David Rosenberg: "The Best Currency May Be Physical Gold"

Tyler Durden's picture

Stop us when this sounds familiar:

What a no-brainer to suck at the teat and go long some very transparent and liquid debt that matures in less than three years (how can there not be a rally in global risk assets when Europe's central bank pumps a combined $1.3 trillion into the financial system? Not to mention a second bailout for Greece we were told a year ago there wouldn't be any!). This must be the safest carry trade ever, or at least that is the perception (1% LTRO loan for a 5% Italian bond or a 2% short-term note even ... back up the truck!). Put up a tiny bit of capital and lever it up. It is incredible that we live in a world where the difference between going out of business as a bank and prosperity lies with cheap money being accessed from the central bank balance sheet.

 

At least LTRO1 was dealing with a possible breakdown of the system since the banks weren't lending to each other. LTRO2 is clearly an overt policy move from the traditional central bank role of being the lender of last resort (which even LTRO1 was to a point) to being the lender of first call, as Peter Tchir aptly puts it. There is no such thing as a free lunch, but there is such a thing as the law of unintended consequences. I can't say I know for sure what they will be or when they will show up, but there are going to be repercussions from a central bank morphing from a bona fide lender of last resort to a gift-giving institution.

 

Somehow a long gold, short euro barbell looks really good here. Bernanke, after all, now seems reluctant to embark on QE3 barring a renewed economic turndown while the ECB is moving further away from the role of a traditional central bank to take on the role of quasi fiscal policymaking, The German central bank, after all, is responsible for 25% of any losses that would ever be incurred by the massive Draghi balance sheet expansion. Why would anyone want to be long a currency representing a region with a 10.7% unemployment rate, rising inflation rates and free money? Mind you — the same can be said for the US (where U-6 jobless rate is even higher), which is why the best currency may be physical gold (or the producers that trade very inexpensively here and you pickup some leverage).

Short and sweet.

From David Rosenberg of Gluskin Sheff

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The Shootist's picture

I'm long a 'big @$$ can' of   FTW!!!

TruthInSunshine's picture

This will be a Zero Hedge article soon, but for those who aren't aware of it, David Stockman's gone full Defcon on the Fed Ponzi & an imminent economic meltdown, warning of absolute carnage, with a full & intentional interview with the AP/USA Today.

And yes, he owns gold, saying essentially that it's risk free, and will important to hold in the period that lay ahead.

From the other thread I posted this in:

David Stockman has gone all in on calling the Federal Reserve 'out of options' and stating that the shit's going to hit the fan (if you don't know Stockman's resume, you should, and this is incredible stuff).

Is he right, wrong, lying, putting a warning out there....????

I don't know. I know he was as high ranking as it gets as an economic adviser to a sitting President of the United States.

I know that when someone like this comes forward in an intentional shout out in the loudest way possible, through the AP Wire Service (which makes its way onto every front page of every newspaper), something is probably afoot:

 David Stockman economy Q&A: Economic disaster in the works 

--USA TODAY

 

Stockman: "Here's the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today 7/8— utterly fearless and independent and willing to scare the hell out of the market any day of the week — you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today.

Q: You sound as if we're facing a financial crisis like the one that followed the collapse of Lehman Brothers in 2008.

A: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.

Q: How do investors protect themselves? What about the stock market?

A: I wouldn't touch the stock market with a 100-foot pole. It's a dangerous place. It's not safe for men, women or children.

Q: Do you own any shares?

A: No.

Q: But the stock market is trading cheap by some measures. It's valued at 12.5 times expected earnings this year. The typical multiple is 15 times.

A: The typical multiple is based on a historic period when the economy could grow at a standard rate. The idea that you can capitalize this market at a rate that was safe to capitalize it in 1990 or 1970 or 1955 is a large mistake. It's a Wall Street sales pitch.

Q: Are you in short-term Treasurys?

A: I'm just in short-term, yeah. Call it cash. I have some gold. I'm not going to take any risk.

Q: Municipal bonds?

A: No.

Q: No munis, no stocks. Wow. You're not making any money.

A: Capital preservation is what your first, second and third priority ought to be in a system that is so jerry-built, so fragile, so exposed to major breakdown that it's not worth what you think you might be able to earn over six months or two years or three years if they can keep the bailing wire and bubble gum holding the system together, OK? It's not worth it."

Not For Reuse's picture

depends on what you mean by currency.

Best thing to travel with, for sure...IF you're traveling somewhere with a strong fiat scaffolding.

If not, gold is really really fucking soft & malleable, in every sense.

DoChenRollingBearing's picture

Gold vs. Buffett.  Silver vs. Jamie Dimond.

Warren Buffett (twice) and Jamie Dimon are both featured in this weekend's Barron's.  I review it at my blog ("Review of Barron's, Dated 5 March").

"I'll be damned if we don't have record profits for the next year or two." -- Jamie Dimon

This is despicable on so many levels.  Want to read more?  Gmail me at my name and promise to behave, and I will send you the link (or just use Google).

fonzannoon's picture

In a possible hyperinflationary environment this guy is recommending mostly cash?

Sudden Debt's picture

Still makes sense. Before we get the next inflation ride, we'll first pass a short term deflation period which might take 2 to 4 weeks

fonzannoon's picture

maybe but that is a trader mentality and this guy does not seem like a trader. What id that 2-4 week period does not happen? Then you are stuck. I just don't see this guy illustrating such a bad outcome and yet his recommendation is to wait in cash for the short term blip of deflation. I just wish he would have expanded more on what he is doing to protect himself.

tarsubil's picture

I think he knows that this isn't all planned and organized. The people running this shit show are retards. It is going to start crumbling and seizing up before they start dumping printed fiat all over the place. Deflation first then hyperinflation.

smiler03's picture

Thanks for this TIS.

It's people like this guy, who I have never heard of before today, that make me think my small pension fund is doomed. I'm roughly 66% into international funds (12 different ones and called "mutual funds" in the US?) and 25% PMs/Cash. The return on my funds this YTD is great. Now if I follow this guys advice I'd sell all of those well performing funds and get zero zip nada 0% in the cash that I'd have instead. (assuming I don't put 100% into PMs).

My questions to myself are: How certain am I that this guy will be right? When do I think the SHTF? How much will I lose if the SHTF tomorrow or in 3 years from now? How do I invest in treasuries, other than via funds? Why are treasuries better than cash?

I have no idea at all what to do so for now I'm sticking to my funds. The worst that can happen to me is I lose the price of a "cheap" luxury car.

I should say that there is no way I would put 100% into PMs, but if I had to it would be 90% silver and 10% neodymium.

Any comments welcome :O)

edit: I should have pointed out that my UK SIPP (self invested personal pension) CANNOT LEGALLY hold physical metals so please don't advise me to get physical. I'm also 15 years from the national retirement age.

MrSteve's picture

Try energy and top mining stocks outside the pound, like Statoil and Newmont. Could you sell out, take a penalty and reinvest in PM? That might be smart if you avoid a 90% currency revaluation.

tarsubil's picture

So gold for my savings, silver for the revolution? I think my buying strategy is perfect.

Element's picture

"She's settling fast by the bow Sir!"

Bendromeda Strain's picture

Rosey better be careful calling gold a currency, one of Obama's "butch squad" may label him a Canadian terrorist and call out the drones. http://en.wikipedia.org/wiki/Anne_Tompkins

Manthong's picture

 

 

"A strange game.

The only winning move is

Not to play."

 

GMadScientist's picture

Very.

One who has, until this point, never lost his shit to that degree.

Channeling RP for a couple beats there.

Sam Clemons's picture

Rosenberg, welcome to the world.  I think the old ZH poster Gordon Gekko pointed out that deflation is a flight to cash, and the finest cash is gold.  He definitely was no dollar deflationist, but a gold deflationist.

resurger's picture

Nice post TIS

Faber also says gold is far from a bubble, but there are some small corrections. this is nice

"No. If you went to an investment conference in 1989, 90% of the people there would have told you they owned shares in Japanese companies. In 2000, 90% of them would have said they owned NASDAQ shares. Only about 5% of the participants at an investment conference today would tell you they own gold. Very few people in this world own gold."

margaris's picture

Sources please.

from Marc Faber 's last interview in "The Gold Report":

http://www.theaureport.com/pub/na/12730

;-)

holdbuysell's picture

From the interview:

"I'm a libertarian."

Stockman for Paul's VP?

Interesting combo.

Troll Magnet's picture

stockman also thinks everyone should pay more taxes. i say no thanks.

TruthInSunshine's picture

He was responsible, primarily (as in he front and center), for one of the largest tax breaks in history, under Reagan, when there was still the notion that everything wasn't a literal ponzi, precariously perched on the ledge of of a scam, teetering on the narrow tip of a massive fraud.

Back then, there were still credible & smart economists who believed that the government had the ability to spend less than it took in.

They obviously are now aware of their massive naivety.

oldman's picture

Yeah, maybe

Volker and Stockman were considered corruptible shills by the old men I worked with

those oldmen probably did not know what 'credible and smart economists' were

There was a punk named Lawrence Kudlow who would fly in from NYC occasionally and they thought he was a fool

since I liked what he had to say I began listening to old men to understand why

All I can say now is that I'm glad I did and a thanks to Kudlow for having been the inspiration-----without those old men--I would have sounded like a lot on this site

it was a long time ago around '78-'80 and still nothing has happened                       om

MrSteve's picture

So tell us why Kudlow is in broadcasting instead of looting his Bear Sterns accounts? google his SEC consent decree. Oldman, take your nominal accounting wet dream to the grocery store in two years and tell us how you make out. Good luck to you and all the other fools sucking on Kudlow Koolaid. Load up on stocks in front of the greatest interest rate crush / currency debasement on earth. There is no fool like an Oldman Fool.

oldman's picture

TIS,

He and Laffer had the same veneral disease, I forget what it was---something to do with 'trickle down' is all that comes to mind.

I don't think they ever found a cure                         om

TruthInSunshine's picture

See Dr. Ken's response immediately below, as he preempted whatever response I would have made, and more eloquently.

I do appreciate what you're saying, however, and agree that Stockman isn't perfect idea or policy wise.

The significant thing to me now is that for a man who resigned because the President wouldn't start implementing a deficit (and debt) reduction effort, and who had the status of Stockman both pre and post-government, what's he's saying so publicly about the system being literally held together by bailing wire and bubble gum, and the enormity of the leverage and margin that's sooner rather than later going to wreak "carnage" in a way that makes Lehman appear insignificant, he cannot be dismissed casually.

kalum's picture

I esp liked the line "we need to get some SANE people at the Fed"

oldman's picture

TIS,

Of course you are absolutely correct.

However, he seemed such a boy scout from the south and was quite young that he was considered very lightweight at the time and has only improved with age. This happens sometimes.

Also, please, remember that the oldmen that trained me never recovered from the dollar devaluation that came when, 1971? Shit, I can't even remember dates any more. These old fools were the dudes who  used to fly to Switzerland as couriers for their clients to be certain all was as the Swiss said it was and all the details to secure their capital were as the clients wished. Those days are gone, of course, but the oldmen turned out to have known what was coming, no matter how crazy I thought they were at the time. These guys were truly 'private bankers' and as rare as hen's teeth today.

Stockman today may be a great guy; I don't have an opinion. But I do recall being asked to leave a meeting where 'trickle-down' was being sold by Laffer buy the eyes of my colleagues for laughing out loud and posing the wrong questions. The good thing that came of this was that the partners never asked me to another meeting.

I'm still laughing and posing the wrong questions, so excuse me for any offense.

None was intended                           om

Dr. Kenneth Noisewater's picture

I believe he thinks that we should not be running ponzi deficits, and if that means raising taxes, then so be it.

 

Me, I would prefer to see prosecutions, clawbacks and massive penalties against companies, fiduciaries, employees and windfall shareholders in any security or asset class that involved fraud (such as MBS, CDS, etc).  Also, a reneging on all 'last resort' backstopping and any bonds held by non-democracies or the Fed.  And, of course, elimination of any federal departments whose jobs are better left to the states, a 50% reduction in defense spending (including mothballing at least 5 carrier groups) and 50% reductions in federal "entitlements", abolition of Davis-Bacon, EMTALA, mortgage interest deduction and student loan special treatment, along with antitrust exemptions for every industry including medicine, pharmaceuticals, and professional sports.

Do all of that first, and THEN consider raising taxes.

oldman's picture

Hey DR,

Why clawbacks? Why not put them in the jail and take all their assets like we do with 'drug lords'?

Theft is theft----and there ought to be a tree nearby, no?

ChrisFromMorningside's picture

The bitching and moaning in the media is getting hilarious.

"WHY?! WHY wont you understand that the economy is RECOVERING? You must be a RACIST who hates Obama."

I think they've jumped the shark. Dow 13,000 and people are still running for the exits because of how farcical it all is. It seems like the wheels are about to fall off this shitwagon.

RSloane's picture

I agree it is hillarious, not only the bitching and moaning by the media, but also as you say, by ardent Obama supporters. The discrepancy between what the MSM reports about the economy and those who live and work in it is growing greater. People who were unemployed for upwards of two years and finally got a new job flipping burgers are not fooled, especially after they lost their home, life savings, and valuables which were sold off to feed their families. Millions of people on welfare, millions more on disability, grown children and their children having to move back in with the grandparents, millions more getting help with just paying bills - they all know the truth of it. 

TruthInSunshine's picture

I am a genuine independent, knowing (not believing, but knowing) that both allegedly different political parties, that are offered up as some sort of Kabuki Theater illusion of choice, when in reality they're both working for and paid by the same people and institutions, using social wedge issues to stir their respective bases rather than issues affecting our very survival (e.g. Pledge of Allegiance in school vs. the National Debt), and if anyone who claims to be an Obama supporter doesn't see the universe of emptiness between what he pledged he'd do during his campaign in 2008 and what he's actually done (e.g. sucked up to the banks, signed legislation and executive orders purporting to strip more constitutional rights from Americans [let's hope the SCOTUS still has a remote passing respect for what is our constitution when the challenges to these actions arise], radically expanded the size of the debt and ongoing deficit spending, etc.), they are literal and true imbeciles of the highest order.

How anyone who actually thinks the constitution is an important if not vital framework upon which our system of government depends can support any legislator or President (or presidential nominee or candidate) who supports NDAA 2012 blows my mind.

jonjon831983's picture

I went overseas with a thin wad of USD because I know it IS the reserve currency of the world... used and recognized globally in most countries.

 

Then I made my way to a store and blew my wad on a shiny little bar of gold.

BooMushroom's picture

And what kind of spread did you get versus just buying the bar here?

rufusbird's picture

RE: Stockman, The best part...

" Q: Are you hopeful? A: No "

fonzannoon's picture

So what the hell does this guy Stockman own? Some gold? Some short term Treas? Thats it?

Idiot Savant's picture

Sounds like he owns cash and a little gold. He's hedged for inflation and deflation. I suppose if the CBs can hold this ponzi together, we'll just get inflation. If Stockman is correct, and the system crashes, it'll be a deflationary collapse and cash is king.

wee-weed up's picture

May be???  Bitchez please!!