With gold prices dropping (notably divergent from the ever expanding global central bank balance sheets) but record-breaking levels of physical gold being purchased, we continue to reflect on the other ‘Great Rotation’ that we suspect is occurring as the New Year begins – that from paper gold to physical gold. Who better to discuss the nuances of this dilemma than Eric Sprott as he outlines to TrimTabs’ Charles Biderman the relative strengths and weaknesses of ETFs like GLD and SLV, physical-based ETFs such as PHYS and PSLV, and physical holdings themselves. While the new meme is that the Fed may be considering pulling back (on its ‘flow’) sooner than expected, reality is far different (as Bill Gross recently agreed with us) and that fact makes the following brief clip even more compelling.
The US government will be bankrupt after another four years of the same Obama we had for the past four. Fitch as much as confirmed this when it suggested a downgrade is coming. TrimTabs’ Charles Biderman takes us succinctly through the painful math of just what has happened in the last four years: since Obama has been president after-tax take-home pay for everyone who pays taxes is still down by about 5% nominally and more than 10% after inflation. Dismissing GDP as anything but a misguided and misused spreadsheet output, the bombastic Biderman is concerned – and rightly so – as he sums up: “My guess is that Mr. Obama and his close buddies have no idea what they are doing, or else they would not be doing what they have been doing. The most dangerous are those people who think they are smarter than they are.“
Perhaps it is his ranting tone but the greyness of the storm-clouds in the background are perhaps the best analogy for what is to come…
After offering his condolences for the loss today of Dan Dorfman, Charles Biderman, of TrimTabs, takes the Greeks (and Germans) to task. Charles remains long-term bearish on European stocks (and the big US banks). Greeks, it appears from Charles perspective, want to stay in the Euro but on easier terms. This, at first glance, perplexes the less-than-sanguine Sausalitan, given the disastrous economic situation they remain in. However, on reflection, Biderman realizes that the simple fact is that the Greeks like the ability to borrow money to pay their bills and even better, never having to repay the loan – which makes perfect sense. If the Germans are willing to keep lending to Greece, even if most goes to repay old loans, then Greeks keep getting some new cash – which would disappear if the Greeks left the Euro. This situation, he opines, would seem ‘horrible’ as “Greeks might have to go and do something for a living and even pay some taxes”. Concluding on the three types of creditors that exist, it is little wonder that the Greeks, in their ponzi state, would want to keep the dream alive and hold the M.A.D. grenade over Germany’s head just a little longer. The brutal truth is that Greece (and Spain and Italy) will take as much cash as they can until there is no more given and then-and-only-then will they act for change. The disastrous end-result will be the same as if Germany left the Euro and first mover advantage in this case may well prove exceptionally valuable.
In his usual quiet manner, TrimTabs CEO Charles Biderman unloads his emotional baggage along with USAWatchdog’s Greg Hunter in this 15-minute interview. The sad truth is that, just like his alter-ego Lewis Black, Biderman is right – again and again. Whether it is reflecting on the kick-the-can mentality of polticians or US investor’s apparent willingness to accept the pulling-the-printing-press-over-our-eyes-behavior, or the fact that Europe can only get worse and how that will spread contagiously to the rest of the world (directly via trade or indirectly via risk-aversion), his focus on the facts (especially with regard to the real state of the US economy as he describes it) makes it hard to disagree for even the most vehement long-only manager (is it any wonder we don’t see him on CNBC that much anymore?). Biderman and Hunter discuss the signs of growing inflation, the need to get rid of the deadwood bankers, Europe’s imminent demise, central banks’ ‘funny money’ creation, and the need for Gold and TIPs in any portfolio, Charles is at his best as he makes friends (except with the bankers and politicians that he scoffs at) and hopefully influences people.
The storm clouds gathering behind Charles Biderman, CEO of TrimTabs, are a perfect analogy for his fascinating treatise on the key to long term bull markets and why the Dow will be cut in half. Bringing together the critical fundamental driver of P/E multiples – income growth in his view – and the historically most critical secular shift of this fundamental driver – communications breakthroughs, Biderman remains calm (for once) in his explanation for why the current low levels of income growth mean that should a new reality of less Fed exuberance (or a belief in less Fed exuberance) occur, the Dow will go to 6000 as he sees little evidence of technological innovations of the scale needed to lead the next 25 years secular bull market.
Back in 2009 and 2010, TrimTabs Charles Biderman made waves for being the first person on prime time financial TV to tell it how it is, namely that the Fed is indirectly and directly affecting asset prices. Then he was ostracized. Now, it is not only a given that the Fed does everything in its power to hike stock prices, but is in fact welcome. Indeed, none other than Bob Pisani made point of highlighting that between central bank intervention and kicking the can down the road, the status quo has managed to restore credibility in the system. Of course, nothing could be further from the truth, as we have demonstrated with the now terminal evacuation of faith by the retail investor in the gross manipulated stock “market” which is nothing but a nominal policy vehicle for politicians and bankers. Unfortunately, the endless lies and propaganda are starting to push rational people who refuse to take the blue pill, and who are fully aware there is no wizard, over the edge. In his latest videoblog, Biderman is back, taking his Lewis Black impersonation to the next level, with the following rant: “Individuals are net sellers of US equities and have been for years, probably because they need to pay bills and stuff. So how are they able to do that and get decent prices without the stock market cracking. Well simple the Federal Reserve has been printing huge amounts of money and that ultimately has been boosting the value of US equities, and therefore the sellers can sell. All of this is driving me even more nuts than I already am.”
Alas, judging by how seemingly normal people act and behave recently, those to whom every fraudulent action of the Fed is clear as daylight, Biderman’s reaction is not unique, and more and more people have been brought to the edge of a full mental collapse as the lies upon lies upon propaganda merely pile up, with nothing ever being fixed (listen to the second part of Biderman’s rant for more on that), and with virtually limitless risk now swept under the rug, and onboarded by the world’s central banks, in a sequence that can only have one outcome: an end of the monetary system as we know it, at the point where no more risk transfer can take place.
Luckily, since we are now in the exponential phase of consolidated central bank balance sheet expansion, the wait will not be very long
In his best Lewis Black impression, TrimTabs CEO Charles Biderman succinctly destroys the ‘growth’ myth behind Obama’s budget plan as nothing but a handout and money-printing exercise in futility and drain-circling. Based on the $3.8tn budget plan, the TrimTabs truth-seeker notes that current government tax revenues are about $2.4tn, and growing at no more than $100bn each year, making the math surprisingly simple – we spend around $300bn per month and receive only $200bn with the missing $100bn to pay for the US government’s largesse (income shortfall) coming from – ‘printing money’. The spin is, of course, that revenues will somehow magically start to grow faster than spending and shrink the budget deficit. With take home pay at $6.3tn for everyone who pays taxes, up $300-400bn from the 2009 low, but still well below the $7.1tn rate from early 2008; Biderman’s consternation at the self-hypnosis that a $200bn tax increase in an economy where take-home pay has been growing by only $100bn per year will somehow create anything other than slow-growth at best (or more likely contraction) is palpable. This slow- or no-growth will mean less tax revenue and more spending on safety-nets and thus the Sausalito-savant factually points out that most people do not realize that government spending is simply giving people money whether they do anything useful with it or not and still the governments of the US, Japan, and Europe want us to believe that our economies will grow faster if we keep taking more money from the workers and give that money to the government.
Wearing a shirt that only a mother could love, Charles Biderman of TrimTabs offers his insightful perspective on the year ahead. Against the backdrop of a fog-bound Sausalito, Biderman sees only one path over the medium-term for Gold (up) as developed market central bankers print their respective fiat currencies and emerging market central bankers horde the one true sound money alternative. Just as we have been pointing out, he notes that the ECB has been QE-ing in all but name and the region faces at best a recession and at worst a depressionary breakup. Cost averaging into a Long Gold, Short EUR position is among his favorite ideas for 2012. Furthermore, he likes non-USD commodity producers in local currencies – implicitly long commodities and short the USD but it is his epiphany that a ‘Miracle on Main Street’ is hoped for by any and every market observer and media hack that rings truest. The hoped-for miracle that explosive growth (just as has always been the case post WWII) is just around the corner and will rescue us from the doldrums-like state we are meandering through is simply our heuristic biases run wild (together with an entire industry of asset managers and strategists who always see 10-15% appreciation ahead in broad equity markets over the next year). Until there is a total restructuring of developed market economies to the point where entrepreneurs are encouraged to act and where government spending is ‘closer’ to government income and not to ‘wish fulfillment’, there can be no jump-start to growth. Political will remains bereft of desire to do anything but kick the can down the road – and unfortunately, that can is getting bigger and heavier by the minute.
TrimTabs President & CEO Charles Biderman gives some advice for 2012 and explains why the past has conditioned Wall Street professionals to believe that economic miracles always Occur. Follow Charles on Twitter, @CharlesBiderman and log on to TrimTabs Money Blog www.trimtabs.com/blog