All You Had To Do Was Wait

Tyler Durden's picture

From Mark Grant, author of Out of the Box

All You Had To Do Was Wait

“What makes people so impatient is what I can't figure; all the guy had to do was wait.”


                                                   -Ken Kesey

It was approximately twelve months ago that I called for a U.S. ten year at 1.25%. The yield back then was around 2.25%. We are a scant 26 bps from my prediction now and we have seen a 75 bps drop in yield during this time period. This has been fueled by the continuing “moments” generated in Europe and the demand for anything having some sort of safe haven status. We now have a second driver which is the recession in Europe and the substantial slowdown in the economy of China which I predict will place America in recession by either the fourth quarter of this year or the first quarter of the next.

The American stock market, always myopic in its view, is about to be hit by what it does pay attention to which is earnings. Europe represents 25% of the global economy and the recession there is about to have a very substantial impact on the revenues and profits of many American corporations. It was inevitable, as hindsight will expose, and now as our earnings season gets underway it will get documented in the numbers. If you don’t delight in losing money you will find that the yields of many senior and subordinated corporate bonds far outpace the returns of dividends and certainly the depreciation in value will be far less. Further, in times of economic stress, it is far safer as has been proved time and time again to be towards the top of the capital structure in bonds rather than in the bottom of the capital structure which is equities.

I can report a wide array and a great diversification of viewpoints on just what will take place in Europe but what also can be said with certainty is that most institutional investors all agree that there is a lot of risk on the table now. As part of this process I also wish to congratulate the media. Many commentators in the Press or on television are no longer willing to take the official press releases as fact. There are more people who are not only questioning the headlines but who are looking past them in trying to decipher not only their accuracy but there meaning. I suppose this has occurred by one announcement after another coming from the Continent that was so shaded and so misleading that eventually people woke up to the fact that inaccurate data was being provided and being provided in a systemic fashion. Then there is the timeline issue where plans are tossed out, do not materialize and are being held to account as mollifying statements that somehow never seem to achieve their goals. Whether it was the statements of the IMF and the EU that the new structural plan for Greece would produce a debt to GDP ratio of 120% or the giant firewall that would prevent Spain or Italy from ever needing to be bailed out or the bailout for Spain which their Prime Minister called “A Great Victory for Europe;” the cries of “wolf” are falling on less and less accepting ears.

“The secret of being a top-notch con man is being able to know what the mark wants, and how to make him think he's getting it.”


                                               -Ken Kesey

It may work, for a moment, to rally equities after the next new piece of sliced white bread is announced but then the reaction flattens out and then the market declines as reality sneaks back in and finds its rightful place at the table. From the very beginning with the first European bank stress test which counted what Europe wanted to be counted and ignored what should have been counted to the second one which was falsified by its methodology; results begin to occur and calamities begin to happen, such as with Dexia, as the real data forced what the phony data reported tried to hide. Europe may cook the books and allow for risk-free assets or the Spanish central bank may allow for “smoothing” and carrying Real Estate at levels with no reflection of reality in them but when mortgages are not paid and commercial loans are delinquent; the lack of revenues and profits tell the accurate tale whatever was allowed to be ignored or not.

All of the time wasted on firewalls and great deceptions worked in the short term but the height of a fence does nothing to help a horse or a nation which is sick inside them. Europe has vastly overspent and tried their best to whitewash the financials of the countries and the European banks and now, and each quarter out for some time; we are going to see a worsening financial landscape for the European nations and their banks. This will not be Armageddon or the end of the world but it is going to be quite painful and have a decided impact on the United States and perhaps the scaring may be deep. In Europe that have mouthed so much nonsense for such a long period of time that they have come to believe in what they have manufactured. This is not uncommon historically but the depth and breadth of it is without comparison. Germany says one thing to placate France and Italy believes the drivel that is touted by the Netherlands and now Greece wants the ECB to forgive their $238 billion in Greek debts on the basis of a united Europe, which would bankrupt the ECB, and then it becomes clear that someone has to pay for all of this and countries start banging on the doors of the asylum to get out. Listen carefully; the banging has begun and will grow loader and more raucous during the balance of the year. 

“The world news might not be therapeutic.”


                             -One Flew Over The Cuckoo’s Nest

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Snakeeyes's picture

The US Treasury 10 yield dropped 3.2bps this morning to 1.517. Between Europe and The Fed, they are trying to get it down further!!!!!!!

GetZeeGold's picture



Sooooo basically......just wait. Got it!



TruthInSunshine's picture

---Breaking OT (the entire European Summit on ESM was a farce) as reported by Martina Stevis of the WSJand Karl Whelan at Forbes (see links below) ---

Senior EU Official tells Wall Street Journal's Matina Stevis that the entire premise of what was publicly stated at all of the various EU Summits was and has been a complete and total lie:

The signal achievement of the European Union’s much-heralded summit last week was an agreement to allow the euro zone’s bailout fund to rescue Spanish banks directly...


Senior EU official said today the ultimate responsibility for the banks would actually fall with Spain, and not the European Stability Mechanism:

“I need to make clear what the ESM can do: the ESM is able–if one were to decide ever on such an instrument–to take an equity share in a bank. But only against full guarantee by the sovereign concerned,” the official said. “What you have is that it cuts out the effect of [the] loan on the debt-to-GDP ratio of the sovereign. Does it still remain the risk of the sovereign or [does it go to] the ESM? It remains the risk of the sovereign.”

Those comments undermine the euro zone’s statement last week. The statement said:

We affirm that it is imperative to break the vicious circle between banks and sovereigns. …. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM  could, following a regular decision, have the possibility to recapitalize banks directly.

The statement said nothing about Spain’s guaranteeing the ESM’s recapitalization. We’ll see how this develops, but it is an essential point.

Many in financial markets have assumed the ESM would recapitalize banks on its own–by giving them cash or high-quality bonds in return for equity stakes (or some sort of hybrid instrument, like contingent-convertible notes) in the banks. That way, the whole of the euro zone, and not just Spain, would bear the risk of the banks’ rescue.

Indeed, this mutualization of responsibility has been viewed as an early step on the path to the broader risk-sharing inside the currency union that, many observers believe, is vital for its survival.


Karl Whelan at Forbes does a great job of breaking down how f*cked the EU really is - as in not months, weeks or days from now, but now:

Next, our old buddy, “senior EU official” (SEO to his friends) decided to tell Dow Jones ace Europe reporter Matina Stevis that, actually, the whole plan was really just an accounting trick.

Nine days later, this progress seems to have been completely undone.  Indeed, despite widespread optimism that this approach could help to cut off what Europe’s leaders themselves recognise as a “vicious circle”, the wheels started to come off this deal almost immediately.

First, the question of EFSF funds provided to Spain not becoming senior was questioned by Finland. In addition, the Finns began muttering about how they wanted the “loans” to Spain to have “strong collateral”, forgetting perhaps that the stakes in Spanish banks to be acquired by the ESM would be the collateral for recapitalising banks.  Not for the first time, it made me wonder whether European politicians know what “bank recapitalisation” (i.e. strengthing a bank’s equity base) actually means.

“I need to make clear what the ESM can do: the ESM is able–if one were to decide ever on such an instrument–to take an equity share in a bank. But only against full guarantee by the sovereign concerned,” the official said. “What you have is that it cuts out the effect of that loan on the debt-to-GDP ratio of the sovereign. Does it still remain the risk of the sovereign or [does it go to] the ESM? It remains the risk of the sovereign.

In other words, the real plan to get rid of the “vicious circle” in which all the risk associated with banks remained on the sovereign was to keep all the risk on the sovereign but to run an accounting trick in which it might appear to the terminally stupid that the risk wasn’t there.  Even by euro crisis standards, this was Alice in Wonderland material: Words mean what we want them to mean.

Finally, this weekend, German finance minister, Wolfgang Schauble, emerged to say that the Euro-summit’s plan was a load of rubbish. Bloomberg reported


Funds that are channeled through the EFSF will be loans and not donations and will count towards Spanish debt even though they come with soft terms, Schaeuble told the newspaper.

To talk about what happens when the European banking supervisor is up and running would be “building castles in the sky” and officials need to work within the existing regulatory framework, he told El Pais.


So there you have it. The German position is now that to talk about what happens when the European banking supervisor is up and running — as the EU leaders did nine days ago — is “building castles in the sky” and Spain just needs to get on with it and take all the risk.


***[My opinion – GOOD! A German bailout of Spain, and PIIGS, is really a bailout of London & New York City's best friends forever of the New York Branch of The Non-Federal Reserve-less Bank, at the expense, for generations, of massive amounts of taxes sucked dry from Germans and a few other Northern European nation-states' citizenry, which will inevitably bankrupt Germany and these nations, and devalue their living standards into developing world status]***

By actually reversing the genuine progress made a few days earlier, they now give the impression of being incapable of agreeing on how to save the euro.


--- [Again, GOOD! The euro is going to die anyways. Why bankrupt Germans and much of Northern Europe in a feeble and idiotic attempt to merely postpone, by a few years at most, the actualization of the inevitable? Why now throw good money after utterly wasted/bad money?]




slaughterer's picture

In keeping with the Ken Kesey citations, what would be the proper way of casting the EZ into "One Flew Over the Cuckoo's Nest":

Nurse Ratched: von Rompuy

Randle McMurphy: Nigel Farage

Billy Bibbit (Brad Dourif), a nervous, stuttering young man: Portugal

Charlie Cheswick (Sydney Lassick), a man disposed to childish fits of temper: Greece

Martini (Danny DeVito), who is delusional: Spain

Dale Harding (William Redfield), a high-strung, well-educated paranoid: Germany

Taber (Christopher Lloyd), who is belligerent and profane: France

and "Chief" Bromden (Will Sampson), a silent American Indian believed to be deaf and mute: Italy

insanelysane's picture

I think the Chief would be the UK.  In the room but not really a part of the group.

slaughterer's picture

Good remark, too late to correct it.

diana_in_spain's picture

2000 miners are marching to Madrid arriving tomorrow and promise not to leave until the conditions of the end of mining subsidies change.

there have been violent battles with the army in some parts of spain in the past few weeks with the miners


GetZeeGold's picture



Those guys just need to relax....we're got plenty of green jobs for them.


Oh regional Indian's picture

Maybe the Miners just need to...hmmmm.....let's see....wait?


HD's picture

I don't like waiting. I prefer to lose all my money as fast as possible.

Uncle Remus's picture

You're in luck ese! Instant gratification is still a bitch.

GMadScientist's picture

Then you'll want to be a Goldman she<del><del><del>...client.

Dead Canary's picture

Those are great. I email the links to my nephew's who think we are in a recovery. I'm trying to save them from making big mistakes. But I'm just their crazy uncle who works for that even crazier Ron Paul. Sigh.

Cursive's picture

Wait?  I've grown weary of the blatant corruption and fraud.  We needed a reset in 2007, yet they've strung it out for 5 more years.  Every day that the reset is delayed further, the solutions only get exponentially more painful.

overmedicatedundersexed's picture

somebody gott a pay? Huh..just like sommboddy gotta go to jail..everybody wants to go to heaven nobody wants to die.

miker's picture

It takes time for the truth to reach the people and sink in.  Everyone wants to believe everything is okay; especially when things come out of the blue.

The coming downturn is going to be much worse than anyone is predicting/imagining.  I can't prove why, just intution.  I think it has to do with the fact that this generation has not seen any really tough times.  Nature has a way of always batting last.


AUD's picture

Yes Mark, Europe has overspent but so has the US, & some.

You'll get your US 10 year at 1%, but evidently you haven't heard the old saying, "genius is a rising market". I smell hubris.

fonzannoon's picture

i see mark grant reads bruce krasting

billwilson's picture

The crazy thing is that the US is in worse shape than Europe, it just has better paper to print with.

janus's picture

too lazy to crow for dead?

yup, Mr. Grant, tis here.  all dat bad stuff...

...trailed by twenty hounds/

didn't get to sleep that night till the mornin came around/

set out a'runnin but i'm takin my time/

a friend of the devil,


eddiebe's picture

Good to know that the U.S. bond is good as gold, or the way it's been looking lately, way better. Amazing, gotta hand it to the banksters, and of course the suckers buying into this scam.

Escapeclaws's picture

I think the problem with Europe is that they are not following the laissez faire Anglo-American model which is the only way for an economy to function. That explains all the predictions of doom concerning Europe. If you actually go to Europe, you will begin to notice a few things, such as roads without potholes, non-boarded up shops, happy people drinking coffee or beer in sidewalk cafes, for example. Somebody needs to tell those Europeans on the street that the sky is falling, because they don't seem to be aware of the wailing from across the Atlantic.

i-dog's picture


"happy people drinking coffee or beer in sidewalk cafes"

Happy sheep living off massive deficits ... Way to go, Europe! It's sure to end well....

PoorByChoice's picture


"happy people drinking coffee or beer in sidewalk cafes"


Yes you see a lot of that in Athens at the moment :-

 /sarc off

Escapeclaws's picture

Yeah, I knew Greece and Spain have issues, but I still feel the whole anti-European thing springs from American jealosy. Greece and Spain are still relatively peaceful--I hate to think what we would be facing in America with similar levels of unemployment. With Romney guaranteed to win the next election (the Bilderburgers are dumping Obama so no need to actually vote), let the austerity begin!

I can't remember if the following video is about Spain or Greece....

PoorByChoice's picture

escapedclaws, it's not just the so called piigs anymore, there is a veneer of affluence all over northern european cities that hides large scale destituition.

Disclosure: I'm a Brit but hasten to add I'm no hater of europeans, travelled all over europe for work\pleasure and met many great people.

I actually enjoy some of the things that the euro and the schengen area brings but the whole edifice is built on debts and social benefits we simply cannot sustain.

As for the USA I remember how scary it was working in Miami in the 90's so you may have a point there LOL!

I think your wrong about the presidency though, Obama will scrape in unless the world economy really tanks in the next 4 months (quite possible of course)  Sadly not that it will make a great deal of difference. 

20 Trillion debt bodes ill for you guys.....

FWIW I don't think any of us will be particularly jealous of each other in the next decade


Escapeclaws's picture

PBC, I see the veneer of affluence, but I don't see any more homeless people than in years past and everyone seems to be getting by. I'm not seeing destitution at all. In America, a dip in the economy would be more catastrophic on a social level with all the crazies and the instability of many so-called normal people. I find Americans, such as myself, more paranoid than Europeans. We are more inclined to put our faith in conspiracy theories, whereas the average European may not like the system, but doesn't go as far in believing conspiracy theories. When Americans, who are already pretty worked up or paranoid, lose the little they have, things could get bloody in a hurry. Most Europeans seem to have more trust that the system is basically working for them, whereas Americans are going through a period of serious doubt, which is probably a good thing. They are becoming more and more afraid of the state and what it is capable of dishing out. In America it seems that you either have your head in the sand or you can't sleep at night.

overmedicatedundersexed's picture

"whereas the average European may not like the system, but doesn't go as far in believing conspiracy theory"

eyes wide shut syndrome..when falling from a building close your eyes and you will never hit the ground.

GMadScientist's picture

What's that? I can't hear you over the car fires!

PoorByChoice's picture

GM your being blinded by the EU haters!

Those aren't car fires, the smoke is from all those happy EU Citizens throwing more crevettes on the barbie.......

GMadScientist's picture

Best get some hummus ready too.

SouthernX's picture

so what have you spankee yankees said so far, different ways to spell bitch. excellent. zh is a troll locus. usa is a game. you're a bunch of smug shits who could'nt put a thought across without bitch, bullish, in the post. and you wonder why you can't win a war. you pathetic little trolls. reap what you have sewn.


i-dog's picture


"reap what you have sewn"

I doubt that a single one is a seamstress ... but thanks for your thoughtful addition to the "smug shits" board! LOL!!

WmMcK's picture

Surely I will reap what I've sewn into the hems of my garments.

GMadScientist's picture

We should have left your pathetic knock-kneed, inbred excuse for a people to the Krauts.

slaughterer's picture

Probably GREEN ES by open.  Miracles never cease to happen in ALGO-WORLD. 

GMadScientist's picture

In the Vapor (Volume) Deposition Age making atom-thick veneers is more than a hobby.

aleph0's picture



Masterfully put - the EUroZone in one sentence :

"and then it becomes clear that someone has to pay for all of this ...
... and countries start banging on the doors of the asylum to get out"

SouthernX's picture

i-dog... witty. never underestimate a spankee yankee. unless you're in a war with them.

GMadScientist's picture

I don't recall seeing you nancies on the battlefield...only Hessians with balls.

Shineola's picture

Its simple really. Kill the bankers that the money is actually owed to. Problem solved.

diana_in_spain's picture

or put them in jail and declare that they owe back the money that is owed to them.

Uncle Remus's picture

Now there's a twist on debt repudiation.

GMadScientist's picture

And when you trace the string and find out "the enemy is us"?

Do you know shit from you?

azzhatter's picture

Von Rumpboy will make another "turned the corner" speech

monopoly's picture

Europe is the warm up, the side show. Can you even imagine the spectactular fireworks when everything that is occuring in Europe shifts to the mighty usofA. What a show that will be. Still time to stock up and get ready, but time is running short. Soon they will be paying the head inmate to keep money safe here. Safe, yup, that is what they think. OH MY GOD. This will be so ugly.

eddiebe's picture

When the reserve currency central bank and the nation it controls expands the money supply, do other nations central banks really have a choice but to do the same? Add to that the mightiest military by far, and the answer becomes pretty obvious. Everything else is just noise.