Notes From The Sales Desk: "All Glory Is Fleeting"

Tyler Durden's picture

From Brian Rogers of Fator Securities

All Glory Is Fleeting

“For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph - a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.”  -from the movie Patton (1970)

Yet More QE3 on the Way

Markets are slightly negative this morning with Europe off by about -1.5% while the US is down about -0.5%.  All eyes and all thoughts today will be focused on what the Fed will say at 2:15pm.  For my part, I think the Fed will surprise to the upside in a big way.  To be fair, this does not at all seem like the market consensus, but I think the elephant in the room for the Bernank is US Treasury issuance. 

Specifically, during the period of QE2, the Fed purchased roughly half of all the new US Treasury issuance.  This was critical to keeping rates low and confidence relatively high in the primary market.  Going forward, the US Treasury will be borrowing on average between $200-300bn per month as we finance our enormous 2011 fiscal deficit and roll previously issued Treasuries that mature.  What sense would it make for the Fed to peg the short-end to 2013 and enact Operation Twist to compress the 10yr Treasury yield another 25bps only to see a weak Treasury auction blow yields out by an equivalent or even higher amount? 

After 3 years of QE, is the Bernank really willing to risk rising rates simply because he didn’t print enough?  For a man who has publicly advocated dropping buckets of money out of helicopters, I doubt it.  That’s why I think today’s announcement from the Fed will have a shock and awe component of between $500bn - $1tr of asset purchases.  They may buy corporate CP, Treasuries, mortgages and maybe even European debt while they’re at it.  Politicians, the inflation-istas and gold and silver will all go nuts, but it’s hard for me to imagine that one Ben S. Bernanke will go gently into that good night.  He has one tool at his disposal that no other central banker on the planet has, a currency printer with unlimited ink.  And you can bet your kids college money he’s going to use it.

The Next Salvo in the Global Currency Wars

Which brings me to a theme that has become more pronounced in the financial press over the last few months, the ongoing Global Currency Wars.  In fact, Jim Rickards has written a book on the theme that comes out this November.  I’ve already pre-ordered my copy.  No matter what the Fed ultimately does today, the medium and long-term options for the Bernank are limited in the extreme.  We’ve got $15tr in on-balance sheet debt, another $6tr in GSE debt we simply ignore and somewhere north of $50tr in NPV of entitlements.  For those keeping score at home, this is a mountain of debt we will NEVER pay off.  Ever.  No way. 

Of course, we won’t actually default on this debt in the honorable way by simply acknowledging we can’t pay it, default, restructure and move on.  No.  We will default the good, ol’ fashioned central banker way - we will print our way to oblivion.  The powers that be in DC and NY can’t see things any other way.  We’ve got the printing press, ergo we use it.  Inflation you whine?  Confidence in the USD you cry?  Such worries are for pansies.  We are the world’s super power, have the biggest, most lethal military on the planet by a large factor and have basically been able to engineer the world’s economy post-Bretton Woods in a decidedly pro-USD way.  With that kind of hubris and over 65 years of success with chants of “USA, USA” echoing in the background, you know the false flag-wavers that run our country will take the easy way out for the simple reason that they can.

So the Fed will keep printing because they can and because they really have no choice.  The rest of the world’s central banks are acutely aware of this and they are scared.  As they should be.  Because this means that in the fullness of time, the USD will go down and their currency - EUR, CHF, JPY, GBP, AUD, BRL, (insert fiat currency here) - will rise.  Which in turn means their exports will get more expensive, pressuring revenues, margins and economies in general.  Their reaction is predictable, they print their own currencies in a valiant, yet ultimately vain, effort to weaken.  The Swiss and Brazil central banks’ recent moves are indicative of the actions other central banks will soon have to replicate.  But no matter what other central banks do – cut rates, peg currencies, monetize debt, etc – they will ultimately be trumped by the Printer-in-Chief, Chairman Bernanke.  Only precious metals will escape this imbalance accumulation led madness.

The Missing Canteen

When I was much younger (and in better shape, thinner, etc), I served our country for 8 years in the US Marine Corps.  I’ll never forget one event that happened during my 3-month stay in purgatory, otherwise known as Marine Corps Boot Camp.  During boot camp in the Marines, you spend the first week basically getting processed into the system.  You get lots of shots and a battery of medical tests done.  You fill out mountains of paperwork and sign numerous documents.  You also get all of your uniforms and most combat gear assigned.  After this first week, you are transitioned from the drill instructors who have been “helping” you through this process to the drill instructors that will spend the next 12 weeks turning you into a freshly graduated Marine. 

For those that don’t know much about the Marine Corps drill instructors, let me tell you, they are a tough bunch, big time.  These are some of the meanest, toughest, most in-shape, disciplined men our country has to offer.  They command respect because they earn it, believe me.

In any case, when my platoon was being transitioned over to our future drill instructors, those same nice gentlemen came in to our barracks and initiated an inspection to make sure that whatever gear we were supposed to have been issued, was issued.  So the main drill instructor would call out an item like, “Hold up 2 pairs of camouflage trousers, do it now!”  At which point, 3 other drill instructors would walk up and down the barracks inspecting each and every one of us to make sure we were holding up 2 pairs of camouflage trousers.  At one point in the process, the call goes out for 2 canteens.  Hold up 2 canteens, do it now! 

Unfortunately, the guy next to me only had 1 canteen.  It wasn’t his fault, the supply depot that gave us our canteens had simply run out of canteens when we were there.  So they gave the guy a chit and told him to come back later.  However, the simple fact was the guy only had 1 canteen.  One of the drill instructors, who later turned out to be one of the toughest men I’ve ever met in my life, Sgt. Salazar, noticed that this guy was only holding up 1 canteen and proceeds to sprint down the length of the barracks and slide-stop to a position about 2 centimeters in front of the guy holding 1 canteen.

Sgt. Salazar is in his face barking at this guy like a pitbull about a whole litany of topics, most of which I have forgotten by now.  However, the last thing he said was classic, “Recruit, you’ve got about 2 seconds to sh%$ me a canteen!  Do it now!”  Of course, this guy didn’t have another canteen and couldn’t produce one under any circumstance.  However, to see this guy turn around and manically start digging through his sea bag praying to magically find a canteen in there, you knew for a fact that if it was physically possible for this guy to actually squat down and sh%$ out a canteen, he would gladly do it in a heartbeat!

All Glory is Fleeting

That was a long story (probably too long) to make the point that we have reached the point with Greece where it is no longer practical to pretend there is another canteen for them to find.  There is not.  The current Greek debt is dead money walking.  Anyone with this debt on its’ balance sheet at par or anywhere close to par is fooling themselves, their investors and analysts who think their balance sheet has any semblance of reality in it.  The discussion in Europe needs to be practical and needs to focus on how they are going to backstop their banks and the global financial system WHEN Greece defaults, not if.  After all, the whole problem with Greece has never really been about Greece, it’s about the leverage the large banks have to Greek debt. 

Blow up the debt, you blow up the banks.  Blow up the banks, you blow up the $700tr derivatives market.  Blow up the $700tr derivatives market and the world we’ve known since Bretton Woods changes forever.  It’s the same thing that had Hank Paulson corralling senior members of Congress into a wood-paneled room telling them that if he doesn’t get TARP the world will end.  He was wrong then and the fear-mongers in Europe are wrong now.  Let the banks blow up, let the equity holders get wiped out and the debt holders take haircuts.  Guess what?  The sun will continue to rise.  Sensible, solvent players will move in to pick up the pieces and the real business of healing a horribly broken economy can finally begin but not one second before we force real capitalism down the throats of the current crop of pseudo-capitalists running the world.

We’ve had a nice run as the world’s super power.  Almost 66 years at the top of the world isn’t too shabby.  And no matter what happens during the next few years that would see the US knocked off its perch as sole super power, we will still be an economically important, vital member of the global community.  The sooner we acknowledge that the current economic system, that we in the US sit firmly on top of, is broken and needs massive, perhaps even painful fixing, the sooner we can get back to being a great country.  In the meantime, the Bernank will tell you how he plans on extending the bad system at 2:15pm.  Enjoy.



* Fator Securities LLC, Member FINRA/SIPC, is a U.S. entity and a member of the Fator group of companies in Brazil. The comments below are from Brian Rogers, who is employed by Fator Securities (Brian’s opinions are his own and do not constitute the opinions of Fator Securities or the Fator group of companies).

Fator Securities LLC is not affiliated with Zero Hedge or any third party mentioned in this communication; nor is Fator Securities LLC responsible for content on third party websites referred to in this communication.

This material was not prepared by Fator Securities LLC. U.S. Persons seeking further information must contact Fator Securities LLC in New York at (646) 205-1160. This material shall not constitute an offer to sell or the solicitation of any offer to buy (may only be made at the time qualified participants are in receipt of the requisite documentation, e.g., confidential private offering memorandum describing the offering, related subscription agreement, etc.). Securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful or until all applicable regulatory or legal requirements of such jurisdictions have been satisfied. This material is not intended for general public use or distribution and is intended for distribution only to appropriate investors. The opinions contained herein are based on personal judgments and estimates and are, therefore, subject to revision. Past performances are not indicative of future results.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SumSUN's picture

Bought 2 silver eagles yesterday :)

SGS's picture

FUCK THAT! Let'em PRINT!  Better for us conspiracy silver addicts...!

kito's picture

correct me if im wrong, but doesnt debt destruction create a deflationary environment, which would lead to the freefall of our gold and silver holdings?

SeverinSlade's picture

Unless the entire currency system fails due to being 100 percent fiat.

That's the way it's going to play out.  The world will lose total confidence in paper money.  It's a mathematical certainty at this point.

theotheri's picture

>>Only precious metals will escape this imbalance accumulation led madness.<<


Not even close.  PM's have run up to heaven so fast that they will come crashing back to earth right along with the US $. 


The Fed is not just trying to save the banks- they're trying to save all the US manfucaturers, ie massive employers, by making their domestic products more competitive.  So while we may bemoan the higher cost of superior imported cars, swiss chocolate, Samsung TV and German appliances, it is ultimately better for the USA for if it's population buys local goods and services.  

Not everything revolves around the banks, sorry to disappoint you Tyler Hedgehog.  Just because Wall Street fired your ass doesn't mean the whole system is corrupt. 


Gold is headed back below $1000/oz people.  You've been warned...

data_monkey's picture

Gold is headed back below $1000/oz people. You've been warned...


nope-1004's picture

I've been warned?  By who?  A white collar criminal?

Hmmm.... let's see.  JPY intervention, check.  CHF intervention, check.  GBP intervention, check.  USD intervention, check.  That leaves.... what?  Canada?  China?  Brazil?  Russia?  Get real.

I say we all sell our PM's and buy buttons.  We've been warned.  Buy buttons ppl..... there is going to be a button ETF out soon, symbol YBW.  Came from a Yellow-Bellied-Wallstreeter claiming You've-Been-Warned.



candyman's picture

My dad lived in the woods for years during the war and lived on buttons. My grandmother melted the gold they had into buttons and sewed them into their clothing. When they needed money they ripped them off. Cash couldn't buy a month old potato.

fdisk's picture

It is sweet, if you'll still have your job and money to buy it.
Usually when everything collapse people spending time in their
bathrooms trowing up 24/7, no time to think about GOLD..

NoTTD's picture

If it does, I'll still be up 300%.  How'd your equities do over the last ten years?  Buy, buy, buy!!

Au_Ag_CuPbCu's picture

Gold will never see the $1,000 light of day again...ever.

eisley79's picture

sure it will :D, just not in federal reserve notes...;)

d00daa's picture

and you just got your longs torched today, didn't you?  don't expect to see your monkey ass around here for a while.

ps - gold is approaching 1800 again....  fantastic call.

nmewn's picture

"Gold is headed back below $1000/oz people.  You've been warned..."

So you're sayin we really do have a chance of paying off a 17 trillion dollar debt with only 58% paying anything toward it?

Excellent!...can the other 42% just put it on their EBT card?

topcallingtroll's picture

Ad hominem is uncalled for here.

That is one purpose of anonymity, so that we focus on the message and not the messenger. I dont care if one of the Tylers sucked dicks in a Turkish prison, or if he is a convicted child molester. I focus on the argument.

If this is the same tyler who earlier claimed that qe3 was going to lead to hyperinflation and that markets arent reflective of current available information then he has become more widely read himself. Tyler isnt perfect. Hehe..Me and Smailes battled them all by saying the end of qe3 was priced in before it ended, while the populist Tyler argued that qe3 would lead to hyperinflation and later that the end of qe3 would lead to rising rates. I dont care which Tyler got fired. I dont care which one got in trouble with the SEC. Right or wrong it is the argument that is important not any attempt to deflect the argument with ad hominem attacks.

theotheri's picture

Tyler Hedgehog is a collective gold monkey pusher attempting to shove the overbought gold trade down the throats of the unsuspecting dimwits that frequent this site.  Sorry suckers, your hedge is being trimmed royally but the real safe haven- the mighty US DOLLAR.

And for the record, my holdings are about 95% prime real estate, unlevered, and 5% cash.  You can torch my total equity holdings today and my great grandchildren wouldn't notice.



depression's picture

Extend and Pretend 3.0

This isn't even close to over.

Fear not, keep accumulating.

Yamaha's picture

Me, I have not had this much fun since my dog died in 1989!

GenX Investor's picture

Yes, deflation is what is really occurring, with a simultaneous moderate run up in commodities due to money hungry traders. But ultimately the Fed is pushing on a string.  There are certain inconvenient truths, such as all debts must be repaid one way or another, incentives matter, and there is no such thing as a free lunch.

Absalon's picture

 "There are certain inconvenient truths, such as all debts must be repaid one way or another"


The inconveniet truth is that debts do not have to be repaid and the public will murder a thousand creditors before it lets ten million debtors starve in the streets.


People on here keep posting as though societies will destroy themselves for the sake of paying off a minority who are holding debt instruments - that is not going to happen.

topcallingtroll's picture

You dont know enough yet to post.

All debts are repaid one way or another. Either the creditor loses his money when the borrower doesnt pay, or the debtor pays his debt off.

No one here has ever believed that all debts will be repaid soley by the borrower. Many debts are going to be paid by the creditor as he loses his money to the borrower. Debt cancellation is debt repayment by the creditor.

You look like a fool absalon if you dont understand the language used by financial and economic types who hang out here. Please read more and dont post stuff that shows you do not understand what it means to say "all debt will be repaid one way or another."

There are two ways debt is resolved, by creditor losing money or debtor paying off loan.

eisley79's picture

"Debt cancellation is debt repayment by the creditor."

lol, not its not, thats like saying two gay people living in a commited relationship to the exclusion of all others is "marriage". 

Just cause you call it by a word doesnt make it so... Writing off debt, is WRITING OFF DEBT.

Also, they debtors, if they control the money of their debt, can change the value of the currency, slowly, or very quickly (repeg).  Repaying a debt in a new currency with a new made up value, is again not the same as actually repaying a debt.

Though you did sort your self out by the end "There are two ways debt is resolved".

All debts are resolved, but not all debts are repaid.

topcallingtroll's picture

I agree with you, but we all knew what he meant. Informally it is expressed debt is repaid one way or another.

Inflating the money supply is writing off debt in real terms, velocity remaining constant. The creditor "pays" even in that situation.

EscapeKey's picture

Yep, as Bernanke has repeatedly warned, we're living through deflation - which is why he recently took the opportunity to tell us that the inflation (which doesn't exist) is now on its way down.

But of course that's not questionable at all. Ben seems to be able to tell one lie after another, and never get called on it by the MSM.

Yamaha's picture

I'm really sorry.....know body takes a girl serious. I want you to know that I DO....want to get laid?

EscapeKey's picture

Google "Anna Chapman".

Whalley World's picture

Deflation is gold positive, look back to the Great Depression where gold went from $20 to $35.

Look up Exters inverted debt pyramid, and see what comes out on top, er on bottom in this inverted case.

GeneH3's picture

Gold went up in 1933 because the price was driven up by the U.S. Treasury and it's proxies. The $2.8 billion profit booked from confiscation at $20/ounce and compensation at $35 was used as seed money for the newly created Exchange Stabilization Fund (unauditable to this day). Deflation is in fact gold positive nevertheless -- relative to goods. It will buy more. That does not necessarily mean it will be priced higher in fiat. But who cares about fiat anyway. If gold is money, why place an undefined medium of exchange (fiat), which can easily distort value, between gold (money) and goods? Fiat should be, if anything, not something considered a thing of value, but only a fleeting convenience for exchanging gold money for goods. That convenience was not necessary between 1879 and 1933 as gold money was directly exchangeable for goods and the paper stuff was superfluous. The clowns in Washington and Wall Street have so screwed up the system of value and so brainwashed J6P that too most people in the U.S. understand financial value only in terms of the paper that the Fed prints with abandon.

HitTheFan's picture

You are correct that debt destruction creates a deflationary environment. However, gold will not necessarily fall, but silver probably would.

But, debt destruction is unlikely, as the Fed/US Gov will keep buying up any and all bad debts to 'save the system'. Eventually leading to the destruction of the system via hyperinflation.

jekyll island's picture

Cash is king in a deflationary environment.  PMs will go down but will hold value relative to falling prices and will lead the charge on the upside recovery.  It's too risky to divest of PMs anticipating deflation.   The government will do anything to avoid it and print FRN$, so we will probably have deflation in some sectors (housing) and inflation in others (food, energy) and eventual hyperinflation.  PMs are the best protection against hyperinflation, and they will do OK in a deflationary environment.  Best case scenario is to have some cash to hedge against deflation and continue to hold PMs for insurance against fiat currency destruction.  

Cole Younger's picture

"Cash is king in a deflationary environment." I agree however, I don't think the fed will allow a deflationary enviroment for to long.

FreedomGuy's picture

Excellent question, Kito! Hyperinflation is also a form of wealth and money destruction. It is the form favored by 100% of debtor nations because all debt is erased in the process. When you can print a 100 trillion dollar note like Zimbabwe you can pay your national debt and fully fund all social programs with a single piece of paper.

This is when gold and silver return to real money status. Actually bottles of whiskey and other things will become a sort of money too. This is when the PM savers win and the fiat money insurance policy you bought when you bought your PMs pays off...big! And you are alive to collect! How much it buys depends on how bad things are but it will be big as none is in circulation.

I would also say that even in a deflationary environment PMs can do well in the sense they still have good purchasing power. A one ounce eagle could still buy a lot in the Great Depression before confiscation. In a deflationary environment all goods and service drop in price too. Your mining stocks might take a beating but you should still be ok.

Inibo E. Exibo's picture

I'm kind of hoping it gets below 30 long enough for me to write a really big check.

BrocilyBeef's picture

I doubt it. When do you see your chance?

Prometheus418's picture

That's assuming you can.

I'm not going to go on about a shortage, as I'm not convinced there is one yet- but I do know one thing for sure... when the price goes up, the coin dealers seem to have a half decent selection, but when the dips roll through, they seem to be either closed or stocking no-name 90% rounds now.

Can't say I blame them really, but what it tells me is that the guys whose livelihoods depend on trading PMs all day, every day, are convinced that the price is not breaking out to the downside for long, if at all.  If I were to see ASEs in the case near spot after a $5/oz drop, I might start to get worried- but as long as it's oddball sterling comemmorative coins selling at a premium, that's telling me that the guy who has spent decades watching this market is betting he can sell the good stuff later for an even higher price.  

Of course, if you're willing to pay a premium on AMPEX or the like, you should have no problem.  Slim pickings seem to be for the big contract buyers or the face-to-face physical buyers.

Also, as kind of an oddball addendum- got an e-mail from eBay a couple of days ago informing me that my couple hundred dollars in "eBay bucks" could not be used in the bullion center.  Kind of irritated me, as I earned 'em there. 

FreedomGuy's picture

It may go back to $50 while you wait. Seems like the neighborhood of $40 is the baseline value now. It sells at a nice low markup at 99 cents over spot at times.

Duffminster's picture

Good move.  Hold em. 


The price of gold is proportional to the net outstanding global sovereign and private debt levels. If the economy has a significant downside contraction then tax revenues will drop like a rock and debt levels will sky rocket

GeneMarchbanks's picture

White Flags all around! Just write a couple of sentences including words like "chaos" "disaster" "mass impoverishment" "NWO" is all that is needed.

Bring the pain...

Oracle of Kypseli's picture

Sad but necessary. We need a rebirth, a reboot. we need a fresh start. No way we can continue that way. We need to pulverize politicians and banksters so that our children can have a better future.

Let's just do it. 

LooseLee's picture well as the traitors (e.g. traders) and so-called investors who worship at the altar of the Fed demanding a crony capitalist fascist/socialist stimulus or bailout. Until we can weed out these bulltard wards of the state (corporations included) and allow the weak to fail as they should have years ago, our children and grandchildren will be saddled with the debts of a wreckless elite that have brought about this fragmentation of society. Unless and until a truly free economy based on capitalist principle and founded on the rule of law is established, there can be no real prosperity in the world and our offspring will continue to slave for TPTB. Unfortunately the Moneychanger in Chief, Ben Bernamke, has no 'soul' (and I speak not of the Christian dogma here) and will continue to placate the dregs of society with his monetary policies that will eventually collapse the world economy...

espirit's picture

There's always a market somewhere, even if it's a black market.

GottaBKiddn's picture

No blow-ups without a Fema Camp for all Banksters.

lynnybee's picture

 pulverize politicians and banksters so that our children can have a better future.     .....   yup.    that's the correct answer & i'm finally ready mentally for it ...... bring it on .    

hunglow's picture

Enjoy the suck.