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The Grand Unified Presentation Of Everything

Tyler Durden's picture


Physics has the elusive Theory of Everything which consists of several Grand Unified Theories and which represents the holy grail of the science and which "fully explains and links together all known physical phenomena, and predicts the outcome of any experiment that could be carried out in principle." In other words, once proven it would make life boring. We doubt it ever will be. Finance does not have anything like it, for the simple reason that while physics is a deterministic science, finance, predicated to a big extent on assumptions borrowed from the shaman cult known as 'economics' is always and everywhere open ended, and depends just as much on chaotic 'strange attractors' as it does on simple linear relationships. Yet when it comes to presentations, especially of the variety that attempt to explain not only where we are in the world, and how we got there, but also where we are headed, we have yet to see anything as comprehensive as the Investment Strategy guidebook from Pictet's Christophe Donay. If there is indeed a holy grail of presentations, this is it, at least for a few more instants, until something dramatically changes and the whole thing becomes an anachronism. In the meantime learn everything there is to know about global decoupling and the lack thereof, the reality of an over-indebted global regime and its 3 incompatible targets, the outlook for the US and the 30% probability of a hard recession, a recessionary Europe and the five possible outcomes of its crisis, China and its hard landing, and how this all ties into an outlook on where the world is headed together with appropriate investment strategies and proper asset allocation, the fair value of the EURUSD, systemic risk evaluation, cross asset correlation, the impact of central bank intervention, debt redemption profiles, the role of gold and commodities in the new reality, and virtually everything else of importance right here and right now.

From Pictet Investment Strategy 2012:

1. Global overview: current major trends in the global economy

  • Developed markets’ growth cycle is not virtuous due to the lack of credit and job creation. Growth rates are well below their potential. At the opposite, emerging market economies benefit from vigorous domestic demand: economic growth does not show any sign of serious
  • Inflationary pressures should recede by the end of this year in both developed markets and emerging markets’ economies. Headline figures evolve well above levels targeted by central banks.
  • In 2011, developed markets’ central banks adopted new rounds of quantitative easing except the ECB. However, the efficiency of monetary intervention is limited because credit mechanisms are still broken: the deleveraging process is still ongoing.
  • The euro crisis is intensifying. Governments struggle to adopt adequate measures to tackle the source of the problem.
  • As a consequence, financial markets are requiring higher risk premiums for sovereign bonds. It generates aggravating financing conditions in the real European economies. Hence economic growth is on the path of a vicious circle.

2. US: instability in growth as a consequence of the end of the Great Moderation

3. Double global decoupling in DM’s versus EM’s

4. Central and alternative scenarios for DM economies

5. From 2008, DM economies have entered an over-indebtedness regime

6. In an over-indebtedness regime, DM governments have 3 incompatible targets

7. The five possible outcomes of the euro crisis

8. Global Trends

  • The end of the Great Moderation could increase States’ controls. Central banks, under the pressure of governments, will be more and more tempted to embrace new rounds of currency exchange rates and capital controls.
  • The lack of public financial resources implies that governments will impose new regulations to trap capital in domestic markets.
  • The final outcome of the euro crisis remains uncertain: we don’t expect a collapse of the eurozone. But the two ultimate resolutions depend only on political decisions: fiscal union and/or the ECB monetizing governments’ debts. Because Europe is multi-cultural, the decision making process is long and painful.


The United States


9. US: the effective GDP level remains well below potential

  • And if our growth forecasts prove correct, the negative output gap will actually widen in 2012 

10. US: the employment cycle persistently diverges from the investment cycle

11. US: growth in nominal labour income decelerated sharply in H1…

  • …but seemed to have bounced back somewhat over the past few months 

12. US: existing home sales have disappointed over the past few months

  • Housing starts remain globally very weak, but the multi-family segment is recovering strongly

13. US: budgetary policy should be restrictive in 2012,…

  • …but to what extent will depend heavily on what is decided in Congress over the coming weeks

14. US: central scenario - Growth recession in H1 2012

  • As expected, growth bounced back in Q3 relative to H1, and prospects for Q4 appear modestly upbeat as well.
  • However, this improvement is mainly linked to the unwinding of transitory drags, namely the oil and Japanese earthquake shocks.
  • The ongoing recovery remains fairly weak, the housing market depressed and, unfortunately, the debt ceiling drama, the US downgrade and the intensification of the European crisis have led to a sharp confidence and financial shock that will continue to weigh on growth over the coming months.
  • Moreover, budgetary policy will likely become more restrictive next year, to an extent that will depend on political decisions taken before year-end.
  • In that context, we expect the US economy to experience a growth recession in H1 2012, i.e. not a full-blown recession, but still with GDP  increases that are insufficient to prevent a rise in the unemployment rate, followed by some modest improvement in H2.


15. US: alternative scenario - Risks of a full-blown recession

  • Our central scenario implies a 2012 growth rate well below consensus estimates. But that’s not the end of the story. We see downward risks as quite sizable. Two elements are particularly worrying:
    • Fiscal policy: we believe measures to limit the fiscal tightening in 2012 will be taken before yearend. However, full political paralysis is possible, which would lead to a sharp tightening in 2012.
    • European crisis: encouraging developments on that front were short-lived. A further deepening of the European crisis may well happen now, or at some stage or other next year. This would have a further substantial negative knock-on impact on the US.
  • If one of these two risks becomes reality – or at worst both, a full blown recession is likely in the US next year. This is our alternative scenario and, unfortunately, we give it unusually high probabilities (around 30%).
  • However, we believe that if there is a recession in the US, it is likely to remain relatively mild.


European Economy


16. Euro area: even the Germans households have capitulated - Consumer confidence suffered a hard knock over the summer

17. Euro area: surveys now clearly in recession territory - Only the post-Lehman deterioration was as rapid as the current downswing

18. Euro area: PMI surveys heralding a recession for the coming winter

19. Euro area: conclusion and key takeaway for 2012: Things are likely to get worse before authorities adopt definitive measures

  • Changes in governments of the periphery (Greece, Italy, Spain) could offer some temporary relief as adjustment programmes will be easier to implement.
  • But the benefits of adjustment programmes are likely to disappoint again as recession will probably hit during the winter.
  • Consequently, the confidence crisis related to imbalances between the huge financial needs and the responses in terms of aid packages will continue to loom large.
  • At this point, pressure will mount on the ECB to significantly step up intervention. This action will offer the needed relief to give authorities the time to mould a new shape for the monetary union
    • institutionalize a form of fiscal transfers
      • European Monetary Funds, fiscal union or euro-bonds…
      • new Treaty
  • The euro should survive, but things are going to get worse before European authorities decide to wheel out their heavy artillery


Chinese Economy


20. China: 2011, the monetary tightening process is over -  Curbing loan growth was about containing indebtedness ratios and reducing leverage within economy

21. China: hot money inflows have not facilitated the tightening process - High economic growth, interest rate hikes and Yuan appreciation attracted too much capital

22. China: inflation topped in July with the last interest rate hike - The decline in inflation doesn’t mean inflation will not remain structurally higher than in the past

23. China’s urban households leverage: a rise in consumer debt? - Household debt to disposable income rose only from 26% in 2005 to 45% in 2010

24. China: investments are normalizing to ensure sustained growth - Growth should remain investment-led in 2012 but a bit less than during usual pre-crisis paces (25% yoy)

25. China: growth is structurally declining for next years - Higher inflation is the new normal for China for the next several years.

26. China: conclusion and key takeaway for 2012 -Growth will continue to decelerate to a new lower potential, on the background of a structurally higher inflation.

  • Policymaking in 2012 is about stabilizing growth at potential (8.5-9.0%) and bringing inflation below 5% (4.5-5.5%).
  • It is about reducing reliance on credit, allowing a better allocation of capital, contain irrational and excessive infrastructure spending to ensure quality of growth (impeding waste in capital).
  • Use of fiscal spending should be expected in public works to support growth and cushion deceleration of growth during restructuration phase:
    • Social housing
    • Water conservancy
    • Subways and urbanization
  • We expect promotion of capital expenditures in manufacturing sectors for upgrading the economy and climbing the value chain.
  • Enhancing social safety net to contain inequalities & promote consumption (wealth accumulation) is called inclusive growth.
  • Local government debt, shadow banking, bad loans, property developers, etc… will still be a overhang on sentiment. But if these problems are a serious concern, they are not insurmountable and do not threaten China’s economy.


Global economic overview takeaway


27. Global economic overview takeaway (I)

  • Our economic growth forecasts for 2012 for developed markets have fallen significantly over the past few months. While it is not our core scenario, the likelihood of a global recession (double-dip) is increasing.
  • The global economy is still characterized by a double decoupling and lower economic growth at 3.5%.
  • First decoupling: emerging versus developed economies.
    • The United States and Europe face a lack of domestic demand. Private consumption is impaired by too few job creations. The public debt deleveraging reduces government spending.
    • With 0.5% GDP growth in 2012, Europe is close to a recession, while growth in the United States at 1.5% is well below its 3% potential.
    • Emerging markets are running at an average of 4% sustainable growth rate.
    • In case of a significant economic slowdown, low public debt-to-GDP ratios in emerging markets will allow governments to envisage a strong fiscal policy. The over-indebtedness regime in which developed markets are deeply stuck greatly limits their leeway to act. Only a new style of fiscal policy could become a game changer (e.g. new supply side economics after the next US presidential election).

28. Global economic overview takeaway (II)

  • Second decoupling: coexistence of two inflationary regimes:
    • In developed markets, headline inflation in 2012 is expected to converge quickly to the core inflation rate. Central banks in these markets should start to adapt their monetary policy style from inflation targeting to nominal GDP targeting.
    • In emerging markets, headline inflation should stay well above central banks’ targets.
  • In spite of the fact that inflation will diffuse in the economies, the PBoC has already reassessed its inflation target upwards to 4%.


Investment Strategy

29. Record Asset Correlation

30. Nominal returns of asset classes depend on risk / reward ratios

31. Asset allocation in risk-off / risk-on modes


Currency Market


32. Currencies: strong nominal GDP growth is a handicap for currencies!

33. Inflation is crucial for currency performance

34. Currencies’ performance dispersions segregated in 3 volatility regimes

35. Currencies: risk-on and risk-off modes of the main currencies

36. Currencies: EUR/USD short term determinants - Pressure on the euro suggests it should be at EUR/USD 1.30 currently

37. Currencies strategies depend on volatility regimes

38. Central banks’ intervention in currency market

39. Currencies: asset allocation framework for currencies

  • The CHF safe-haven behaviour is artificially blocked. As a result, the CHF will move in line with the EUR versus other currencies.
  • The CHF should remain in the narrow range of EUR/CHF 1.20-1.25 in coming months. The SNB policy is credible in our view and an attack of the CHF is unlikely anytime soon.
  • In the course of 2012, the Swiss franc could weaken further either because of another SNB intervention or because of the deterioration in the Swiss economic cycle (mostly deflation).
  • The GBP should remain range-bound in the coming year between EUR/GBP 0.85-0.90 and GBP/USD 1.55-1.65.
  • This apparent stability finds its origin in the unique policy mix adopted by the UK: quantitative easing and fiscal tightening. While awkward at first sight, this policy mix balances well short term risk (growth) and long term credibility (public finance).
  • The JPY upward trend is likely to continue throughout 2012 (USD/JPY 70 year-end).
  • Globally low yields refrain Japanese investors to recycle their current account surplus abroad.
  • In spite of the strong appreciation of the JPY, it is not massively overvalued, as it is the case for the CHF. Consequently, Bank of Japan interventions are unlikely to reverse the upward trend, while adding some volatility.
  • The ECB easing cycle should weigh on the EUR in coming months. The eurozone debt crisis remains a key risk. The USD should benefit from the EUR weakening, until the possible launch of a QE3 in the US.


40. Equities: since 2000, we are in a secular equity bear market

  • In the financial literature, there is no formal definition of a secular bear market.
  • We propose the following definition, built around four parameters:
    • Intensity, combining an amplitude of the decrease of more than 30% over a minimum period of 3 to 5 years;
    • Volatility: a long term down-trending market is accompanied by a sensible and persistent increase in market prices’ volatilities;
    • An economic growth that is not self-sustained while the secular bear market develops;
    • A massive deleveraging process of economic agents, who abusively used financial leverage during economic growth phases.
  • A secular bear market is always interrupted with sharp rebounds: secular bear market rallies.

41. Equities: since 2000, we are in a secular equity bear market

  • The last shock of innovation of the TMTs lasted six years, from 1995 to 2000. It caused an increase of 233% in the S&P 500 and an average annual growth in real GDP of 4%, i.e. 100 basis points above the previous annual average (since 1950).
  • Since 2000, without any innovation shock, the average annual growth of U.S. real GDP was only 1.5%.
  • Over some 11 years, the S&P 500 has declined by 24%, reaching even 56% at the low of March 2009.
  • Over the period, the average volatility was 22% compared to 14% during expansionary phases.
  • During these 11 years, the U.S. economy experienced three phases of deleveraging. Firms deleveraged between 2000 and 2004. Since 2008, households are doing so. Recently and for some years to come, governments are deleveraging as well.
  • Between 2003 and 2007, the decline in S&P 500 was broken by a cyclical bear market rally of 96%, accompanied by an average annual GDP growth of 2.9%. Also, between March 9, 2009 and April 29, 2011, the S&P 500 rallied by 101.6% and average real annual GDP grew by 2.6%.

42. Equities: volatility has a major impact on equity returns

As risk increases:

  • Extreme performance becomes more likely (kurtosis).
  • Extreme negative performance is more likely than positive (skewness)

Q4 11 - Q1 12 are expected to remain in high volatility regime.

Macro and political decisions would trigger volatility regime switches in 2012

43. Equities: valuation ratios by volatility level

  • The higher the volatility, the  wider the range.
  • In the high volatility regime, our best educated guess should lie between 7 and 12, capturing 73% of possible past outcomes.
  • A volatility decrease would trigger an increase in valuation ratio.

44. Equities: long term Price-to-book (Europe and US) - Pre-1987 crash period and 2000 bubble distorted valuation regime.

45. Equities: euro area banks and CDS spreads


Government and Corporate Bonds


46. QE1, QE2 and Twist are pushing long-term rates downward

47. Redemption for public debt by end-2012 amounts to a total of €1’049 bn !

48. Bonds: 10-year bond yields fell heavily in Q3, to about 2.1% currently

  • However, due to a relatively high core inflation rate, our model is still pointing to a figure of 3.7%...

49. VIX Leading


Commodities and Gold


50. Commodity price volatility rises with risk aversion - Commodities’ beta is a function of risk aversion

51. Commodity returns are negative when risk aversion is very high - Negative relation appears only above a certain risk aversion level (above 1 standard deviation)

52. Returns are asymmetrically distributed - Extreme volatility tends to be associated to negative returns

53. Commodity prices depend on industrial activity - When industrial activity falls, commodity returns remain positive as long as inflation is high

54. Commodities’ performance depend on the world’s real activity - When activity falls, commodity returns remain positive as long as inflation is high

55. Existence of two return regimes for commodities - Depending on extreme inflation behaviour (high & rising inflation vs. low & falling inflation)

56. 2012 : recovery year for commodities

2012 commodities scenario - Paradigm remains intact

  • Commodities scenario depends on 3 key points:
    • Inflation: on a downward trend
    • Growth: down in H1, recovery in H2
    • USD: stronger until Q1, weaker in H2
  • Impact on prices:
    • Commodity price trends to recover in 2012
    • Volatility to be highest in Q1/Q2 and to moderate thereafter
    • Inflexion point end of Q1 2012, beginning of Q2 2012 : possibilities to enter the
    • Commodities market to play momentum

Impact on inflation

  • Price swings in 2012 will continue to be important but:
    • General upward trend not steep enough to be inflationary
    • Downside corrections not durable enough to be disinflationary
  • Commodities not a source of inflation or disinflation in H1 2012.

Alternative scenario

  • Recessions in both Europe and the US, Chinese exports are severely hit
  • Commodities decline to 2008 crisis comparable levels, volatility hits extremes, should however provide excellent entry points, as in 2008.


Wrap-up and conclusions


57. Investment strategy takeaway (I)

Because the doubt about the sustainability of the global economic recovery and the final outcome of the euro crisis remain the two main drivers,  the 2012 investment outlook should be amazingly similar to 2011.

Financial markets should be driven by political decisions. In developed markets’ economies, economic policy will be required to boost economic growth, but governments lack leeway to act due to deep public deficits and painful overindebtedness.

Receding inflationary pressures should allow developed markets’ central banks to act in favour of growth. But will they do it ?

We have determined 3 volatility regimes for most asset classes: equities, currencies and commodities.

The low volatility regime is observed in a standard economic growth cycle. It does not apply to economies of developed markets ever since they evolve in a overindebtedness regime.

In 2012, financial markets should continue to evolve in volatility regimes ranging from average to high, in function of the systemic risk aggravation (euro crisis and bank bankruptcies).

In these volatility regimes, the correlation between asset classes should stay abnormally high in 2012.


58. Investment strategy takeaway (II)

In such an environment, our tactical asset allocation style remains appropriate. We articulate the asset allocation and the portfolio construction in  two stages. The first aims at protecting capital and at generating a return from defensive assets: gold, corporate bonds and low volatility equities.

The second aims at generating a return through the tactical asset allocation.

The frequent sudden and brutal tendency disruptions should constitute the investor’s environment.

The major market tendencies to construct the TAA should be:

  • A continuation of the equity secular bear market. The economic slowdown is pressuring earnings growth, which is the main driver of equities.
  • Developed markets’ sovereign bonds are classified in two groups. The first, safe government bonds, is represented by German Bunds and US  Treasuries. The second includes government bonds that remain at risk.
  • The aggravation of the over-indebtedness of states crisis could affect the safe haven status of the German Bunds and US Treasuries.

Performance discrepancies between currencies could increase in an elevated global market volatility regime. However, unilateral central bank currency market interventions create dysfunctions. As a consequence, playing these markets will prove difficult.

Even though gold has become more volatile, the asset maintains its safe haven status. The unavoidable developed markets’ central bank interventions constitute the fundamental driver for the increase in gold price towards our medium term price target of USD 3’000.

Corporate bonds, particularly in the investment grade segment, are of real interest for investors. Corporate bonds remain a strategic asset.


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Thu, 11/17/2011 - 01:44 | 1885871 prains
prains's picture

all i see is vag

Thu, 11/17/2011 - 01:48 | 1885873 strannick
strannick's picture

its, its. beautiful!......

Thu, 11/17/2011 - 01:51 | 1885875 prains
prains's picture

bow before it as we are not worthy

Thu, 11/17/2011 - 02:04 | 1885893 NewThor
NewThor's picture

In breaking news...

After crossing the 15 trillion dollar debt mark, Jesus Christ downgrades America from 'Christian Nation' to 'Debtor Nation' and warns us if we don't get our act together we will be further downgraded to 'Failed Nation'.

Vaya con Dios.

Thu, 11/17/2011 - 03:58 | 1885992 TruthInSunshine
TruthInSunshine's picture

all i see is vag


Rorschach effect.

Thu, 11/17/2011 - 07:16 | 1886149 Oh regional Indian
Oh regional Indian's picture

Hhha, the best Rorschach , the one that has everyone seeing blots the same way is.....

Everyone sees the blot on fiat-cotton as Munny!



Thu, 11/17/2011 - 09:43 | 1886423 oh_bama
oh_bama's picture


Sat, 11/19/2011 - 21:34 | 1894976 Hugh_Jorgan
Hugh_Jorgan's picture

Mmm.... Excellent information, but some conclusions are sketchy. This guy is still out to make a buck with this report, so I think he certainly has his rose-colored glasses on for this presentation.

Thu, 11/17/2011 - 05:40 | 1886084 Snidley Whipsnae
Snidley Whipsnae's picture

After so many years people are fed up with green FRNs. Tastes change, it's time for a new color. I vote for gold/silver.

Thu, 11/17/2011 - 01:56 | 1885880 paarsons
paarsons's picture

What I'm looking forward to is watching China shit the bed.

Now that's gonna be a lot of fun.

Talk about event horizon.

I truly can't wait.

Thu, 11/17/2011 - 04:20 | 1886019 Snidley Whipsnae
Snidley Whipsnae's picture

It's simple... Push the 'Potential' lever from 'below potential' to 'above potential'... Problem solved!

Now let's see... Where is that potential lever?

Thu, 11/17/2011 - 01:47 | 1885874 cherry picker
cherry picker's picture


Thu, 11/17/2011 - 01:56 | 1885882 Bansters-in-my-...
Bansters-in-my- feces's picture

I'm So confused...!

Thu, 11/17/2011 - 02:01 | 1885888 rumblefish
rumblefish's picture

can someone explain the phrase 'risk on/risk off"?

Thu, 11/17/2011 - 02:18 | 1885910 e_goldstein
e_goldstein's picture

stfu and btfd.

Thu, 11/17/2011 - 04:09 | 1886001 Gief Gold Plox
Thu, 11/17/2011 - 05:20 | 1886071 Snidley Whipsnae
Snidley Whipsnae's picture

"can someone explain the phrase 'risk on/risk off"?"


This information is for Eyes Only if you have a top secret clearance with crypto attachment...

Or, you can google it... in which case you will get 62,200,000 results.

Thu, 11/17/2011 - 10:52 | 1886748 RockyRacoon
RockyRacoon's picture

I believe you were looking for THIS.

I get 511,000,000.

Thu, 11/17/2011 - 02:02 | 1885890 caerus
caerus's picture

feynman had it right...principle of least action bitchezzzz!

Thu, 11/17/2011 - 07:35 | 1886162 oldman
oldman's picture

Hey C,

Is that anything like 'do-nothing'?

you know I'm stuck on that as an action plan, right?


Thu, 11/17/2011 - 02:07 | 1885895 CalBear
CalBear's picture

Thanks Tyler! I can't wait to look at your post in detail (once I'm rested LOL!)


Thu, 11/17/2011 - 02:09 | 1885896 voshnishki
voshnishki's picture

Long commodities, short high beta equities is what I hear 

Thu, 11/17/2011 - 02:11 | 1885898 CalBear
CalBear's picture

rumblefish: Risk on = still believe in capitalism; risk off = stock up on guns and ammo

Thu, 11/17/2011 - 02:15 | 1885905 The Big Ching-aso
The Big Ching-aso's picture



E = MC2

eCONomics = Morons (x) CONgress Squared

Thu, 11/17/2011 - 02:19 | 1885912 e_goldstein
e_goldstein's picture

"See the cat? See the cradle?"

Thu, 11/17/2011 - 02:24 | 1885921 caerus
caerus's picture

see the silver spoon?

Thu, 11/17/2011 - 03:36 | 1885980 DavidPierre
DavidPierre's picture
Vastitas temporis !
Thu, 11/17/2011 - 03:47 | 1885984 caerus
caerus's picture

salve amice! quid agis?

Thu, 11/17/2011 - 03:58 | 1885989 DavidPierre
DavidPierre's picture

media lectio ... ante somnum !

Quid in mundo locus ... tibi ?




Thu, 11/17/2011 - 04:06 | 1885996 caerus
caerus's picture

texas amicus meus

Thu, 11/17/2011 - 04:20 | 1886015 DavidPierre
DavidPierre's picture

urbem ?

Vivo... Salmonum Arm... Marcus... Columbia !

Bona nocte!  Fortunatos amet!

Thu, 11/17/2011 - 04:33 | 1886029 caerus
caerus's picture

bona nocte!

Thu, 11/17/2011 - 04:46 | 1886040 caerus
caerus's picture

pulchellus...pulchritudo pulchritudinis

Thu, 11/17/2011 - 02:21 | 1885915 alexwest
alexwest's picture


look at #47. Redemption for public debt by end-2012 amounts to a total of €1’049 bn !

reading this chart you'd assume that countries that in need to re-financed debt are : France/italy/spain/ireland/etc

WHAT ABOUT GREAT BRITAN,? WHaT ABOUT JAPAN? WHaT ABOUT USA - 800 lbs monkey in the room?

well if authors would out chart correctly than we would find out that refinance need of USA or JAPANA bigger than sum of all countries in EUROPE. got that.. ?

USA run 1.5 trln deficit+ 15 trl of debt w/ avg duraction 5-6 years,
so EACH AND EVERY YEAR USA NEED TO REFIANNCE/ISSUE NEW DEBT ABOUT 4-5 TRLN... well its 10 times more than whole bad defaulted italy..

good luck to idiots printing/READING research junk


Thu, 11/17/2011 - 07:46 | 1886168 oldman
oldman's picture


From what I read above, I began to understand why there is so much fear of regional currencies.

Why not just borrow enough money to buy the necessary gold and silver and deduct all the debt everyone is holding by paying off the creditors and handing the bill to the debtors to pay off over the rest their corporate lives? Of course, individuals would have the first $250,000 of debt forgiven so as to play out one of Obama's promises in a reverse manner.

Anyway, the gold and silver would soon begin to move around and before long we would have real money in circulation again------

I'll leave it here as it is with the hope that you and others much more learned than this oldman will pick it apart and maybe I'll learn something useful.

thanks    om

Thu, 11/17/2011 - 02:36 | 1885934 huckman
huckman's picture

Hello- Where's the chart for the non performing assets?

Thu, 11/17/2011 - 02:43 | 1885935 michael_engineer
michael_engineer's picture

In light of all those charts and data, this now might make more sense to some of you :


Thu, 11/17/2011 - 02:49 | 1885943 Peak Everything
Peak Everything's picture

Anyone who tries to explain or predict the economy without analyzing net energy availability is an idiot.

$1 US (1990) = 9.7 mW is all you need to know to understand everything.

Thu, 11/17/2011 - 04:17 | 1886014 Seer
Seer's picture

Looks like a couple people have tried (based on two down arrows).  People just don't get it... cognitive dissonance.

Thu, 11/17/2011 - 05:01 | 1886055 natty light
natty light's picture


Thu, 11/17/2011 - 13:00 | 1887336 Peak Everything
Peak Everything's picture

Yes, intuition would suggest mW-hr. However Garrett shows wealth = mW. Quite profound with big implications. It will make sense after you study it a bit.

Thu, 11/17/2011 - 07:25 | 1886157 Schmoo
Schmoo's picture

interesting idea - thanks for the link

Question: if energy growth rate is 1.8%/yr, and global population growth (per Wiki) is 1.1%/yr, does the hypothesis suggest the true global economic growth rate is 0.7%/yr? (normalizing to population)

Thu, 11/17/2011 - 13:05 | 1887369 Peak Everything
Peak Everything's picture

If net energy consumption is growing faster than population then average wealth per person is increasing. This of course says nothing about the distribution of wealth which as we know is shifting from developed countries to developing countries.

Note the word "net". It's important to net out any energy used to obtain energy. If we use a million barrels of oil to get a million barrels of oil then our wealth is zero.

Thu, 11/17/2011 - 07:44 | 1886164 Archduke
Archduke's picture

part of this mirros an original contrarian thermodynamic energy view opined a number of years ago:

The Bottomless Well: the twilight of fuel, the virtue of waste, and why we will never run out of energy


however they introduce an entropy concept of energy quality instead of quantity, ie energy order,

and have a far more optimistic prognosis for the future.  they argue for example, that increased

consumption creates wealth (and begets more consumption).


Thu, 11/17/2011 - 09:36 | 1886394 TheAkashicRecord
TheAkashicRecord's picture

//why energy supply is infinite.//  

So it says on that site.

Please explain to me, within the context of thermodynamics, how this is possible.

Thu, 11/17/2011 - 12:40 | 1887234 Archduke
Archduke's picture

yes, as a contrarian book it's full of captcha trolls, but if you read the book it's quite sound and profound.

it argues that energy scarcity of one lower form drives us to discover new forms or higher order energy.

that we'll either get better at extraction, or move on to new sources of power. that the nature of the

source or fuel is irrelevant, only its energy density and order in terms of entropy are what matter.


Thu, 11/17/2011 - 09:48 | 1886450 Seer
Seer's picture
Biggest Oil Find in Decades Becomes $39B Caution

The greatest minds and the greatest array of technology's best rearrangement of matter (technology's ONLY capability is in providing us with the IDEAS on how to rearrange matter/physical resources)...

EROEI - of course, those bilking tax dollars (subsidies, direct OR indirect [military]) out of us don't want us to view things in such perspective, no more so than the banksters want us looking at their second set of books.

Thu, 11/17/2011 - 03:08 | 1885954 Mercury
Mercury's picture


Thu, 11/17/2011 - 03:11 | 1885956 Bolweevil
Bolweevil's picture

He shouldn't use the terms European Authorities and Heavy Artillery in the same sentence. I hope to be suffering from a severe case if kurtosis. I'm pretty sure restructuration is not a word, but then what kind of doofus actually reads this stuff?

Thu, 11/17/2011 - 03:42 | 1885962 DavidPierre
DavidPierre's picture

Picked through this witch's caldron of eCON MumboJumbo with wavy STRINGY THEORY charts...

Everything of import for here and now ...

GOLD ...





Bill Murphy and Chris Powell, @ said as much 7 years ago !



Thu, 11/17/2011 - 03:21 | 1885966 Max Fischer
Max Fischer's picture




Clearly you have not read any of the recent research by Nicolas Gisin from the University of Geneva.  In short (and minus any quantum entanglement gobbledygook), he blew a hole straight through the Einstein-Podolsky-Rosen paradox and proved that the physical world can be very imprecise. Apparently, God does play dice with the universe, and nothing can be certain.

Looks as if economics and physics have more in common than you think. Sorry. 

Max Fischer, Civis Mundi



Thu, 11/17/2011 - 03:20 | 1885967 tahoebumsmith
tahoebumsmith's picture
Not sure what to say? Seems like we are all caught up in some kind of circus? I'm trying to survive owning my own biz in this clusterfluck...Am I a clown or the ring dog? I thought I was living the American Dream until I realized I was acually the side show.....

Were all in it together... All I got to say is the midget bitch is mine

Thu, 11/17/2011 - 03:55 | 1885990 TruthInSunshine
TruthInSunshine's picture

No matter how one slices it, it's all a big shit sandwich that the merry central bankster pranksters have fixed for the world, with their fractional reserve banking witchcraft of conjuring worthless fiat (held out as inherently valuable) from thin air, loaning said 'money from nothing - and at no cost' out at interest, seeing that the base amount of this debt (presented and sold as a credit) is leveraged to the moon (9x if you're a commercial plain vanilla bank, for starters, as much as 31x or more if you're more exotic & suave, and dabble in derivatives or other society-benefiting, job creating financial engineering)...

...and I'm going to love it when even a plurality of the sheeple realize that what G. Edward Griffin deemed 'the Harvest' and Hayek deemed 'the boom-bust cycle' is coming, all grim reaper like (sickle in hand) for their head.

The Money Masters drank the sheeple's milkshakes again, bitchez.


Thu, 11/17/2011 - 04:14 | 1886009 w a l k - a w a y
w a l k - a w a y's picture

Anybody know what "TMT" refers to?


41. Equities: since 2000, we are in a secular equity bear market

  • The last shock of innovation of the TMTs lasted six years, from 1995 to 2000. It caused an increase of 233% in the S&P 500 and an average annual growth in real GDP of 4%, i.e. 100 basis points above the previous annual average (since 1950).
Thu, 11/17/2011 - 04:46 | 1886042 Snidley Whipsnae
Snidley Whipsnae's picture

Neg... "Anybody know what "TMT" refers to?"


I don't know what TMT stands for ... but, the period mentioned was about internet start ups. Most them collapsed when they were found to be frauds of various sizes so I can't see how they added 4% to REAL GDP except in the narrowest sense and for a short period of time. Since I believe that US Real GDP is a joke why would it matter how it's effected by 'the TMT innovation shock'?

Internet start up frenzy bubble = a version of the european tulip bubble

Thu, 11/17/2011 - 04:51 | 1886045 lunar
lunar's picture

may be ---> Technology, Media, Telecommunications

Thu, 11/17/2011 - 05:32 | 1886078 w a l k - a w a y
w a l k - a w a y's picture


may be ---> Technology, Media, Telecommunications

Makes sense / sounds right to me. Thanks

Thu, 11/17/2011 - 04:16 | 1886012 stika
stika's picture

It's all about an epistemologic issue. Two different subjects, two methods. For economics, the Austrian method. As simple as that.

Thu, 11/17/2011 - 06:12 | 1886105 spdrdr
spdrdr's picture

I'm sorry - I misread that as the "Australian" method, and all that I could think of was Australian philosophy.

Which might very well suit........

Thu, 11/17/2011 - 04:22 | 1886021 Seer
Seer's picture

Economics is all about DECEPTION.  That's its purpose.  It's meant to obfuscate the real state of the physical world such that the power brokers can continue to sit on top of the pyramid of those who work.

The Pyramid = The Ponzi = Interest/Growth

Thu, 11/17/2011 - 04:29 | 1886023 TruthInSunshine
TruthInSunshine's picture

Do not tell anyone I wrote this, because all fingers will point to me, but in reality (and most won't believe what I'm about to reveal), The Bernank has one of those cheesy Magic 8 Balls that you shake after asking a question, and he bases every decision he makes off the answers it provides.

He gets really frustrated, his lips correspondingly quiver and he gets the nervous facial ticks whenever the answer is the dreaded "Maybe."

He has thought, at various times, about replacing it with that Staples 'Easy' button, but he hasn't quite figured out how that would work or assist him in answering the vexing problems routinely faced by a central bankster.

Thu, 11/17/2011 - 04:56 | 1886051 Snidley Whipsnae
Snidley Whipsnae's picture

TISunshine... Central bankers have only had those 8 balls since ~ 1970. Perhaps they should revert to the chicken bones and goat entrails readings used during the 'good ol days' of the roaring twenties and subsequent Great Depression? :)

Any method central bankers choose seems to lead to the same outcome.

At any rate, Einstein was certainly right about one thing; 'Any central banker that repeats the same experiment over and over again and expects different outcomes is insane.'

Thu, 11/17/2011 - 05:30 | 1886077 Cult of Criminality
Cult of Criminality's picture

quote; "He has thought, at various times, about replacing it with that Staples 'Easy' button, but he hasn't quite figured out how that would work or assist him in answering the vexing problems routinely faced by a central bankster.'


Like how to hide the FRAUD ?

Thu, 11/17/2011 - 04:58 | 1886053 madbomber
madbomber's picture

 AMER ICAN millionaires



match the song with the youtube likes with the alexa top 10,000 with , with , with, alexa, with, with RECOGNIZE

Thu, 11/17/2011 - 05:19 | 1886065 madbomber
madbomber's picture

this song is also relevant






Thu, 11/17/2011 - 05:19 | 1886067 bigwavedave
bigwavedave's picture

and..... Pictet is forced to give up all its tax cheat USA client data to the IRS

Thu, 11/17/2011 - 05:33 | 1886070 madbomber
madbomber's picture

whos gonna talk to me till the sun comes up???





Thu, 11/17/2011 - 05:21 | 1886073 ManicMechanic
ManicMechanic's picture

Indecision is the key to flexibility.

Thu, 11/17/2011 - 05:32 | 1886079 Snidley Whipsnae
Snidley Whipsnae's picture

It's possible to be indecisive and hide bound. Look around you.

"If people are given the choice of changing their minds or finding reasons not to, most will get busy on the reasons'

John K Galbraith Sr

Thu, 11/17/2011 - 05:30 | 1886076 caerus
Thu, 11/17/2011 - 05:36 | 1886081 props2009
props2009's picture

C3X live trading room


C3X Portfolio of FX trades making over 1900 pips for Nov

Thu, 11/17/2011 - 05:38 | 1886082 madbomber
madbomber's picture

the bar is empty but suddenly fills with guests

(in the shining)




Thu, 11/17/2011 - 06:03 | 1886099 Snidley Whipsnae
Snidley Whipsnae's picture

"I'm sorry to differ with you, sir. But you are the caretaker. You've always been the caretaker. I should know, sir. I've always been here."

Fri, 11/18/2011 - 03:23 | 1890561 madbomber
madbomber's picture

hi Whipsnae, no relation to wesley snipes



Thu, 11/17/2011 - 05:55 | 1886090 bombimbom
bombimbom's picture

GEAB N°59 is available! Global systemic crisis: 30,000 billion US dollars in ghost assets will disappear by early 2013 / The crisis enters a phase of widespread discounting of Western public debt

As we come to the end of the second half of 2011, it is evident that 15,000 billion in ghost assets have gone up in smoke since last July, just as was anticipated by LEAP/E2020 (GEAB N°56 ). And, according to our team, this process figures to continue at the same rate throughout the year to come. Indeed we estimate that, with the introduction of a 50% discount on Greek government debt, the global systemic crisis has entered a new phase: that of the generalized discount on Western public debt and its corollary, the fragmentation of the global financial markets. Our team believes that 2012 will bring an average discount of 30% of total Western public debt (1), plus an equivalent amount in loss of assets from the balance sheets of worldwide financial institutions. Specifically, LEAP/E2020 anticipates the loss of 30,000 billion ghost assets by early 2013 (2), with an acceleration in 2012 of the partitioning process of the global financial market (3) into three increasingly disconnected currency areas: Dollar, Euro, and Yuan. These two phenomena feed into each other. They will also be the cause of a sharp decline of 30% on the part of US currency in 2012 (4), as we announced last April (GEAB N°54 ), which will occur amidst a sharp reduction in demand for the US dollar and the worsening of the US governmental debt crisis. The end of 2011 will therefore see, as anticipated, the trigger of the European debt crisis detonating a US bomb.


Thu, 11/17/2011 - 07:55 | 1886178 oldman
oldman's picture


You are amazing! I had just decided to see if GEAB's, new issue was out because it is the 16th/17th of the month, when I read your post and saw the link.

Thanks, brother/sister i'm going there right this minute       om

Thu, 11/17/2011 - 08:17 | 1886193 oldman
oldman's picture

Thanks again bombimbom,

I always enjoy the style of these dudes, although, they were a little stronger than usual in their comments on the US(well-deserved as they were); usually a little more reserved than this issue, probably just ran out of patience with our constant preachiness.

Anyway---thanks again    om

Thu, 11/17/2011 - 05:56 | 1886092 madbomber
Thu, 11/17/2011 - 06:29 | 1886118 Optimusprime
Optimusprime's picture

I am suspicious, despite the work that went into this presentation.  Anyone else notice how "sovereignty of states" is inversely proportional to "growth"?


Aside from any necessary critique of the political economy of growth, alluded to by many here in different guises, and which provides its own distinctive line of analysis, there is the the "one-world government"/one-world fiscal/monetary goal, the holy grail of the same elites who seem to have managed the catastrophe so far.


Count me out. 


It is not that I love "states" so much--far from it--but the movement from more-local to more-imperial authority ought to arouse aversion in any who have libertarian instincts.


Especially when the imperial order is being masterminded by alien elites, aided and abetted no doubt by turncoats and opportunists as always.

Thu, 11/17/2011 - 16:37 | 1888730 onebir
onebir's picture

Anyone else notice how "sovereignty of states" is inversely proportional to "growth"?


This is probably just a intended as description of the reality faced by the EMU members: give up fiscal sovereignty or go bust (unless the ECB prints).

Thu, 11/17/2011 - 06:41 | 1886129 michaelsmith_9
michaelsmith_9's picture

Heavy equity selling pressure is likely to cause a break down.

Thu, 11/17/2011 - 06:58 | 1886139 Instant Wealth
Instant Wealth's picture

Wasn't this meant for Christmas ?

Thu, 11/17/2011 - 07:16 | 1886151 chaartist
chaartist's picture

Sometimes I m so tired of so many charts. They were clear few years ago. I often skip directly to comments section, we have more fun here. Good fun is hard to get today in zombielands, it almost reminds me of gold

Thu, 11/17/2011 - 07:24 | 1886156 fonzanoon
fonzanoon's picture

finally a grand unified presentation of everything. so we are done now correct?

Thu, 11/17/2011 - 07:46 | 1886169 ThatThatcher
ThatThatcher's picture

5) Looks like there's an error there. Real GDP growth > 3% in 'insolcency territory'?

Thu, 11/17/2011 - 07:48 | 1886171 SecondComing
SecondComing's picture

...once proven it would make life boring. We doubt it ever will be.


Actually, once proven, that is the End of Science.  Life will have a new chapter.  And that is just what is about to occur.

Thu, 11/17/2011 - 08:03 | 1886184 PulauHantu29
PulauHantu29's picture

Expalins why Central Banks (and investment banks) are grabbing commodities esp gold, oil and silver.

Don't tell the CB'ers, "you can't eat gold."

Thu, 11/17/2011 - 08:37 | 1886211 DavidC
DavidC's picture

Your intro was poetic!


Thu, 11/17/2011 - 09:50 | 1886467 Caveman93
Caveman93's picture

"If it bleeds...we can kill it."

Thu, 11/17/2011 - 10:10 | 1886482 Orange Pekoe
Orange Pekoe's picture

Theory of Bernanke:

Governments are businesses that sell monopolies. US government has sold a monopoly to Federal Reserve to sell dollars for taxes and oil. Federal Reserve charges people a percent per year per dollar. Bill Gates doesn't pay for the Windows license on his desktop because he owns it, that's why he gets to sell it. Someone is sitting in a castle somewhere spending an unlimited bank account of dollars that they own and didn't have to pay for because they own Federal Reserve. This sets the fee for everyone else. The higher the fee--inflation--the higher people raise prices to make up for it.

This is why Bernanke says gold is not money, because gold is competition and monopolies cannot withstand competition--that's why they had to make them monopolies.

This is why deflation is bad to Bernanke, because it means fewer people buying his product: dollars.

Thu, 11/17/2011 - 10:34 | 1886656 Stuck on Zero
Stuck on Zero's picture

A lot of great material.  All the charts point to one conclusion: "He who inflates first inflates best."


Thu, 11/17/2011 - 11:00 | 1886799 GeezerGeek
GeezerGeek's picture

The language of Physics is mathematics, but as complicated as the equations of physicists might be, they pale in comparison to the 'mathematics' employed by the financial universe to create ever more complicated financial instruments. Physics eventually reaches a point where all it can do is discuss philosophical concepts, particularly at the quantum level. Finance, as practiced by central banks, seems to consider reaching ultimate obfuscation its primary goal. That allows them to siphon the wealth of average people while proclaiming the great benefits to humanity that will arise from their efforts. Unfortunately, I gave up on math after having problems in a Differential Equations course and now understand neither the math of quantum physics nor the math of central bankers.

Thu, 11/17/2011 - 16:44 | 1888809 onebir
onebir's picture

Can anyone comment on the significance of single vs multi-occupation housing starts? :s

Thu, 11/17/2011 - 17:17 | 1889050 smiler03
smiler03's picture

There is an error in one of the graphs.

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