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It's Absurd - Do Not Fool Yourself
Excerpted from Artemis Capital Management letter to investors,
Risk cannot be destroyed, it can only be shifted through time and redistributed in form.
Vibrant life and rebirth comes from the acceptance of change and death in many complex systems:
The forest service has long understood that controlled burns are a more effective tool for fighting forest fires than total suppression. The act of subduing forest fires results in a dangerous build up in dry foliage that counterintuitively causes larger and larger fires. Mother Nature will initiate controlled burns naturally via lightning strikes and this is essential to the rebirth of the forest. The trees of the great sequoia forests will not release seeds without first sensing heat from a wildfire.
The art of avalanche prevention in backcountry snow terrain is based on a similar philosophy. Rangers use controlled blasts to reduce snow pressure rather than risk massive uncontrollable slides.
Marriage therapists observe that couples that do not fight are at the greatest risk of a divorce. The couples that fight actively bring core issues to the forefront instead of suppressing their problems. Apathy is worse than anger.
Treatment of cancer requires extensive chemotherapy to kill the cancerous agents from the body and allow healthy cells to multiply.
Treatment of addiction requires brutal recognition of the reality of the problem, personal responsibility, and immediate withdrawal from the source despite painful short-term effects.
The act of pruning a garden requires forcefully removing sick leaves to promote the vibrancy of the healthy plants.
In management science the ability to address problematic or below average employees is an essential value in the culture of many successful organizations.
The classic trading axiom of “cutting your losers and letting your winners ride” is an alternative form of the same idea.
All of the aforementioned natural and social phenomena have great positive exposure to change but at the expense of a short-term loss. In other words, they are long convexity.
The mainstream view that central banks have suppressed tail risk is absurd and runs counter to common sense.
Policy makers have done the opposite.
Central banks have taken asset returns from the future and brought them to the present...
they have taken tail risk from the present and shifted it into the future…
that have turned private risk into public risk.
The risk is not gone... do not fool yourself.
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It's great to be young and have your future in front of you.
It sucks for the young that have this future in front of them.
Well said. The Central Banks pretend to be our Saviors, when they are really our adversary. Those with ears to hear will understand.
The central bankers are not fools (probably). Neither are their hired economists.
Economists spin what they are told to spin, using econo-talk. Dumb people think these economists are intelligent and truthful to the best of their ability. Intelligent people think these economists are dumb and isolated from reality. Neither is correct.
Economists are intelligent, but patently dishonest shills for organized crime known as central banking. They are neither dumb nor isolated, but instead are well informed as to the criminal undertaking behind them, paying their way for their criminal speeches.
Are they fools? Depends on how you see it. Are all criminals fools? Let's not find excuses for their behavior, now!
Have you noticed that the federal reserve is now a .gov website rather than .com as it was last week?
Rumor is the pentagon has assumed control, which is to say, Nationalized the formerly private bank. Nice rumor, but we'll wait and see.
Makes sense if Glencore exploded and left some taxpayers on the hook for the derivatives cascade.
ha ha. nationalizatoin wouldn't happen without a lot of dead bodies (and markets)
but if it happens...totally worth it
Except it's been .gov for the past 17 years...
https://web.archive.org/web/19981212024910/http://www.federalreserve.gov/
Theory is always much nicer than reality.......
One million dollars to anyone who can give me back fifty years; check released from escrow when I leave puberty.
"The future ain't what it used to be."
~ Yogi Berra.
This website's renowned/notorious perma-bear mentality put aside for a moment, I'm inclined to agree this time. Reading things like this do raise warning bells with me:
http://blog.moneymanagedproperly.com/?p=4782
In Australia, the Aboriginals, and Caucasians today, burn the country to clear out the undergrass and dry growth.
This means the fires are of lower heat and duration, allowing the trees and small shrubs to survive.
survive! http://zhc0.com
If they didn't burn often, the fire, when it did come, would be a towering inferno that killed far more trees and shrubs.
The greenies won't allow that here, even though it has been demonstrated to be an optimum approach it doesn't meet the prejudices of the poorly informed and coddled urban elite......
15horses1donkey.
IF ZERO HEDGE HAD A FUCKING CURRENCY OF IT'S OWN, IT WOULD BE MINTED IN INCORRUPTABLE NON HYPOTHECATED NON DERIVATIVE NON MARGIN ABLE SILVER OR GOLD.
Jesus, fucking kids these days. You all think technology is a miracle. All it is is electrons that can be made to go poof any fucking minute now.
Crypto currency is just a fancy name for digital fractional reserve banking - without the reserve, or the bank - and, like the stawk market, no accountability, and no recourse for the bag holder.
If I blew up your phone right now, you would look like a cow at the slaughterhouse just at the moment the bolt gun goes off - " How could you do this to me ? What'll I do now ? "
Improvise. Adapt. Overcome. Triumph over adversity.
And, transform your idea into minting a fucking physical coin out of noble metals, with Tyler's permission, before he copyright lawyers your ass into bankruptcy.
Crypto currency is like fucking your sister - it may feel good at the moment, but it is just plain wrong deviant aberrant behavior society frowns upon.
Do not fool yourself thinking there is stlll risk. Just BTFD.
The moral of the story is people should burn the criminal cabal running this country and the world, in order to prevent a bigger fire later. Did I get that right?
so what the author is saying is that the music is still playing. so dance , dance !!
don't worry, i ate the seed corn, everything will be fine.
Treatment of cancer requires extensive chemotherapy to kill the cancerous agents from the body and allow healthy cells to multiply.
WTF?
Is this an attempt to through a stinking turd on the thesis of this article?
Yep.
It is like saying the only cure for banker insanity is a bullet to the head.
Oh.
Wait...........................
Central bankers need to be given the death penalty for such actions.
Kudos to ZH for posting this. I reccommend everyone go to the source and read the entire piece, it is well done.
Central Banks, the US Central bank in partricular, was formed by bankers for the benefit of banks. It's no wonder they don't care much for savers or the middle class or the poor. Only for the banks. Hasn't anyone ever wondered why they call for 2% inflation rate? What is that for anyway? I'll tell you what it's for. It's for the banks who have massive amounts of loans outstanding that is collateralized against an asset. In deflation, those assets become less valuable and negatively impact a banks loan to value ratio. And, if the borrower defaults, the bank will be in the position to take hold of the collateral, which they will have to sell at a loss. In an inflationary environment, which the central banks want to control at 2%, those assets as a whole will appreciate in value and thus the loan to value ratios remain strong, giving the bank a much stronger balance sheet. And, if the borrower defaults, the bank can take posession of and sell the asset at its market value and not lose money. That's the theory anyway and politicians are either too stupid to understand it or they're complicit in this raping of the citizenry.
Yes.
All that and more.
Fractional Reserve banking is a risky affair by design.
It is the implicit juggling of simultaneous 100% claims on the same asset. At a 10% reserve ratio, the banking system is like a bigamist with 10 wives, each of whom think they are the only one. And like the wives, no two claimants can simultaneously exercise their claims. And again like the wives, if ever one discovers the multple claim, they will all race each other to divorce court, because ONLY ONE OF THEM CAN GET 'HALF'.
When not specifically sold, and compensated for the huge risk it is, Fractional Reserve banking is fraud, plain and simple, It is fraud in precisely the same way it would be fraud for a someone to set up a booth in front of the parking garage for free parking...and then selling each car as it is parked witht he bet it can be replaced before the owner returns.
Central banking's purpose for existence is to provide a 'flexible currency' which is to say to transfer the risk inherent in Fractional Reserve banking from the largest fracional reserve banks to the public at large using the currency itself as a transmission mechanism.
Every price increase over the last century in such a system has been an act of theft from the public to the benefit of a banker whose fraud was discovered. In each case, the money needed to make the fraudulent banker whole was printed up, increasing the number of currency units for the specific purpose of making not the defrauded customer whole...but the banker who committed the fraud whole.
That is what they mean by the requirement for 2% inflation.
That is their estimate of how much they need to steal each year to keep their scheme from collapsing.
Everything good except the 2% part.
That is their estimate OF HOW MUCH CAN STEAL each year and not attract unwanted attention. If the rate would be higher (say 5-10%), the cash devalorization would be too obvious and the public would not accept to see their money lose so much buying power and would revolt. So 2% is enough for them to steal and small enough to go unnoticed.
http://realmoney.thestreet.com/articles/10/22/2015/more-qe-would-be-reward-banks
More QE Would Be a Reward to Banks
By Roger Arnold
Oct 22, 2015 | 4:00 PM EDT
In the past few months, I've written several columns concerning the recessionary trajectory the U.S. is on and how the Fed would respond if that continues.
Although a recession is not yet inevitable, the preparation for how the Fed will respond, if required, has begun.
On the recession issue, the Chicago Fed National Activity Index (CFNAI) released this morning validates the recessionary trajectory with the opening remarks of:
"The Chicago Fed National Activity Index ticked down to -0.37 in September from -0.39 in August. Two of the four broad categories of indicators that make up the index decreased from August, and all four categories made nonpositive contributions to the index in September" (emphasis is mine).
On the monetary response issue, as I discussed earlier this week in the column, "When Bad News Is Exactly That -- Bad," the San Francisco Federal Reserve Bank has already indicated that a probable response by the FOMC will be negative short-end rates coupled with another round of quantitative easing (QE).
As I discussed in 2011, monetary and fiscal policy come in two basic forms, pull through and push through, which may also be considered reward and punishment.
In that context, the implementation of another round of QE may be considered the pull through; a reward provided to the banks for agreeing to accept the push-through punishment of negative short-end rates.
The first issue to deal with is the potential structure of what another round of QE would involve and when it would be supplied.
The last round of QE involved the purchase of agency mortgage-backed securities. The idea was to allow the Fed to purchase what had become illiquid mortgage securities from the banks in order to provide the banks the capital necessary to make new mortgage loans and in the process drive the mortgage rates down to stimulate consumer demand for home purchases.
As I've noted previously, that structure required approval by the U.S. Treasury, and the next round of QE will, too, because the Fed's mandate has not been expanded by Congress to allow it the opportunity to purchase other than Treasury securities without first getting approval from the Treasury secretary.
The next round of QE will likely require the Fed to go beyond mortgage securities and into purchasing other kinds of bank loans that will likely become illiquid as a result of the economic deterioration.
Those loans will likely be concentrated in autos, commercial real estate mortgages and commercial and industrial.
This, too, will require Treasury secretary approval.
However, it is also likely the Fed will use the potential for it to expand into those areas by requesting that the executive and legislative branches coordinate and supply a fiscal response this time that is complementary to the goals of the monetary efforts.
In addition to requiring the fiscal support, the Fed will require the banks to agree to accept negative short-end rates in order for a round of QE targeted at these other kinds of loans.
The next issue concerns the timing of the Fed moving forward with a round of QE structured this way.
Until the bankers agree to accept the negative short-end rates and the government agrees to provide a complementary fiscal response, the Fed will wait to implement the next round of QE, even if the Treasury secretary approves.
The executive and legislative branches won't have the political support necessary to coordinate and respond with a complementary fiscal stimulus package, however, until there's been enough of a deterioration in economic activity and capital markets to afford for such.
That's a normal part of the political process, though, as there is too much risk to the continued viability for re-election faced by individual legislators to warrant even attempting a pre-emptive fiscal stimulus measure.
A fiscal package is only politically viable as a reaction to economic and market events that have already caused the electorate to not only acquiesce to the necessity of it, but request it.
The most important part of this process for investors, as I wrote about earlier this week, is that the current expectation of a pre-emptive monetary response to market instability or weak economic reports indicating an imminent contraction in private-sector activity is imprudent.
The Fed is telegraphing its willingness to supply a monetary response as the legislative mandate requires, but the experience of the past seven years has also proved that a monetary response provided in the absence of complementary fiscal measures is not just inviable but actually counterproductive.
At this stage, the most likely catalyst for encouraging the required response by bankers and fiscal authorities will be a decline in oil prices, but it may instead first be evidenced by continuing deterioration in the biotechnology and technology sectors.