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Forget Rate Hikes: Bridgewater Says QE4 Is Next; Warns World Is Approaching End Of Debt Supercycle
In a just released letter to clients, the head of the world's largest hedge fund delivers one of his usual sermons about the economy as a perpetual motion machine, affected by central banks, and where interest rates are supposed to boost asset returns by being below "the rates of return of longer-term assets."
None of that is terribly exciting and it is in fitting with what Bridgewater has said for a long time (incidentally, it is curious that just over the weekend, the FT released a piece in which a "US asset manager warns over risk parity" which is what Bridgewater's bread and butter is all about).
What is exciting is the following part:
That's where we find ourselves now—i.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.
That is what we are most focused on. We believe that is more important than the cyclical influences that the Fed is apparently paying more attention to.
We suppose this gis suppoed to justify the Fed's preoccupation with hiking rates, and why Yellen has on more than one occasion spoken against soaring asset prices. And yet...
While we don't know if we have just passed the key turning point, we think that it should now be apparent that the risks of deflationary contractions are increasing relative to the risks of inflationary expansion because of these secular forces. These long-term debt cycle forces are clearly having big effects on China, oil producers, and emerging countries which are overly indebted in dollars and holding a huge amount of dollar assets—at the same time as the world is holding large leveraged long positions.
While, in our opinion, the Fed has over-emphasized the importance of the "cyclical" (i.e., the short-term debt/business cycle) and underweighted the importance of the "secular" (i.e., the long-term debt/supercycle), they will react to what happens. Our risk is that they could be so committed to their highly advertised tightening path that it will be difficult for them to change to a significantly easier path if that should be required.
Leading to the conclusion that "We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten"
Odd, that: it's precisely what we have been saying since the announcement of the taper in 2013.
As for why stocks just took a major leg down once the letter hit, Dalio's warning that the era of easy debt-funded returns is over, appears to be striking a chord...
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insightful
no clinton, no bush
Don't worry, I am sure they will find a way the little guy will keep his debts and pay more on them.
The St Louis Fed just said QE was ineffective! They are telegraphing they are going to try a new policy. They will let this crash continue to give them political cover and try some new form of easing.
And here I was expecting CC1.
Regards,
Cooter
HINT: It rhymes with apital ontrols.
shut it craptain.
Nobody's expecting a rate hike, so that's exactly what we'll get.
Just wait until companies start going under and are unable to make payments on all of the junk bonds they sold. Interest rates will hike themselves.
45 S&P500 pt move up in 10 minutes??? Yup, this is a normal market alright
Not this fucking QE-4 shit again..
It's to keep the last few Muppets in the market to slaughter.
My butt is incredibly sore
I can't afford food at the store
I went to my Doc
She said with a shock
"You suffer acture QE4"
Sittin' by de ticker, me heart, she feel so sad
Sittin' by de NazDaq, me pocket, she feel so bad
Don't got de money Duh get me New York city cab!
Fine calypso woman, she cook me shrimp and rice
Fine calypso woman, she cook me shrimp and rice
Dese yankee hot dogs Don't treat me stomach very nice
In Trinidad, one dollar buy
Papaya juice, banana pie
Six coconut, one female goat
An' plenty fish to fill de boat
One bushel bread, one barrel wine
An' all de town, she come to dine
But here is bad, one dollar buy
fallen splinter APPL, an' no pie.
Me throat she sick from necktie
Me feet hurt from shoes
Me pocket full of empty
I got Apocalypto blues
Dese yankee fraud give me big scare
Is preach de bull, but teeth de bear
Her quote id false, all pig wid paint
And stick da save are where buyer she ain't
She dips and darts when she should waltz
I even think her lies is false
But calypso girl is good a lot
Is what you see, is what she got
Sittin' in tradin' space, me heart, she feel so sad
Sittin' wid'out me face, me heart, she feel so sad
Don't got de money To take me back to Trinidad
https://www.youtube.com/watch?v=R0QLYH3vOCc Marley & NKC
The time has to come to back up the boat on the physical, while it's still being mined... eagles under $19 (25% premium) can still be had.
The debt super cycle which is ending is the 35 year Treasury cycle which started in 1980. Too many young pups haven't been alive long enough to see it.
They are printing fucking money to maintain it. This mean it's over. PeriodEOS.
Look at the long term chart on Fred graph of Treasury 10-year constant maturity rate and tell me where we go from here. It's fucking over.
The party has to end some time
You're missing one major difference between then and now. Currencies are now fiat. Free capital means the economy is peaked. Until the US loses is hegemony, the present circumstances will continue quite well. You really think you're getting out of the dollar? Kaddafi tried to offer at true global reserve currency of merit since the Swiss Franc went fiat in 1999. What happened to him? You think the Remnimbi is going to overtake the dollar ? You know better. The dollar and the present QE to infinity system will work just fine for a long time. Who cares what the debt level is when interest rates are effectively 0% and debt service becomes de minimis ? Check out all the free stuff on Craigslist. Entire business models succeed on people DONATING their cars. Admit it. Supply is plentiful and capitalism won. I don't think it's pretty either and I worry about that great a concentration of power. But that's why we have a Second Amendment. Enjoy it. It's a new world indeed.
You're missing one major difference between then and now. Currencies are now fiat.
Currencies have been fiat since before 1980. In fact, this is the enabling reason for the 35 year Treasury cycle which is ending. You missed that?
The dollar and the present QE to infinity system will work just fine for a long time. Who cares what the debt level is when interest rates are effectively 0% and debt service becomes de minimis ?
Who cares when "money-things" can be created endlessly from nothing, given cost-free to the 0.01%, then used to buy real things? The liars telling everyone it's different this time are more sophisticated, just sophisticated enough to get away with it until they can't, just like last time. Just like very time.
bullish
You're missing one major difference between then and now. Currencies are now fiat. Free capital means the economy is peaked. Until the US loses is hegemony, the present circumstances will continue quite well. You really think you're getting out of the dollar? Kaddafi tried to offer at true global reserve currency of merit since the Swiss Franc went fiat in 1999. What happened to him? You think the Remnimbi is going to overtake the dollar ? You know better. The dollar and the present QE to infinity system will work just fine for a long time. Who cares what the debt level is when interest rates are effectively 0% and debt service becomes de minimis ? Check out all the free stuff on Craigslist. Entire business models succeed on people DONATING their cars. Admit it. Supply is plentiful and capitalism won. I don't think it's pretty either and I worry about that great a concentration of power. But that's why we have a Second Amendment. Enjoy it. It's a new world indeed.
Any way this ends the oligarchy is going to steal your money sooner or later...so you might as well get used to that.
"I don't know where you've come to get that Bettie Davis wheeze."
"Worst of all young man you've got Industrial Disease."
"no shit" comes to mind.
In 5 years this guy will be on the CNBC peanuts futures segment ranting on about how correct he was.
They are all assholes.
You may be right. But I specifically remember this guy correctly predicted the Fed's purchasing of US Treasuries back in early 2009 at least a couple months before they did. And while I don't cover everyone in the investment advisory business, I do read a number of them. And nobody else I read was mentioning it at all.
So you're saying he is a blind squirrel? Or he really can predict the future?
Wake up muthr fulkr.
Interest rates will hike themselves.
That's the beauty of it. The FED is fucked either way. Those companies are iether going to be squeezed by FED tightening which raises their costs or FED easing which will bring even more inflation (at least initially) in RE, Food and Energy strangling the consumers they need to survive.
Liquidity. Trap. Janet Yellin is facing pressure from both sides. I sense a FED Double Penetration.
Wouldnt that be a hideous site.. That whore with two red white and blue dildos up her crank
Yellen checking in at Dildos Anonymous. Ouch.
It's a trap they built for themselves from whole cloth. They knew it while they were doing it. I have no sympathy.
Greater israel is the plan. It's no trap, it's a very well orchestrated plan to rape America then the joos will flee and leave the mexicans and naggers in charge.
Why are there any real white people even left in USSA? Stoopids that like the raping.
Actually they didn't.
Jacques Reuff said they made a mistake and the world would someday look back on it with astonishment and wonder.
All the genius government officials created a system that was a design by committee and just settled for it. This is actually the way the world works. A lot more shortsightedness and a lot less conspiracy than many imagine.
They will truley be surprised when it collapses though a few are beginning to see it is coming apart at this point...and they think they just have insight even as they lived in denial for years.
"Actually they didn't." know what they were doing.
Look here Vegas. You just don't seem to understand Babylonian Money Magic.
WTF needs QE anything when "they" can just pour on 5 SNP points a minute like they have here in the closing moments?
Agree, looks like the rate hike rumor is completely priced in. So if it realizes, there shouldn't be much space left for devastation. I think they'll do it; for a while and after collecitng everything at lower prices, they'll start pumping again...
Disagree. You can see, after the mind bending ramps off the lows today, ie. 500 pt. ES ramp in one trade during the initial market halt, that they dearly do not want this thing going down. They already own all of it and there's no one to sell it to.
Paying with cash? Arrest him!
edit: more and more small-biz places, especially bakeries, I notice, are going for the iPoop tablet payment systems. I asked at a local bakery "which do you prefer, cash or card?", and the guy thinks for a second before saying "anything is fine", but reconsiders and says "well, if you have 68 cents... I don't have any change." I had 68 cents. He did have a fiver and enough G-Dubs to give me the remainder. This is a bakery with many loyal customers.
If they don't take cash, my rule is to leave the merchandise and walk away.
On that note, I stocked up on Kleenex tissues over the weekend. CAD$5.35. I handed the cashier $6.35 in Canadian coins (three toonies, a quarter and a dime), and she was stumped, literally incapable of doing the math. I had to explain it to her. The same kind of thing happened later at a restaurant. These children will regurgitate the "global warming" narrative at length, but they can't do basic MATH!
And what new forms of easing are left to them? The only things that I see are buying stocks directly, which won't do much for credit markets, buying junk bonds, which isn't really that much different from what they've been doing, and a helicopter drop to the masses, which if big enough to have an effect will eventually spiral out of control. Oh, and NIRP, which is fucking insane.
QE won't do a damned thing, but the mercenary financial groups like Bridgewater are the people fucking it all up, and like all mercenaries, always demand to be payed first.......
I'd say banning cash and implementing seriously negative rates, it will only result in super bubbles but it will also kick the can. The E dollar is more viable but still fits the mould of shifting monetary systems, namely the banks and governments get stronger, so I'm not a big fan. Of course, I would want to take a step toward sound money, but I don't have the con of this economic ship.
The bankers may want a cashless society, but there are too many black markets that it would fuck up. It would cause some real problems.
Plus I don't think there is enough time to go cashless. It will take several steps through congress, etc., before that can be approved. Not that they wouldn't buy off everyone but still the time element doesn't fit what appears to be an imminent crash. Maybe on the backside to double fuck us when the reset hits.
You'd be amazed at how fast politicians move when they are pissing themselves.
What? No link to your website?
That will be the reset. In exchange for having your debt forgiven and your assets confiscated, everyone will get 1000 Hillarybucks or trumpbucks if you prefer. It simply deosn't matter who wins.
EV,
spose it'll be gold for heroin?
"There are too many black markets that it would fuck up."
#blackmarketsmatter!
We were talking yesterday about a QE.4 helicopter drop of cash for the sheeple. Now I can see an innovative helicopter drop of STAWKS for the sheeple. Kill 3 birds with one stone.
1. address the disparity of the poor, downtrodden left out of the wealth effect because fairness.
2. find muppets for student, auto loan debt
3. ramp the mocket with new fake money
I figure this is what the talk about raising minumum wage is about...helicopter drop to the masses.
They could rather easily increase EBT/SSI/Social Security payments, forgive/cut student debt, etc.
Yes, it would increase overall debt, but they need inflation. Enough inflation then the debt is less difficult to manage.
And what have they got to lose at this point? Might as well give the masses a big slice of government cheese...should even turn down the temp on civil unrest.
The Fed is working on a new regime, a totally different paradigm shift, to be called "Easing Quantitatively".
With this program the Fed will create digital fiat from the ether, and distribute it to their 13 member institutions,
who in turn will lend it to "qualified" recipients, who can buy real things with it. Such a novel approach.
It's demographics and credit that no CB can overcome that is bringing this show down...go to the link and stare at the last chart and only the ramping debt creation offset the declining demand...Demographics of 0-64yr/old global "high consumer nations" population have been declining and now go negative...
http://econimica.blogspot.com/2015/08/depression-does-not-come-close-to.html
Demographics have been saying the party can't go on for awhile now, but nobody wants to believe the sun is setting and want infinite growth forever....
So the "West" or the Caucasian race needs to start having babies and lots of them for the good of the planet.
WTF!!! - the biggest change is actually China and Japan...but birth rates are slowing nearly everywhere on earth. No one is going to save this system by having more kids and the racial shit is tiresome.
Soon I go from massively supporting the system to sucking large on the teat. The more the govt fucks up my business the more I move that date forward....and there is about a million like me.In truth I expect that after payng taxes for 50 years, the day I ask for Soc Sec will be the day they close their doors.....actually I don't think it will even be that long after tdoay.
Well hello boys and girls.
What's the difference between an economist and the godfather?
Drum roll,,,
The econimist gives you an offer you can't understand. MUHAHAHAHAHAHA
Man are we fucked!!!
QE4 was inevitable. Banks giving us 0% is really robbery. They take our money, use it, make money and give us nothing in return.
Maybe a wall will be built when you cannot escape.
Well duh!
"no clinton, no bush"
Just one fuckin' thing after another!
What this guy is really saying, "come back in guys, the water's fine".
Equities is not the place to be anymore.
Since the soverign bond market hasn't crashed yet, he's correct.
But for how long?
Every dead clock is right twice a day.
Now there's no Repo market, they'd have to set neg. rates with a promise to stay, and a promise to buy, the fed has been the garbage collector, buyer of last resort, throwing bonds on their balance sheet. Other nations are over stuffed with USTs.
Remember the addict needs a bigger hit each time to maintain his high.
I think equities have seen there better days now.
nice candles today
http://stockcharts.com/freecharts/candleglance.html?[DOW]
I'm now short bigtime but it does make me wonder.
How long before the next QE.
Before EACH FED meeting, I'll be selling my puts and buying them back right after if it doesn't mean a QE will come. Sure I'll lose money on it but the risk of a surprise QE of a few trillion could spoil a lot. And then I'll go long bigtime.
The only big loss are my miners and a few reit stocks which doesn't make any sense
Wow, I've never heard this theory before!
Peter Schiff has been saying this all along
Schiff had Oil at 90 a barrel, how's that doing ?
I'm just saying... The guy got roasted for showing up on CNBS and proclaiming we would see QE4 before the Fed hiked rates.
Oil will get back to 90 and then some. We may even look at 90 as cheap. Timing is everything, and the first oil depot that goes up in smoke in the middle east will usher in the turn. Anyone believe that that won't happen?
Oil is going to remain unpredictable and volatile for anything more than short term.
this is true
It's not like the Saud's listen to Schiff. Without their going all out on pumping, it might be there now.
No Schiff...;)
If the dollar crashes oil will be more than 90 dollars per barrel.
Schiff is alright, he just gives goldbugs a bad name because he misses all the good arguments when he's on the media. But he does get an A for effort.
But boy, was schiff right about the no interest rate increase by the fed! He will also be right about the next QE, coming soon. In the end, he'll also be right about gold and silver.
So were a lot of people, many right here on ZH. I prefer Stockman, he nailed deflationary before the inflationary in his book big time. Read his NYT article Sundown In America, 2 yrs ago. Schiff always the hyperinflation guy. Cash will be king for a few days.
Jim Willie has been on the mark as well.
We have no true price discovery at this time....And I will take Schiff right on QE over being wrong on oil any day.
Yeah, and to his defense, no warning singal told us that Saudi Arabia, USA, and Russia would increate production at once.
We may never really know if the likes of Peter and Marc Faber were right all along . . . it would take a free market to really judge them.
I along with a lot of people have been saying it for a long time too. QE in the US and China are in their infant stage.
Didn't Dalio say we were in the "sweet spot" 2 months ago?
Yeah, we WERE in the sweet spot two months ago. Now that everyone is losing money we're not.
It's like.... when stocks go up it's "market gains" but when they go down it's just "volatility".
More like today's Cramer n' Cook's wet spot. Had to go there.
Meh. Wake me up when it's open season on banksters.
Now he tells us
Blah blah blah. Just like WW1 then WW2. QE never ended just like world war hasn't ended. Just moves around geographically.
The FED is turning a new leaf - will become McFrugal and start raising rates in September as promised!.
that will only happen when a larry silverstein analogue gets on the horn and says "pull it"
WRONG. There will be no more QE programs. They have failed, everyone knows including the politicians, it and it won't happen again. Policy will normalize regardless of the market and the world will have to work its way out of this mess over time...just like in the old days before the fed.
you forgot the /sarc
thanks for pointing that out.
No shit sherlock! Actually QE has never been stopped and has already been increased. It's only been stealth QE and not reported all along. The news might report it as QE4 but it's already been on QE-forever.
Printing money to buy up all available Treasuries isn't QE, that's business as usual and why the congress critters have no real interest in auditing the FED......
"and why the congress critters have no real interest in auditing the FED....."
When you're scared of the dark, you don't go looking under the bed.
I can't wait to read the FED script, as spoken by their leader Cankles-The pillsbury dough girl, and see how they go from hikes to meth. I'm waiting on the script cause I can't stand listening to them.
a mild "sorry for elking y'all of all your money" to the remeaning sheep in their fold.
Tokyo City, Tokyo City here we come......
The truth is the economy was broken with Ronald Reagan and there is now no way out as humanity wasted too much time within a false narrative. Mal-investment on a global scale wasted the easy to extract resources on consumer garbage.
Not Bush..., but Reagan? LOL
Infrastructure investment and R&D typically has a 15 year timeline. Reagan tax cuts meant companies no longer had to invest to make a return. The 2000 economic downturn is directly tied to Reaganomics and most of the true data points that have not been corrupted by politicians point to this time period as a major turning point. Accounting treatment of Goodwill changed at this period. 9/11 occurred shortly after which created an entire virtual "security" economy that is supposed to have real value, when in truth it is filler for what was lost. Real labor rates began to decline at a rapid pace. The list is extensive.
Let's get real. It was Taft. He started corporate taxation!
blaming reagan for the economy being broken? he is the president who re-appointed paul volcker who is the exact opposite fed-head of bernanke/yellen. so if you believe the economy is broken due to current central bank policy, i don't see the link to connecting reagan to whats happening now. this mess is on bush & obama, 2 of the biggest keynsian whack-jobs of all-time. massive debt financed by central banks hit biblical proportions under these 2 clowns.
Under his administration, the national debt also more than doubled from all other presidents before him.
Sorry, but at the end of Reagan's 2nd term, the debt was 2.84 times what it was at the beginniing of his first term.
Keynesian economics only works if money is provided to the producer class at a faster rate than the consumer class. Otherwise it gives you hyperinflation. One of the major ways Keynesian whack-jobs make their garbage economics work is via the tax code. Under Reagan the top tax rates were reduced drastically, the bulk of which was money freed up for the producer class. Reaganomics enabled the Keynesian fraud on a massive scale.
George Schultz was already commenting on Reagan's mental degradation around the 1985/1986 period and Reagan was easily abused by the financial sociopath Alan Greenspan and his ilk.
Merika, welcome to da banana !
Well I am not sure how to even explain this guy and his ability to predict market turns. Woody Dorsey informed me in his newsletter on August 4th-that the "kill zone" was scheduled to hit between 08/14-08/21.
I started buying spy puts last week and I made over $85,000--and this is not the first time he has nailed these turns. He has predicted over 1300 SPX points (turn dates) since September 2014.
I strongly suggest you follow this guy--he is absolutely amazing!! Here is the Augsut 4th call--see for yourself
I got something you can see..., see this!
Would QE4 be positive or negative for Bridgewater's portfolios?
Der de der
QE 2001, THE MOTION PICTURE!
The Ulimate [Asset S]trip
Wrong wrong wrong. The Fed ain't doing shit.
why admit fault when you can just lie, print more $$$, and buy more shit? not like they have to worry about redemptions. or do they?
QE4 will begin a mass selling of the dollar...
Hmmmm, a falling dollar is good for our exports, right?
Why, we'll load up those empty TEU containers with, uhmmm, uhmmm, derivatives?
Interest rates are going negative
Strangely, I'm cool with that. So long as the negative interest payment covers my payments.
What's that? Only bankers will get that deal?
Fuck.
Insanity.
"Interest rates are going negative"
On Treasuries alone, or all bank deposits too?
If it's the latter, wouldn't that start a bank "walk"?
Ray has the insight. He probably got the email from Tim yesterday.
Ray wrote the letter for him 1 week ago.
Go outside drink a beer come in sells off 300 points to almost 700 points. Roller Coaster
Hey, look at that! The 3:30 ramp is back!
Just in ..... Granma Yellen on suicide watch.
Why doesn't the Fed just issue a 50K a month stipend to every US shitizen? That would trigger inflation, which they desperately need and nearly everyone would be able to afford rice n beans.
What, and end up a bunch of commies?
i think they are going to raise rates like some sort of kamakize pilot at midway
Assumption being, the fed is in control of interest rates.
So Krugman wins !
"World's Biggest Hedge Fund Demands More QE"
...couldn't have seen that coming.
And so it begins, bitchez! Whocouldanode?
KONDRATIEFF SUPER ROGUE DEATH TIDAL WAVE
BITCHEZ
40 years of offshoring. Only jobs left pay 3rd world slave wages and now the whole shit show is collapsing. I got nothing more than a highschool education and I saw this train coming decades ago.
So did I , and thats why I escaped the USA in 1989.
So did I , and thats why I escaped the USA in 1989.
...so said the prideful genius; a ZH member for 2 days and 2 hours. Where were you when we needed you?
It's DutchBoy2015 posting under another account
that was my thought. but he seems nicer.
When you see 1,000+ point swings in the Dow, you know QE4 has already started. I'm not the first to say that here, just restating the point...
-Argenta
All that debt out there will become a lot more expensive if Yeller does raise rates.
There's hole in the bucket dear Liza, dear Liza
QE 4 evah. Oh yeah, thanks PPT for the giant put option discount on Sep QQQ mid morning today. Doubled my position at the low before the market gave your PPT the big red middle finger. KMA sociopaths.
Marc Faber, a few years ago, said that the FED would be doing QE to infinity. People laughed at his hyperbole. Not any more.
Peter Schiff as weel
No, the next stage is waging wars to take people's stuff.
It is Keynesian Economics 101:
Step 1: Use income taxes structure to give money to suppliers (1980s)
Step 2: Use phony credit scoring to diverge the interest rate differential between suppliers and demanders (1990s)
Step 3: Enable theft by suppliers of demanders via deregulation (2000s)
Step 4: Just outright gift piles of counterfeit $ to suppliers via QE (2010s)
Step 5: Kill the demanders with war and just outright take their shit (2020s) Edit: Michael Hudson would argue that Wall Street has figured out how to financially kill someone without physically killing them. Greece seems to be the experiment to prove if this is true. People would do well to realize that the US govt is captive within the Dollar the same way that Greece is captive within the larger Euro.
What, you think we can step back in time and repeat one of these steps with corporate tax rates already very low, fed funds rate at 0.25%, a broke ass demander class, and a financial class flush with counterfeit money?
People may be slow, but they are not stupid. And going back to a failed step is something every scam artist knows is not something you do.
Oh shit, it's the end of Shamitah and Blood Red Moons!
I thought stocks took the leg down because Dennis Gartman went long.
I have never bought stocks or bonds. I am debt free, home paid off and retired with 4 pensions..
Kiss your pensions goodbye
You don't know what kind of pensions I have.
You don't know what kind of pensions I have.