Royal Bank of Scotland to investors: 'Sell everything'

I think if he needed to learn something from someone, it would have been from Kuroda, not Yellen. The BOJ tried the shock and awe tactic at its meeting at the end of January when it surprised with negative rates. The yen against dollar has rallied more than 8 percent since then -- the exact opposite of what they were trying for (and needm to hold off their ultimate collapse from all of the monetized debt they have created). They have overplayed their hands, and the dollar bubble looks to have peaked. In the case of the BOJ at the end of January, it actually took a whole day before the market shrugged it off. This morning, it was barely an hour and a half. The euro move was a repudiation of a central bank. Something that was unthinkable a few years ago -- they are all powerful. Draghi basically said he will cut checks to banks (pay them) if he has to, to try to get them to keep lending money for people to gamble on risk assets. If today's reaction holds up, the banks are no longer playing along. So the carry trade is done. Without that carry trade, which drove up asset prices, equity markets (and high-yield debt markets) can not sustain anything near current valuations. Not based on anything fundamental, such as earnings (what a concept!). I agree with you. It is just a matter of time.

 

You'd have to understand my posts to tell me about anything I have predicted, cran. I can, and have, posted precisely about just how much the U.S. money supply has been expanded, even as your posts in response to me are endlessly inane. It used to be that it was necessary (some technocrat saved the world!) to keep the U.S. economy from "collapse." Is the world still on the verge of collapse -- how far do negative rates in 40 percent of the world have to get to?

The U.S. economy isn't fine, and it is precisely because of the stuff I have pointed out. It's not even a discussion. Growth is anemic, corporate profits are not good, debt levels are through the roof. Not quarter over quarter. Not from one data point. We are in a depression, as in an extended subpar growth range (and possibly in a new recession already) in what should have been the RECOVERY part of this cycle (which has been a depression globally). ... and with the real unemployment rate well into double digits. But if I actually post something substantive about that, all I get from you is some nonsensical characterizations from you in which you tell me everything is great (because you said so; end of discussion; chicken little anyone who points out reality) and that I "predicted" something you want to distill my post down to. You're as tired as you think I am.

Let's try this. The Federal Reserve has created a $4.5 trillion balance sheet (making itself insolvent on paper) -- propping up our debt markets for a time by buying every piece of shit mortgage-backed security and treasury bond in sight to create an artificial world that rewarded risk asset gamblers by punishing savers. They are now stuck rolling over the long-term debt endlessly it overpaid for because it backed itself into a corner that has no way out. They have ridiculously expanded the money supply (but there is no sign of inflation. Good luck looking for your signs, Waldo). Easy question. Explain to me how they are ever going to unwind $4.5 trillion worth of debt that nobody in their right mind would have bought based on the valuations. ... And how they are going to ever be able to normalize rates with trillions of dollars of debt out there (that they were responsible for creating) that needs rates being kept artificially low forever to keep cascading defaults from happening (which are starting anyhow). Anything plausible, cran? In your own words -- the way I post. And what you think happens when they do -- to the trillions of dollars of debt in this country that rely on rates being manipulated lower to keep the farce going. Have that conversation with me -- the one I am actually having. Nah.

Of course, when we have yet another crisis (and what I am pointing out now makes your financial news digest), you will be able to Monday Morning quarterback it the way you do so well (dismissive beforehand with chicken little posts when you have no clue what I am talking about. ... but you sure do have all of the answers for what SHOULD have been done when there is a mess [that you were dismissive of toward the person who was pointing it out when it was being created] to deal with).

Then LTL. The fact that LTL trails me around parsing my posts into trades he imagines I recommended (sell stocks today!; Sell the Euro next week) used to make me smirk. But today, I feel like responding. ... Pretty much the way he tries to respond to me, but in this case, factually posting about his bullshit (not stuff I imagine about him).

As the biotech bubble was running up, someone came on here with a thread about their 401(K), like in late 2013 or early 2014, and I did a typically long post about how I think for most people it makes sense to find a comfortable asset allocation mix that will grow their money within their risk tolerance, while trying to minimize expenses with index funds (because their low costs are a huge advantage and it doesn't require paying a lot of attention) . Nothing novel. Certainly not the market timing idiocy LTL is eager to attribute to me when he is not contracting his bullshit characterization a minute later in a lame attempt at sarcasm.

It was nothing crazy. I tried to explain how the broad diversification can allow you to partake in the potential gains of equities historically while reducing your beta (or risk). ... which in my opinion is the key to good long-term investing. Not that I consider myself much of an investor. I do it to the extent that I want to secure my future, and I try to do it in a way that statistically gives me the lowest beta / reasonable alpha approach. Which makes sense for me.

LTL, as does endlessly, was being a yippy know-it-all. He suggested loading up on a couple of high-flying narrow sector funds. Fidelity Select Biotech Fund was one. Fidelity Select Computer Fund was the other. I tried to explain that good investing -- especially with something as important as your retirement -- is not about gambling (what he was doing if he thought he was giving good advice and really does something like that), but trying to minimize risk while maximizing returns for that minimal risk. I tried to explain that in a prolonged bear market (what people are likely starting to learn about now, that kind of high beta approach he was throwing out there is going to be disastrous -- it's incredibly risky. It is what people lose sight of in bull markets -- even multiyear bull markets. It is likely to whipsaw you around, and at worst it might leave you with very little to retire on (even if it has a small chance of making you wealthy beyond imagination, if you get lucky and cash out at the right time).

Yet somehow, last week when he was slinging his typical yippy bullshit on this thread, he was telling me that he would have "missed a chance to double his money" if he had followed the "advice" I have given (the biotech index is down easily 30 + percent since that conversation and down 50 percent off its bubblicious high, and the IBB got hit even more today and I suspect is going to see some bad times as this bear market prolongs). ... Yeah, he's a magician. My advice? His sell motherfucker" (the stupidity he trails me around with because his understanding of my posts doesn't even reach kindergarten levels). ...

He is seeing nice returns from places others have seen massive selloffs. But forget about his killer portfolio. What made his "double his money" statement even odder, is that I am sitting with a decent amount of cash in my retirement portfolio right now, and the equity funds (global, S&P 500, U.S. extended market index funds) I owned are down more than 9 percent from where I decided there was way more downside than upside with the mess various central banks had created more than a year ago, and I moved to cash. That isn't an "I was right" post either. Something LTL won't get, because not everything I post is about proving the world right or wrong or a stupid message board argument. Even if that wasn't the case -- let's say the S&P hadn't peaked at 2100, or the Russell 2000 hadn't peaked at 1300 -- down 18 percent since, for what it is worth, which makes LTL trailing me around about my "advice" even dumber -- it would have been great advice, if I was trying to tell people to time markets a year ago) and let's say stocks were still climbing and getting into even crazier bubble territory (which they are not). ... I didn't move to cash as the "trade" he imagines. I was ready to have markets move on up some more me for quite a while, because this wasn't a market timing exercise, of course. I understand beta and I know that incremental alpha in this kind of environment isn't worth the systematic risk to a stock portfolio. Yes, that makes me the smart money right now, because markets are way overvalued by any normal, historical metrics. And I know exactly why -- as I am always happy to point out on here. When you have things artificially skewed the way they are by the extreme monetary manipulation that has taken over our markets, people lose their heads. Or as is more the case now (since individuals by and large are not participating -- in that great economy cranberry sees, average people aren't saving and consumer debt levels are at record levels), institutions think they will be able to get out in time. Not me. I am not gambling. I see way more potential downside with where equity valuations are than there is SUSTAINABLE upside -- even if stocks were to run up some more, I know that it will not be sustainable and I know there is a high probability that there will be a buying opportunity well below where it peaked out at some point during my time horizon for retirement. But LTL reads that, "Ragu said sell motherfucker!" and is going to trail me around with whatever advice he thinks I gave him.

But good luck with your biotech fund strategy, LTL, the only actual advice I have ever seen you give on here (maybe you should stop trying to read nonsensical "advice" into my posts and rethink your strategy?)

LTL is also apparently an ace trader (one who doesn't understand the difference between investing and trading, but still. ...). ... Telling me how truly awful the intraday moves in the S&P were today (the attempt at sarcasm is stupid when you don't even understand what you were responding to).

One of us was actually trading financial instruments today, LTL -- watching price movement minute by minute from about 4:30 am on in a variety of markets and having a really good day actually swing trading financial instruments. I'll post my daily statement tomorrow morning, after you post yours. Deal? Then we can talk about intraday moves in various markets and turn the conversation into the trading conversation you seem so eager to have (something one of us actually does successfully).

 

I can see why you would feel that way. It's not awful to me at all. I wouldn't expect you to get it. Just as I wouldn't get some things you do. One thing you probably would understand if I could explain better like this, is that the extreme satisfaction (sometimes) and the extreme frustration (sometimes) I experience don't necessarily correspond with the bottom line, as you put it.