A few weeks back I wrote a piece titled “why don’t you listen to them?”. The subjects were Paul Craig Roberts and David Stockman because both were previously employed at top level positions in Washington and are both are trying to warn a sleeping American population as to what is really coming. At the time, I thought it was important to highlight their on target logic exactly BECAUSE they were from inside of Washington. I’d like to do the same type of analysis again but instead choose another individual with a very long term track record from the private sector.
This past week, Bill Gross reiterated the dire warning he’s given in the recent past. Bill Gross has been dubbed “the Bond King” has had more assets under management than anyone over the last 25+ years, to say he has a little experience under his belt is putting it lightly. He has also lived and invested entirely inside the box his entire career, he may be seeing a problem with the box itself.
I had planned to include Richard Russell in this missive as I have noticed his “tone” change this year, and particularly the second half. As he has in the past, he has again flip flopped this week and believes we may still have a year or more of equity reflation. Until two years ago I thought he tiptoed a little bit too much and really tried to stay out of the manipulation debate. Little by little as moves in gold and silver could only be explained by jamming volume during off hours and other tricks, Russell finally came around and called BS on all markets as manipulated. Not just markets but financial and economic reports, “bravo old man!”. It’s just been in this year’s second half where he his gloomy outlook has included the talk of “systemic collapse” and also included talk about the world going back to gold standard (again, bravo!). Now, his systemic collapse is postponed in his mind but still at the center of the table.
While Richard Russell over the years has been able to speak his mind as an independent, this wasn’t as true for Bill Gross. He primarily managed bond portfolios and more or less had to “talk his book,” this has really changed recently as he moved from PIMCO to Janus funds. Gross wrote in his Dec. newsletter some very interesting and I might add very painful truths of the financial world. If you notice, the following paragraph was underlined by him as important:
How could they? How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation? It has been a nursery rhyme experience for sure, but more than likely without a fairytale ending.
The basic premise to this newsletter is that a debt problem cannot be cured with more debt, (does this sound familiar to you?). He seems to be back pedaling from what he wrote a few years back where he believed this scheme could actually be pulled off with three caveats:
But each of these central bankers is trying to achieve the same basic objective: Solve a debt crisis by creating more debt. Can it be done? A few years ago, I wrote that this uncommonsensical feat could be accomplished, but with a number of caveats: 1) Initial conditions must not be onerous; 2) Both monetary and fiscal policies must be coordinated and lead to acceptable structural growth rates; and 3) Private investors must continue to participate in the capital market charade that such policies produced.
For me, the cherry picked gem from this letter was without a doubt when Mr. Gross wrote… “Keeping private investors playing the “game” in our financial markets even though they smack of a pyramid scheme might seem like a no-brainer”. And there you have it, “our markets smack of a pyramid scheme!” Again, where have you read or heard this before? He makes mention how investors will leave the negative interest rates of Germany in favor of 12% rates in Brazil, I would ask if Brazil is any less of a Ponzi scheme than anywhere else in the world? Without a doubt, I am sure Bill Gross knows this but he does work for a mutual fund company which has a basic need for capital to stay “within the box”. By the time the words gold or silver come out of his mouth, you will know game over has arrived.
I wanted to mention Bill Gross to you for several reasons. First, he is at the absolute pinnacles of the finance profession and the core of the system …debt. No one has managed more money nor been closer to the debt market internals than he has. I believe he sees the game coming to a head and wants to be “on the record” before it ends. Please understand what this man is saying about “HIS” industry, he used the word “pyramid scheme” within his thought process …the only worse word he could have used (which coincidentally starts with a P) is the word “Ponzi!” How anyone could read his thoughts and still stay “inside this financial box” is beyond me?
Switching gears entirely, I want to briefly ask a few questions as usual. The Treasury Department yesterday put out a bid request for “survival fanny packs” for their bank examiner employees. What in the world do they need these for… in case they get stuck in an elevator somewhere? Of course we already knew of the firearms purchased for the various government agencies along with ammo. At first it was just 1 billion rounds but that was moved up to nearly 2 billion …in case the first billion wasn’t enough or didn’t work?
We also found out yesterday that Russia, who had previously scheduled testing of their own “SWIFT” system for May, next year …will now test the system Dec. 15th! Why did they move this up 5 months? Did they also see 100 NATO (U.S.) tanks rolling across Latvia as we did yesterday? Do they see something “we the sheeple” don’t? Or do they see something only the tin foil hat society could possibly dream up?