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IceCap Asset Management Limited Global Markets 2013.8

IceCap Asset Management Limited Global Markets 2013.8

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Published by zerohedge
IceCap Asset Management Limited Global Markets 2013.8
IceCap Asset Management Limited Global Markets 2013.8

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Published by: zerohedge on Aug 07, 2013
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08/21/2013

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Our view on global investment markets:
 August 2013 – The Miracle Belay 
Keith Dicker, CFAChief Investment Officerkeithdicker@IceCapAssetManagement.com www.IceCapAssetManagement.com 
 
1
Becoming a legend
www.IceCapAssetManagement.comIn 2009, the Americans lead by Hank Paulson and Ben Bernankethrew unlimited amounts of money to the financial sector to self arrest the entire plant from spiraling out of financial control. Thesefinancial acts of bravery stabilized the system and so we were toldwould set the stage for a recovery.Alas, one year later in 2010 the same Ben Bernanke announced thatthe recovery had completely stalled and he would once again savethe system by printing even more money. Of course in 2011 herepeated the same strategy and began yet another round of moremoney printing to save us again.And, then in 2012 the Europeans felt that everyone needed evenmore life saving, and told the World that just like the Americans, theEuropeans too would watch your back.Those who disagree with history conveniently forget it was actuallythe US Federal Reserve who created the housing bubble, by creatingthe technology bubble, by bailing out a Wall Street hedge fund. Toadd more ice cream to this dish, let’s not forget the central banks rolein the Asian crisis, the Mexican crisis and the savings & loan crisis. Asyou can see, these are not one-hit wonders, and sadly the Fed’sGreatest Hits are anything but great.Certainly, the stock market has recovered – and this is exactly whatthe US Federal Reserve wanted. At the time, they read somewherethat if people “feel” wealthier, they’ll borrow and spend more. Simple
August 2013 The Miracle Belay
 
In mountaineering lore, summiting Everest, McKinley or even theVinson Massif certainly warrants a notch in your ice axe. However,the mountain that always produces jaw-dropping admiration, respectand outright fear, has been and always will be K2.The World’s second highest mountain, is rarely guided and attemptedonly by the most skilled, the most patient and the most determinedclimbers – and for good reason, falls, slips and nasty tricks canhappen in a moments notice. And when they occur, knowing how toswiftly execute a self arrest, or a belay can be the difference betweena tragic fall and living to climb another day.Now, when it comes to belays, American Pete Schoening has becomesynonymous with not just any belay, but the “
miracle belay 
.” In 1953at 25,000 feet high in the clouds on K2, one precarious momentturned Mr. Schoening into a climbing legend when he single handedlysaved five of his rope mates from plummeting off the mountain.Naturally the climbers were all shaken; yet they learned from thisexperience and enjoyed many more years of climbing.In 2009, 2010, 2011 and if you can believe it again in 2012, globalfinancial markets were also hanging from a ledge. But each time,instead of having an experienced professional to save everyoneinvolved, the World was dependent upon central banks whose entirelegacy was smeared with economic and monetary failures.
 
2
Fair is fair
www.IceCapAssetManagement.comenough, all they had to do was to make people feel wealthier andwhen it comes to wealth in America, there’s no better barometerthan the stock market.
Chart 1
next page shows the cumulative effect on the US stockmarket from all the various forms of quantitative easing, or moneyprinting programs. One can see that as the Federal Reserve printedmore and more money, the stock market increased more and moreas well.This made Ben Bernanke a happy man. As demonstrated in
chart 2
,the household net worth of Americans has just hit its highest markEVER. Yes, Americans are now wealthier and now all the world has todo is wait for them to start their borrowing and spending engines.Except this hasn’t happened.While GDP loving economist are quick to point out that unlikeEurope, America hasn’t slipped back into any recession, theyconveniently fail to mention that +1.5% GDP growth is hardly thestuff of legendary recoveries. Instead America, and the Worldcontinues to slowly grind lower.At any time, cracks in the system appear. Fractured governments inItaly and Greece, massive protests in Turkey and Brazil, and outrightcivil war and coups in Syria and Egypt are all symptoms of a weakglobal economy. Let’s face it, those who disagree and say moneycan’t buy happiness probably have never had a lot of money. Not onlydoes the economy matter, it matters a lot. And this is one belief thatour central banks got right. Except, there’s just one thing wrong. Note
chart 3
. This picture has really befuddled the US Federal Reserve andBen Bernanke who believe that if they throw trillions of dollars intothe economy making the stock market rise, then the velocity of money, or the speed at which it zooms around the economy shouldskyrocket as well.While the official reason for the decline in velocity continues toconfuse Bernake and company, the unofficial reason is loud and clear – bad government policies and actions are scaring the pants off of private capital.President Obama wants the rich to pay their fair share of taxes.Considering the wealthiest 20% of Americans already pay 65% of alltaxes one might ask “What number is fair?” 80%,? 90%?, 100%?.Maybe the rich can cover the deficit as well and pay the impossiblerate of 120%. Don’t underestimate the lack of logic in tax policy. If theAmericans need help in suspending the laws of mathematics, just askthe Europeans for guidance.Worse still, many people are not aware that Obama Care has had anextreme impact on employment in the US. The new mandatoryhealthcare program makes it considerably more expensive forcompanies to have full-time workers. And so they simply hire part-time workers instead.
August 2013 The Miracle Belay
 

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