How Billionaires Are Investing In 2016: "The Only Winning Move Is Not To Play The Game"

Tyler Durden's picture

Ever since 2009, when we first showed how broken the capital markets are first at the micro level, thanks to the pervasive spread of parasitic, frontrunning algos, and then at the macro, as a result of constant, artificial central bank intervention and levitation, we have advised readers that the best option is to simply avoid rigged, manipulated markets altogether. Now, 7 years later, the world's richest people agree.

Remember when we warned virtually every single day for the past 7 years that constant central bank and HFTs manipulation will lead to a market so broken nobody will have any faith in price discovery or asset valuation until everything collapses and is rebuilt from scratch? Well, we are delighted to announce that this is now conventional wisdom, and as a result every so-called "prominent investor" is now resistant to putting on fresh positions and expected asset prices to head downward, according to the WSJ.

In short, they say, the only winning move is not to play the game.

It's not just that: according to WSJ reporting from the just concluded symposium of billionaires, prominent investors and other hypocrites in Davos, the consensus is that "the world’s central banks can’t save us anymore."

The next WSJ sentence is absolutely epic: "Their mood here was irritated, bordering on affronted, with what they say has been central-bank intervention that has gone on too long."

Oh yeah, they had no problem with central bank intervention for 1, 2, 3, 4, 5, or even 6 consecutive years... but seven? Now that's just absurd!

The WSJ goes on to vindicate all so-called tinfoil fringe websites by admitting that "from this anecdotal sampling, at least, that has created growing distortions in nearly all asset prices—from stocks to bonds to real estate."

But... fundamentals?

Great job central bankers and other central planners: the one thing you just had to save at any cost, the market, pardon the "market", even if it meant crushing the middle class, is no longer credible - not even to the smartest people in the room.

"The trade now is to hold as much cash as possible,” said Nikhil Srinivasan, chief investment officer for Generali, a European insurer with $480 billion in assets. "Equity markets could go down 15% to 20%."

Or much more: after all the S&P is only in the vicinity of 1900 instead of 666 thanks to 7 years of central bank intervention. Pull the rug, and you get a 70% collapse.

Srinivasan said the central banks in the U.S. and Europe have done all that is possible, bringing rates to historic lows, and in Europe weakening the Euro to help sustain exports. Markets need to “stop expecting miracles,” he said, “now it’s time for the fiscal side to do its job.”

Actually, all central banks have done is delay mean reversion by injection trillions in liquidity which not only did not end up in the economy where it was not requested due to a complete collapse in demand, but simply inflated asset prices to record levels. Now even the wealthiest admit that the day of reckoning is coming.

The sentiment was the same for Axel Weber, the chairman of UBS AG. He said in a panel at Davos that: “There may be no limit to what the ECB is willing to do but there is a very clear limit to what QE can and will achieve,” he said, referring to the European Central Bank. “The problem is that monetary policy has largely run its course.”

Which is funny considering the only reason for the market rebound of the past two days was promises and hopes of more stimulus. Monetary policy may have "run its course" but the same billionaires will be delighted to get a few extra final hits before it all comes crashing down.

Added one other CEO of a major global financial firm: “The sickness is not inflation, it’s the mispricing of assets.”

 

The realization that Western economies will be growing slowly—and there was little that the central banks may do to aid—put financial executives here in something of a stupor.

 

The Netherlands, for instance, is experiencing negative interest rates. "We have limited opportunities to lend on the other side” of customer deposits because of those negative yields, said Ralph Hamers, the chairman of Dutch bank ING NV. “The only thing we can do is extend credit we would normally not do, and that leads to an accident waiting to happen.”

 

For Mr. Hamers and others, a shift in sentiment seemed to be taking hold. Annual growth of the old order—3% to 4% for the U.S. and other Western economies, is far away. Absent structural changes led by governments, there was little reason to be cheered.

One person who has also been warning about this terminal outcome for years is Elliott Management chief Paul Singer who said that "if central banks double down on their policies of QE, ZIRP and NIRP, it could cause a loss of confidence in central bankers, paper money in general, or one or more currencies, and lead to a collapse in bonds and stock prices."

He is, of course, right, and incidentally this "thought scenario" is precisely what will happen because as we have repeatedly said, not a single economy or fiat system in the history of the world has disintegrated from deflation: governments and their central bank owners will always find a way to reflate, even if it means dropping money out of helicopters, even if it means destroying a reserve currency. And, as Venezuela most recently found out the very hard way, in the end, only hard assets remain - assets such as gold, which have preserved their value across the centuries.

As for these "prominent investors" who were anything but and merely rode the central bank wave for over half a decade, the fun is over.  For him, “we call it the new abnormal and we better get used to it.”

What a coincidence that even the world's richest are suddenly using terms first coined on this website all the way back in 2010, almost as if we were right from day one.

Now, anyone interested in a nice game of chess?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture

I agree.  Been watching for several months now.  All productive assets are still producing the same revenue they did last year and the tribe is happy.  Have not fired anyone and haven't hired anyone, but still profitable...

 

Fuck these useless overcompensated paper-pushers.  Personally, I cannot wait to see these fuckers actually have to work for a living again.

Dindu Nuffin's picture

bitcoin is the final solution.

LawsofPhysics's picture

Yes, for Goldman Sachs and JPM etc.  I had a previous employee that was a very good computer hacker/code writer.  He went to work for JPM on cryptocurrencies back in the mid 90's. 

Sure, if I had access to FREE money (ZIRP), I might hedge by buying the shit out of every dip in alternative currencies, why the fuck not?

Good thing the state controls the power grid and the internet and every single transaction is recorded...

I need more asshats's picture

The music stops in America. 1 chair left with ~350 million ASSES trying to sit in it.

Bitcoin is "Straight outa Tel Aviv!"

Keyser's picture

"The trade now is to hold cash"

How does that work in a cashless society? Oh snap, that only applies to the plebs, not to the ruling class... 

quintago's picture

bitcoin is the solution, until that internet kill switch is flicked. or your power goes out. 

strannick's picture

Holding government controlled, massively produced, hugely inflated cash is the only winning move?

Tell that to the Russians, Kazaks, Venuezuleans, Argentinians, Canadians, Mexicans, Europeans...

The dollar like all the other currencies, will revert to its intrinsic value.

Course if you held gold in those countries....

 

Stainless Steel Rat's picture

The winning move for all small players is to get in there and bet against those who are limited to defensive moves.

e.g. If you have a large investment, and you are forced to defend a position to maintain it, then you are fucked by any gnat that wants to come along and stand on your shoulders while you try to keep your head above water...  Bear markets fuck the 1%ers because they are not free.

Eirik Magnus Larssen's picture

Stunning article. It's content like this which keeps me returning to Zero Hedge in spite of its comments section.

Winston Churchill's picture

Perhaps you should refrain from commenting then.

Every little bit helps in raising the average.

Eirik Magnus Larssen's picture

Spare me the rhethorical cleverness. I'm here to stay.

These forums are frequented by individuals ranging from zany conspiracy theorists to bona fide neo-Nazi's (complete with overlap). Public ridicule of these "people" and their beliefs is more than appropriate.

Winston Churchill's picture

Your dogma is just as intractable as theirs,

Its a waste of time and effort to argue against either,

Wisdom is understanding what you can change.

Expat and Happy's picture

'ranging from'?  What about bona-fide, died-in-the-wool statists and socialists who would sell out their own culture in a feeble and pathetic attempt to finally feel good about themselves?  In other words - hey, don't forget about your own end of the range!

Reality Creator's picture

Eirik Magnus Larssen I just joined the commenting class yesterday bacause after four years reading 0Hedge, after being so thouroughly entertained by the commenters, I had to join the fray. Every action has an equal but opposite reaction, and I think I found my foil -- and so soon!

And I have learned much from reading these comments -- infotainment at its best. Sure the periodic appearances of racism against non-whites are indicative of the success the very few have scored dividing and conquering us proles, however I find it as informative as distasteful. The seering critcism of Zionism seen on every comment page is directed at the folks who are trying to expand the borders of Israel over the rest of the globe, and that critique is quite just except for when a few go off the rails and don't distinguish between the Jew and the Zionist: it only takes a few Zionists to tar the entire Jewish diaspora, which is why anti-Zionism can become anti-semitism.

Lastly, I am so thouroughly surrounded by indignant people in my life who think every single slight is a Crime Against Nature, that it's refreshing to be around a bunch of people who have thick skins, candid observations and a sense of humor. Pretty much half of everyone I come across daily has an IQ below 100...This fact explains so much... 

 

 

Expat and Happy's picture

So the billionaires want to hold cash, but the banks don't want us holding cash.  

Got it.

Anopheles's picture

Would you buy stock in a company that produces nothing, has no assets, has no cash reserves, or reserves of any kind, and has no backing by anyone or any government, and has said that they will never have any revenue, nor profit or actually do any business.    And that company's only claim to fame is that you can trade their stocks online. 

 

Yet people the world over have become blathering fools, falling over each other telling you what a great "investment" it is?????

How much stock (bitcoins) can I sell you?

 

 

logicalman's picture

You should never use the term 'final solution'

Too much baggage.

 

MissCellany's picture

The final solution against whom?

I need more asshats's picture

Sorry, I don't fagbook or twatter. Thanks anyway.

Minions's picture

The only game left we can't play it. It is the game these billionaires play https://goo.gl/bFYusM

I need more asshats's picture

"If you can't put the destination link here then don't put any link at all"!

Remember who said that here on ZERO Hedge? Hint: starts with "T".

cpnscarlet's picture

Hold as much cash as possible? Isn't free and easy cash the thing that got us into this mess?

5 will getcha 10 they are actually going to hold as mich GOLD as possible.

I need more asshats's picture

Eventually those fucking Indians(dot) are going to have to give the gold back to the world from which they took it.

You CANNOT buy gold with fiat. Fiat is fraud joo paper so all fiat sales are null and void.

I am the rightful owner and claim a superior lien on all gold purchased with fraud joo fiat!

arbwhore's picture

"The trade now is to hold as much cash as possible,” 

 

Right because holding cash in a bank or with a broker is... safe.

 

LawsofPhysics's picture

Numerous examples throughout history where having physical cash in your possesion was a very good thing.  In fact, those "debt notes" became interest bearing.  Capital controls are really great for this, you basically become a high-interest bank overnight.

Of course you need to have enough to actually collect on those loans and that will require some mercenaries.  Just ask any person that lived through the collapse of the Soviet Union.  The gangs, mafia, and former service members did very well.  The only good thing was that politicians started dissappearing pretty quickly.  Pretty much any and all useless middlemen did.

Theosebes Goodfellow's picture

That's a real curious story, logical. Thanks for sharing. I'll have to sit on that and chew it a while to try to grok the ramifications. It certainly keeps the currency, (or what's left of it), local. Considering the monkey-hammering the Loonie is taking these days, cutting into even smaller pieces seems... counter-intuitive. But like I've said,  Mongo just small fish in big pond of life.

arbwhore's picture

A billion in cash would be difficult.

Cognitive Dissonance's picture

But...but...but I thought there was a war on cash? So are they talking about electronic 'cash' held inside the monetary system? Does this mean they will be bailed-in?

So many questions, so little time.

knukles's picture

Would it be safer sending it to that guy in Nigeria who sent me that fax?
Can't seem to find it.
Think his name was Sweatyo or sumptin' like dat.  Obungo?  I dunno. 

Anopheles's picture

You (wrongly) assume that the money is in a bank where the US or EU can get their hands on it...... 

Cognitive Dissonance's picture

These are the ultra rich. They aren't talking about salting away a few thousand in the basement. They must hold 'cash' in a widely held and liquid currency. Since all of the major currencies in both the East and West are in trouble, exactly what currency (and bank) do you suppose they might be holding millions/billions in 'cash'?

knukles's picture

Puerto Rico Electric Power Authority Moral Obligation Bonds?

Yen Cross's picture

 What happened to Poor-to Rico Knuks.  Everything is caving in\ around Rome.

 Elysium on Earth?

Imagery's picture

YOu know knuckles I recced your post but any reasoned analysis must correctly call us US TBTF WS Moral Obligation Bonds, NO?  The US is far more "fascist" than PR - out colony - ever thought about being.  We just give all our "support" to those who enslave us while PR supports those who proivde electricity to the masses......at about 10x per capita at that!

Interesting thought experiment, NO?

The Oligarchs of Finance are gonna always get theirs as they can simply print, rehypothecate, QE, etal.  Why not support the people......or in the alternative, at least a company that is supporting a good the people need??????

Sure puts a different spin on most 'Muricans thinking too, NO? 

Anopheles's picture

In fact, the US dollar isn't in trouble.   It's soaring relative to almost every other currency. We're not talking about some theoretical future, we are taking today and the near future.  

That's the point about having "liquid" assets, it's quick and easy to change them to something else. 

As to where to keep that "cash"?  Lots of banking havens around the world with little or no taxation.   I have an account in a differnt country, and I have close friends who are in that category you mention.  They live in the Caymens, gave up their original citizenship for tax purposes.

TheReplacement's picture

How are Cayman's situated when it comes to anti aircraft and anti missile capabilities?  I only ask because I'm pretty sure that Iraq and Libya thought their money (resources) were pretty safe investments at one time as well.

GRDguy's picture

I don't think the word "cash" means the same to the so-called "ultra-rich" as it means to everyone else. It would be interesting to know exactly what they mean, but I doubt they'll define it for us.   If it's anything like paper promises (of which even cash is) then they've got just as much to worry about as us lowly subjects. Maybe more.

daveO's picture

Us bonds, mostly. The 10 yr will probably break below 1% before QE rolls around again. It depends on those excess reserves. The FED just bumped up the interest rate they pay banks for these to .50%.

Cognitive Dissonance's picture

Surprisingly not much. I posted some pictures on our website yesterday. Come by and take a look.

www.twoicefloes.com

marts321's picture

Gold/silver, physical, in your possession, now.

Sanity Bear's picture

They could buy fewer governments and maybe invest a little of that amazing wealth into making the future a little better place for everybody...

marts321's picture

If the middle classes have it too easy, they will have too much time to learn, research, think and become a threat to the rulers. They can't have that unfortunately, the people must be kept under the thumb of blind servitude, mindless consumerism and petty one-upmanship!

GRDguy's picture

Exactly. How else would I have had the time to stumble onto the 1889 book The Great Red Dragon in an old bookstore in Detroit back in the 80s. 

Spiritof42's picture

When this government gets desperate enough, they'll be coming after billionaires too. 

Eirik Magnus Larssen's picture

I very much doubt that. The last crisis has shown that ordinary people never get a free lunch, but the bankers always do.