Guest Post: Take A Step Back And Look At The Macro Picture

Tyler Durden's picture

From Maurice Pomery of Strategic Alpha

Take A Step Back And Look At The Macro Picture

Good Afternoon/ Good Morning America..I have decided to take a step back whilst all are so concerned with the short-term headlines and take a look at the macro picture developing. Many are questioning risk positions but as you will read below the risks remain extremely elevated and policy mistakes look more likely than ever. Currencies may just be losing their store of value and precious metals may have to take up the slack!!!! See below...

Keep the Faith....

Let’s take a step back and look at the macro picture that is developing across the globe:

In my humble opinion the global economy is facing one of the toughest times it has seen in decades and the inter-connectivity of the “global village” will actually exacerbate the problems the developed world faces. The idea that the emerging world can de-couple and save the world is quite ludicrous when they rely so heavily on exporting to the developed nations. The demand drought that is coming from the consuming, developed world is only part of the problem. The perfect storm is still building out there and the consumer is the key. Global growth expectations seem far too optimistic in my view!

The problem is that to make austerity measures work, the governments need the consumer to be strong not weak and they certainly do not need them to start deleveraging and refusing or reducing credit. This however, is exactly what austerity brings. A lack of confidence amidst rising unemployment and a reduction in benefits, coupled with falling housing prices and to some considerable extent, a loss of faith in government, does not fill consumers with an appetite for more risk. In fact the opposite is the case. Consumer confidence tells us that deleveraging will increase very soon.

However the problem does not only lie with the consumer, the banks and to some extent many sovereign nations are in deep trouble as well. What a cocktail. Economists always look back and suggest ways out of this and the Keynesian believers seem to think history can help them. I am afraid this time is different as I am not sure we have seen anything of this nature before (maybe 1929-1933) and the central banks are run by academics and economists who use models which simply do not have the scope to predict what is potentially coming, as evidenced by their disgraceful predictions based on little more than hope than knowledge recently in my view. The models at all the central banks have been proven yet again to be useless along with many economists, in predicting slowdowns, financial crisis or recessions! Unfortunately the models are designed by the economists and this needs to change quickly.

Bank regulation was seen to be needed urgently after the sub-prime issue but at the first signs of stress the calls for a softening ring out, so it looks like a return to moral hazard. The question is do some of the banks need to fail to keep the system alive? For sure the system is broken and the pain would be deep but this cannot go on in its current state. Treasury yields are at their lowest for 60 years for goodness sake and the Fed is expected to reduce yields further at the longer end! What if that does not work and to be honest a slight shaving of long-term rates will do nothing to change sentiment when a collapse in prices has failed to trigger any bargain hunting at all! Developed world rates are headed for Japanese type levels and it is clear that they have far from helped Japan! It is not all about low interest rates Ben!

To amplify this, taking a step back, we are looking at potential Nations defaulting, plus augmenting further austerity measures to try and reduce debt (which will stifle any growth for years to come), the spiral of banks coming close to nationalisation across the developed world, consumer deleveraging, rising unemployment, falling house prices and a rising loss of faith with government along with discontent and civil unrest. Why on earth would you sell gold when the outlets for safe havens are being radically reduced since the SNB move and the threat from Japan to intervene? Plus the fact that currencies offer less in the form of stores of value also. A massive shift from currency investment to precious metals could take place.

Currency wars will exacerbate this and whilst the SNB move is from a small nation, what happens if one of the big boys like Japan join in? Carnage basically and trade wars and border issues will ignite and G20 could implode. Just what the world is ill-prepared for but it looks like it is brewing. Civil unrest and regime changes around the world will add to the soup.

The stimuli we have seen are the effect not the cause both in the US and Europe and we need to get back to basics and solve these issues at their roots. However they do not look like they are helping much. For sure QE1 may have stopped a depression for a while but it may have only delayed it. What worries me is what the end game is for the Fed? If they are solely looking to save the banks then the US economy is in deeper trouble than I thought. He needs to get out into the real world and then he would realise how futile creating a “wealth effect” is in reality. Higher taxes will surely come with austerity measures and the US is already far behind the curve for reducing debt. Consumers will save and deleverage for sure and the fight, if ever we see it, against the deficits will come at a price and that will be higher unemployment and slower growth! Bond markets are beginning to price this but the Dollar is another matter. Will the US finally admit and use the Dollar as a monetary tool. I think at some point they will, especially if the currency wars spread. However until then the Dollar will be forced higher by other nations. If it affects US policy, which it will at some point, then the US may turn very insular and return the idea that the Dollar is their currency but your problem. (John Connally. US Treasury Secretary 1971). On that day all bets are off.

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hugovanderbubble's picture

Amundi Troubles,

French Asset Management Co.


Ready for mai dai

jaffa's picture

The ability to predict major changes in consumer confidence allows businesses to gauge the willingness of consumers to make new purchases. As a result, businesses can adjust their operations and the government can prepare for changing tax revenue. If confidence is dropping and consumers are expected to reduce their spending, most producers will tend to reduce their production volumes accordingly. Thanks.
college personal statement

Blank Reg's picture

"Gold bugs are stupid."   baa-baa
"Why?"  baa-baa
"Because the smart people in TV say so."   baa-baa
"But the Zero hedge people say gold is smart."  baa-baa
"Yes but the people on TV are smarter."  baa-baa
"Why?"  baa-baa
"BECAUSE THEY HAVE A TV SHOW STUPID! Do the Zero hedge people have a TV show?  baa-baa
"No." baa-baa
"Well there you go." baa-baa

Dr. Richard Head's picture

Went to a neo-conservative's house over the weekend for drinks and food.  He was so excited about the "profits" he made after selling the American Gold Eagles his mother had been holding onto for years.  He brought one chart out to prove that the end is neigh for gold, which was the actual gold chart going back to 1965 or so.  He pointed to the Hunt Bother's peak and then pointed to the current peak. 

I couldn't control my laughter.  I picked up my phone and pulled up the United States Debt Ceiling Chart overlayed onto the price of gold chart and asked him one question, "Since Bush expanded government spending and Obama expanded government spending, who do you think of the current GOP crop of Presidential contenders has any desire to cut government spending?  By the way, the US just clipped the most recent debt ceiling deal just last week, so we can anticipate another 'debate' on the debt ceiling within the next 3-6 months as the Feds start dipping into any source of funding they can find to delay that talk.  Do you think the Congress and the President will not increase the debt ceiling again?"

Deer in the headlights stare......"Gold isn't going any higher Tim.  Have you ever listened to the Mike Church show?  Those libertarians are living in a fantasy land."

I guess we will see.  Only time can prove one wrong over the other and let us know if the last ten years of Gold's bull run is over or not.

DormRoom's picture

the first rule of trading: never fall in love with any asset.

Dr. Richard Head's picture

If one is not playing the trading game the rule you have given doesn't apply.  Plus, I am not falling in love with an asset, just saving money.

Besides, neo-con Bill didn't have anything to disprove the crux of my particular position as it relates to government spending and the price of gold.  Additionally, his chart of support for his side of the argument doesn't explain away the free-floating fiat currency of the last 40 years either. Neither does your proverbial saying.

buck4free's picture

Bill had a clear position, while you failed to even state one. As far as your nebulously implied association between "government spending and the price of gold" is concerned, Bill obviously found it wanting as soon as he grasped that his historical gold chart is not correlated to your "Debt Ceiling" overlay... whatsoever.

That is why he just "stared" at you.

mcguire's picture

agreed, but not because the price of gold is going anywhere but up..

rather, because of things like the 1933 confiscation, because of hidden taxes in obamacare, etc.  

LowProfile's picture

the first rule of trading: never fall in love with any asset.


The first rule of trading is "Don't lose money.".

Second rule is the same.

Third rule is "Be right and sit tight.".



malek's picture

Exactly. I hope you had applied it first to stocks, then to houses, while now it applies to dollars and gov't bonds.

The time to apply it for gold is at least 2 years out from today.

gwar5's picture

Marxist/Socialists with Nobel prizes say the same thing about a 'gold bubble' as your friend on TV, all day long, except they know better and are just lying to the masses to be deceitful which is their perpetual M.O. 

If the guy was really your friend you wouldn't be laughing. At least he was nice enough to invite you over.






buck4free's picture

If I was showing you a chart of the historical price of gold, and you overlayed something absolutely uncorrelated on top of it, whilst interrogating me about something completely off topic... I would probably just stare at you too.

malek's picture

Love the declared non-correlation with no fact or argument whatsoever. And you forgot to mention that "deficits don't matter," and never will do. What a brave new world we live in.

theotheri's picture

Dick Head, pull up your debt chart and gold chart over the past 12 months and then repeat your idiotic statements as many times at it takes for you to realize you are dead wrong.


Gold <$1000/oz.

malek's picture

Gold <$1000/oz.


Now please also state something like "gold will never go above $2200" so we are able to prove you wrong, as one can never prove non-existence.

Freebird's picture

Now we know why you're called Dickhead

joshua10's picture

The short term price fluctuation of gold or silver is irrelevant. The underlying declining purchasing power (I won't use the term value) of the paper currency is what is relevant. How many dollars did it take to buy an ounce of gold in 1930? How many dollars does it take to buy the same ounce of gold today? Will the dollar ever strengthen enough to purchase gold for $25/ounce as it did in 1930? Absolutely positively not. I'm not a monetary expert or economist, but that much is obvious to me. The only reason I would sell physical precious metal today or in the future is if I had raise emergency liquidity or to purchase another hard asset such as real estate. Anything else would not make sense to me.

Downtoolong's picture

Not bad, but, it's just not as funny without the cartoon bears saying it.

Lazlo Toth's picture

Thats it. Were getting a TV show.

Real reality TV.

No fake reality TV anymore.


Corn1945's picture

The "market" is totally disconnected from the economy. The two have no real connection.

So it doesn't make a lot of sense to pay attention to the macro data when the market won't pay attention to it.

You'll do far better monitoring the various proposed frauds, bailouts, and other schemes because that is all the "market" pays attention to.

The market has failed at becoming a valid price discovery mechanism due to intervention by the central planners.

rocker's picture

So the question I ask is "who" and "why" do they extend and pretend to keep the market up. Why would they not let it correct properly.

There has been no sell off except for the one at a time Hedge Fund or Major player who has left.

Is it as simple as by extending they can suck a few dollars out of the suckers who are left.

Who they not make more money by letting ti capituate and by the bottom.   

Threeggg's picture

"who" and "why" do they extend and pretend to keep the market up. Why would they not let it correct properly.

We know who.............................

and we know why........ "Reserve Currency Status" and "Petrodollar"

Aterall it is "the only thing" supporting the Dollar as we know it.

monopoly's picture

I am buying this dump on miners.

Gringo Viejo's picture

Back up the freakin' truck! It's a gift!

Cdad's picture

Depends on time frame, of course.  But if you're longer than a day trader...the GLD chart looks very dicey right of this morning.

BarryG's picture

Surprise Surpise, the German Constitutional Court has OK'd the bailouts, as long as the German Parliament now has the final say, not the Eurozone.

Germany now has complete control of the EFSF. This was a coup, as we have been saying since the start.

LowProfile's picture

The Germans held a coup to take over an ocean of unpayable debt?

What a bunch of fucking super-geniuses!  Next they'll be waging a land war that starts in the Fall with the goal of being deep in Russia by Winter.

Surly Bear's picture

On a long enough timeline the ending balance is always zero.

Oh regional Indian's picture

It's WAR time folks. Get ready for some siren action and decidedly not of the sultry kind.

That is the macro picture. The rest, is snowflakes in your mind's eye.


Truth about America/World

SheepDog-One's picture

We've been in WW3 economic war for a while, soon the nukes will start flying in the mid east, and drag everyone else into it.

Oh regional Indian's picture

Yup, the Triangle of Fire in the ME. Nuclear of not, who knows, conventional stuff is bad enough eh?

But it will be the seamless stitching of all the theaters into one, the Neocon wet-dream.


Zero Debt's picture

There is no plan.

stant's picture

yep war it is

Die Weiße Rose's picture

^ = STFS   


Central Bankster's picture

BTFD = PMs and miners

STFS = SP500

youngman's picture

I think there will be a trade war too...just like in the 30´s.....the politicians love a boogie man....the other guy is why we are screwed....blame him...not me....

Robslob's picture

Funny...try writing all your congressman about the Federal Reserve and they all respond with the exact same message:

Dear Mr. XXX:   Thank you for contacting me regarding the Federal Reserve.  I appreciate having the benefit of your comments on this important matter.   As you may know, the Federal Reserve was created by the Federal Reserve Act of 1913 and serves as the central banking system of the United States.  The Reserve is comprised of the Board of Governors—whose members are appointed by the President, the Federal Open Market Committee, and twelve regional Federal Reserve Banks.  This system serves to formulate monetary policy, regulate banks, and provide financial services to the federal government and private financial institutions.   To this end, I support efforts to increase transparency and accountability within the Federal Reserve.  During the Senate’s consideration of the Dodd-Franks Wall Street Act (P.L. 111—203), I supported an amendment that would have required the Government Accountability Office (GAO), the independent, investigative arm of Congress, to conduct a comprehensive audit of the Federal Reserve and submit a report to Congress detailing its findings and conclusion of their audit within six months.  Unfortunately, this amendment did not become law; however, a similar proposal was included in the final version of P.L. 111—203.  Under this provision, the GAO is required to conduct an audit of all loans or other financial assistance provided by the Federal Reserve through emergency lending since December 2007.  Additionally, the GAO has the authority to audit the Federal Reserve’s assistance programs and other credit facilities.  Finally, P.L. 111—203 requires the Federal Reserve to disclose on an on-going basis, within specified time periods, additional information regarding the borrowers and counterparties participating in the Federal Reserve’s emergency credit facilities, discount window lending programs, and other open market transactions.   America’s system of credit is the lifeblood of our economy as it affects thousands of purchases and investments made in our country each day.  Without access to credit, small businesses cannot pay their employees and working families cannot receive the loans necessary to send their children to college or purchase a new home or car.  It is critical that Congress continues to work to preserve and create jobs, while strengthening the economy for Texas families and retirees.   As a member of the Senate Committee on Finance, you may be certain I will continue to stay abreast of the Federal Reserve’s actions and keep your views in mind should relevant legislation be discussed during the 112th Congress.  I appreciate the opportunity to represent the interests of Texans in the United States Senate.  Thank you for taking time to contact me.   Sincerely,   JOHN CORNYN United States Senator           517 Hart Senate Office Building Washington, DC 20510 Tel: (202) 224-2934 Fax: (202) 228-2856

SheepDog-One's picture

Yes, in other words they basically tell you that youre simply an uneducated moron, and youre better off to leave this important stuff to the experts. 

I get the same reply. 

Sudden Debt's picture



SheepDog-One's picture

Funny, all the headline buzz about QE3 has suddenly been totaly forgotten. Hillarious.

Tense INDIAN's picture

i just hope i dont loose my JOB....till atleast i get rich enough

Sudden Debt's picture

You can always become a roadbuilder :)

Or become a railtrack layer, a tent supervisor in the Fema camps.....

plenty of options you know.


crosey's picture

I just want to import Chimay and drink the profits.

Sudden Debt's picture

The only thing that changed this week is that gold has entered the same manipulation game as Silver.

It will give everybody a few extra more months to buy cheap.


virgilcaine's picture

Nice clean short entry on the Sp here.. use a wide  stop @ 1205.00  cb's are going apeshit.  I believe they are going to sell this hard today.

RobotTrader's picture

They are buying the same crap again.

AAPL, PCLN, LULU, CMG, and all REIT stocks.

None of which were fazed in the least during this "Eurozone Crisis"

TradingJoe's picture

Ahhh Gold got cheap :)))!

SheepDog-One's picture

But stocks are being bailed out at every dip, they cant even let a 100 point DOW drop stick. No QE3 in 2 weeks.

gatorontheloose's picture

REIT index VNQ is a bitch to figure out, sometimes it leads the selling, sometimes it's inverse correl.

virgilcaine's picture

AAPL gives me a headache.. for a short. but with the Bear Flag pattern the floor can drop out at any time.   A posted  aapl stock would be defended.. it's the poster child for consumer excess and all.