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Bill Gross' Latest: Here Is How The "Debt Man Walking", aka Uncle Sam, Plans To Steal From You

Tyler Durden's picture





 

In his latest letter, Kings of the Wild Frontier, crushes the optimism of all those, roughly 4 altogether in the entire world whose combined IQ barely breaks into triple digit territory, who believe that the debt ceiling "compromise" does anything at all for US spending patterns, weather it is for total marketable debt, or the $66 trillion in NPV of future liabilities. Gross, however, does show us the 5 ways (well, 4 plus default) that the "debt man walking", aka Uncle Sam and his tens of trillions of future liabilities, plans to rob from you: dear taxpayer, in order to minimize the present value of these unmanageable future liabilities. To wit:

  1. Balance the budget and/or grow out of it
  2. Unexpected inflation
  3. Currency depreciation
  4. Financial repression via low/negative real interest rates

All of these guarantee that investor pocketbooks will be dramatically affected... Adversely. Let's dig in...

From PIMCO:

Kings of the Wild Frontier

  • Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.
  • In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at “net present cost.”
  • Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.
 “Over the years we’ve had some fun together – killin some ‘bars,’ drinkin moonshine – some even in these chambers. (Whiskey that is – the ‘bars’ I’ve seen once or twice, but only when I was plum drunk). But the time for funnin is over. They’ll be no jokes from David Crockett today.” 
Davy Crockett Speech to Congress, 1830
 

Figurative coonskin cap on head, I echo the sentiments of Davy Crockett – Indian fighter, Alamo defender and Tennessee Congressman – not necessarily in that chronological order. The debt ceiling may have been raised and the palpable sighs of relief heard across global financial markets, but the fun times are over. They’ll be no jokes from Bill Gross today, nor across this land for years to come I suspect. Even though the U.S. has managed to avert a debt crisis and perhaps a ratings downgrade, there remains a stain on our reputation, a scarlet “A” for budgetary “Abuse,” that will not disappear. The whole world was watching, and what they saw was a dysfunctional government taking its country to the financial precipice and backing off at the very last moment. “Shades of a Banana Republic,” as former Reagan budget director David Stockman opined somewhat harshly last week. We may not be Greece just yet, but Mr. Stockman is looking in the right direction.

Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit. “Out year” fantasies, as opposed to “current year” realities, is an apt description of the spending cuts that characterize this compromise. The Office of Management and Budget (OMB) estimates that future deficits will be reduced at most by .5%, and if so, it would be welcomed, but that .5% comes with no new taxes and a continuation of the belief that we don’t have to pay for our trespasses. Like many a Banana Republic, we may one day be invoking the Lord’s Prayer, pleading – “Forgive us our debts, as we forgive our debtors,” yet at the same time looking towards the heavens á la Saint Augustine with a fervent “let me be chaste, but let it be tomorrow.”

Treasury Secretary Tim Geithner noted last week that it would be unthinkable that the U.S. would not meet its obligations on time. Now that the timeliness has temporarily been put aside, an investor must logically ask how we will meet our obligations, and how much they really are. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near-unfathomable $66 trillion of future liabilities at “net present cost.” As shown in the following table from a Mary Meeker “USA Inc.” study, and validated by the Department of Treasury and Congressional Budget Office (CBO) calculations, the combined present cost “payment due” from Medicaid, Medicare and Social Security is over six times our current obligations of Treasury debt. The press and most professional investors are accustomed to measuring “paper” debt as opposed to walking/living liabilities in the form of people. I call these liabilities “debt men walking” because as long as 330 million living Americans require promised entitlements – the $66 trillion that wear shoes are as much of a liability as the $10 trillion on paper.

Admittedly, as Meeker’s table (Figure 1) points out, we can address these liabilities by improving the efficiency of our healthcare system, reducing benefits, raising retirement ages, increasing tax rates or a combination of all of the above. We likely will. So reduce that $66 trillion if you care to, but the subjective remainder still hangs over financial markets like a Damocles sword. How will we meet these obligations as Secretary Geithner asked?

 

Aside from the unthinkable outright default, there are numerous ways that a government – especially a AAA rated one – can employ to reduce its future liabilities. Highlighted below are the prominent tools that can significantly affect investor pocketbooks:

  1. Balance the budget and/or grow out of it
  2. Unexpected inflation
  3. Currency depreciation
  4. Financial repression via low/negative real interest rates

Let me address each of them in brief:

  1. Balance the budget/growth – The current Congressional compromise is but one small step for fiscal solvency. There is no giant leap for mankind anywhere on the horizon. Trillions of further spending cuts, and yes trillions of tax hikes, are necessary to stabilize our “official” debt/GDP ratio of 90% or so. One important detail to keep in mind: projected deficits in 2012 and 2013 of 7-8% of GDP rely on OMB growth estimates of 3%+ in the next few years. Recent trends give pause to these estimates as does PIMCO’s New Normal, which believes 2% not 3% is closer to reality. If so, deficits move right back up to near-double-digit percentages of GDP. Likewise, should interest rates ever rise from current 2% average levels, a 100 basis point increase raises the deficit by 1% and erases any hoped for gains. Sisyphus would be familiar with this seemingly unsolvable dilemma.
  2. Unexpected inflation – While markets are global these days, figures sometimes lie and policymakers often figure. Focusing investors’ attention on statistics emphasizing “core” or “chain-linked” methodologies can entice investors to stay home, or in the case of foreign nations, to “invest American.” Central bankers, not just in the U.S., but the U.K., have long been arguing for a reversion of headline 3% CPI numbers to the 2% or lower “core” standard expectation. “Patience,” they argue, but “prudence” might be the better watchword. If so, then the expected “unexpected” inflation would mimic the old Roman custom of coin shaving or its substitution with base metals instead of silver or gold. Inflation is the result no matter how you coin it, which puts more money in government coffers to pay their bills and less money in your pocket to pay yours.
  3. Currency depreciation – High deficits, both fiscal and trade, combined with low interest rates for extended periods of time produce declining currency valuations against more prosperous, and more policy conservative competitor nations. Few Americans are aware that the dollar’s recent 12-month depreciation of over 15% is an explicit tax on their standard of living. Uncle Sam, the government overseer, benefits enormously: one rather clever way for the U.S. to pay its bills to foreign creditors is to pay them in depreciated dollars. The Chinese and other offshore holders wind up getting not only .05% interest on their Treasury Bills, but 12 months later – voila! – their Bills are worth only 85 cents on the dollar in global purchasing power. The Chinese should be reading Shakespeare, not Confucius – especially the second half of “neither a borrower nor a lender be,” when it comes to U.S. dollars.
  4. Financial Repression via low/negative real interest rates – I have commented on this Carmen Reinhart, commonsensical technique in prior Outlooks. If the Treasury is borrowing money from you or PIMCO at .05% for the next six months and CPI inflation is averaging 3%, then lenders/savers are being shortchanged beyond even rather egregious historical examples. The burden of “sixteen tons” of debt á la Tennessee Ernie Ford is considerably reduced at 5 basis points of annual interest. “Loading” coal or debt in this case at near 0% yields doesn’t make the borrower another day older, nor deeper in debt. Actually it’s a shot of Botox for the borrower, but a shot of lead for the lender. Duck!
By using these four life rafts available to U.S. and other AAA sovereign borrowers, one can almost imagine a half century from now, that they remain solvent – although chastened perhaps with a lower credit rating. Based on historical example at Moody’s and Standard & Poors, it just might take 50 years for them to downgrade U.S. credit, but be that as it may, you and PIMCO as savers and savings intermediaries can take precautionary or even retaliatory measures to preserve purchasing power. Favor countries with cleaner “dirty shirts” and higher real interest rates: Canada, Mexico, Brazil and Germany come to mind. Shade equity and fixed income investments away from dollar based indexes towards those of developing nations with stronger growth prospects. Purchase commodity based real assets before reserve surplus nations do. And above all, don’t be lulled to sleep by Congressional law makers that promise a change in Washington. The last change I believed in was on Election Day 2008, and that turned out to be more fiction than reality. Davy Crockett, where are you? You may have been drinkin’ whiskey in those Congressional Chambers and those “bars” may have been half fiction, but you were a coonskin hero of a forgotten age, a hero the likes of which we have yet to see in 21st century Washington. We’re stuck with the new Kings and Queens of a wilder frontier.
William H. Gross
Managing Director
 


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Tue, 08/02/2011 - 09:05 | Link to Comment topcallingtroll
topcallingtroll's picture

Ok even the troll can capitulate, so watch out!

All but point number one say "buy gold"

However we may be in for a slowdown.  Somehow I have to admit I don't think it will effect gold too much.

Tue, 08/02/2011 - 09:40 | Link to Comment trav7777
trav7777's picture

I feel lucky that Bill Gross has my back and is lookin out for me

Wed, 08/03/2011 - 19:35 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I dedicate the Foo Fighters 'Hero' to Bill Gross.

Don't the best of them bleed it out,
While the rest of them peter out?
Truth or consequence, say it aloud.
Use that evidence, race it around.
-----
There goes my hero,
Watch him as he goes.
There goes my hero,
He's ordinary!

 

Foo Fighters - My Hero

 

 

Tue, 08/02/2011 - 09:08 | Link to Comment papaswamp
papaswamp's picture

I know the treasury puts out a sheet with on and off the books debt...anyone have that link? I'm too tarded to find it.

Tue, 08/02/2011 - 09:08 | Link to Comment VisualCSharp
VisualCSharp's picture

At least one grammatical error in the write-up: weather -> whether.

Tue, 08/02/2011 - 09:15 | Link to Comment Stoploss
Stoploss's picture

Probably a Dell keypad.

Tue, 08/02/2011 - 10:06 | Link to Comment El Viejo
El Viejo's picture

got dat right: there is a delay on my shift key that makes me miss capitalizing the first letter. drives me mad and if it were my keboard and not work's I would have tossed it long ago.

Tue, 08/02/2011 - 09:13 | Link to Comment razorthin
razorthin's picture

don't forget 5. Confiscate your retirement funds (all, 401K, IRA and defined benefit alike)

Tue, 08/02/2011 - 09:13 | Link to Comment gbresnahan
gbresnahan's picture

This is my biggest fear.  There is, I think, over $10 trillion sitting in 401ks, and there was at least one plan to create an annuity out of them (aka Social Security v2.0)

Tue, 08/02/2011 - 09:24 | Link to Comment TaxSlave
TaxSlave's picture

Most of these funds are held in the prison of mutual funds with no way out.

Already, the hft schemes are whipsawing them out of their value, silently whittling them down to nothing.  So why grab the low hanging fruit out in the open when the 'banks' can make all their profits in 'the market' instead of doing what people think banks are supposed to do?

There are two rules for 401K's.

1) They make all the rules.

2) They can change the rules anytime they want.

Takes a lot of faith to put your future into such a long line of unaccountable mountebanks.  Have ANY of them earned your trust?  Ha!

Tue, 08/02/2011 - 09:37 | Link to Comment Smiddywesson
Smiddywesson's picture

All they have to do is remove the tax shelter status for 401ks that are not invested in government debt.  Instant sugar buzz as sheeple crowd into treasuries.  Then we can run up the debt to GDP to 260% like Japan.

I also see class warfare being waged by the government.  They will use means testing for everything, making it desirable to spend and become even more dependant.

 

Tue, 08/02/2011 - 09:49 | Link to Comment TaxSlave
TaxSlave's picture

Means testing will drive a lot more savings into tangibles. (Gold and silver)

Tue, 08/02/2011 - 10:02 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

I know that my desire to be "cash poor" is strong and one that I have followed now for the past three years.  I have exactly zero stocks or 401k/IRA "investments" and the balance in the bank is merely for checking when required.  On paper I look awfully poor and have zero records showing where my excess capital has gone.  This is precisely why I love my stash of silver and gold.  No paper trail means limited ability for Uncle Scam to tap into my wealth, which is exaclty why I believe you to be right TaxSlave.

Tue, 08/02/2011 - 13:13 | Link to Comment DCFusor
DCFusor's picture

That's also my basic strategy though I do have some land and vehicles that of course are paid and have paperwork associated.  Keeping a ton of money (whatever sort) in a place that's easy for someone to steal or confiscate doesn't seem real wise.  If they should ever go for that -- your cash is a phone call away for them, your car pretty easy to take and sell, land not so much, and whatever you have under the bed or buried -- they don't know to try for.  I really doubt they'd try to confiscate my machine shop either, just not worth the effort for that sort to monetize that, especially these days when manufacturing is not exactly booming.  Yet I get good service out of all those things in good times as well as bad.

Tue, 08/02/2011 - 11:11 | Link to Comment grey7beard
grey7beard's picture

>> I also see class warfare

The war is over and we lost.

Tue, 08/02/2011 - 12:57 | Link to Comment sun tzu
sun tzu's picture

I doubt it. Most people will simply stop putting money into the 401k. 

Tue, 08/02/2011 - 09:51 | Link to Comment jumblies
jumblies's picture

and don't forget 6. Donations

 

Tue, 08/02/2011 - 09:12 | Link to Comment Debt Rolling
Debt Rolling's picture

Balance the budget: if your brain can seriously imagine the necessary 50% cuts in government salaries and pensions happening, then you should lower your chems intake.

Grow your way out: the dream of every crony government. But it's a dream for one reason.

So there's only one way left: transfer money from the sheeple to yourself. And that's called inflation. 

Tue, 08/02/2011 - 09:49 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Cuba approves economic reform plan

 

Changes will lead to elimination of more than a million government jobs and reduction of state's role in key sectors.

 

http://english.aljazeera.net/news/americas/2011/08/20118243132157532.html

Those crazy Socialists! 

Tue, 08/02/2011 - 10:09 | Link to Comment El Viejo
El Viejo's picture

Like it has been said, The public sector is there to support[not dominate] the private sector. When do you think we will finally learn that here?

Tue, 08/02/2011 - 13:03 | Link to Comment sun tzu
sun tzu's picture

Cutting government salaries won't help much. Total federal pay, including all benefits is around $400B per year. Cutting them by 50% would only save $200B per year. Plus you have alot of people making $30K per year. Will you cut their pay to $15K per year? The better option is to fire 500,000 paper pushers who do nothing. Trim the rolls down the same way private companies do it. Buyouts for the old-timers who have been there for decades. Then attrition. Then finally start the layoffs until you cut by 500,000 within 5 years. Do the same with the military. End the wars and foreign aid. Cut useless and redundant government departments entirely. The government is not a jobs program.

Tue, 08/02/2011 - 13:14 | Link to Comment DCFusor
DCFusor's picture

The government isn't supposed to be a jobs program.  Fixed that for you.  Nevertheless it is.  And as you point out, one where creating real value for the economy isn't job #1.

Tue, 08/02/2011 - 13:34 | Link to Comment Ricky Bobby
Ricky Bobby's picture

That's misinformation. Where did you get that stat from? Huffington Post

Tue, 08/02/2011 - 09:15 | Link to Comment Cdad
Cdad's picture

BlowHorn [CNBC] loud mouth extraordinaire Jim Cramer is right now complaining about spending cuts [where?] in Washington DC.  Another millionaire looking for the trough to be expanded.  Another so called capitalist who thinks that economic activity and job creation comes from the Federal government.  

What's the over under on when COMCAST finally projectile vomits the idea of putting this guy on in the morning? 

Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.

Tue, 08/02/2011 - 09:28 | Link to Comment dogbreath
dogbreath's picture

I don't own a TV, but just who is Cramers audience

Tue, 08/02/2011 - 09:43 | Link to Comment Cdad
Cdad's picture

His human audience, as measured by his ratings, are very few.  His real audience are the sound bite trolling quant funds that fire off escalating and absurd buy orders on anything he specifically mentions on air....to be followed by sharp reversals and short selling.

Tue, 08/02/2011 - 14:12 | Link to Comment Cathartes Aura
Cathartes Aura's picture

who needs a TV when you can read about who says what HERE, EVERYDAY - to answer your question about "audience" - reckon most here are still drooling over the presenters "with one hand" while typing about them with the other. . .

"Kings of the Wild Frontier"??? Adam Ant???

I feel beneath the white
there is a redskin suffering
from centuries of taming

"no method in our madness
just pride about our maner
Antpeople are the warriors
Antmusic is the banner!"

okay. sure.

Tue, 08/02/2011 - 09:31 | Link to Comment FEDbuster
FEDbuster's picture

CNBS has become un-watchable at this point.  Only one voice of reason, Rick Santelli, remains.  I have threatend to cancel my cable TV, if they don't provide an alternative business news channel (hopefully Fox).

Hasten the Collapse, OBAMA 2012

Tue, 08/02/2011 - 13:05 | Link to Comment sun tzu
sun tzu's picture

Fox Business isn't much better. They are also cheerleaders and push for the status quo. Fuck them. Bloomberg is pretty good.

Tue, 08/02/2011 - 13:24 | Link to Comment DCFusor
DCFusor's picture

And Bloomie is available online for free live if you have a decent computer.  While I find them amusing, and sometimes on top of the news that matters, I don't think anything major media out there is much other than a waste of your time.  In fact, I recall a study that showed people make less the more they watch that tripe.

Tue, 08/02/2011 - 17:28 | Link to Comment FEDbuster
FEDbuster's picture

Maybe RT (Russian Television) will start a business channel, seems Putin likes to tell the truth about US economy and the dollar?

Hasten the Collapse, OBAMA 2012

Wed, 08/03/2011 - 19:26 | Link to Comment rustymason
rustymason's picture

It's no wonder that the media keep pumping out that foul sludge -- people keep paying for it. 

Tue, 08/02/2011 - 09:13 | Link to Comment Savvy
Savvy's picture

Nothing less than a PR stunt to make Rove jealous. Maybe they could start a tv reality show called 'Be a congressman for a day' and each prize is one minute of prime time news...

Tue, 08/02/2011 - 09:15 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

double post. sorry.

Tue, 08/02/2011 - 09:14 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

Investing your money today is not about opportunity or growth anymore. It's about not losing it through inflation, taxes, confiscation or defaults. Everybody is focused on not being cheated, or not winding up the sucker in the room. Good luck with that everyone. This is the American financial system. One gigantic con game and fraud. Oh look Gold at $1640. Wonder why?

Tue, 08/02/2011 - 09:22 | Link to Comment Debt Rolling
Debt Rolling's picture

I don't know why you've been junked. 

There is indeed zero absolute returns today, in the face of lacking technological innovation. Wealth is not created. The level of life of people does not increase significantly. Wealth is transferred. 

Buying gold preserves your capital, and makes you richer relatively (which is fine), but not absolutely. 

Tue, 08/02/2011 - 09:28 | Link to Comment TaxSlave
TaxSlave's picture

The armed brigands are roving through the countryside, pillaging as they go, and it's open season on the ignorant.

The savings rate is going up in the only place where it matters--in metal that cannot be confiscated or stolen from without them physically getting their grubby little pincers on it.

Dreamtime is coming to an end.

The biggest lie in all of mankind's history (well maybe the 2nd biggest one) is falling apart.

Tue, 08/02/2011 - 13:07 | Link to Comment sun tzu
sun tzu's picture

When TSHTF you know that TPTB will make gold and silver illegal to own.

Tue, 08/02/2011 - 20:23 | Link to Comment StychoKiller
StychoKiller's picture

Yo Dude(tte), stop bogartin' and pass it around!  'Nuff said.

Tue, 08/02/2011 - 09:14 | Link to Comment Oh regional Indian
Oh regional Indian's picture

C'mon big Bill. Feeling so badly about all this?
Use your billions to change something. Do some shit. All this talk and everyone is happy. Ron Paul, good talker. Bill Gross, good talker. George Sorrows, best talker of them all.
Anyone followed the Sorrows story today?
He's returned all client monies.
That is news.

It's days now folks. Days/week or so........

ORI

http://aadivaahan.wordpress.com/2011/07/30/pre-cursor-01/

Tue, 08/02/2011 - 10:11 | Link to Comment falak pema
falak pema's picture

reaping the wind of sorrows... as you borrow more n more...comes a time of reckoning when rocking the boat...rolls over into moronic law. Now balancing the budget is like belling the cat, or cutting the fat on a sacred cow,who is all skin n bones.

Nowhere to run nowhere to hide, as the crazy money takes a roller coaster ride. 

Precious metals are like the ancient gods; we believe in them but we can never reach them once we've bought into their cause. They are untouchable, and only good for pouja.

The world needs Hulwa! not hawa!

Tue, 08/02/2011 - 09:17 | Link to Comment TaxSlave
TaxSlave's picture

The purpose of the debt is not the spending.

The purpose of the debt is that it owns you.

Perpetual debt servitude, living under the whip of your masters, is your future.

Grow a set, repudiate it.  Declare that it's not your debt, that you will not be enslaved to pay it, and you might be able to control your own life.  Otherwise, your only choice will be to get in line, hold still, and shut the hell up for your own good like the rest of the obedient drones.

Tue, 08/02/2011 - 09:16 | Link to Comment Archimedes
Archimedes's picture

hey, he stole my CAD idea! That is the ONLY fiat currency I would buy right now.

 

 

Tue, 08/02/2011 - 09:37 | Link to Comment DaBernank
DaBernank's picture

I humbly vote for NOK as Fiat I might buy, but why not just buy more gold and silver instead?

Tue, 08/02/2011 - 09:16 | Link to Comment johngaltier
johngaltier's picture

Here's an idea.

Good bank/bad bank

Canada is now responsible for Medicaid obligations. They pledge as collateral all unclaimed mineral and resource deposits, government land, etc.

If they don't like it, we get a chance to battle test the JSF F-35

Tue, 08/02/2011 - 09:17 | Link to Comment tickertapeguide
tickertapeguide's picture

All your 401Ks are belong to us... GAME OVER

Tue, 08/02/2011 - 09:51 | Link to Comment Smiddywesson
Smiddywesson's picture

All your 401Ks are belong to us... GAME OVER

No, that is not their way.  The methodology is, and always has been, to keep you ignorant, lull you to sleep, and slowly strangle you.  They will never evoke a confrontation with the American public by just taking their 401k money, not after spending the last 50 years telling them that these programs are the yellow brink road to wealth.

Confrontation is not their way.  They will slowly tap these funds through taxation and inflation.  They are in control, so they do not want confrontations or an examination of their methods through which they always win.

Tue, 08/02/2011 - 10:15 | Link to Comment Silver Dreamer
Silver Dreamer's picture

Problem, reaction, solution.  Imagine a massive crash.  401K's get crushed.  The government comes in and "saves the day."  We need the government to protect our 401K's afterwards after all, riiiight?

Tue, 08/02/2011 - 09:19 | Link to Comment HoofHearted
HoofHearted's picture

On my desk right now is a book by Jacques Rueff, _Le Peche Monetaire de l'Occident_. As we seem to say often around ZH, NOBODY could have seen this coming for the US. Nobody. I won't mention James Dines's _The Invisible Crash_ because it is back on the bookshelf and not on my desk.

We need to study the classics. Nothing is new under the sun. What is has been before. John Law, party of one....and we all know what John Law had in that carriage as he was trying to escape...

Tue, 08/02/2011 - 09:22 | Link to Comment tmosley
tmosley's picture

Is it just me, or are #2, 3, and 4 all the same as default/money printing?

The real choice here is to default, or to put their house in order.  It seems pretty clear which path they will take.  And with that path clear, there are only one or two paths for investors.  If you don't know what those are, you haven't been paying attention.

Tue, 08/02/2011 - 10:01 | Link to Comment Smiddywesson
Smiddywesson's picture

there are only one or two paths for investors.  If you don't know what those are, you haven't been paying attention

a.  Stock up on pitchforks and torches

b.  Stock up on lead, lots of lead

Tue, 08/02/2011 - 10:18 | Link to Comment fishface
fishface's picture

Ha, Tmosley, I thought exactly the same

There can be only #1

As for the Investing..

Favor countries with cleaner “dirty shirts” and higher real interest rates: Canada, Mexico, Brazil and Germany come to mind. Shade equity and fixed income investments away from dollar based indexes towards those of developing nations with stronger growth prospects. Purchase commodity based real assets before reserve surplus nations do.

The Commodity based assets are propably the safest, looking at Germay, with all those problems in the Euro zone, for Brazil, there is the risk of the carry trades beeing repatriated, Mexican economy relies to much on the US

 



Tue, 08/02/2011 - 09:26 | Link to Comment High Plains Drifter
High Plains Drifter's picture

old davy got caught up in that alamo thingy. at  the end, he and a few others were corned inside a building in the fort and tried to surrender. santa anna was in no mood to play the games of compromise that davy the politician tried on him that day.  he ordered them to be beaten to death with rifle butts. some of his generals protested due to the rules of war. he overruled them and had the order carried out.....so davy the politician met his end that day.......

 

and in all of this cost saving, no mention of war by mr gross.........or the military industrial complex.........what about their  entitlements?  wars that never end chasing enemies that cannot be found, based upon lies..........

and yet they want to take away the things that help poor people exist in this country as it is now.

you see, mr gross and his colleagues don't make money off of entitlement programs , therefore he thinks they should be cut.......but war, oh he makes money off of war so he is silent about war..........yeh sure pal...........

 

 

Tue, 08/02/2011 - 09:43 | Link to Comment DaBernank
DaBernank's picture

Agree with you on ending the military adventurism but on entitlements, means-testing is a damn fine idea; not everyone over 65 is poor or needy. Case in point, my father, who was a school teacher, with pension and soc-sec pulling in 6k per month as a single man, he doesn't need a check from the gov.

Tue, 08/02/2011 - 10:11 | Link to Comment Smiddywesson
Smiddywesson's picture

You are so close to the answer.  The old geezers like to obfuscate the issue by saying "I paid in" and "I want my money" but in many cases they have outlived their money by decades.

The only way to fix this would be to clarify the issues.  Fair is fair.  Give them back their money with a reasonable rate of return.  When they outlive it, put them in another program called CHARITY (which includes means testing), because that is what it really is, charity, living off the following generations like locusts. 

They shouldn't be allowed to make an intellectually dishonest argument that it is their money unless it is their money.  In cases where they have gone through all their money, they should show some humility for not saving for their futures during some of the best bull markets in history.  They should especially show humiltiy to the generation feeding them despite their having allowed the economy to be destroyed under their vote, if indeed they even took the time to study reality and vote. 

Tue, 08/02/2011 - 11:56 | Link to Comment Toma Haja
Toma Haja's picture

And you, Smiddy, along with so many others, are so far from the facts.  Most of us "old geezers" have been working and contributing for 50 years or more.  Back then, teenagers worked for their spending money.  Back then, when the minimum wage was $.35 per hour, we still had taxes to pay. 

The only way to fix this would be to clarify the issues.  Fair is fair.  Give them back their money with a reasonable rate of return. 

So, what do you think a reasonable rate of return would be?  

Trying to avoid the intellectually dishonest thingy, we all know that what we put in was intended to fund the existing retirees.  Still throughout our working lives, the SS Trust Fund had built up a surplus with the expectations that it would help cover the Boomer generation's retirement needs.  What has happened to the trust fund?  Pilfered to pay for pork barrel politics and a bloated, insatiable government.  Investment income of the fund tied to treasury yields.  Leaving demographics aside, a fund unable to maintain itself due to an ongoing depression.  Need I mention, rising administration costs as a percentage of the fund?  Or, the one-trick pony solution to the depression of reducing FICA contributions in order to keep demand from totally tanking.  (OK, the pony has a lot of other tricks.)

I am not about to try to defend an entire generation, but "They should especially show humiltiy to the generation feeding them" HUMILITY? Who wiped your butt when you were a baby?  Who cleaned your running nose?  Who picked up after you?  Who fed you?  HUMILITY?  As in, "just shut up and go away, already."?  The Boomers have gotten just a tad bit angry.

Come on Smiddy, you can do better than play that stupid generation class warfare crap. 

 

Tue, 08/02/2011 - 20:31 | Link to Comment StychoKiller
StychoKiller's picture

So, it seems "fair" to you to continue to receive a SS Check even though the US paid you back ALL of your "contributions", while your grand-children eat the chaffe?  Check your premises.

Tue, 08/02/2011 - 11:35 | Link to Comment grey7beard
grey7beard's picture

>> Case in point,

There are a vast number of ex-military double dippers out there. I use to run into them in my business on a regular bassis.  They would do their 20 and get retirement and medical.  Then they would get preferential hiring for government jobs because they were ex-military.  Again, 20, or less, and a pension.  Early retirement and a double pension.

The second most common group, disable police and firemen buying boats  go on world cruises.  Full pension, full medical, 40 years to enjoy.

I have a close personal aquaintence who spent three years in the navy.  I have to hear endless stories about how she served her country.  Actually, she spent three years in Europe partying and fucking nayy guys.  She scammed the navy into a full disability.  Somehow she scammed social security in disability.  She collects $3,500 a month tax free and gets full VA medical.  How much will this person cost they system in a life time?  There are millions of them.

Tue, 08/02/2011 - 14:51 | Link to Comment Cathartes Aura
Cathartes Aura's picture

I shouldn't worry grey7beard - with the military handing out anti-depressants like they used to chocolate bars, the suicide rates are over 18 monthly - and with depleted uranium and other poisons of war, passed on to their sexual partners "back home" too - payouts will decrease over time.

as to your "friend"

I have to hear endless stories about how she served her country.  Actually, she spent three years in Europe partying and fucking nayy guys.

sounds like she "served" her country in a way it recognises - if she was a "navy guy" fucking local women set up by the military (Philipines, Guam, Okinawa, etc. etc.) would you be as outraged?

http://www.lightparty.com/Politics/ForeignPolicy/WomanInMilitary.html

Tue, 08/02/2011 - 10:14 | Link to Comment falak pema
falak pema's picture

hey lone gunman! You are getting intelligent as you mellow yellow.

Tue, 08/02/2011 - 10:36 | Link to Comment fishface
fishface's picture

HPD you are so right!

these wars cost a lot...does anybody remember why they started?

I think, they are both dead...

So there you go, reduce the spending, of course that will hurt the war industry, but hey they've got enough already

Sun Tzu said: (400b.c.)

When you engage in actual fighting, if victory is long in coming, then men’s weapons will grow dull and their ardor will be damped.  If you lay siege to a town, you will exhaust your strength.
Again, if the campaign is protracted, the resources of the State will not be equal to the strain.

Tue, 08/02/2011 - 09:27 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Kenny Rogers said it best.....

 

"and the best you can hope for is to die in your sleep"

Tue, 08/02/2011 - 09:44 | Link to Comment FEDbuster
FEDbuster's picture

Much better to die of a heart attack during sex.  "He came and he went".  Just like Nelson Rockefeller.

Tue, 08/02/2011 - 10:15 | Link to Comment falak pema
falak pema's picture

on the job...of paying dividends like a true capitalist..down to his short hairs...

Tue, 08/02/2011 - 09:28 | Link to Comment monopoly
monopoly's picture

Well, he may have lots of toys but he speaks the truth. Going to be real tough for our kids, don't care if they are 5 or 25. Really sucks. And we are screwing all those good people who are 75+ who did everything right and look at their CDs and just cry. No one talks about that part of the interest rate curve. This country is on its way out.

Tue, 08/02/2011 - 10:21 | Link to Comment Silver Dreamer
Silver Dreamer's picture

Perhaps, but the banksters may still not win in the end.

Tue, 08/02/2011 - 09:30 | Link to Comment Life of Illusion
Life of Illusion's picture

 

Sovereign Wealth Funds flows have already ramped up asset pricing in most of bill’s picks.

Little late bill.

Just go purchase some gold at this point even if you’re a little late.

 

Tue, 08/02/2011 - 10:17 | Link to Comment Smiddywesson
Smiddywesson's picture

Just go purchase some gold at this point even if you’re a little late.

Nobody is late to the gold trade.  If you think they are destroying the currency, then gold is not even half through its bull market.  I would venture a guess that, despite its ten year run, gold isn't even out of the gate yet in proportion to where it is going.

 

Tue, 08/02/2011 - 13:13 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

You guys really need to get calibrated.

If Gold is in any way significant, rest assured that IT will be the target.  Nothing else.

No confiscation, ever.  No prohibition on traficking, ever.

But all gold transactions and barter involving gold will be taxed.  Huge.  Maybe 80% of transaction amount.

It's the obvious way to eliminate gold from any potential for significance.  The government must be paid.

Tue, 08/02/2011 - 14:06 | Link to Comment tarsubil
tarsubil's picture

How do you track that? Might as well outlaw alcohol while you're at it.

Wed, 08/03/2011 - 19:45 | Link to Comment rustymason
rustymason's picture

"See something, say something."

Tue, 08/02/2011 - 09:30 | Link to Comment agNau
agNau's picture

I think that will soon be referred to as "Dirty Shorts!"
On the 401's......Timmah has already "floated" that trial balloon. I say trial because not many are aware Federal Pension theft happened., and those "crosshairs" are trained as we speak on that vast treasure of 401k American wealth. Be Patriotic!, the rallying cry.
I am comforted by the fact that IOU's are at the ready when those pensioners need to buy cat food.

Tue, 08/02/2011 - 09:52 | Link to Comment TaxSlave
TaxSlave's picture

Restatement:

If your superiors can generously sacrifice their pensions for the greater good, so can you.

 

Tue, 08/02/2011 - 09:34 | Link to Comment tickertapeguide
tickertapeguide's picture

Ok, so if the dollar continues its normal relative cycling and DXY goes up (and austerity is good for the Dollar), then the market should go down and drive T's up.  We then have another platform from which to launch QE.  Why would history not repeat itself this time?  Average buy and hold investor accounts would stabilize and the general populous would put the blinders on again in time for the election.  International pressure would mount against the central planning (which would probably mean QE3 would be a bit more disguised than previous versions).   I just dont see any real inflation hitting until after some form of easing is lauched....

Tue, 08/02/2011 - 09:34 | Link to Comment stiler
stiler's picture

GOld is too honest. The lending of false money is a CON that brings together CONsters. There are no more "statesmen", at least none that have any clout, like the butt of a rifle, but was it 'bars' or 'bears'?. Even Geo Washington had trouble fending off the likes of these political apostates.

Tue, 08/02/2011 - 09:52 | Link to Comment janus
janus's picture

can anyone direct me to a reference for bonds?...specifically, everything i will ever need to know about bonds; sort of a high-brow encylopedia for folks keen on bonds that want to know it all...about bonds that is. 

this B Gross is highly intelligent...he's a hedgehog (from famous I. Berlin essay; check it out, bitchez!) in perspective and a fox in practice; reminds me of ole janus.

Tue, 08/02/2011 - 09:59 | Link to Comment TaxSlave
TaxSlave's picture

Bond: root word for Bondage.

Underlying premise:

Bonds are a "Safe Haven".  What makes them 'safe' is your faith in government's ability to put a gun to the head of its citizens in order to make you rich in return for helping to fund their subjugation of the citizenry.

If you think the power of the gun is the ultimate, safest form of wealth-creation, by all means, pile on.

Don't worry, we will never, ever turn on you and declare

It's not my debt, you don't own me, and I'm not paying it!

Notwithstanding the fact that what you help government to achieve by financing it is the destruction of the wealth-creating capacity of the economy.  So, you are always and everywhere guaranteed to lose out anyway.  You will be paid back in depreciated currency, and taxed on any nominal difference.  Muhahaha!

Tue, 08/02/2011 - 10:33 | Link to Comment janus
janus's picture

right, well, good and evil being what they are, i guess it's too late taking sides now...

anyway, i'm looking for something that looks at bonds cosmically -- their interplay with other assets, their predictive (or should i say barometric) capacities, their relative strength/weakness, what contributes to those vice/virtues, and, most of all, how they are used to manipulate broad economic trends, what are the indications of manipulation, what is the lead time, and, of course, their traditional efficacy under disperate economic circumstances...there's a bunch more stuff i need to know, but i don't even know what questions to ask; and that's the rub: you've got to ask the right questions before you can get anything approaching an answer.

who has wisdom? please show me the way. 

Tue, 08/02/2011 - 11:35 | Link to Comment TaxSlave
TaxSlave's picture

When the general consensus is 'buy bonds for safety', and everybody knows that is the indisuputable truth, that is exactly the time to avoid them.

The minute the market players (other than the Fed) get a whiff of the idea that 2 + 2 does not equal $1 Quadrillion (code for "They can't be paid back"), they will be piling out of them, trying not to be the last rat off the ship.

And, not to mention, there is a player in the market that can print money from thin air, and happens to be the biggest bondholder of them all.

Does that make you comfortable?  Buy! Buy!

Wed, 08/03/2011 - 05:36 | Link to Comment janus
janus's picture

i will not be shopping bonds till i have at least another significant digit added to my net worth.  i'm interested in them for the same reason i follow currencies -- they're damned important...and i'll need to know what to do once i have my other significant digit and a 60 foot catamaran.

cheeseburger in paradise/

makin the best of every virtue and vice/

worth every damned bit o sacrifice/

to get a...

Tue, 08/02/2011 - 11:25 | Link to Comment IcarusOnFire
IcarusOnFire's picture

Janus asks:  can anyone direct me to a reference for bonds?...specifically, everything i will ever need to know about bonds;

Try "The only guide to a Winning Bond Strategy you will ever need"  By Larry Swedroe and Joseph Hempen

Regards,

Icarus 

Wed, 08/03/2011 - 05:31 | Link to Comment janus
janus's picture

 

merci, Icarus.

and the sun it tried to warn me/

boy, those wings are made of wax/

and the things i do to kill me/

they just tell me to relax

Tue, 08/02/2011 - 09:52 | Link to Comment Eireann go Brach
Eireann go Brach's picture

'Hope' and 'Change' we can believe in! But Obummer will post on Facebook today that he saved the financial system and thus the world with the credit card limit increase, and his 20 million fans will bow to him of course! I hope he will go down in the record books as the president that oversaw the worst ever crash of the US financial system!

Tue, 08/02/2011 - 09:58 | Link to Comment game theory
game theory's picture

Uncle Sam and all his cronies are looting the taxpayers because they think they knows what is good for the country.  Apparently, what is good for the country is granite countertops and pools and a Mercedes or three in the driveway.   If you haven't yet, take a trip to DC and the suburbs. You will see what a gov't and federal contractor bubble looks like. It is in full swing even three years after the worst financial crisis in decades.  That's taxpayer money you will see there.  Oh, and some Chinese money too.  But China loves that we've adopted central planning.   It will make the merger a little easier. 

Tue, 08/02/2011 - 10:03 | Link to Comment Dragline
Dragline's picture

He's way wrong about the "bars".  Negative real interest rates means buy more bars!  Of Gold that is!

Tue, 08/02/2011 - 10:07 | Link to Comment Dangertime
Dangertime's picture

Buy gold, silver and oil before it's too late.  These guys are going to the moon!!!

Tue, 08/02/2011 - 10:07 | Link to Comment gaoptimize
gaoptimize's picture

I think there will be many means of Financial Repression that will go far beyond real negative interests rates.

Tue, 08/02/2011 - 10:14 | Link to Comment Silver Dreamer
Silver Dreamer's picture

There will be nothing "unexpected" about the inflation.  We already know that is one option the federal government has already pulled the trigger on long ago, and it will continue to increase it more and more.

Tue, 08/02/2011 - 10:15 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

...debt man walking, what a Gross reality, lol, like a dead man walking http://www.youtube.com/watch?v=wOZrGHmMl4o ...gives a whole new image of the name and number to that beast. http://www.newscientist.com/blogs/onepercent/2011/08/facial-recognition-identifies.html?DCMP=OTC-rss&nsref=online-news

Looks like Celente is on target too, with the Gross Point.  http://theintelhub.com/2011/08/01/gerald-celente-%E2%80%9Ceconomic-martial-law-will-be-declared%E2%80%9D/

Tue, 08/02/2011 - 10:31 | Link to Comment the grateful un...
the grateful unemployed's picture

unemployment is the real problem americans who used to be self sufficent now depend on government assistance. too many mouths to feed. is the economy of 2012 really much worse than the economy of 2000? the rich pay less in taxes and the poor need more financiial aid. duh. but canada and mexico? one banana republic and one chinese satellite nation. not good solutions for americans to consider

one of the least successful mayoral candidates (major Cal city) in a recent election said he would float bonds to make the city energy self sufficent in twenty years. imagine that, spend money to save money, to reduce the expense of government, and by extension the people. as a government official i know that in twenty years you are going to be a big load on my budget, and yes the current generation is being programmed to fail.

i want to see that you are less of a burden in twenty years. i will spend money now to see that you don't need my help later. (think outlaw cigs, booze and risky behavior) put a tax on fast food. the nanny state will not begin to explain this future. and once people become autonmous they are less likely to listen to their government. more Tea Party complainers, more nanny state supporters.

however it all comes together at some future date. the tea party ultimately disappears because no one is paying taxes, (except a few corporate types) and everyone is singular in their lives, living mostly without government interference, after twenty years of complete interference, the nanny state is no longer needed. and in that nearly perfect state there are only a few corporate types left, because most of the crap you currently consume is bad for you in one way or another. its not that we spend more money than we have, we dont' spend money on things which help us grow. definition of a deficit spending problem

in the meantime its going to be a bumpy night

Tue, 08/02/2011 - 10:42 | Link to Comment GCT
GCT's picture

I really hate to post this.  I am not a real savy investor.  I have done real well with gold.  Got out of the market four months ago, still in equities.  Yes it is all about trying to find a safe place these days to actually come out ahead.  The financial markets are downright scary right now.  I took s bloodbath in 2008 and made it all back and then some and thought with QE2 ending it might be smart to go to safer places.  I am glad I did.  The main reason I started learning about finanace is because of 2008 and all the bull crap on TV.

Come here all the time post sometimes and get some good laughs.  Get some real news without all the sugar coating and lies.  Refreshing.

Tue, 08/02/2011 - 13:46 | Link to Comment Bear
Bear's picture

Gross ... "Sell them bonds at 122" ... current .... 130-16

Wed, 09/14/2011 - 04:32 | Link to Comment chinawholesaler
chinawholesaler's picture

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