Inevitable Spiral Equity Collapse, Biderman's 'Better Early Than Late' Call To Sell Into Strength

Tyler Durden's picture

It's the end of deficit spending in Europe as we know it. That's how Charles Biderman, of TrimTabs, rightly describes the unwilling-to-compromise German's (perhaps heroic) attitude to their fellow European sovereigns. From his perspective, this forced austerity will mean slower growth and with that all chance that the European nations can 'grow/tax' their way out of this charade. He notes there is simply no way they can grow fast enough to be able to kick the can far enough down the road for it to matter. Pointing to his 'better early than late' calls on markets over the last 40 years, the man from Sausalito sees it as inevitable that the practical insistence on the elimination of deficit spending will force banks into bankruptcy, leading, as asset values are marked down, to a spiral collapse in equities. He then dismisses the simple-minded decoupling perspective as if no new Keynesian-inspired 'technology shift' occurs, US growth will be in the doldrums as European deleveraging drags global growth down with it. It's not all doom-and-gloom though as he ends on the upbeat notion that this collapse won't happen tomorrow, given balance sheet strength, although selling into rallies is the clear picture he is painting.

(h/t @ZH_Crown)

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economics1996's picture

He didn't say anything we haven't heard 100 times before.

CPL's picture

He didn't say anything we weren't discussing a year and a half ago.  Between then and now the deficits in most countries have jumped 50-100%, the US has hit it's "debt ceiling" twice already, with the third this year coming on the 16th of December.


All we are seeing from this lad is the tiniest amount of contrition of the remote possibility that the concept of market backed capitalism is dead.  To a CEO of a third tier services market that pushes weight loss pills on hour long infomercials, my skepticism remains firmly in place.  Not because of the nature of Trim Tabs as a business, but to this man and many other business people over the age of 60, it is a completely taboo subject.


Their lives have always been Bullish, the concept of them being wrong as a herd just cannot be.  To this group, it's completely impossible that everything that they worked for will be destroyed because of central banks colluding and undermining their businesses with inflation, taxation and theft. 

economics1996's picture

Reverting to communism and barter is soooo appealing.  Let’s murder another 200 million while we are at it.  That purchasing power parity of $9 grand per year s so appealing.  Let’s all become communist and start murdering each other for a few decades.  WTF make the PPP $300 per year.  Who needs a house anyway?

Yea right.

What you fail to see is that capitalism works perfectly, if you let the bad guys go out of business.  When it collapses it will not be the end of capitalism but the rebirth of capitalism stronger than before.  Getting rid of corruption and misallocated resources is what capitalism is all about.  I will rejoice when it fails because that means all the bad guys will be getting their justice.

Communist thugs look at it as a opportunity for power.  I look at it as a opportunity to cleanse the air of all the thugs and bad guys.  If you have tattoos you might want to remove them before TSHTF.  Just saying.

CPL's picture

I live in the sticks, own a farm and run engineering projects.  I've never even had a piercing.  My hair cuts run military style, over #3 and that's hippy hair.

Communism...barter...whatever.  You understand that money, fiat money is a relatively new idea.  Every attempt of it has failed.  Not one or two times, everytime.  And by everytime, I mean everytime through out all human history.  Voltarie famous for his quote: "Paper money eventually returns to its intrinsic value - zero." (Voltaire, 1694-1778).

Not making this up either, history has excellent examples of situations that were WAY better funded and under leveraged that collapsed overnight.  When people discuss the great depression of the US, they point to it as the model.  It's not.  All that we are watching is a herd of humans deeply in denial over their options.  They simply have to options left, so they pray, lie to one another, tap dance around the problem while it gets bigger and bigger.

Right now, we are talking leveraged markets in the 50x range.  Consumer debt to equity ratios that are 1:1.  Roughly 18% underemployment, 9% unemployment, 8% on welfare.  Things are not in great shape.  There are only two ways  way to repair the current system.

Interest rates must go to 37.4% for home loans and 67% for regular small/business loans to properly allow the credit collapse to happen, while not graceful, it will cease all ridiculious over leveraged positions.  Since that isn't going to happen, the darker path of Keynesian logic will be chosen.  Print, print, print.  Inflation is a bitch as well in this situation.

To attempt to moderate the spending cycles of credit the Kenysian MUST, not choses to, jack up interest rates.  Here's the problem at hand.  Nobody is.  The central bank interest rates go past 1% and all hell breaks loose on corporate and consumer debt.  So what is going to happen? 

Does that make people MORE or LESS causious with their capital?

Does gold and silver become the defacto standard for trade?  (probably not, I'm seeing oil take this role.  The FX currency trade versus the PM bloc, it's pretty easy to see who is winning.  Over a single three year span against S&P performance, they are up 150%


Market Capitalism with fractional reserve banking is literally asking for a poorly designed economic solution that self destructs, EVERYTIME.  When this all collapses, not if, when.  Capitalism will still be around.  Only the assholes that ran it to it's conclusion will be flat broke and busted.  The rest of us however I think will do just fine until they reboot the system and the "new" currencies are established. 


What those are, you and I have no clue as to the what they are?  I would hazard a guess someone has a couple of ideas though.

economics1996's picture

I think we both understand the problem perfectly and agree on the collapse.  We differ in our interpretation of capitalism.

To me capitalism is not a central bank and federal government sponsored cartels.  We have gone away from capitalism starting with Teddy Roosevelt and the Federal Reserve.  Social Security, Medicaid, Medicare, Department of Education, social justice, affirmative action, and so forth.  All these government interference in the free capitalist marketplace is the cause of the blow up, not capitalism.

If we had capitalism, limited federal government, none of this blow up would be happening.  The problems are the parasites in the federal government and the central banks.  When it implodes these institutions will be wiped out as we know them today.  It would not be that preposterous to see the United States break up into several countries.

redpill's picture

What has dawned on the Greeks is what is slowly dawning on the rest of the Western world.  We are going down.  The only question is whether we force the bankers to go down with us or let them become our oligarchs.  We can either go through the dark time and re-emerge a free people, or we can allow the bankers to turn us into tightly fenced milking cows that do nothing but eat, shit, and pay interest, perpetually.  I'll take option A, gladly.  But it's not easy to get people to wake up enough to make that choice.

High Plains Drifter's picture

from 500bc  (oh excuse me, we can't say bc anymore because it irritates certain parties) , oh i mean 500 bce till now, the greeks have come a long way..........

eureka's picture

RE: "the unwilling-to-compromise German's (perhaps heroic) attitude to their fellow European sovereigns"

NOTA BENE:  The only EU sovereign "unwilling" to fiscal restraint is: UK. 

UK - the appendix to US - hence my term the USUKs - is "unwilling" precisely because it has a 1000% debt to GDP ratio and London is home to the world's biggest scumbag bankster hedegefunds and oligarchs, which and whom EU wants to regulate and restrict.

Let it be clear and known then - that it is the ANGLO-JEWISH METHOD - also false known as the Anglo-Saxon ditto - and its USUK bankster-mafia which:

A) rigged the world with garbage paper - and

B) is "unwilling" to enforce regimes of fiscal restraint - as in US Fed monetizing and bailouts

Continental EU will win - USUKs will fail.

trav7777's picture

oil is not going to unpeak no matter what we do with this stupid credit system.

You people need to wrap your heads around that.  The credit effects are a SYMPTOM, not a cause.

Oh regional Indian's picture

Very very well said all around CPL.


High Plains Drifter's picture

ok cpl. 


what if they said enough. and allowed it to colllapse. what scenerio do you see in such a situation?   another words, which would be worse?  the deflationary collapse or weimar?

CPL's picture

That's the central problem of Keynesian design.  It has outlets to work off the steam and pressure in the system, it's interest rates.


A general consensus of the situation regarding interest rates hasn't even been approached.  You know how the fractional reserve with central banking dealt with these issues before Clinton.  They jacked up interest rates.  Depending on what age we all are, if sentient during the 80's and 90's, it wasn't unheard of to obtain a bank loan for 45% with GREAT credit.  For home loans they ran from 12-23% depending on the week literally.  People saved hard for a large down payment on a home.  It was better business to save money than borrow.


Deflation to a guy like me, is a good thing.  I save my money.  However we are given the option in a deflationary cycle to really put the screws to anyone that owes money.  The forces people, businesses and governments to smarten up and consider purchases.  I can accept that interest rates would be in the 1-5% range on savings, but my pile of money will be worth something at the end of the day


Inflation, to a guy like me, is a bad thing as I save my money.  So to capitalize in that situation, it is in my best interests to pull every ounce of credit tied to me and max it out.  We can see what happens with that.  Credit dries up, locks down and freezes everything from credit card companies to LIBOR.  Right now it's the reason all the US, Asian and Euro banks are constantly re-capitalizing.  It's literally 'free' money.  That situation puts me in jeopardy because I've over extended myself with leverage I really didn't need to use in the first place.  Like people that use their margin for long trades, all that needs to happen is margin call. 


What we are all looking at here is a broken system run to it's logical conclusion.  If the TPTB want to use fractional reserve lending with Fiat under Keynesian practices then they have to use the tools available to manage it.  The longer they wait, the higher the interest rates have to be.  When the model hits 1:1, as in the only way to salvage the scraps from the system is to move interest rates to 100%, that's when the engine stops working.


Every time they print it pushes up the ratio, every extra dollar of liquidity in the system leveraged which needs more money to re leverage the carry trade.  Rinse and repeat.  Over and over and over again.  We all know that this has been the process for the last 30 years, it's in the last 3.5 years that it has become awful, yet we aren't using the tools as prescribed by the originator of the Keynesian theory and design.


If I build a car without brakes how many do you think I could sell? 


To be honest, it doesn't matter.  What I can promise you though I will not have any repeat customers unless the customer has a four leaf clover shoved up their ass and blessed by the almighty. 


This is the situation we are in.  No brakes in the financial system and everyone riding in that system is starting to notice the car is a out of control.

Mr Lennon Hendrix's picture

the question is not, "what will be the most important good?", that is obviously oil, the question is,"which good will trade for oil?"


trav7777's picture

again, no amount of credit bullshit is going to resurrect Cantarell or any other oil field that is in terminal decline.

Just get over it, get over your stupid savings and your stupid expectations of money "making money" by the pure magic of growth.  Get over your idiotic capitalism vs socialism false dilemmas.  NONE of it matters.

Nature is at the plate now.  The count is 3-1. 

CPL's picture

Trav, you might be an asshole, but you don't sugar coat.  I would have to completely agree, even as much as it pisses me off.

Woodyg's picture

The Question is HOW to make sure that the wealthy don't capture the government.

And frankly to thnk the wealthy and powerful Won't try and capture the guv is naive.

So is thinking you an Cut the guv down to nothng and Still have a free market. Nature abors a vacuum.

The Wealthy will ALWAYS attempt to use their $ to control and capture a economy and guv.

The true question is how to have a guv that will protect We The People over the monopolistic tendencies of the ultra-wealthy.

High Plains Drifter's picture

well what did john adams say?   without Christianity involved in its highest levels , this sort of government will not work.......... 


"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."


it is the only way to make such a democratic republic work.  if a man does not fear God, then why should he fear any of us?   this type of system requires constant vigilence by its citizens. this part and parcel is called citizenship. for many, the "freedoms" we have enjoyed have been mistaken to be excuses to live their own lives within their own little bubbles . the masonic idea of life liberty and the pursuit of happiness is nonsense....

wisefool's picture

Thats why people have to keep the pressure up on the current ganrenous tax code -- not just sound money. The tax code serves the rich/corporation and domesticates the poor, a bastardization of christian teachings.

Romney is able to throw around $10,000 bets because he pays 11% effective taxation. The typical citizen may have every domestic need met, with a tax credit for this, deduction for that, but the system makes sure they average $10,000 in net worth heading into retirement.

IamMarla's picture

well said CPL

it is hard for the soft underbelly of those who had little creativity and no innovation and made literally a killing stealing and selling snake oil to the barely conscious masses. Most of these boys are on their knees wondering what happened.

Its OK there is plenty of room in the pasture.

Germany will not do a reply of the early 20th century again as I have said before. Germans are not willing to be reamed and the rich know there is a fine line in Deutschland between distaste and murder look into the radicals of the late 70's in the Bundesrepublik.... That psycho just got paroled (-D 

I am Marla's total indifference.

games have to end


economics1996's picture

Letting the bad guys go bankrupt would include the central banks, bloated governments, and the elites on Wall Street.  Capitalism is what you want.  It is a wonderful disinfectant.

High Plains Drifter's picture

germany won't do it again because they have totally been brainwashed and feminized......from the germanic  tribes that faced off against the roman legions and held them to a stand still to the pussies that are living there now.......its a long way they have come.  when you consider the history of the germanic peoples all the way back to roman times, one can surmise a tremendous prejudice by the world against them, it seems.....strange , no?  for example. what a problem it must have been for the mixed race romans to look toward the rhine and see all of those white, blue eyed, blond haired and free men running around without a owner........from the day they were discovered by the romans, even perhaps before during ancient times as these tribes spread out across this area, coming from the mesopotamia and the levante, i suggest , it has always been a problem for some. this problem continues to this very day. 

IamMarla's picture

So you took a great deal of (American) history at school that is very nice for you. Are you still paying for your higher education? I am not.

You forget that the Teutonic peoples (from the far north and more related to the Scandinavian tribes) were only one group and those who held off the Romans were the Goths, Swabian, Alleman, and Germanian tribes (all of whom are not as blond) many of which were the Vanals who sacked Rome and did not pillage or harm the people.

A little side note to your mesopotamia reference Farsi (Persian) and German have a startling number of words that are pronounced the same and have the same meaning.

Further Europeans are mixed every place you go unless you get up near the Arctic circle where no body wants to hang out all on a daily basis unless they are allergic to warm weather.

and I like Clint Eastwood


WhiteNight123129's picture

THe one thing is: Absent major technology productivity. This is the only caveat in Gold  case. It is a not very likely but it is a logical one. You can not grow by exports, you can not continue to kick the can. The only way our is massive productivity gains, hence technology. Watch material sciences, there are a lot of new applications coming from there, but It will still be too late in my opinion. 

CompassionateFascist's picture

Nein. Since the Luftwaffe, the Kriegsmarine, and the Waffen-SS are no more, nothing can be enforced. There will be no "austerity". They are printing now, will continue to do so, and the collapse will come via hyperinflation...and/or Iran War black swan.

Michael's picture

I really don't like being considered collateral of the federal government.

After the collapse, could we please have abolished, The Act of 1871?

I know it's just a legalese determination of who I really am, but I'd like to, for what few decades are left of my life, live knowing I am owned by no one.

Oh regional Indian's picture

Micheal, being owned or otherwise is a matter of the mind, if no-one owns you, or rather "thinks' they do, how does it matter? Born free mate...



Ahmeexnal's picture

Then you must ditch the GF, your dog (dogs own their "owners"), your cellphone, your facebook, your kakhis, your ....

IQ 101's picture

If I want to get out of my vehichle I will just roll down the window.

Unprepared's picture

Unfortunately, inevitably, those who were chasing stock prices up to these levels (and maybe higher) are the least likely to think time to sell is anytime soon. Cognitive biases also play against momentum buyers.

As a marginally "conscientious" investor, I refuse to participate in an auction where prices are being bid up and down completely independently of the value of the underlying asset even if I'm certain I can make a buck or two "flipping" the asset in the process. I looked up in the game theory terminology, but couldn't find a term for an auction where participants do not know the object of the auction.


Fuck market liquidity-rationalizers.

mayhem_korner's picture

I looked up in the game theory terminology, but couldn't find a term for an auction where participants do not know the object of the auction.


Try looking up 'ponzi' or 'pyramid scheme'. :D

On a more serious note, the equity markets are tangential to the actual game going on.  Game theory is applicable in terms of the currency wars / default chicken being played.  The two-actor game between the ECB and the Fed is remarkable because neither can afford the other's currency to implode.  So you get Timmay taking the red-eye over to Sarkozy's pub twice a week essentially to protect the USD debasement, which is necessary to prevent a 25% pullback in US Stocks and a crushing blow to GDP from a ballooning trade deficit.  Euro has the same problem, but they're on the other end of the teeter-totter and cannot afford the bag-holding banks (and, oh yeah, China) to face-plant on the toxic debt they show on their balance sheets.  The whole thing is built on quicksand and the sock puppets are engaged in a staring contest (well, Sark-puppet is prolly sipping a $1000 bordeaux).

OK, I'm off my soapbox...



FEDbuster's picture

Or Jon Corzine could just steal your money from your trading account?  Blatent THEFT by the house has now entered the casino, you get up to take a piss and the dealer rakes your chips.  Fuck that.

GM Bondholders should have been the wake up call for everyone to leave the table, but now they will just take your money like a thief in the night.  Poof it's gone......

I want to know how South Park is frontrunning this shit. 

Mr Lennon Hendrix's picture

Art Trumps All

The one thing the Illuminatti will never have is a muse on their shoulder.  look at how fast Jack London ran away from Bohemia!

They can create Brittney like a bowl full of jelllo, but they can't create Jimi!  They can't create Lennon, or Dylan, or Willie!

The greatest question about science fiction is how does science fiction create possible science concepts?

We are the music makers, we are the dreamers of the dreams

Ricky Bobby's picture

and sometimes art is all we have left.

machineh's picture

Then they designate it as "entartete Kunst" and arrest you as a "dissident intellectual."

See no evil, comrade. Stick to safe elephant and donkey graphics in red white 'n blue.

Two parties, one bright future! ;-)

Escapeclaws's picture

I have the impression that they are more interested in wearing powdered wigs and commandeering the future Mozarts for their "enrichessment culturelle".

Global Hunter's picture

"our society is run by insane people for insane objectives.  I think we're being run by maniacs for manical ends and i think I'm liable to be put away for expressing it.  That's what's insane about it".  John Lennon.

Well we know now he was shot under pretenses that a crazy man from Hawaii thought he was Holden Cauldfield from the Catcher in the Rye.  Peter Tosh who was calling bullshit on this whole system was also shot.  

"To have the truth in your possession you can be found guilty, sentenced to death".  Tosh.


trav7777's picture doesn't.

That's the thing you downing effected people don't get.  The scientists are MORE creative than you are.  They come up with shit you can't even grasp nor comprehend and your stupid little "imagination" or whatever you think you're good as as a conceit to cover for your inadequacy in math isn't the indispensible portion of the creative process.

Jimi Hendrix isn't a pile of shit in the overall scheme of things, nor are all the self-important artists in the history of the world.  People like Orville and Wilbur Wright piss on them.

Art trumps nothing...go paint me a fucking oil well.

ISEEIT's picture

Found something good and just wanted to share it.

NO I'm not one of these obnoxious pest that post links to my own blog. This is legit and I opine worth checking out.


If nothing else at least some thoughts to ponder till the Tylers wake up?


ISEEIT's picture

Found something good and just wanted to share it.

NO I'm not one of these obnoxious pest that post links to my own blog. This is legit and I opine worth checking out.


If nothing else at least some thoughts to ponder till the Tylers wake up?


The Big Ching-aso's picture



The Euro now stands for...........

European Union of Remorseful Overspenders

JenkinsLane's picture

Amen brother.

UK government debt was approximately £350bn in 1997, was approximately £850bn in 2010 and is projected to hit £1500 bn around April 2016 and that's *with*



Sam Clemons's picture

So in real terms, is that an increase or decrease?

Hansel's picture

But money is backed by government debt, so that means you are richer...?  I don't understand the whole gov't debt - austerity - currency debate.  In this system the only people that have money first got it from the Fed/Euro/BoE because the central banks are the only ones that create money, and they only made the money to buy gov't debt.

The Big Ching-aso's picture



Allow me to help eliminate your confusion.     Austerity abruptly imposed in a debt-based monetary system is akin to removing heroin from a pipette addict on his last legs.

Obviously severe austerity in such a system is suicidal.   Therefore severe austerity will not happen - at least not in the degree necessary to balance the books.   Austerity enough for political purposes, yes.   But not make-a-difference austerity.

Bottomline to what comes next:    a particular and diverse group of people is about to get screwed out of pretty much everything they've worked for in lieu of austerity.   I think you can deduce what group that is by now.