrorist action was blamed in turn on Hezbollah, Saddam Hussein, the Palestinians and Syrian intelligence operatives.
Most recently, trusting to the historical amnesia of the masses, Zionist interests attempted to blame their current archenemy, Iran—even claiming that Argentine President Cristina Fernandez de Kirchner and her government were colluding with Iran to cover up the latter’s responsibility. And when Nisman turned up dead, they attempted to blame President Kirchner—despite Argentine-Iranian mutual cooperation in seeking the bombing perpetrators.
This happened shortly after President Kirchner told Jewish vulture capitalist Paul Singer and others that they would never receive full face value on defaulted Argentine bonds, which the wealthy investors had bought for a pittance. President Kirchner thus defied a court order by a New York judge, and Singer got world banksters to declare Argentina in “default” on its sovereign debt, although it had missed no payments. This suggests the whole Nisman event may have been a payback.
...
http://americanfreepress.net/?p=24493#more-24493
Great article.
This analysis is not just about one of the more interesting asymmetries of risk and reward in market history. Rather, it is about leaders abnegating their responsibilities to their citizens (in the case of presidents, prime ministers and legislators), and other policymakers (central bankers) engaging in risky, extreme and untried policies to the point where they are in way over their heads and violating (by design) the moral compact between governments and citizens that is the basis of paper money. Central bankers like to protect their “independence,” but that is absurd in the current context. In what sense are central bankers independent if their extreme policies just give cover to political leadership to do next to nothing to restore sustainable levels of growth? Central bank independence is a concept meant to protect the value of fiat money against grasping politicians, not to empower central bankers to pick winners and losers, allocate credit and behave as if they are fiscal authorities. Certainly the Fed’s “dual mandate” to pursue both monetary stability and maximum employment ought to be replaced with a single mandate to focus on financial and price stability. It doesn’t matter that the other major central banks are engaging in similar practices (QE and ZIRP or NIRP) despite lacking a maximum-employment mandate of their own; eliminating the dual mandate would still be an important symbolic act aimed at pushing back against the arrogance of the Fed and forcing the President and Congress to face up to their responsibilities for optimizing growth and sustainable employment.
The central bankers of the developed world are the architects and enablers of a policy mix whose most powerful result is to further enrich the already well-off, which is clearly posing a challenge to the social fabric of the developed world. It is possible that this situation could worsen if central bankers, frustrated by their economies’ refusal to dance to their incessant piping, step up the pace of their bond-buying and possibly convert it to more direct forms of money-printing, which at some point is certain to ignite the inflation that they have been trying merely to kindle. Don’t fall out of your seats if inflation then burns right through the finely-tuned “target” and keeps on going. If this happens, we all may find out whether they indeed can, or have the courage to, stop inflation in “10 minutes.
The theater of central banks is burning. The spectators run around wildly like mr Singer because all paper assets are doomed as there is no alternative or exit for them. Wise words of mr Singer but indeed an unwise trade. The net effect of QE is becoming negative as insurance companies/pension plans/banks etc lose money with these yields so the FED must raise rates soon but that will end very badly.
I believe that the reason that, "Central bankers obviously do not understand..." is cuz they don't have any common sense.
Yup, I don't believe they know the first thing about how to get blood out of a dying turnip.
Beware the end of lies.
If I didn't have an opinion I wouldn't have anything.
~toktomi~
Short bonds like Singer did with Argentina http://www.cnbc.com/id/102298800
And if there is no fiat collapse?
Exhibit #1 Sunday May 10th, Malibu California @ Gladstones, suited for artillery practice. This pricey tourist trap with a fine view and bad food, usually has 300-500 people in/outside in years gone by: 60 people total in side and out. Parking 30 cars. In speaking with the valet I asked if there had been a bomb scare and he answers that it "has been dead for monthat at this point." In the 10 mile stretch on PCH there were three Ferrari La Ferrari 2.2M per.
Exhibit #2 Beverly Hills dinner on Canon, dead. Valet says "no one goes out to eat anymmore". The realtor I'm with says she is short inventory on $5-8 million entry homes.
"UP" is the new Down. Bags of Mercury Head dimes, physically delivered bullion and AR15s and shotguns, with plenty of ammo. Firearms up 30% in 14 months. Ten year porfolio.
Mr Bernanke should speak to more valets.
GOLD!
Or YWH the great unspeakable conduit from one money system to another
Great post!
So many missed the last Big Short that many are now trying to identify the next Big Short. It won't work. We're left with countless end times scenarios by financial celebrities.
Great article, but....
When inflation starts heating up, how can we believe the inflation numbers from the government? I think most of us here would agree that the inflation numbers currently reported do not accurately capture the true inflationary pressures from some things such as housing, health care, and higher education.
My point is that they will continue to manipulate the inflation numbers through a bunch of double seasonal adjustments and behind-the-scenes shenanigans and will never be forced to raise rates until the country has literally devolved into chaos because people can no longer afford to live.
How long can these monsters rig the game before people wake up..?
"Our view is that central bankers have chosen, and doubled down on, a palliative (super-easy money and QE), which is unprecedented and extreme, and whose ultimate effects are unknowable."
1+1 does still ALWAYS = 2.
The writer understands the situation, but he doesn't know how to trade it.
1) traders don't have to predict this event
2) prices do not instantaneously adjust to changes in perception
3) Fundamentals are in place for this trade, technicals are not. Therefore now is not the time to engineer this trade
D.C.