Michael Krieger Explains Why It Takes Only 5 Minutes

Tyler Durden's picture

From Michael Krieger

Power concedes nothing without a demand. It never has, and it never will.

- Frederick Douglass

Fairly quickly, Corzine accumulated a massive net long sovereign debt position that eventually totaled $6.3 billion, or five times the company's tangible common equity as of the end of its fiscal second quarter. I'm told Corzine's move was highly controversial within the firm. But no one overruled him, maybe because after all, he was Jon Corzine. In a mark of just how much Corzine mattered to the market, in early August, MF Global filed a preliminary prospectus for a bond deal, in which the firm promised to pay investors an extra 1 percent if Corzine was appointed to a "federal position by the President of the United States" and left MF Global.

Did accounting help sink MF Global?

It Takes 5 Minutes

Alright I am going to kick things off with Europe and get that out of the way as quickly as possible.  Nothing has changed and absolutely nothing has been accomplished.  There is no “solution” to the crisis that will not result in massive pain, confusion and wealth decimation.  The reason is patently obvious.  At least half the continent is completely and helplessly bankrupt.  There are only two outcomes to the entire situation.  Either the sovereign debts are written off aggressively and the banking system declared insolvent and restructured or the ECB decides to turn on those printing presses to the tune of trillions and destroys the purchasing power of the union in Zimbabwe-like fashion.  People will read this and think I am exaggerating .  The phrase “it takes 5 minutes” keeps running through my head because all it takes is a small amount of time to see the situation for what it is.  I am not that smart.  This is obvious.  The scary thing is that it is abundantly clear that the vast majority of U.S. investors have not bothered to take the 5 minutes necessary to understand how extreme and binary the outcomes to all this is.  Their clients will suffer massively in the months and years ahead as a result of their laziness and lack of macro curiosity. 

Remember, there is a very good reason that no “definitive solution” has been announced.  There is none.  What the Eurocrats are trying to do is pretend that lifelines to bankrupt nations will be enough to tide them over until strong growth allows them to wiggle out of the problems.  This has already been proven a failure after they tried it last year as Greece is now worse than ever.  So there are two choices and no one can be totally certain which outcome it will be but either one will result in massive wealth destruction.  The first choice is the one I prefer (hard defaults and a declaration of insolvency of the banking system followed by restructuring) because it will place the majority of the losses and pain on the elites that led us to this ruin and who own most of the financial assets in the world.  The second option (massive inflation and loss of purchasing power) will kill the poor and middle classes as well as the wealthy but financially illiterate.  The ruling oligarchs will be fine (until the masses come for their heads) as they understand what they are doing and will move to protect their assets.  Since the same criminal, crooked and morally bankrupt financial oligarchy is still pulling the strings worldwide you have to assume they will opt for choice number two, although unforeseen social and political events could throw a wrench into their twisted plans.  Gold is the only asset that should outperform in either scenario.       

Before I leave Europe, there is a must read article posted this week on Zerohedge that everyone needs to read and understand.  http://www.zerohedge.com/news/how-us-banks-are-lying-about-their-europea...

MF Global

What is there to say about this debacle that hasn’t been said already.  The main point I want to make is that the collapse of this firm and its crony capitalist CEO Jon Corzine fits in perfectly to one of my overriding themes regarding the current fourth turning we find ourselves in.  Namely, that the celebrated elites and “financial wizards” will be disrobed, disgraced and proven once and for all to be the frauds they always were.  If nothing else, the story of MF Global should make it crystal clear to all observers that the biggest problem the world faces today comes back to a small cadre of financial engineering misfits that continue to be recycled all over the world’s positions of power.  Most of them have Goldman on their resume or at the least JP Morgan.  I just find this hilarious considering that I don’t think the clowns at any of these banks could make a dime without government help.  When I write this I do not mean to insult individual rank and file people at these firms because I happen to know some of them to be capable and decent; however, come on guys.  How can you feel good about your paycheck or trades when you are just a ward of the state that  in reality owns you souls.  Let’s see how you do without the government backstop.  We just saw how Corzine did.      

So Corzine was as “insider” as you get and he blew his firm to smithereens because he made the mistake of working at a firm that was allowed to fail.  He represents everything that is ruining America today.  Guys like him are everywhere and their reputations and firms will all be plunging into the ground over the next several years.  The best part about this whole story is how Corzine was apparently being considered for Treasury Secretary of the United States.  I mean this doesn’t surprise me at all, but it should be a warning to everyone around the world that it is people exactly like Corzine that make all the important decisions in the world today.  While it takes a long time to run entire nation-states into the ground don’t you worry they are working hard and are well on their way.  You’ve got to read this gem http://mobile.gothamist.com/2011/07/05/corzine_to_obama_if_i_raise_enoug...

The State of the Union (and Financial Markets)

The one thing I feel more confident in than anything else right now is that the U.S. consumer is about to roll over.  The most interesting dichotomy lately has been the extremely depressed consumer confidence numbers (and falling) coupled with resilient consumer spending.  I believe this is about to reconcile itself via much lower rates of consumption.  Let’s start off with today’s Bloomberg Consumer Comfort reading. 

Bloomberg Consumer Comfort Reading 10 Year Chart

This chart tells us two things.  First the number was the second lowest on record.  People aren’t lying on these surveys.  They are being screwed and they know it.  The second observation is that it is clear there is basically no bounce since the recession supposedly ended.  Why?  Because we are in a depression.  Sadly, it is a depression in which Central Bankers are doing everything in their power to transfer more and more purchasing power to the elite financial oligarchs that already own everything via money printing.

Despite the horrific consumer confidence numbers and the recent stats showing a new food stamp participation record in the United States where we have about 15% of citizens needing government assistance to survive, spending has held up pretty well.  How has this happened? Well, it seems the main reason is a decline in the savings rate.    

U.S. Personal Savings as a % of Disposable Income 10 Year Chart

Ok, so what we see is that as confidence has dropped so has the savings rate as people scramble to maintain some semblance of a lifestyle that is gone forever.  Many will point to this and say, well look at the 2005 period where savings went even further south and kept the economy afloat.  Why can’t this happen again?  There are two reasons I think it won’t.  The main one is that in 2005 housing prices will still at their peaks and people thought they were much wealthier than they were due to these “assets.”  As a result, they were willing to dip into their savings.  That is not the case today and therefore I think people will only dip so far into their savings.  I think people are right here right now about to cut back.  The other reason relates to commodity prices.  Although the important ones have all have all shown large year-over-year increases, they have been more or less flat sequentially as of late.  I believe that is about to change and if the governments of the world continue to prop things up and sustain unsustainable consumption we will see oil and other commodities make another meaningful move higher in the months ahead.  Since I think a large percentage of U.S. investors are totally clueless about the real state of inflation and the consumer, once spending starts to get cutback it will catch markets completely flatfooted.  I think this is a near-term event.  As always, we shall see.    

Peace and wisdom,

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NOTW777's picture

wonder if retail will rollover

cnbc avoiding the less than stellar #s on retailers this morning




Chief KnocAHoma's picture



Last night this conversation between Obama, Geitner and Bernanke was recorded in the Oval Office:


Obama: What seems to be the problem gentlemen? And it had better be important because Sports Center is about to give my pre-season basketball picks.


Geitner: Mr. President the global credit markets are seizing up again. All liquidity is being drained from the system because those greedy European peasants are demanding what was promised to them.


Obama: No problem Timmy. I'll give a speech in the morning with soothing words and caring faces. I'll put just the right emphasis on selected words and phrases. The press will fall all over themselves thanking me, and the markets will heal.


Bernanke: (Looking at Geitner with dumbfounded glare) Mr. President I think we may need to do more than that. I think we need to inject a significant amount of capital into the markets immediately. We can call it The American Re-Investment Act Phase 9. I'll print the living shit out of money, and create a lot electronically, then the system will free up. (A devilish grin appears.) Of course we will have to tax some one for the additional debt.


Obama: Is there any way we can exempt minorities, Muslims, single mothers and White Sox fans from the tax?


Geitner: I think that is called Obamacare.


Obama: Hmm... (scratching his chin) This is another hardship on the American people, and more importantly, it will hurt my poll numbers. Do you think we can blame Bush?


Bernanke: (Trying to keep a straight face.) Mr. President you will be viewed as a hero to thousands on Wall Street, which means big campaign dollars, and we can even blame it on the banks. They don't care...


Geitner: (Laughing out loud) Yeah... like they have souls anyway.

luna_man's picture

"Chief KnocAHoma"...Nice to have the fly on the wall.:)

LeonardoFibonacci's picture

Thank President Obummer for turning the US into a Zimbabwe economic powerhouse!

LeonardoFibonacci's picture


For those  lovers of CHANGE from our leadership

Fake Jim Quinn's picture

This is hateful sh*t dude. You really stepped over the line

mtomato2's picture

Yep.  The guy is on the wrong blog altogether.  He should have taken that left toin at Albecoiky.

beatus12's picture

just simply appalling Leonardo, how can anyone be

complicit to this evilness...

LeonardoFibonacci's picture

The facts are what they are.....they just luv to chimp out.  And i'm not even racist.  But lawlessness is just in their DNA.

Paul E. Math's picture

WTF?  Seriously, dude, get a life.

buyingsterling's picture

They dont get any 'blacker' than Alan Keyes, Walter Williams, Thomas Sowell, Louis Farakhan. Are they chimps? If you say so, you're blind. The enemy isn't blackness, it's greed, sloth, entitlement, self-conceit, and indulgence.

tamboo's picture

those guys are all jewgroes, without the jew blood theyd be chimps like the rest.

tickhound's picture

I won't sit here and deny statistics... Or pretend that there would be more white dudes in the NBA if there were more basketball hoops in Bumbleweed Suburbia.

But try to judge people for what they do... For what they say... For who they are, as individuals...........Cuz I don't give a fuck what you say, Reggie Middleton kicks fucking ass.  He's smarter than you, he's smarter than me, and he could OWN you if he chose to... You Fucking Fuck.

dolph9's picture

I personally learned alot from sites like chimpout and niggermania, even though they sometimes cross the line.

For example, have you ever wondered why so many blacks have so much to eat, and live in all these houses, even though many of them can barely count?  It's because they are handed food stamps and section 8 vouchers, paid for by all you supposedly enlightened people out there.  The fiat money printing continues the charade.

Ever encountered an incompetent black who clearly was out of their league, even in low level positions?  They are token blacks hired to keep the lawyers away, and they can only be fired for the most egregious, obvious stuff.  This lowers the quality of every place where they work.

Of course, at some point most people learn this on their own.  Whether it's a Teach for America newbie who has to deal with the ghetto schools, the unknowing middle aged people who put grandma in a nursing home full of affirmative action hirees, or simply the people who have to live amongst the worst blacks.  Or maybe someone who was mugged, beaten, robbed, raped, or had a friend or family member killed.

Eventually alot of people figure it out, the other half continue to insist we are "racist" and society is divided, and nobody can work together.

Well done indeed, America.

To all the people out there who claim racism, prove me wrong.  Live with, work with, do business with, befriend the people whom you claim to have nothing but love and tolerance for.  Otherwise, shut the fuck up and leave me alone.

tickhound's picture

Ever wonder why an uber-wealthy fat fuck lives in his 6-car multi-faceted facilitated waste of a mansion?  Cuz people like you are more worried about denying someone who may be lesser than you, for whatever reason (biological, environmental, whatever), than those receiving Section 1,000 vouchers to the nth degree, golden parachutes, deception and crime (albeit more sophisticated).

Point is... If you LEARNED anything from those sites, then you were naive to begin with... Most here live in the real world, and can't deny what we see. 

Want to fight dependancy?  Want to fight entitlement?  Want to fight affirmative action for those people MORONS like you believe deserving?  Then wake up.  This isn't about racism.  You make it about that.  This is about fraud, on a level that crushes ANYTHING you can present to me based on biology. 

Bring it, bitch. 

awkward squad's picture

I see we Jews have taught you white Goys well....we must fight racism wherever we see it! Race? There is no such thing!

tickhound's picture

Read my post again, uber-jew.

Pladizow's picture

I'm sorry Mr. Kreiger, I am a Harvard PHD - I dont understand, could you please explain?

Doña K's picture

Problem is that they are all so terrified with the truth that they block it out. They just don't want to accept it.

That explains the expression "bitter truth" 

Nascent_Variable's picture

It's also hubris.  These people build their entire sense of selves, not to mention their professional reputations, around being right about everything.

How does someone like that cope with the realization that they haven't just made a few mistakes in their calculations, but rather their basic, underlying assumptions are demonstrably false?

Drunken Monkey's picture

"How does someone like that cope with the realization that they haven't just made a few mistakes in their calculations, but rather their basic, underlying assumptions are demonstrably false?"

Well, if they had any old school honor they would take a one way walk in the woods with a bottle of good wiskey and their fathers duling pistol, but that's way too much to hope for these days.

Henry Chinaski's picture

Hubris is one of my favorite universal themes... and so apropos in these times.

In ancient Greece, hubris (ancient Greek ?????) referred to actions that shamed and humiliated the victim for the pleasure or gratification of the abuser.[1] The term had a strong sexual connotation, and the shame reflected on the perpetrator as well. It was most evident in the public and private actions of the powerful and rich. The word was also used to describe actions of those who challenged the gods or their laws, especially in Greek tragedy, resulting in the protagonist's fall.


Five minutes bitches!

mtomato2's picture

Math is the final abuser.  Always has been, always will be.


MATH, Bitchez.

Seer's picture

You're correct.  They've been bruoght up to believe that they're the exceptional ones and that they are responsible for the fate of others.  Of course, this allows them to live the high life, but they're earning it, really!

None of us here grew up knowing everything.  I didn't get most of what's going on until a bit later on in life.

When one is totally immersed in a paradigm one is totally immersed.  The trees are in the way!

Killer the Buzzard's picture

No selling drugs to kids!  That's an infamnia.

IAmNotMark's picture

Is this a comedy, tradegy, or documentry?

I guess it was all three.  I liked the Marx brothers more.

GenX Investor's picture

It's all three, kinda like Capitalism: A Love Story meets Wall Street: Money Never Sleeps.  The both got it wrong, but it was fun to watch.

TeamDepends's picture

Obama aka Barry Soetero aka Harrison J. Bounel aka Bari M. Shabazz is the right men for the job.

Chief KnocAHoma's picture

(bowing to the audience) Thank you... thank you... I'll be here all week. Be sure to fondle your waitress!


I am The Chief!

knukles's picture

Avioding #'s?  I was of the impression that CNBS only avoided news.

disabledvet's picture

Yeah no shit. How dumb do you think we are down here Mikey? The fact is all this Kick the Caan down the road bullshit doesn't represent an economic threat to the US is because there in the death throes of Bailout Nations instead of the USA's, well--I wouldn't call it mere since now every one knows bailouts fail too--successful bailout of Wall Street. The euro landers couldn't even handle a 5 billion dollar CDS. We had to deal with an 80 billion dollar one at Phuck nuts AIG! Anywho I would agree "there are security issues." and since I hate war and the people who start them with a passion (CN plucking N and Anderson Cooper--yeah that's right--I'm watching you phucker) I don't like what's going on over there and have an...enraged interest in it.

Seer's picture

Not in defense of the Euro Cluster Fuck, but they've got several countries acting in their own interest, whereas the US only has one.  Ah, the failings of democracy!

It's all pointed at the edge of the cliff, just that some will get there faster than others.

The EU will fragment.  So too will the US.

GoinFawr's picture

eventually, that might be for the best anyway, no?

kaiserhoff's picture

Quite right, but I think only Germany's vote counts.

Ancona's picture

Very well said sir.

I'll do the same thing in one sentence:

We're fucking screwed.

tempo's picture

Its clear sailing until Thanksgiving with the market breaking out about 1260 spx because there is no hard news, just rumors.

Divided States of America's picture

Yeah well in 5 minutes, the algos can pump the SPX up 20 points!

Ruffcut's picture

It takes less than that on a good porn site.

Syrin's picture

It only takes five minutes...


See, this is my point.   I am an MD, and much of what is discussed here is beyond my limited knowledge, yet I can still see the structural flaws as clear as day.   What baffles me is why others are so blind to the OBVIOUS ?!?!   If I can read the thoughts of bright financial minds, look at numbers, underdstand the basics of how an economy works (thanks Mises), then why can't others?   People I know that I consider very bright are in denial or are ignorant.  It's somehwat surreal.   I have given up trying to educate.   People hear what they want and no more.   I think it's willful ignorance for many.

Pool Shark's picture




"It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair


SPONGE's picture

It's called cognitive dissonance

Bastiat's picture

It's called knowing where your bread's buttered.  When you can't deal with how that conflicts with your idea of yourself and the world, then it's called cognitive dissonance.

Orange Pekoe's picture

People are so greedy and so stupid they will believe anything if they think it gets them what they want. The bigger the greed and stupidity, the bigger the lies they will believe and tell. Unless they figure out a better thing to want and a better way to get it. In other words, people are dumb monkeys.

“Education is teaching our children to desire the right things.” 



To wit, the monkey trap: 



monkey trap (plural monkey traps)

  1. (literally, probably folk-lore) A cage containing a banana with a hole large enough for a monkey's hand to fit in, but not large enough for a monkey's fist (clutching a banana) to come out. Used to "catch" monkeys that lack the intellect to let go of the banana and run away.
  2. (figuratively) A clever trap of any sort, that owes its success to the ineptitude or gullibility of the victim.




I am sure that monkey totally believed he could get that banana. (haha)