Podcast

Barry Ritholtz: Sailing with Sea Monsters

Learn to accept market realities & invest accordingly
Friday, September 21, 2012, 6:03 PM

Barry Ritholz has had a long career, both participating in the Wall Street machine operates and opining on how it operates. By any account, few understand the ‘street rules’ of modern investing better than he.

And he thinks many investors today, both individual and professional, are letting themselves get dangerously distracted.

In a May article titled Where Sea Monsters Live, he observed that many fund managers spend more time railing at Fed policy than on their own portfolio strategies. Yes, the seas have become more turbulent, admits Ritholtz, but that’s exactly when the captain’s expertise is needed most. Simply cursing at the winds and tides will not get the ship to safety.

By the way, I do not want people to misunderstand this. It's not that people shouldn't be criticizing the Fed; it's not that people shouldn't be actively and vocally debating public policy and monetary policy. But if you are doing that instead of managing your assets, if you are doing that instead of paying attention to how you should be positioning your portfolio, you are going to be in trouble as an asset manager.

The priority, he says, is to accept that – for good or for bad – central bank intervention is an integral component of financial markets now. Whether you approve or not is immaterial; if you are a steward of capital, you’d better work quickly to develop an investing approach that takes the range of likely Fed actions into account.

Markets are driven by human nature; they are driven by psychology of fear and greed. Sometimes the fear is missing out on the rally. Sometimes the fear is uh oh, things are going lower.

What changed the game so dramatically post-2008 crisis is the footprint of the Federal Reserve and what they are doing. And so, if the Fed was not involved in this market I would be looking at decelerating macro economics, I would look at earnings peaking and reversing, I would look at a number of factors that would have me radically reduce my equity exposure.

We run an asset allocation model that uses a 60/40 benchmark. 60% equities; 40% fixed income. We came in to the year 80/20, way overweight in equities, and as the market has rallied – each time we rebalanced to take a little bit off the table. But we have also made a conscious decision to go to equal weight as opposed to overweight. Now, if this was a normal situation I would probably be 40/60. I would probably be 40% equities, but it is really, really challenging to say. Despite the fire hose of liquidity, despite the really low fixed income rates, I want to still sell stocks. In light of what is going on, I just cannot do it.

By making bond yields so low, you drive money out of bonds into equities, and by providing so much liquidity to banks, history has shown us that when that happens it seems to find its way into equity markets. When you look at that historically, when you look at when the Fed says we are going to increase liquidity, we are going to put a lot of cash into the system as a lubricant, the impact is that risk assets go higher. And that is pretty much stocks, bonds, and commodities - and the dollar weakens. Look at what happened under Greenspan and once Bernanke took over. From 2001 to 2007, the dollar lost 41% of its value, and I have no doubt that was driven by Fed policy.

If this was a normal situation, I would be battening down the hatches and waiting for this storm to come forward. Instead we are looking at a Fed with a fire hose and wondering every time there is a 10% to 20% correction in the equity market, they throw more cash at the system in order to generate some improvement. And I keep coming back to this from our original conversation about Where Sea Monsters Live. It's more than just being the armchair critic. The impact of this from an investment perspective is: “I want to own this and I do not want to own that for all of the above reasons.” Where people seem to falter is in taking it to the next step and saying, “Well, what does this mean from a risk versus reward perspective?”

Click the play button below to listen to Chris' full interview with Barry Ritholtz (48m:51s), including his his thoughts on gold:

Transcript: 

Chris Martenson:  Welcome to another Peak Prosperity podcast. I am your host, of course, Chris Martenson, and today we are going to look at the economy with someone who can truly help us see the big picture. His name is Barry Ritholtz, and it would be impossible to list all of his achievements, awards, appearances, let alone convey his impact on the financial world. So I will just touch on a few highlights here.

He is the author of the book Bailout Nation, lauded as the best-reviewed book on the bailouts to date. You really should read it if you want to know how we got here and where we are going. And, as well, he is the proprietor of the extremely popular and often praised financial and economic website, “The Big Picture,” found at Ritholtz.com. In his day job, Mr. Ritholtz is CEO and director of equity research at Fusion IQ, an online quantitative research firm. And the firm makes its institutional-strength number-crunching available to individual traders and investors at an affordable price. I could hardly think of a better person right now to talk about our turbulent financial markets, where they are likely headed next and where investors may be able to find acceptable returns at acceptable risk. With the ECB, the Fed, and the Bank of Japan now announcing massive new equity injections into global markets, people need that guidance more than ever.

Barry, I am thrilled to have you as a guest.

Barry Ritholtz:  Well, thanks for having me.

Chris Martenson:  I always like to begin at the outside, widest possible view, if we could, so we share the necessary context to make sense of these details. I would like to begin, as it were, with the big picture here; take stock of circumstances in which we find ourselves. I want to begin back in May of 2012 when you wrote a piece entitled, “Where Sea Monsters Live,” in which you recounted a dinner conversation you observed. Maybe the conversation was not distinguishing very crisply between debating policy and managing assets, and that perhaps there is quite a lot of armchair policy-critiquing going on out there right now, but that people, like you, like me, still have to wake up every day and make decisions.

Barry Ritholtz:  That is exactly right. You know it is an ongoing debate [that] I have been having with a number of friends who are all traders, hedge fund managers, people running different types of assets. And if you are not playing football, there is always the tendency to be a Monday-morning quarterback and say this guy should have done this, why did they go through in on fourth and two? Yeah, it is a very different philosophy when you are on the gridiron making actual decisions. But what I find kind of astonishing are people who are literally on the gridiron, supposed to be making decisions, and they spend most of their time Monday-morning quarterbacking.

The whole idea of “Where Sea Monsters Live,” the analogy I sort of went off on a rant at a dinner party one night, is hey, I am the captain of a sailing vessel and I have passengers and crew that I have to get safely from here to there, and it is my job to know what is the wind like, what does the weather look like, the tides, can I guide the ship by the stars, and where do the sea monsters live. When you are out and there is danger and you have to make decision –do you make a dash for it or return back to port? What you do not get to do is lean back and criticize the tides; you do not get to say, gee, this north wind is really going about it wrong. You have to read the signs, read the sea, read the circumstances, and safely get to where you are going.

And I am finding lots and lots of managers are not doing that. Instead, we receive missive after missive after missive about why the Fed is destroying the world. I have been pretty critical of the Fed over the years, but that is sort of my weekend fun thing. And I criticize Greenspan in Bailout Nation, and I scratch my head over what Bernanke is doing, but that is a footnote. My job is to look out and say, what is the impact on their behavior and their actions on opportunities and risks? How do I navigate those seas knowing that the Fed is a player in the entire situation?

Chris Martenson:  So then you followed up this excellent piece back in May with another one in September entitled “Situational Awareness” drawing on a military metaphor. In that one you wrote that these days the FOMC (Federal Open Market Committee) is a – they are a participant, they are in the market, and so the line I like was “critique the Fed, but manage your assets.” Do you see that the Fed, like the FOMC – they are a full-on market participant at this point; is that right?

Barry Ritholtz:  No doubt, and it is not like it was thirty or forty years ago where everybody – unless you are a historian, unless you know what the Fed used to do, people forget. There was a day when they never used to make announcements as to what they were doing. You could assume the Fed was shifting their interest rate targets, because someone was selling the hell out of bonds and guess what that did to yields? Just like buying bonds drives them lower, when someone is selling them, it sends them higher. That is how they actually operated. They did not come out and say we are raising our targets 2.5%. It just happened in the bond market.

And so, today not only did they announce their targets, they say, oh and by the way, if you want a front run, we are going to be buying forty billion dollars’ worth of mortgage-backed bonds or mortgage-backed securities as far as the eye can see, at least for the next twelve months and maybe longer. So they are not just a participant, they are a public participant engaging in active jawboning, letting everybody know here is exactly what we are going to do, and the reason for that is they are trying to push markets, they are trying to push interest rates, they are trying to push risk appetites in a certain direction.

I think their thinking is, here is how we will stimulate the economy; here is how we will get people psychologically more comfortable with assuming more credit, spending more money, making more investments. We could criticize that as whether or not it is a well-founded policy, but as an asset manager I have to look and say, okay, what does this mean for fixed income, what does this mean for commodities, what does this mean for the economy, what does this mean for earnings, and what does this mean for equities?

Chris Martenson:  Absolutely. You know, my grandfather served on the New York Federal Reserve Board under Volcker for a period of time, and back then one of their policy tools was surprise. But that Fed does not exist anymore. They have taken that tool out of the box in favor of policy directions. So, what is the situation right now? The Fed has clearly said we are asset-priced targeting here, we want to – all sorts of things we would like to have happen, the wealth effect, we would like to repair balance sheets. A lot of good things they want to have happen.

That is the situation, so do you see that changing at any point in time, or do you sort of dial back the element of surprise to near zero and just count it on the idea that you are going to get plenty of advance warning from the Fed when they do decide to start to move in a different direction?

Barry Ritholtz:  Yeah, I think surprise has not been in the playbook for a while. It is a shame, because it certainly could be effective. Although I do think a lot of people were surprised at the size and scope of QE3 (quantitative easing) this time. As I mentioned in that piece “Situational Awareness,” there has been this horrific blind spot for the Fed. They should be a “known unknown,” as Rumsfeld used to say, and yet people continue to be surprised. They telegraph what they say very clearly. They have – working with John Hilsenrath of the Wall Street Journal – that is the worst kept secret in the world, that when he writes something it is because Ben whispers in his ear here is what is going on. When you see a week before Jackson Hole, hey we are likely to come out with some form of QE; people were still denying it up to the last minute. Oh, they cannot do it in an election year; oh, the balance sheet is already too big. Hey, these guys have a history; here is the track record. They say something to Hilsenrath, he publishes it in the Wall Street Journal, and then it happens two weeks later, and yet people continue to be surprised by it.

By the way, I do not want people to misunderstand this. It is not that people should not be criticizing the Fed, it is not that people should not be actively and vocally debating public policy and monetary policy, but if you are doing that instead of managing your assets, if you are doing that instead of paying attention to how you should be positioning your portfolio, you are going to be in trouble as an asset manager.

Chris Martenson:  Well, I have talked to a lot of people who are professional money managers – many run some pretty big funds – and there is a level of paralysis out there, particularly for people who had methods, and tools and processes that seem to work for a long time that no longer work; asset correlations spiking, and a variety of things that used to be tried and true not really working as well anymore. Alpha shrinking.

What is your view on this? Do you think the markets have really fundamentally changed and some of this is paralyzed people who do not know how to operate in this environment, or is there something deeper going on?

Barry Ritholtz:  I think the markets the same as they have ever been. They are driven by human nature; they are driven by psychology of fear and greed. Sometimes the fear is missing out on the rally. Sometimes the fear is uh oh, things are going lower. What changed the game so dramatically post-2008-crisis is the footprint of the Federal Reserve and what they are doing. And so – look, I have said this a number of times – if the Fed was not involved in this market, I would be looking at decelerating macroeconomics; I would look at earnings peaking and reversing; I would look at a number of factors that would have me radically reduce my equity exposure.

We run an asset allocation model that uses a 60/40 benchmark – 60% equities, 40% fixed income. We came into the year 80/20, way overweight in equities, and as the market has rallied, each time we rebalanced we take a little bit off the table, but we have also made a conscious decision to just go to equal weight as opposed to overweight. Now, if this was a normal situation, I would probably be 40/60. I would probably be 40% equities, but it is really, really challenging to say.

Despite the fire hose of liquidity, despite the really low fixed-income rates, despite casting trash, I want to still sell stocks. I just – in light of what is going on – I just cannot do it. By making bond prices – bond yields – so low, you drive money out of bonds into equities. And providing so much liquidity to banks, history has shown us that when that happens it seems to find its way into equity markets.

I always like to remind people, in October 1999 when the Fed was so concerned about Y2K, which turned out to be misplaced fear, they just did a fifty-billion-dollar one-off, and from that point until six months forward, the NASDAQ, which had been screaming higher for ten years, doubled over the next six months. I tell people October to March – October 1999 to March 2000 – the NASDAQ doubled, and no one believes me. They have to go look it up. We were at 2490 or something like that in October, and the Fed announces this $50 billion liquidity issuance in order to make sure that there are no fears that there is a run on the bank, that ATMs run out of money, there is plenty of cash in the banks for January 1st. And they started that three months earlier, and the markets, which were in full throw, full mode just doubled.

So, when you look at that historically, when you look at when the Fed says we are going to increase liquidity, we are going to put a lot of cash into the system as – I call it a lubricant; I do not know what they call it – but the impact is that risk assets go higher, and that is pretty much stocks, bonds, and as we have seen it, the dollar is weakened, commodities as well. Look at what happened under Greenspan once Bernanke took over. From 2001 to 2007, the dollar lost forty-one percent of its value, and I have no doubt that was driven by Fed policy.

Chris Martenson:  When you look at the $50 billion, that injection back in 1999, how quaint [laugh].

Barry Ritholtz:  It is quaint today, but relative to Fed interventions at that time, it was a pretty hefty chunk of change. Today you look at it and it is a rounding error, but back then it was like, wow, this is really pretty substantial.

Chris Martenson:  Yeah, it had that surprise element, maybe 10X the size of their normal, permanent market operation. It was pretty big. As I saw it, it was – yeah, it caught me by surprise back then as well. So, here we are, we have got forty billion a month now pouring in indefinitely. We have got the Fed saying that as necessary they might do other asset purchases, leaving a little vagueness to potential trajectory. And you think that they are going to continue to step in? And what is it that they are really aiming for here? Can we take them at face value and say they are focusing on employment in the context of price stability, or are they really targeting asset prices here?

Barry Ritholtz:  You know, they believe in the wealth assist, and years ago, before the crisis, I recall writing something called “Tales of the Wealth Effect Have Been Greatly Exaggerated.” The concept behind the Wealth Effect is this: When we look at the history of stock markets, when prices rise, people have a tendency – or so goes the narrative – to feel better, and then thus they go out and spend more money, hire more people, make more investments and you have this virtuous cycle.

There is a pretty significant flaw in that argument. There are actually a few, but let me just give you the two biggest flaws. The first is just your classic logical reasoning causation-and-correlation error. When stocks are going up, you have to look at, is that causing the spending to take place, or is there an underlying factor affecting both of those? And historically, when you look at long boom markets, when you look at the history of the stock market, when you have a substantial rally in equities, it tends to be because you are having this broader secular expansion in the macro-economy in employment, in wages, and so it is not a surprise that people spend more.

But it is the same factors that drive the spending that drive the – that are also driving the increase in stock market. It is expansion, and more hiring, and more spending, and greater profits. Oh, guess what, in that environment, stock prices go up and people spend more! But the stock prices are not causing them to spend more; it is that all the underlying factors that are affecting A are also affecting B. So, rather than assume a causation relationship, it is really a correlation. The same thing that is driving the stock market is driving spending; the stock market is not driving spending.

People make that mistake all the time when they look at elections and the DOW. Does the DOW – is the DOW good for the incumbent, bad for the incumbent? It is like, no, when the DOW is going higher it tends to be good for the incumbent; when the DOW is going lower it tends to be bad for the incumbent, because of the underlying forces. So, that is the – that Wealth Effect is the primary – seems to be, and if you look at – read some of the speeches and listen to what Bernanke has said, that seems to be one of the primary focuses of the Fed.

The problem with that is the numbers are vastly disproportionate to who owns equities. The average family is a $25,000 or $30,000 portfolio. The average 401k, which is a typically higher-income person, is a $60,000 portfolio. And the numbers – it is something like 50% is owned by the top one percent, 80% is owned by the top – or 75% is owned by the top ten percent. And those are my client bases, and I can tell you, they spend money; they do not care what the economy is doing other than full-blown Armageddon. The Fed is not going to stimulate them to spend money. They spend money regardless of what is going on.

And the marginal spender, the marginal retail player, is somebody who really does not care much about what stock market is doing. You know, if you are making $75,000 a year, and a mortgage, and kids going to college, and a two-income family, the Fed moving interest rates up or down is not going to make a difference. You are not going to say, all right, I am going to start a business, and buy a car, and buy a house because rates are three percent lower. It is – you are paying your bills, and what is much more likely to have an impact on your spending habits is, are both people working; is the person who is out of work getting a job; is the person who is working getting a raise? Those are the factors that really impact – is credit available? That impacts spending

You know we just got a proposal from our bank to lower our 30-year mortgage to 3.6%. That is insane. A fixed, no point, 3.6% mortgage, and if you do a 15-year mortgage it is 2.75%. These are just unfathomable numbers, and it means that if you qualify for a mortgage, you actually have about 15% more buying power than you would have [had] two years ago. And yet still, housing is just bumping along the bottom.

Chris Martenson:  I think that point that you made before about the concentration of wealth, which has certainly been a feature, has been much-discussed and well-dissected from a data standpoint. That certainly has to be a drag on the Wealth Effect, because, as you know, people who are above a certain income level, their spending habits are not really going to be all that impacted by whether their portfolio is gyrating up or down a few points.

Barry Ritholtz:  That is exactly right. And here is the thing that I think people forget: When you go through these long periods of time, if someone decides to take some cash and say all right, I am getting no money out of the 10-year bond yielding 1.6%, let me move ten percent of my portfolio to equities. That is a paper transaction. That is not like building a factory, constructing a building. It has almost no impact other than driving; you know helping to drive stock prices higher. So, I think the underlying belief that hey, if we can only get equity prices higher, people will go out and spend.

Now, keep in mind, the opposite, however, may be true. The opposite is when everything is in free-fall, when markets are crashing, we have a tendency as human beings to be [like a] deer in the headlight and everybody kind of freezes. And you hear a lot – during 2008, 2009, you used to hear, I want to go do this. I want to buy this house, buy this car, buy whatever. I am going to wait a little bit and just see how things shake out. Well why? You own your own business; you know what your cash flow looks like. I know you have money in the bank; you are not buying a billion dollar – you know you are not buying Veyron; you are going out and getting a car. One month to another, do you really think you cannot make the $700 a month payment depending on the economy?

But, that is human nature. People have a tendency to see the backdrop, and I think people tend to overreact to the negative much more than they positively react to the positive.

Chris Martenson:  Well, you know what is making me nervous right now is not that the Fed is being so interventionist, but that their interventions, all the trillions of them, including – here I have to toss in the Bank of Japan, as well the ECB (European Central Bank) and the UK.

Barry Ritholtz:  It is global, and it is well coordinated.

Chris Martenson:  It is, and what is worrying me is that I actually expected more bang for the buck. I was expecting a greater sort of market response, and better yet, an economic response, and it is not there. So, my concern is that the forces of deleveraging – I am worried about being like Japan. Like that this could just be a fairly persistent –

Barry Ritholtz:  Go on forever.

Chris Martenson:  Yeah, it could go on forever, which means growth is going to be really subpar, and if it slips into recession, all of a sudden we have banks – big central banks – holding onto a lot of very expensive assets in a poor environment. Do you have any concerns that we are not seeing the traction we should have seen? Do you have any worries there?

Barry Ritholtz:  Yes and no. The yes is they have thrown an awful lot of fire power and have not gotten a lot of bang for the buck. So that is the initial concern. The no part – I will give you a two-part on that. The first is, history shows us that fiscal policy has a much bigger impact on the broader economy than monetary policy has. Monetary policy has a tendency to affect things that are financed, or purchased with credit, or what have you. So it can impact auto sales, and it can impact home sales to some degree, and it can change those sorts of prices. But it is going to have a modest impact on employment, and it is going to have a modest impact on GDP compared to what I think could be accomplished or not through a fiscal policy.

The reason I think we are not running into a full-on Japan – first, unlike Japan, we had the FDIC put a number of banks into bankruptcy. So when you hear Washington Mutual, or Wachovia, or go down the list, you know hundreds of lenders went belly-up. That is the FDIC’s role. They are supposed to a) guarantee the deposits of people up to whatever it is now, X dollars per account, and b) be a regulator of banks and say this bank is insolvent or this bank is not handling the depositors correctly and close them down.

And the FDIC was pretty effective. In fact, if the FDIC would have been in charge instead of the Treasury and the White House and the Fed, we would have been better off, because all of these banks – and that includes Bank of America and Citigroup – would have been put into a reorganization and come out with their debt wiped out, their senior management fired, all of their equity zeroed out, and the bond holders basically own[ing] what is left. So, instead of bond holders being bailed out and getting 100 cents on the dollar for making loans to insolvent companies, they would have gotten – pick a number – 20 cents, 27 cents, somewhere in that range. 15 to 35 is probably a broad enough range to include what they would have been left with after they discharged all their bad loans.

And we would be much healthier. It would have been more painful. Hey, maybe we would have been looking at DOW 5000, I do not know. But, you would have had a much quicker recovery because you are still not saddled with all of this debt. And not only that, do not kid ourselves – when we look at Fed policy, it is very much geared at protecting banks who still carry a lot of bad loans, who are still servicing a lot of mortgages that are underwater, and if we had a normal or a normalized Federal Reserve policy with rates higher, that means real estate might be another 15% or 20% lower. And that would have a significant impact on the lenders and the banks who underwrote those mortgages.

So, not only did the bailouts turn out to be ill-advised, then when we look at countries that did not do bailouts, places like Sweden, or Greenland – or Iceland – I am sorry, not Greenland, Iceland –admittedly much smaller countries than the United States, they ripped the Band-Aid off; they put the banks into sort of a pre-packaged bankruptcy. What we did with GM we should have done with Citi and Bank of America. And while it is more painful at first, the healing process is much quicker. Instead, we are in this ten-year convalescence, and here it is 2012, it is five years – four years after Lehman dropped.

So we are not even halfway through this process, and in order to allow the banks to rehabilitate their balance sheets – it is really a backwards way to do this – it is saving the banks, but letting the banking system falter. That is what the Japanese did. What the Swedish did was something completely – in the early nineties, when they had their banking crisis, their answer was to hell with the banks; save the banking system. And by putting all of these banks into bankruptcy, you end up with a much healthier, much more competitive banking sector.

So, again, not to just wax on the policy, my investing approach to this has been to steer clear from any of the banks with mortgage exposure, any of the banks that have a liability that can potentially come back to bite them. In the finance sector, for example, we do not want to have zero exposure, but we own firms like Visa, which does not take credit risks. They gave that to the banks. You know when you get a credit card through Chase, or Wells Fargo, or Citi, or whoever your bank is, they are the ones with the risk if you decide not to pay your credit card. Visa is really just the toll-keeper. So, it is more than – and I keep coming back to this from our original conversation where “Where Sea Monsters Live” – it is more than just being the armchair critic. You have to say – and the impact of this from an investment perspective is, I want to own this and I do not want to own that for all of the above reasons. And all of these things that we are talking about – where people seem to falter is taking it to the next step and saying, well, what does this mean for a risk-versus-reward perspective?

Chris Martenson:  Well, very interesting. I love that description. And a while ago you mentioned that there are actually a number of things that get impacted by QE. One of them is commodities. I am a little confused by world oil prices. I checked Brandt Wright, so we were at 114 yesterday. What do you make of these high oil prices right now in terms of your macro analysis, how it impacts equities, growth, things like that, but most importantly maybe the rescue and recovery operations that are currently underway? I know that in history I cannot find a single example of an economic recovery with oil at, inflation-adjusted, $100 or more a barrel.

Barry Ritholtz:  Well, you have a couple of cross-currents working at each other with oil. First, obviously every time there is an issue in the Middle East, there is a real significant concern about prices and Straits of Hormuz being problematic, and Iraq is still slowly coming online. We are still way behind where we should be with that. So, on the one hand, you have the Fed printing money, the Fed – I do not want to say debasing the dollar, but – the Fed creating future inflation expectations and turmoil in the Middle East. Those are both positive forces for prices. That is going to drive prices higher.

On the flip side, you have a slowing global economy. We saw it recently with the Fed Ex data, and it is pretty clear they are a leading indicator that transports in general look awful. You have Europe – look, half of Europe is, if it is not on the edge of a recession, it is already slipping into a recession. Clearly Spain and Greece are in deep recessions. Ireland is in a moderate recession. Germany is near recession. China, we know, has slowed down dramatically, as have a number of other Pacific Rim countries. And the nicest thing we could say about the U.S. economy is it continues to muddle along just above stall speed.

You know, there is that zone; you really cannot exist in the zero to 1.5 GDP for too long. It is like a plane running on four engines, and when you are at 1-1/2% or 1%, it is like you are flying on an engine or two. You can go a little while, but it is really eventually going to stall. You cannot operate it at that speed. You are going too slowly. So, you need to be over 2% consistently, otherwise – and everybody seems to fear a recession like it is the end of the universe – otherwise, you go into a normal recession, which is not the end of the world.

During a recession, misallocated capital gets reallocated more appropriately; businesses that are on the verge fail. Someone once described recessions and market crashes as events that take place in order to return money to its rightful owners. Meaning money leaves the speculators and heads back to real investors. And yet, so much of the policy we have seen from the Fed and from the government has been what can we do to avoid this next bailout, to avoid this next recession. Sometimes you just have to let the recessions happen, which again brings me back to, if this was a normal situation I would be battening down the hatches and waiting for this storm to come forward.

Instead we are looking at a Fed with a fire hose and wondering every time there is a 10-20% correction in the equity market, they throw more cash at the system in order to generate some improvement. I think the fear is if they let the equity market fall 25%, 30% it has that negative impact. Whether or not that is an intelligent decision or not is a different story. But the pattern has been set, and as an investor, when that happens you can pretty much expect the next hit of heroin from them.

Chris Martenson:  Well, speaking of those countervailing forces then, we have got the Fed with the fire hose in the one hand, and I know that they did fund an awful lot of the fiscal deficit last year, if you want to look at it that way. And we have this thing called the so-called fiscal cliff coming up. What is your view on that particular event or potential non-event? Are you positioning for that at all? Does it concern you?

Barry Ritholtz:  You know I look at it – there are a couple of factors that sort of make it – I think people make more of a deal about it than they should. Gun to head, the Congress ultimately does what it has to do, number one.

Number two, there is a legal argument – and I say this as a recovering attorney – there is a legal argument to be made that, the Congress in the Constitution has the power of the purse, and when Congress authorizes spending, they do not have to say a second time and we really mean it; this money has already been authorized. That is it. You have Congress authorizing the money. If somewhere else along the line they said, up to this amount, well, too bad; you have already authorized that money. I do not know if anybody wants to go to the Supreme Court and make that argument, but stop and think about it, since the Constitutional authority for spending is with Congress. How can they not spend money that Congress has said here is how much we are spending and here is how much we are taxing? That has kind of been done. That is a little out-in-the-weeds for a lot of people.

The third thing is, hey, so what if they hit the fiscal cliff? What that will mean is a) we will see deep cuts in the military. Not the worst thing in the world. We have a bigger military than the next twenty-five countries combined. (P.S., twenty-two of them are allies.) And b) we will see deep cuts in social security. And c) we will see deep cuts in Medicaid. And then d) you will see the Bush tax cuts expire; we will go back to the tax levels of the 1990s, which was not a terrible time.

So, if sequestration takes place, all those cuts are likely to lead to a pretty significant recession. But, as we just said before, that would not be the worst thing in the world. In fact, in many ways, it has got a healthy cleansing effect.

Now, if I think that is going to happen, if we see signs that it is going to happen, then I am going to want to hedge my equity positions. I am going to want increase my fixed income positions. I am going to want to jettison any commodities I own, because that severe – or I should really call it significant – recession, you can see a 30-40% correction in equities. You could see a significant rally in bonds from already pricey levels, and it means that demand for a lot of commodities is going to fall off the cliff at least for six months and then everybody will figure it out and we will move forward.

But I am not looking at that as the worst thing in the world. That is a potentially healthy recession. A lot of people forget [that] a lot of the troubles that we are in trace back to Greenspan’s refusal to allow a normal recession to take place in 2001 and 2002 following the dot-com crash. Had we had a healthy collapse, had we had an economic equivalent to the dot-com crash, we very likely would not find ourselves in the situation we are in today. Instead, he took rates down to what was then the unprecedented level of under 2% for three years, and actually at 1% for a year. At the time, that simply had never happened, and post-crash, well, here we are at zero. But that was not a full-blown financial crisis. That was just a run-of-the-mill equity bubble that popped. Had he allowed that to run its course, I think we would all be much better off today.

Chris Martenson:  Well, there is a sense I have, and I think others share this as well, that we have these mini crises. So, when I look back at, say, long-term capital management in 1998, that is just a blip compared to some of the crises we have going on now. So there is a sense that the amplitude and frequency are sort of building, and maybe this is just the function of just living in a more globalized economy, but maybe it is because we forestalled wanting to take the pain and we sort of have been saving it up.

And if you are an average investor right now, you are just somebody; you have got a job; you cannot spend all of your day looking at money; you care very much that it does not go away; you are worried about things like the custodial risk that Peregrine Financial and MF Global introduced to the equation; you are worried about maybe the things you have been reading about the NYSC recently; where trading information is asymmetrical to preferred clients, and on, and on, and on. There is enough chattering noise in this sphere out there to erode that confidence. And you do not have time to maybe manage your money on a minute-by-minute basis. What would you do in that circumstance? What advice do you give people?

Barry Ritholtz:  Well, I always – I give a couple of different speeches, and one of them is called, “Stop Paying Me So Much.” And essentially, I tell people the average investor should be dollar-cost averaging into a broad set of indexes, and not trying to turn the market, and not trying to pick stocks, and not trying to outguess everybody else. You do not have the time. You do not have the expertise. Oh, and P.S., the way you are wired, you are going to tend to buy too much at the top and panic and sell at the bottom. So I always – oh, and by the way you are paying people too much for advice. If you have a big account, if you have a complicated tax situation, if you are concerned about generational wealth transfer, and blah, blah, blah, well then it is okay, it is worth it to pay somebody. But we see accounts all the time and say to people you are paying way too much for advice. This is a really simple portfolio. You have pretty basic needs and just do this, this, and this, and you should not really be paying anybody a whole lot of anything for that. That is the basic advice.

The biggest problem with that advice is you know the math is unequivocal; the academic papers on it are just conclusive. There is no real debate about this. The problem is execution. Most people do not have the discipline to follow it, which means when everything looks terrible and crappy, they will override the automatic purchase when things were really cheap. Look at 2009 and look at the amount of inflows in the equities. It was de minimis, and if you are really doing that sort of dollar-cost averaging, you should be buying back when the S&P was in the high six hundreds and the DOW was in the six thousands, even seven thousands, eight thousands. And yet, most people do not do that. And when everybody is chatting about stocks, when things are at fifteen hundred on the S&P, sixteen hundred and it is a topic of conversation, the natural inclination is to say hey, I want to get involved in this and to pay up. You know, equities are the only thing in the world that we are much more comfortable paying more for than paying less for. And it is the way we are wired.

Chris Martenson:  Just this morning I think I saw every major house have some sort of an article about gold in this post-QEternity sort of environment. What is your take on gold here?

Barry Ritholtz:  Well, we first recommended gold based on Greenspan’s behavior back in – it is not quite a decade ago, but it is almost a decade ago. I know it is pretty clear, hey, here is what is going on, and here is inflation, and here is what is happening to the dollar, and I could look at those inputs and say, given those inputs, we are going to see gold prices go up. Now we are in a different environment. We have had the recession; we have had the crash. I am less convinced that I have any sort of insight as to guessing where gold is going to be.

With equities, I could look at discounted cash flow, and earnings, and dividends. With fixed income, I could look at what is the credit rating, is it AAA, is it B, is it this, what is the interest rate, what is the yield to maturity? And so there is some basis of pricing those assets. With gold, essentially I am now stuck with will someone want to pay more for it than I paid for it and that becomes a bit of a challenge, especially when you are coming up on two thousand dollars. This has historically been a place where it is tough to get through absent some major catastrophic events. So we own a little bit of gold. We have it as a little bit of a hedge.

The more I study gold prices, the more I think there is a minimal correlation with inflation and a much greater correlation with the value of the dollar, which is how it is priced, and the behavior of consumers in countries like India and China who are the big marginal buyers of gold. And anecdotally, I can tell you when prices get up to eighteen, nineteen hundred, two thousand, those consumers tend to be sellers, and when they get down sixteen, fifteen, fourteen, those consumers tend to be buyers. It is something that I just do not have a whole lot of insight into.

The one thing I could say about gold – at least when I look at oil, I can look at coal and I can look at natural gas and say, hey what do these cost per BTU, and how relevant is it, and how expensive is it to ship it, and you can easily ship oil, and you can easily ship coal, and it is a little harder to ship natural gas other than compressing it and liquefying it. So, there is some frame of reference to looking at the prices. With copper, and aluminum, and other industrial metals, you can look at demand and the overall economy. With gold, I cannot look at any of those things, so that is a long rambling way of me saying I have no idea where gold is going to go, but I do own a little bit of it.

Chris Martenson:  [Laugh] That is fair enough. I like gold as well because there is a small embedded option value in it, which is that if we do have a big international currency crisis at some point, the idea that we might default to something that we know works, which would be a gold standard  – whether that is modified, fractional, full-based, it does not matter. If that happens, I see very much higher gold prices, so I like the option value that it has got contained. And like all good options, it is way out of the money right now but will have just an excellent payout if it does come to pass. It is a long shot, but it is the kind of thing I have – I like to have a little of it in my portfolio on that basis alone.

Barry Ritholtz:  There is some pretty wild forecasts, two thousand, twenty-two hundred. That is spitting distance; that is not a big deal. But I am always surprised when I see people say here is how we figure gold goes to $5000, or here is how gold could reach $12,000 an ounce. I am a little skeptical of those. I have found the Armageddon scenarios. It has always been a bad bet for two reasons. First, it has not happened, and second, if you win, how are you going to collect? So, I have not really been keen on the end of the world scenarios, and the here is what we are going to do because everything is going to hell, and so sell everything, buy bottled water and canned food, and buy gold. By the way, I love the group “Buy Physical Gold;” you do not even want to own an interest in gold. You want to physically have the gold in your – locked in a safe that is embedded in the concrete in your basement. I am not looking to fight off a zombie apocalypse if that is the case.

To me having a little bit of gold in portfolio makes sense. I think it is a good potential hedge against other forms of economic disruption, but I have no idea what the price is going to be.

Chris Martenson:  I understand that. I do advocate physical gold, if only because, it is a way of controlling counterparty risk if you cannot assess –

Barry Ritholtz:  Absolutely.

Chris Martenson:  – where the counter party risk really is. You know that old saying, if you are at a card table and you do not know who the sucker is –

Barry Ritholtz:  Yep, that is right.

Chris Martenson:  – it is you. I cannot read JP Morgan’s 10q and make any sense of it. I honestly do not know what the risk there is, and I am not saying because of that I assume it is very high. I am telling you I do not understand their derivative positions or how they are hedged, and I lost confidence with their little whale shenanigan saying maybe they did not understand hedging as a verb either. So, at any rate, that is just one reason I get into that.

Oh, hey, as we come up on the end of our time, you have a really interesting conference coming up I would love to hear about.

Barry Ritholtz:  Oh sure, so our conference – we do a big-picture conference every year and the whole goal of this is – you know some of the conferences out there are, here is this guy to tell you what stocks to buy, and here is somebody is going to tell you what to short. I have never been a fan of those sorts of things. What we prefer is teaching people to fish, as opposed to giving them a fish. And so, what we have managed to put together is just a killer line up of people coming to speak and it is just a –

I will give you a quick rundown:

  • Neil Barofsky was the special investigator general of TARP. He is the first speaker, and he is going to describe the sort of stuff that happens in Washington, D.C. If you think you know what a disaster Washington, D.C. is, after spending time with Neil I discovered it is worse than anything I imagined.
  • David Rosenberg, who used to be Merrill Lynch’s chief economist, has been dead on gold, dead on commodities, dead on fixed income for the past few years and has a really good macroeconomic perspective, will be speaking.
  • Dylan Grice, very early in recognizing Europe as a big risk area, he is an economist in Société Générale, he will be speaking.
  • Jim Bianco, really well-regarded institutional equity and market analyst; some great, great calls over the past few years; Jim is the guy who pretty much turned me on to here is what the impact of QE is going to be way back in August 2010 when people were looking at this market saying hey this is falling apart. He recognized really early QE was going to be the deciding factor.
  • Michael Belkin used to be with Solomon Brothers. Now he is out in Washington state, puts out The Belkin Report. His clients are just giant hedge funds and mutual funds. Another guy down on the institutional side, really super well regarded.
  • You may have seen the book, What Works on Wall Street; you know that is sort of a quant Bible –  James O’Shaughnessy wrote that decades ago and I think it is in its eighth printing now; he will be speaking, super interesting guy.
  • Richard Yamarone of Bloomberg is an economist there.
  • Bill Gurtin runs Gurtin Fixed Income, just a really savvy, mealy bond shop, has just done really, really well when you have people like Meredith Whitney screaming the sky is falling, he goes through rubble and picks out the winners and losers. They have a great track record. People do not know him because it is a relatively modest size muni shop out in California, but they are great.
  • Scott Patterson is a Wall Street Journal reporter, wrote two killer books. One is called The Quants, and the other is called, Dark Pools. They are both really good.
  • He is doing a panel with Sal Arnuk, who is from Themis Trading, is a high frequency trading critic, and their book is Broken Markets.
  • Actually, the person leading that panel is Josh Brown, who works with me. He is a well-regarded blogger and has a huge following on Twitter.

And then I, each year, use the conference to have a little fun and present something on behavioral economics and neuro-finance, and I want people to understand here is how flawed your thought process is, how you are going to make intelligent decisions about investing when you are really much more likely to panic about this, or misread that, or engage in selective perception with here or there. But, it is October tenth. If you go to “The Big Picture” blog at Ritholtz.com, you can find something for it, and I am looking forward to it. It should be a whole lot of fun.

Chris Martenson:  October tenth, and where is that going to be held?

Barry Ritholtz:  It is in New York City. It will be at the TIA Craft Conference Center, which is right in Midtown, and we have really put together a great list of people to share. I am very jazzed about it.

Chris Martenson:  Yeah, you sound jazzed. It really sounds incredible. That is October tenth, and it is in New York. And we have been talking with Barry Ritholtz of “The Big Picture” and author of Bailout Nation. You should check out the website first, and read the book second, or reverse the order. However you get there, you really want to follow this guy. Thank you so much, Barry.

Barry Ritholtz:  Well, thanks Chris. This has been fun.

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31 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 2500
Two of Clubs! Is that all You've Got?

The FED has played its last card, a two of clubs.

In the absence of information I am free to speculate. The petro-dollar is history. With a new, better source of energy who needs it? Impermanence and eternity.

Do you trust the FED? They say that they are going to print automatically. What happens if they are lying? Have they an ace up their sleeves?

It seems a good fund manager should begin his career in psychology.

And yet, so much of the policy we have seen from the Fed and from the government has been what can we do to avoid this next bailout, to avoid this next recession.

Hubris. They still operate under the delusion that recessions are a thing of the past. "Hey. We've got this vehicle under control. It is all here in the equations. I mean come on, What do you believe, the Model or Reality?"

It seems that Economists should begin their career with a solid pair of boots.

I am less convinced that I have any sort of insight as to guessing where gold is going to be.

Me too. Nicholle Foss said that silver should go down to $3 oz. I will keep mine on imperfect knowledge.

I have not really been keen on the end of the world scenarios

Amen. Neither am I.

I am investing in my pantry. That is guaranteed to go up.

SingleSpeak's picture
SingleSpeak
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Posts: 430
Look at the Bright Side

At least he didn't say, "Well you can't eat gold can you?" wink

Actually he implied that 10-20% upside is already baked in the cake. I know a few pension funds that could use a piece of that action.

SS 

Oliveoilguy's picture
Oliveoilguy
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Posts: 400
Ritholtz on the Fiscal Cliff

A quote from Barry:

"So, if sequestration takes place, all those cuts are likely to lead to a pretty significant recession. But, as we just said before, that would not be the worst thing in the world. In fact, in many ways, it has got a healthy cleansing effect.

Now, if I think that is going to happen, if we see signs that it is going to happen, then I am going to want to hedge my equity positions. I am going to want increase my fixed income positions. I am going to want to jettison any commodities I own, because that severe – or I should really call it significant – recession, you can see a 30-40% correction in equities. You could see a significant rally in bonds from already pricey levels, and it means that demand for a lot of commodities is going to fall off the cliff at least for six months and then everybody will figure it out and we will move forward."

Yes but........Barry's position assumes that the Fiscal authorities will trump FED policy. I would not be so sure. Bernanke knows that a recession could be the death knell of his tenouos recovery. 

Jim H's picture
Jim H
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Gold

So Barry is very honest here... he professes a very backward looking, normalcy-bias driven view of Gold's value.  Demand is driven by India/China buyers, etc, etc.  He indicates that he thinks Gold will be driven by the value of the dollar... and while this is true in some sense, it fails to recognize that Gold can and will rise against a seemingly stable dollar (relative to other currencies) in an environment where we have competitive devaluation going on, i.e. US printing, EU printing, Japan printing, UK printing......  all currencies will go down against commodities and Gold ultimately. 

As well, the dollar is slowly but surely losing it's reserve, petro-dollar status... and this is another strong driver (of relative Gold strength) that Barry does not acknowledge (at least up to the point where I just had to shut it off) .  He professes to have no metrics against which to predict Gold's future movement... well... while I can't say I have a quantitative model for such, I surely do watch every day for the next qualitative sign that the dollar has been or is in the process of being cut out of yet another inter-country Oil trade pathway... it really would not be all that difficult to sum up every known trading pair in the world, and model in a much more quantitative way the arc of reserve currency loss using that as the marker...  Maybe Gregor would be interested in a small joint venture   smiley

Barry said another thing that really caught my ear;  essentially asking the question, if armageddon hits, how am I going to collect on the value of my Gold?  Duh...   one does not need to "collect"... which is of course the beauty of physical Gold.  It will hold some semblence of value as money into whatever future takes place... and if I don't ever get a chance to "collect" or convert my Gold into other assets or things I need .. then maybe (probably) my kids will.  All the other paper.. including most stocks.. would lose all value if commerce grinds to a halt.  While stocks are the paper assets most likely to hold some value through a major transition... most would be severely depreciated due to lack of commerce... Pepsi stock will always hold some value as the formula and the Brand would not be destroyed... but how much without commerce?  

In the end, I think Barry is just unable to imagine the US as Zimbabwe, or Argentina... and it is this failure of imagination that limits his ability to understand Gold better.  I remain about 4/5 allocated in my brokerage accounts in a diversified set of Gold and Silver miners, and PHYS/PSLV.   I believe these will perform much, much more rewardingly than any stock/bond allocation that Barry can conjure up... and I will be looking to get this out of the (paper) system and into hard, tangible things, not excluding the idea of property in another country that ranks higher on the scale of economic freedom  (http://www.alt-market.com/articles/1045-us-drops-to-lowest-rank-ever-in-...), as the inflationary crash that is to come takes shape over the next few years.   

While Barry does not understand Gold... and I really do admire his being honest about this.. there are many ex-Wall Street insiders that do;

http://truthingold.blogspot.com/2012/09/right-now-best-expression-of-our...

Dave's curriculum vitae;

Dave in Denver
I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance. Currently I co-manage a precious metals and mining stock investment fund in Denver. My goal is to help people understand and analyze what is really going on in our financial system and economy.
darbikrash's picture
darbikrash
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Posts: 573
I actually think this is one

I actually think this is one of Chris’ better interviews.  There is no shortage of supposed gurus that claim gold is going to $5,000 or even higher, and these same so called gurus are also all too quick to blame market manipulation when things don’t go their way (which is most of the time), rather than concede their assumptions are way off base.

Rithotlz’ points out that no matter how compelling the story, someone still has to be willing to pay +$2000/oz, and I would agree with his skepticism and call that unlikely for a wide variety of reasons, despite the manifold doomsday proclamations to the contrary. This story of gold to infinity is being pumped by literally hundreds of web sites, many which profit or participate in some way in the “gold story”.  At the core of these belief systems (beyond the obvious profit motive of talking the book) is usually some Austrian monetary theory, some doomsday fetish, or some misguided belief that somehow the gold bug has figured out an element of the financial system that no one else has seen, some specialized, specific information that only he or she is privy to, and the call to action is to buy gold and (preferably) bury it in the ground.

Rithotlz blows that whistle on that nonsense, pointing out but a few of the many reasons why this is a bad idea, and kudos to him for doing so. I don’t like the financial system anymore than the Austrians or gold bugs, the point is that it is a fool’s game to bet against it- at least for now.

Jim H's picture
Jim H
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Of belief systems...

Fiat money can work if it's scarcity integrity is enforced by those who hold the power to do so.   We have had 40 good years with ours... with a small hiccup in the 70's that Volcker managed to squelch with ultra-high interest rates starting around 1980, at a time when the US was a creditor nation.  I would have sold my Gold at that point too.  Today, we are a debtor nation of the highest order, and most of the population is lulled into a belief system built around the infallability of our monetary masters.. and the unfathomability of what it is they do.  Gold is simply the most ancient form of money.. .an alternate currency if you will.. whose scarcity integrity is enforced by nature.  If there was not Gold, I might tend to cheer for something like Bitcoin, whose scarcity integrity is enforced by an algorithm and strong encryption... but there Gold is.  Pretty too. 

Forget for a moment what value in today dollars Gold might go to.. because that is really not the point at all.. the point is how much can the buying power of the dollar shrink?  What does history say about the longevity of a fiat currency?  Have many of them have ever crashed and burned into hyperinflationary obscurity?  Is the dollar on that path, and if so, what are the signs?  

Gold will do what it will do.. and I will be sure to remind Darbi along the way if it plays out the way I predict it will.. and he (or she) can feel free to rub it into mine if the market decides Gold is a fool's game.. and that the financial system as it stands (fiat, debt-based petro-dollar reserve currency) is worth maintaining one's confidence in.  I will start my rubbing at Gold > $2000....    

sjdavis's picture
sjdavis
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Zimbabwe and Argentina

Jim H wrote:

In the end, I think Barry is just unable to imagine the US as Zimbabwe, or Argentina... and it is this failure of imagination that limits his ability to understand Gold better

Jim,

This quote is an idea that always makes me scratch my head.

In my mind, gold is insurance - at least physical gold.  Paper gold is an investment choice, unless you can choose delivery.  But physical gold, that's insurance.

But it makes me feel like we've got fathead sized tinfoil hats on when we use Zimbabwe as an example.  Even Argentina to an extent.  There is so much room between the US and those two countries that it's difficult to make the leap.

How are they a relevant example?  I enjoy your posts and the information you share, so hoping you, or anyone, can make sense of the example.  To me, it's simply scope that makes the example a bit silly.

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
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Posts: 573
Jim H wrote: Gold will do

Jim H wrote:

Gold will do what it will do.. and I will be sure to remind Darbi along the way if it plays out the way I predict it will.. and he (or she) can feel free to rub it into mine if the market decides Gold is a fool's game.. and that the financial system as it stands (fiat, debt-based petro-dollar reserve currency) is worth maintaining one's confidence in.  I will start my rubbing at Gold > $2000....    

There is a lot of misunderstanding on and around fiat money, with most of the fiat detractors not really comprehending the details.  Much of this confusion results in an affectation for gold, gold backed currencies, and alternate currencies. A review of endogenous money principles provides good discovery on why these related theories are not really meaningful.

I’ve had a sizable portfolio in physical gold and a mixed bag of junior mining stocks for some time.

I am very disappointed in the YTD performance, although to be sure the last few weeks have been quite good. My disappointment stems not necessarily from the yields, but from the lack of explosive action that was supposed to occur as theorized by the “gurus” over the last two years particularly. The various QE’s, volatility in Europe, Greece, etc, were all supposed to slingshot metals, and gold and mining stocks into the stratosphere. This never happened, and likely never will, Also, the recent bump due to QE 3 has been lackluster, at least in the context of all that was “predicted”.

I’ve lost confidence that there is any merit-at all- to the theories that are to propel gold and junior miners forward. It is sounding very much like the lottery of the middle class, with plenty of excuses centering around market manipulations and conspiracy theories.  I will likely hold on to the end of the year, and get out of the whole thing.

I accept the friendly “challenge” to reflect back on future gold and junior miner prices, I’d concede $2000 may well happen, but not much more.

As to Bitcoin, you do know they are insolvent…………..

http://www.digitaltrends.com/cool-tech/bitcoin-robbery-exposes-the-curre...

Doug's picture
Doug
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Posts: 2763
Agreed SJ

The comparison with Zimbabwe and Argentina struck me as inapt also.  There are factors that just get in the way of the kind of run away inflation they experienced.  The USD is still the world's reserve currency.  That status is beginning to fade, but is still intact until some other currency has the weight of an economy the size of the US's economy behind it.  That's not going to happen over night.  Much of the world still depends on trade with us and, ignoring the collective Eurozone economy, there isn't another one that is even half our size.  Can you imagine the Euro being the world's reserve currency?  Size matters, but so does some sense of legitimacy.  The USD has momentum that will keep us rolling for some time.

We also have the world's largest military by a huge margin.  Many nations depend on us for stability in a world where the alternatives are grim.  That alone will dissuade many nations from rejecting the USD in favor of some yet to be named currency.

The obvious alternative at this point is the Renminbi, but it's going to be a while before a totalarian nation's hegemony is going to be accepted by the western world, which collectively (including Europe and Japan) are still the 800 pound gorilla in the closet (or whatever that metaphor is).

The nutjobs in the ME will continue to use oil to degrade the dollar, but they just don't have the horsepower to really destroy it. 

Although I accepted the apocalyptic view for the future of the dollar for a while, experience has shown, I think, that the USD is probably in for a long deterioration rather than a cliff.

Bernanke has said the ideal for inflation should be around 2%.  Not counting food and fuel, he has kept it close.  I don't think he can keep it that low, but I also don't think we will see Zimbabwe inflation any time soon.

That said, the reason I originally started buying PMs was to preserve purchasing power.  They have done more than that in the years since, but who's to say that will continue?  Keep your hopes a little lower than Kingworld News would counsel, and you'll probably wind up OK and may wind up in a much better economic position.

Doug

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
Joined: Aug 25 2009
Posts: 573
Jim H wrote: Gold will do

Jim H wrote:

Gold will do what it will do.. and I will be sure to remind Darbi along the way if it plays out the way I predict it will.. and he (or she) can feel free to rub it into mine if the market decides Gold is a fool's game.. and that the financial system as it stands (fiat, debt-based petro-dollar reserve currency) is worth maintaining one's confidence in.  I will start my rubbing at Gold > $2000....    

There is a lot of misunderstanding on and around fiat money, with most of the fiat detractors not really comprehending the details.  Much of this confusion results in an affectation for gold, gold backed currencies, and alternate currencies. A review of endogenous money principles provides good discovery on why these related theories are not really meaningful.

I’ve had a sizable portfolio in physical gold and a mixed bag of junior mining stocks for some time.

I am very disappointed in the YTD performance, although to be sure the last few weeks have been quite good. My disappointment stems not necessarily from the yields, but from the lack of explosive action that was supposed to occur as theorized by the “gurus” over the last two years particularly. The various QE’s, volatility in Europe, Greece, etc, were all supposed to slingshot metals, and gold and mining stocks into the stratosphere. This never happened, and likely never will, Also, the recent bump due to QE 3 has been lackluster, at least in the context of all that was “predicted”.

I’ve lost confidence that there is any merit-at all- to the theories that are to propel gold and junior miners forward. It is sounding very much like the lottery of the middle class, with plenty of excuses centering around market manipulations and conspiracy theories.  I will likely hold on to the end of the year, and get out of the whole thing.

I accept the friendly “challenge” to reflect back on future gold and junior miner prices, I’d concede $2000 may well happen, but not much more.

As to Bitcoin, you do know they are insolvent…………..

Oliveoilguy's picture
Oliveoilguy
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Don't Gamble with Junior Miners

darbikrash wrote:

Jim H wrote:

Gold will do what it will do.. and I will be sure to remind Darbi along the way if it plays out the way I predict it will.. and he (or she) can feel free to rub it into mine if the market decides Gold is a fool's game.. and that the financial system as it stands (fiat, debt-based petro-dollar reserve currency) is worth maintaining one's confidence in.  I will start my rubbing at Gold > $2000....    

There is a lot of misunderstanding on and around fiat money, with most of the fiat detractors not really comprehending the details.  Much of this confusion results in an affectation for gold, gold backed currencies, and alternate currencies. A review of endogenous money principles provides good discovery on why these related theories are not really meaningful.

I’ve had a sizable portfolio in physical gold and a mixed bag of junior mining stocks for some time.

I am very disappointed in the YTD performance, although to be sure the last few weeks have been quite good. My disappointment stems not necessarily from the yields, but from the lack of explosive action that was supposed to occur as theorized by the “gurus” over the last two years particularly. The various QE’s, volatility in Europe, Greece, etc, were all supposed to slingshot metals, and gold and mining stocks into the stratosphere. This never happened, and likely never will, Also, the recent bump due to QE 3 has been lackluster, at least in the context of all that was “predicted”.

I’ve lost confidence that there is any merit-at all- to the theories that are to propel gold and junior miners forward. It is sounding very much like the lottery of the middle class, with plenty of excuses centering around market manipulations and conspiracy theories.  I will likely hold on to the end of the year, and get out of the whole thing.

I accept the friendly “challenge” to reflect back on future gold and junior miner prices, I’d concede $2000 may well happen, but not much more.

As to Bitcoin, you do know they are insolvent…………..

Hi darbi,

You've been listening to the Gold Cheerleaders like Kingworldnews, and have unreasonible expectations. Remember Gold is your insurance policy. Junior miners are for gambling not investment or insurance. Senior miners with proven reserves and dividends are the place to be. If you insist on being in the Junior space, you need to hire an advisor to pick companies for you. I stronly advise you to reduce your risk in the sector and hold on to long term Gold and Silver positions. Remember Gold has way outperformed the S&P during the last 10 years.

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SJ, Doug, Darbi, and Oliveoil

Great dialogue here...  and I am frankly surprised to find that Darbi and I are so closely positioned market-wise in Gold and Miners, being that we often seem to be polarized on other topics.  Anyway, I agree with Oliveoil that the juniors are very risky, and have not performed well in general.  Anything with a market cap below about $400M is really dangerous.  That being said.. the miners are now showing strong movement, and I believe this to be the early phase of a very strong bull market.   

My reading over the years has left me with the following worldview regarding the metals... you are welcome to disagree, but you are unlikely to dissuade me;

1)  Gold and Silver markets are structured in a way that allows the monetary authorities to exert strong control over price, especially over the short term (see Friday's market action).  The Comex is a paper futures market, where only a very small fraction of contracts traded ever get settled in physical.  In this way, the Comex market allows for a disconnect between supply and demand.

2)  The entire market structure is one of fractional reserve... i.e. a system that allows for many more liabilities than exist real metal.  This benefits the monetary masters in that they can blunt the price movements of Gold and Silver, in their roles as a check-and-balance on monetary debasement.  The mechanisms behind this are several;

     a.  Gold and Silver leasing;  Gold can stay on the books of one entity, say a bullion bank, or central bank, and at the same time be sold out (leased) into the market.  Amazing stuff here. 

    b.  The GLD and SLV, huge ETF's, allow for investment demand to be siphoned off to these fractionally reserved, hypothecated paper vehicles.. such that true physical stores are not stressed.  Again, really cool if you are trying to keep the dollar from looking bad.  

     c.  Unallocated Gold accounts.  This is simply a naked scam... sucking investment demand in to "pooled" accounts with the lure of lower storage fees... duh.. paper Gold is much easier to store than real Gold.  Note that there have been rumblings that allocated Gold accounts are now being raided... hypothecated.. whatever... and that this is an especially ominous sign if true.

Now you can feel defeated... and start believing up is down, as Darbi seems to indicate he is about to do before year end... or you can hold on with the belief that nature will eventually intervene, and that the true dynamics of supply vs. demand will ultimately win.  I believe we are very close to a point where the bankers will lose control of these markets due to overwhelming physical demand.  They can only sell so many paper contracts into a rising price Comex market before they get slaughtered.  They cannot print Gold and Silver.      

As for the idea that the dollar could eventually go the way of any other fiat currency that has been debased away to nothing throughout history... I stand by my statement that if you can't see the possibility of this happening here...  then you simply have a failure of imagination.    

No doubt that the current reserve currency status will make debasement a much slower process... but while our military can work to keep teetering ME nations reasonably friendly to our pertrodollar wishes... the rest of the oil pumping world is slowly but surely figuring out other ways to do business;

Brazil?  A lot of people might dismiss commentary like that from Brazil's Government.  But Brazil is one of the faster growing economies of the world right now, it's a large trading partner with the U.S. and it has begun to economically and financially ally itself with China/Russia.  This China alliance includes the implementation of a currency swap facility which enables China and Brazil to conduct trade in their respective currencies, thereby bypassing the U.S. dollar as the trading medium and rendering the dollar irrelevant for such purposes. The point here is that the U.S. dollar is losing its status as the world's reserve currency.  And more quickly than most realize, I might add.

source:  http://truthingold.blogspot.com/2012/09/right-now-best-expression-of-our...

There will come a time.. and Chris has mentioned this in his writings as well.. when the huge hoard of paper and credit dollars held overseas begins to come back to chase goods that we are also chasing with our dollars... and this will be a new dynamic.  RETURN TO SENDER.  This will be officially held dollars... less being needed due to the waning reserve currency status... and privately held dollars.. held in matresses around the world in places where local currencies have not historically been good stores of value.. when the word goes viral, around the world, that the dollar is being debased... watch out! 

I have no idea what the timing of all this will be... probably a few years at this rate.. but maybe faster given the instantaneously connected nature of the entire world today.

There is one other point I want to make regarding the near to mid-term future.. and that is that the next way station on the road to inflationary hell is most likely going to look and feel like a recovery.  What I mean by this is that, barring some kind of black swan that takes down the system... Europe imploding, etc... the extreme measures Bernanke has now embarked upon may very well create some acceleration in housing.  As well.. as more folks wake up and see the writing on the wall.. they will start spending more NOW vs later.. and this will effectively increase the velocity of money.  The early stages of inflation will feel good to the economy, and the official CPI will understate the true nature of what is happening.  These factors will be interpreted via MSM propaganda feeds as economic recovery... and this may help perpetuate some degree of upward spiral.  At this point, real inflation will set in... and remember.. Bernanke specifically stated in his QE3 announcement that he will not take away any of the punchbowl until well after the party gets going again.. he has basically promised to blow another bubble.  When we finally get to this point.. I will be looking to get out of the pool for good.    

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Jim H
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One who can imagine....

I just had to repost this comment from Turd's blog tonight - I don't know whether we will get to hyperinflation myself.. but I have to hand it to this guy for his logic ;

source:  http://www.tfmetalsreport.com/comment/216046#comment-216046

$ may not go to hyperinflation?

The dollar will go to hyperinflation.  There is no other alternative.  Too many people in the US receive a monthly check or benefits from the government.  People on the payroll, on SS, on disability, SNAP, military suppliers, and on, and on, and on.  When inflation begins to kick in, more government employees will strike and demand........more money!

The $400 per month of SNAP benefits will no longer buy peeled shrimp-cocktail platters and NY strip steaks.  SNAP recipients will demand.....More Money!

When SS recipients begin to fall further and further behind, they will demand.......MORE MONEY! (Please don't be mad at me Katie! Not questioning if SS recipients "deserve" it, or if they "earned it".  Just commenting on the economics and human nature)

Federal govt CAN'T cut spending.  At they same time, they CAN'T raise taxes enough to cover the spending. 

Only options are to borrow the money, or to print the money. 

Nobody wants to lend us money at 2%, and if we let the interest rate rise, that also blows the budget.

The ONLY option available to the Federal govt is to print.  And print they will.  They will print to cover the spending, they will print to bail out the states, they will print, and print, and print, and print.  There is no alternative.

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Very good

This is a very good interview, and Ritholtz impresses me as someone with broad knowledge and experience.  His perspective is more conventional than many of us here, but coming from him it is credible and I am glad to hear it.  The comments are also very good.  It is heartening to see a real dialogue among members.

Travlin

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Ritholtz says he can tell us

Ritholtz says he can tell us "historically" this and "anecdotally" that about gold's behavior, and makes it clear he doubts gold's potential because he thinks it will probably perform like it always has. Well, "always" in the context normal conditions anyways. But wait- the whole interview was about how the game has changed, the recessions that once redistributed capital into responsible hands are not allowed anymore, and the can has been kicked so far that we are much worse off than we would have been. He doesn't say what exactly makes him think that people will sober up and accept the hangover now, instead of suffering the liver failure later.

The idea that we are on some sort of a slippery slope towards some armageddon or another is tossed around a lot, and probably always has been. The crazy thing is, armageddon happens everyday in the world. It can come in the form of local natural disasters, wars, whatever- it's the breakdown and violent collapse of over-stressed systems we depend on as they release tension. Imagining that armageddon has never happened before is silly, and to imagine that you will always sit unperturbed through the chaos of nature is silly too.

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Oliveoilguy
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Little Disasters vs. Big Armageddon

blk924s wrote:

Ritholtz says he can tell us "historically" this and "anecdotally" that about gold's behavior, and makes it clear he doubts gold's potential because he thinks it will probably perform like it always has. Well, "always" in the context normal conditions anyways. But wait- the whole interview was about how the game has changed, the recessions that once redistributed capital into responsible hands are not allowed anymore, and the can has been kicked so far that we are much worse off than we would have been. He doesn't say what exactly makes him think that people will sober up and accept the hangover now, instead of suffering the liver failure later.

The idea that we are on some sort of a slippery slope towards some armageddon or another is tossed around a lot, and probably always has been. The crazy thing is, armageddon happens everyday in the world. It can come in the form of local natural disasters, wars, whatever- it's the breakdown and violent collapse of over-stressed systems we depend on as they release tension. Imagining that armageddon has never happened before is silly, and to imagine that you will always sit unperturbed through the chaos of nature is silly too.

Granted disasters are everpresent, But much of the discussion on this site focuses on the scope and impact should a worldwide fiat monetary system self-implode. This would surely be a disaster of epic proportion. No country or person would be unaffected.

Zimbabwe and Argentina were instructive as models of hyperinflationary disasters, but the world barely noticed. (My only connection to Zimbabwe is the $10,000,000,000,000 bill that I have framed on my wall cause it is so mind-boggling to look at.)

If Katrina caused a ripple in your life, then you had better fasten your figurative seatbelt cause the storm that is brewing will knock you off your feet. 

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The end of the world as we know it

I meant that it's truly *like* the world is ending when you’re in the thick of disaster, and just because most people survive doesn't mean it didn't crash their system effectively for the rest of a generation's lives, or even forever.

My view of the kind of armageddon that people here talk about is that elementally it's just another potential collapse. It has all the same potential components that have contributed to previous collapses (warmongers, overconfidence in our resilience, resource depletion, bubble mentality)- but magnified in scale. That, unless there's a nuclear war or we get plastered by that overdue asteroid from space, "armageddon" just means "the end of the world as we know it". What do you think? I feel like Ritholtz is of the camp who says "nope can't happen to me/us because...."

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I have found this Podcast to

I have found this Podcast to be very useful too. I found the casual approach with an eye to what is being given us as sensible, and can be positioned to be profitable.

I have a need to be quite a bit more conservative in my approach as I feel I have enough information to recognize what may occur in economies world wide, and how I might  move on these incidences as they unfold. I do not believe that all is well, and I do believe a major incident is near, and will be extremely profittable if we are positioned to take advantage of it. 

Congress will have to actually make decisions after the election and into 2013, and an early guess would be a negative effect on our GDP but I do not need to decide now how that form will take place. I'll guess that it will be very contentious, and that will not be good for the market. 

The EU will have similar decisions to make, and Spain and Italy will have to make some decisions, and again I do not need to react to this just yet. I believe some serious problems will happen and effect the world economies in the very near term. Their banking system is so over leveraged that something must give. I will not bet on something I hope to happen but we react to what actually happens. 

China, if a hard landing, and it appears they are contracting strongly then I can afford to wait on this. I see a hard landing, I see some strange things happening in China that just don't jive with a country I favor as one going through their economy unscathed, on the contrary. 

Overall, I can afford to wait on everything, and the worst I can do is make money, the best I can do is make more. I will allow things to come to me.

All of this accomplished as I have no issues waiting. If we crash, move to an S&P 800 at some future near term time line then I'm set to walk away from this madness if I so chose because I will have more than I ever expected in my lifetime. I most likely would not because I enjoy this so much..

I have Gold and Silver because it is money, that simple. I like it as an Inflationary hedge and Deflationary hedge. My position is significant. I DO NOT own it as an armageddon hedge as that world is not even a visual for me just yet, and one I would hate to be apart of. I have the imagination to see a catastrophic outcome but I'll keep that in the recesses of my mind until such a day comes where perhaps I should prepare far more than is expected by me today.

I WILL NOT leave the United States for any reason are my thoughts. I just am not wired for that. I have an emotional attachment to my country that I am willing to fight  through the vote, protest, and actionable causes. Mostly, I prefer a quiet existence, loved ones near and tended too.

Finally, I enjoyed the debate by all here as I learn from each and every one of you. My sole focus is creating a sincere and realistic way of life that satisfies the very basics of needs leaving just as much room for the pleasures our family enjoys. I will always attempt to treat others as I wish to be treated.

Be Good

Go Tigers

BOB 

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Bob's post

Thanks Bob, nice sentiments expressed, and they mirror mine, albiet my alegience is to Canada. But your message is one of rational contemplation tempered with a bit of hedging the bets, while keeping an eye on what is truly important - those who are close to you. What else is there? If everyone did this things sure would improve in a hurry.

I'd end with "go Blue Jay's" to counter you, but they look about as shaky as the EU these days, so I won't embarass myself ;) 

Cheers!

Jan :)

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I like Mark Grants words very

I like Mark Grants words very much and he said this today as part of his essay:

"The Law of Nations forestalls the crash but the Law of Averages virtually guarantees it while the precise moment of impact is unobtainable that is exactly why I am so cautious and so determined in my viewpoint that exposure to Europe should be avoided. The impact is surely coming and in my mind; it is only a question of “When?”."

I believe this is truth, and the trickle effect will be a large wave by the time it reaches shore. I believe the actions of the Fed and the ECB is "PANIC" as Mish, Chris, and others have opinion ed. Why? The markets were at near all time highs with no growth what-so-ever apparent, frankly an illusionary high. The Fed's actions wasn't because of Bernanke fearing for his job, or any other feel good stories that he has decided to due whatever he is doing, it is in my opinion because the Central Planners have no clue as to how to get a grip on the Worlds Finances. How do you model anything when bullshit in gets you bullshit out. Sometimes you have to let things take due course because the forces are just too powerful. The planners have failed conceptually, so will fail. That simple. They have decided to print from " infinity to beyond ", and then more, before pulling it all back in! Really!? Good luck with that, and WHAT!?. Thanks for the certainty Big Fella that all is well.

All of this feels like an open ended question mark, and that tells me FEAR!

Take what is given you and bet accordingly. Gold is money, and fiat paper is being mass produced making each and every one of them less valuable. One cannot go to zero while the other most certainly can. One can take you anywhere on earth and purchase food, clothing, water, and shelter. The other cannot.

Have a great day

Go Tigers

BOB
 

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Barry said:

the Fed – I do not want to say debasing the dollar, but – 

wow if one cannot see that that is exactly what is happening then I'm not certain that one can see much at all. I think his views are a lot closer to what one would hear on CNBC than what one reads on this site or other contrarian sources. But...I guess it must be very hard to see the fears that many of us have come to uncover over the past 2 to 4 years (or more).

I am reminded of that reality of exponential growth (from the Crash Course)...you are in the stadium and it is filling with water, doubling with every unit of time. When it is half full you have but one time unit to remove the cuffs. It is this knowledge that when 'shit happens' it happens fast that makes me less willing than most people to just wait and see.

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Jim H wrote: As for the idea

Jim H wrote:

As for the idea that the dollar could eventually go the way of any other fiat currency that has been debased away to nothing throughout history... I stand by my statement that if you can't see the possibility of this happening here...  then you simply have a failure of imagination.    

Jim, imagaination has little to do with it.  My point was that Zimbabwe and Argentina are not good examples.

They're good academic exercises.  But that doesn't make them good examples.

For all intents and purposes, the US is an empire.  Shifting soci-economic baselines are best seen through that lens.  Plenty of choices, and I stand by my statement that Zimbabwe and Argentina are not among them.

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Dollar decline

The devaluation that took 200 years in Rome is about the same as what took 100 years in the US.   This might go on a lot longer or accelerate quickly, who knows!?

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NO! Barry said this:

http://trimtabs.com/blog/

Shorted Oil after the Fed release QEInfinity and I am just in a darn good mood. Plus Janjuah and some of my friends convinced me my research made sense to do so.

Regards

Goooo Tigers

BOB

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RJE wrote: Shorted Oil after

RJE wrote:

Shorted Oil after the Fed release QEInfinity and I am just in a darn good mood. Plus Janjuah and some of my friends convinced me my research made sense to do so.

Regards

Goooo Tigers

BOB

Pshaw....you got lucky with the short.  Some of us know the real reason why you are "just in a darn good mood" is because the Tigers are tied for first, Sanchez is finally throwing the way he's supposed to and Miggy has a real shot at the Triple Crown!!  It's an 8 day season now.......

Indeed, Go Tigers!!  cool

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Busted DOG! I told you

Busted DOG!

I told you Brother, wayyyyy back in the day.

Enjoy!!!

Gooooooo Tigers

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Thanks Bob...

I was wearing my Strohs tee while I listened to the Tigers song.  From one beer lover to another.... well, you know the tune.   

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Jim H wrote: How's about

Jim H wrote:

How's about Rome?

Now that's what I'm talking about.  Scope is relatable.  The example also works better because we share the "preferred status" and stretched military-profit complex.

Like I said, Zimbabwe is a good academic example - the results of currency devalution.  But the scope is the problem.

Rome works.

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Baseball was here before gasoline and here after gasoline...

Why I have no doubts that we, as Americans, will come out of our malaise and figure it out. BASEBALL!!!

Trains will need to be running, on schedule, and baseball will see to that. Stadiums will need to be lit so power of some sort will be figured out. Little League, Highschool Ball, College, Minors, Pro's and well over $250 million people are dependent on the game for their stress level control, and as baby sitters so the Dad's can teach properly their son's and daughters, and the woman socialize the most gifted of gossip, something I have come to really appreciate in my life. Woman can get the goods on EVERYONES personal life, truly amazing. I cannot ever remember someones name unless I coached with these people, and woman know everyones name, their addresses, ages of the kids, and all to memory, and only write them in the address book at some later date over coffee!!!

Baseball has grown through the horse depression of the late 1800's when the horses caught some mysterious flu and all commerce stopped! You couldn't get goods and services to hook up because the horses were all sick. Trains got the food to town but without horses nothing moved.

We have had two world wars, nuclear explosions, many conflicts, many recessions, etc...

In addition we started baseballs long legacy before the automobile and gasoline and will probably play baseball without the internal combustion engine and gasoline (that is affordable anyways).

Over the years the only thing that has changed in baseball is that woman have come to realize that if she truly wants her significant other in her daily life that she had to adapt, and in doing so has now conceived the form fitted, designer (of course) girls jersey. The boys jersey just won't do anymore. Ladies don't dress for Men as some here may think they dress for other women. Why? Women can see in one glance what another woman's shoes look like, where they bought them, stockings, is the dress hem professionally done or not, do the colors of the outfit compliment skin tone, so forth and so on. It is an amazing process to watch. A woman's facial features as her eyebrow goes up in the corner, how her lips react, and whether all of this, in a millisecond, and even faster than HFT, if she likes or dis-likes the outfit or the person!!! 

Guys, we just don't care about such trivia although we have all come to appreciate the effort our Ladies have put into our relationship, and we are much happier for this. I will offer this however, the walk to the gates are a bit more interesting from the parking lots. We no longer have to cover our mouths as we step over a man hole cover because the smell of Channel No5000 has wafted about nuetralizing the stench from the man hole cover so all is good. Which reminds me, before my Lady and I had come to appreciate each others so well I almost got busted for something I DID NOT do. I smelled of womans perfume after getting home from the game that day, was asked about it, and all I could say was it must have gotten there on the walk to the game. She nodded. Woman are so perceptive that way. Whew!

My Lady has actually reached a level of expertise about the game over the years that she is now a peer in all things baseball. I really believe she loves me because of this, and is why I will honor her wherever we should happen to be. Except, at a baseball game! Once we hit the gates and our tickets have been scanned it is focus time!!! Get to our seats NOW!

Men have their stuff, granted, and will request that the mustard stains and beer (I prefer root beer or Crown and 7up) drippings be left just where they are as to not jinx the Boys in their next game because "our" jersey has special powers. So no washing machine is required. We are responsible somehow for the new, current, winning streek we are on because the mustard just so happened to have landed on our Jersey during a game we just won. That Jersey can look a mess during a long streek but we Men wear it as a BADGE of HONOR!!! Thankfully the woman all wear Channel No5001!

Me, I might saturate my Jersey with Old Spice, everybody loves Old Spice plus it too has a catchy tune. We all know it, are whistling it now, aren't we!? All Dad's wore Old Spice and we loved our Dad's. Even if we didn't (I most certainly did, he taught me BASEBALL) we still love Old Spice. 

So why is this important? A family who plays together, lives together. They are happy, every day is a tense, joyfully so, day, just waiting for the Boys next BIG GAME. The season's are changing, there's 7 games left and the boys are up by one game.

Take this game away from the people and I assure you commerce will stop too, and is why baseball will save the world. Until Football season, then Hockey, Basketball, Golf, Bowling on TV (only), and finally Kick Boxing, in a ring, with some really crazed American honors students just trying to pay off their student loans will just kick the livin' bejeebers out of one another's and smile about it after the fight!!! .

I love my Tigers, 162 games of absolute delight. 

My favorite play in all of baseball is the liner off the wall in right with a Big, facial haired monster of a Man, in the later stages of his career, can't run like he used to on second, the carum is played perfectly, the outfielder spins, locates, and hits the cut off man who then fires a rocket to home, a collision occurs, and the catcher raises his glove to the umpire and the umpire gives a rather spirited out call. Nothing, and I mean nothing in life is so beautiful.

Except!!!, perhaps, Dirks, a spirited, young, aggressive, wanting to stay in the show, rookie,  taking out the second basemen in last nights game not allowing the completion of the double play, runner from third scores, and is the winning run as it turns out.

Life is hard, it is, but life without baseball would just be unbearable.

Time to draw up the plans for high speed rail because America CANNOT and WILL NOT be happy if their sports are taken away. GAURANTEED!!!

Jim H, tell the truth, you have been singing that tune in your head (at least) a hundred times since you heard it, right? Me too! We're all behind our baseball team, go get em Tigers....LOL

Jim H, I have a book for you that you will truly enjoy, and I'll send it along. I missed an opportunity for something special that may still happen again, and I want to send that along as well. Hang tough my friend, I never just let things be and I try to enhance things where I think I can.

Gooooo Tigers

Up 1 with 7 to go!!! I love it.

Respectfully Given and NO ONE honors the Lady's as a gentlemen as I do so if I have caused the corner of any eyebrow to twitch of any Lady here it was UNINTENTIONAL. I respect you all.

BOB 

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Hear, hear Bob

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