Presenting Russell Napier's Greatest Hits

Tyler Durden's picture

Two weeks ago, courtesy of Gresham's Law, we brought to our readers Jim Grant's greatest hits: a compilation of the most memorable TV appearances by the famous newsletter writer. Today, we are happy to present another controversial luminary - Russell Napier: the renowned financial historian and consultant for CLSA, as well as author of the engrossing Anatomy of the Bear, who only together with Albert Edwards, has predicted that the S&P would eventually drop to 400. Napier has articulated some fantastic insights on the generational cycle, bear market bottoms and currencies in recent years. His insights, unlike those of TV pundits whose soundbites are only there to fill the gap between two ad segments, are always something to look forward to.

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rambler6421's picture

Deflation bitchez!

Dr Paul Krugman's picture

So if deflation is a threat then we need to increase spending!

knukles's picture

Cut my taxes and I'll spend more. 

Dr Paul Krugman's picture

Nothing is guaranteed when we cut taxes.  Who knows what people will do.  But if we increase taxes we then know we have a surplus to spend, and the government can increase its programs, and increase spending.

Golden Boy's picture

Lucky me! Dr Krugman on Zero Hedge! Tyler must be making a fortune to be able to have you here.


I have a midterm test in macro 101 tomorrow and I haven't studied anything.


First question:

Was Keynes an idiot and a failed economist because he was a homo and a child molester or was it the other way around?


Thomas's picture

The money line that I remember him saying years ago is that bear markets die of apathy--when the blood in the streets has dried up and blown away.

WestVillageIdiot's picture

The most important aspect of Keynes is not whether he licked balls or enjoyed the occasional banana in the tailpipe but that he was part of the Bloomsbury Group.  I think that taking him out of the context of that group of prima donnas, and their view of the world, is the big mistake.  There is no way Keynes believed in what he wrote about government actions.  I think he more likely knew that governments would collapse if they followed his advice and this thought of anarchy was welcome by the nihilists of Bloomsbury.  Cynicism was their stock in trade. 


I think one of the Tylers should do a little work on a more in depth look at Keynes and his role in that group of candy-asses.  Then we can have a better discussion of Keynes. 

GenX Investor's picture

It's a false premise to assume that there will be surplus to spend?  Where are the incentives in taxing more?  Where are the incentives in deficit spending in a global economy?  Tell me again where this has gone well in western Europe?  

El Viejo's picture

You can't compare the US with Europe. The ECB is hamstrung. They can't do anything.

If you wan't to compare Greece to California or Michigan Ok I'm listening.


Beam Me Up Scotty's picture

Typical bullshit.  I don't have a PHD in anything and I can tell you your theories are bullshit!!  You think just like the typical American does who is up to their eyeballs or worse in credit card debt.  You know what credit card debt does?  It allows you to pull demand forward.  I can buy it today and pay for it tomorrow.  Most people who have done this are in deep shit.

I pay my credit card bill every month.  If I cant afford it when the bill comes due, I dont buy it.  You know what?  Im not having any financial problems at all.

Government spending is the exact same thing.  It doesn't take a PHD in bullshitnomics to figure it out Paul.  Can I call you Paul?  Eventually, you can't pay your bills.  Just because you can print more doesn't mean shit.  What happens when the government needs every single dollar that every single person in this country produces?  Then what Paul?

In conclusion,

Fuck you!!

Thomas's picture

Despite some edginess in the delivery, your ideas are sound Scotty.

El Viejo's picture

Didn't they increase taxes back during the Great Depression? Isn't it a general conclusion now that this was a mistake?

manodedios's picture

the moment i found out this is the *real* krugman, that moment will be my last on zh!!!

J 457's picture

Right, force those cash rich American corporations to bring their money back to the USA and "increase spending" on hiring, infrastructure, new factories, corporate tax, shareholder dividends, better health care for employees......ooh, nevermind, who am I kidding, they will just keep paying their CEO 25mm a year, off-shore jobs to Taiwan or China for cheaper labor, and squeeze every last cent out of the consumer.

You can't spend if you're broke. 

WhiteNight123129's picture

Hi Guys,

If you are wondering about inflation versus deflation, check out Tobacco leaves prices. Tobacco leaves were used as currency in the US between late sixtheen hundreds up to beginning seventeen hundreds, so longer than post Nixon window. As Greenspan put in his 1966 famous article about the Gold standard, Tobacco was also used in the second world war as currency.

Why? It´s demand is extremely inelastic and predictable (it is a drug and the level of addiction - not side effects, is worse than cocaine). Hence you have the most stable demand for any soft commodities. Since the 1970, it has shown to have a very stable upward price (check on bloomberg the commodity index for processed tobacco). You have also interesting bits that confirm that, in the Whitman book, there is one exhibit that he does not talk about but tells volume about the stability of demand of the product. Tobacco industry has "earnings mistake" which are between 6 and 15 times less than any other industry. That means that while other industry typically have very large earnings mistake, this industry does not have, again because the demand is almost completly inelastic.

This is the why it has been used as currency, a commodity whose demand supply is very stable. Further there is no speculator price induced swings, so it is a pure indicator.

I will believe in deflation when I see that price move down. Interestingly there is no inflation of Tobacco leaves in Yen at this point, given that the yen has been strengthening. 

So if Napier is telling us that the US dollar currency will have to go down against emerging market, the price of Tobacco (which is manufactuer within and outside of the US) will have to go up. If the US dollar weakens that can not be deflationary, as the USD price of Oil will go up, and many other USD denominated commodities will go up.

What one can conclude is that he sees deflation first, but that is not sustainable without later massive currency change (devaluation against Gold from 20 USD to 35 USD like in 1932) or outright currency collapse.

So the outlook of GOld in Foreign currencies might not be intersting for GOld as it would be in USD. But if the USD sinks, how can the GOLD price in USD sink? Remember than in the 1929 and later deflation period if you held Gold the whole time and you escaped the confiscation of it, you made quite well since your ounce of Gold went from 20 to 35, than ounce the devaulation is in place, roll over into Equities.

So assume we have deflation, ok (which Tobacco price is saying no way at this point), then you have to have the devaluation happen first (which has happened but still has a long way to go given trade deficit). Next you have to have the equities at 5-7 times earnings, we are at 20 using Schiller, but if you use real inflation we are at 16 times. That has not happened yet.

The final answer is that you have to assume that the Fed let deflation happen, judging by the response of prices so far, it has done a decent job at creating inflation.



Carlyle Groupie's picture

"The continuation of negative real rates is the new normal."

Bla, bla, bla, splat. Bug meets windshield.

WhiteNight123129's picture

Well Show me deflation on Tobacco leaves price, and I will capitalute on my Gold, if you show me deflation on flat screen TV it is meaningless for inflation of debasement nature. Historical defabsement ALWAYS had deflation on manufacturing good AND inflation on basic necessities. As long as we see both together we decrease the possibility of 70s like inflation but increase the possibility of currency crisis. If wage inflation would happen it would be good because it would remove the threat that many consumer debt are actually not repayable, the scenario would a good old stagflation, not hyperinflation. The deflation on high end items is the symptom that people are getting squeezed by basic necessities and less is left for discretionary spending. Check also Walmart along with Tobacco leaves, if stuff is getting cheaper there, dump the Gold for sure, because that means more money left for discretionary items and the debt becomes more repayable. So the roadmap: Check Tobacco and check Walmart.

Do not use the current liquidity squeeze which is propping the dollar, it will temporary result in "cheaper" oil and imports at Walmart. Unless you assume that liquidity squeeze has to be permanent!!!

So deflation would have to show in basic necesseties, partial deflation (on high ticket items versus basic necessities) is a common feature of currency crisis (hyperinflation).

Tsunami Wave's picture

I wish this were the real Paul Krugman, because if it were i'd tell him to go fuck himself and stick his good for nothing worthless nobel prize up his ass.

WestVillageIdiot's picture

Why can't we bring back the practice of dueling?  Do you know how miuch stupid shit from these assholes this would stop?  That is a natural barrier to fuckheads acting with impunity.  God bless Aaron Burr. 

ACP's picture

I agree. Increased spending would result in a much more profitable crash.

FranSix's picture

I very much prefer his film student coke bottle glasses, than the wire rim ones.

navy62802's picture

The Scottish accent makes people sound like renegade rebels.

Golden Boy's picture

No, it makes them sound like idiots.

LowProfile's picture

Especially when he says emerging market currencies are a "safe haven", with no discussion or even mention of that other safe haven.

Abitdodgie's picture

He is Irish not scottish , for fuck sake you Canadians sound all the same , was that a joke. do I up them or down them

css1971's picture

No, he´s scottish and his accent is scottish.

Golden Boy's picture

What this stupid fuck doesn't understand is that the Fed can't raise interest rates anytime soon, or ever. 

Raising the fed funds rate would be inflationary. 


My god, I have to listen to these limey idiots every day and one of these day I'm gonna snap.

Unprepared's picture

You are making me doubt what I understood for him or you. If we are referring to the same thing, he's talking about REAL interest rates.

Golden Boy's picture

I'm talking about the fed funds rate.

zhandax's picture

Italy didn't hit crisis mode when their bonds went from 5% to 6% because the ECB raised rates.

moonstears's picture

I think this guy's saying creditor(China) will force deflation on the debtor(USA). A rise in interest rates for US bonds caused by the creditor, what, devaluing the Yuan? I'm still saying bi-flation/stagflation. Some assets will deflate(housing?), though if housing starts stay low, eventually(3-5yrs?)the excess housing(9mos inventory) gets sopped up by young families entering the market. Jobs would have to exist, though. The reason they're not fixing housing is they're waiting for this to occur? Thoughts, bitchez?

Golden Boy's picture

A 1% rise in yield across the board would cost the USA an extra 140 billion in interest payments a year. They would have to either print the extra 140 billion or convince the bond holders to add to their bond holdings (which they have been dumping). Deflation in the very short term? Sure, why not. Medium to long term? Impossible. This is not Japan. Do you know anyone who actively invests in usa bonds for retirement?'s picture

I have about $12,000.00 in US bonds in a lockbox in my house inherited from my father...I used to actively invest in treasuries when they yielded something on the Treasury direct website.

Caviar Emptor's picture

Agree Biflation. One part of the economy will hum along while the rest slowly sinks. Process can go on for an unlimited time baring significant social unrest until you reach the natural banana republic outcome: a few super rich with most of the ownership and all of the political power. All the rest super poor just scraping by, cringing every time the price of bread goes up 

walcott's picture

go right ahead and buy some linkdin netflix 

kito's picture

anybody looking for a bunch of ron paul bumper stickers can check out this site:


he appreciates donations but will send them to you for free...........

Implicit simplicit's picture

Thanks for the link. I have placed my order.

Gamma735's picture

John Milton: Eddie Barzoon, Eddie Barzoon. Hah! Oh, I nursed him through two divorces, a cocaine rehab, and a pregnant receptionist. Heh. God's creature, right? God's special creature? Hah! And I've warned him Kevin, I've warned him every step of the way. Watching him bounce around like a fucking game, like a windup toy! Like 250 pounds of self serving greed on wheels. The next thousand years is right around the corner, Kevin, and Eddie Barzoon-take a good look, because he's the poster child for the next millennium! These people, it's no mystery where they come from. You sharpen the human appetite to the point where it can split atoms with its desire, you build egos the size of cathedrals, fiber-optically connect the world to every eager impulse, grease even the dullest dreams with these dollar-green, gold plated fantasies until every human becomes an aspiring emperor, becomes his own god, and where can you go from there? And as we're scrambling from one deal to the next, who's got his eye on the planet? As the air thickens, the water sours, and even the bees honey takes on the metallic taste of radioactivity. And it just keeps coming, faster and faster. There's no chance to think, to prepare. It's buy futures, sell futures, when there is no future! We got a runaway train boy, we got a billion Eddie Barzoons all jogging into the future. Every one of 'em getting ready to fist-fuck god's ex-planet, lick their fingers clean as they reach out toward their pristine, cybernetic keyboards to total up their billable hours. And then it hits home! You gotta pay your own way, Eddie. It's a little late in the game to buy out now! Your belly's too full, your dick is sore, your eyes are bloodshot, and you're screaming for someone to help! But guess what? There's no one there! You're all alone, Eddie. You're god's special little creature. Maybe it's true, maybe god threw the dice once too often. Maybe he let us all down.


Emphasis added by Gamma735

Caviar Emptor's picture

They'll never see it coming. Biflation. They don't see it because they don't get it and they fear it so therefore it doesn't exist. How can Treasuries maintain negative real yields while CPI is humming along? How come there's no hyperinflation when every major central bank keeps monetizing? 

moonstears's picture

CE, IMO, why no hyperinflation? I kinda, maybe, confusedly think it's because that "money" created was digital and went to the banks(start at TARP). They, in turn, shored up black holes(CDS's, MBS's) and or used proceeds to loan to bank type entities/funds to play the commodities markets(oil bbl $35-$147 back to $40s, even gold $900-$700-$1900 back to $1700s). They (Geithner+Ben?) started to print some "currency" to put out in the economy(remember the blundered, thus unusable, "new" $100 bills with gold bells?), but Ben musta caught the "fear of Uncle Friedman", or the old boys club decided they needed more time, to rape the system? I'm at a loss but there're many ways/ reasons that no rampant inflation to morph to hyperinflation(remember thay can cause heavy inflation, but "hyper" is a "trust loss" event, not monetary, per se), they are not incentivising funding or loaning to mainstreet business, so no "trickle down". Just me thinking aloud. Remember that some say the great depression I was due to the drying up of liquid paper currency, which was their (banking interest's) response to the J6P run on gold coin "currency", prior. Then Roosevelt forced the masses to give back "their" gold, under penalty of law, but those bankster assholes wanted to prove a point, and let it go on 'till spirits broke and babies starved. I've read that theory on Mr. Gore's interwebs and it's not crazy as it sounds once you roll the idea around in your brain, for a while.

Island_Dweller's picture

FYI.  According to, we hit 100% debt to GDP today!

OldPhart's picture

Not quite, though we're damned close.  My guesstimate puts us at 100% on Wednesday, 11/23, so we can properly celebrate "Thanksgiving" in true american style...using OPM.


I'm 52 and I remember penny candy, etc.  This shit both enrages and saddens me.  I wish I had been more awake when I was in my 20's and 30's.  Now I'm too old to have enough time to offset the sleeping decades.

I will die working.

Toolshed's picture

Same here. My "retirement" starts right after my breathing stops.

High Plains Drifter's picture

mr napier, i am not buying your argument..............sorry...

Caviar Emptor's picture

In the past 30 years, average real weekly wages for men in the U.S. have fallen by a staggering 28 percent. The loss of manufacturing has also exacerbated capitalism’s natural boom- and-bust cycle. After the first seven post-World War II U.S. recessions, it took an average of only four months for employment levels to return to their pre-recession levels. But after offshoring became widespread in the 1980s, recovery from recessions started to take much longer. After the 1990-1991 recession, it took 19 months to return to normal. After the 2000-2001 bust, with even more manufacturing jobs offshore, it took 30 months for employment to reach pre-recession levels.

How long will it take to regain the 8 million jobs lost in the latest recession, let alone the 4 million additional ones needed to keep up with population growth? It has been almost 30 months since the trough in June 2009, yet we’ve made almost no progress.