QB Asset Management - Towards Capitalus - Nov. 2010

8/8/2019 QB Asset Management - Towards Capitalus - Nov. 2010

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QB ASSET MANAGEMENT November 2010

THIS MATERIAL IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE SECURITIES OF ANY KIND. RETURN FIGURES HEREIN ARE ESTIMATED NET OFALL FEES AND CHARGES. PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RESULTS. ANY COMPARISONS HAVE BEEN OBTAINED FROM RECOGNIZED SERVICESOR OTHER SOURCES BELIEVED TO BE RELIABLE. THIS REPORT MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIESLITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE INHERENT RISKS AND UNCERTAINTIES, AND WE MIGHT NOT BE ABLE TO ACHIEVE THEPREDICTIONS, FORECASTS, PROJECTIONS AND OTHER OUTCOMES WE MAY DESCRIBE OR IMPLY. A NUMBER OF IMPORTANT FACTORS COULD CAUSE RESULTS TO DIFFERMATERIALLY FROM THE PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND INTENTIONS WE EXPRESS IN THESE FORWARD-LOOKING STATEMENTS. WE DO NOTINTEND TO UPDATE THESE FORWARD-LOOKING STATEMENTS EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAWS. NO PART OF THIS DOCUMENT MAY BE REPRODUCEDIN ANY WAY WITHOUT THE PRIOR WRITTEN CONSENT OF QB ASSET MANAGEMENT COMPANY LLC.

Towards Capitalus

Crucifixion can be discussed philosophically until they start driving the nails.1

- Wallace Stegner

A short fable: There is a galaxy not too far away called Galaxy Economia. The four planets that comprise it areCapitalus, Policus, Medius and Restivus. Capitalus is at the center of the galaxy and emits light. Restivus is furthestaway from Capitalus and its orbit is heavily influenced by Policus and Medius, which comprise the Distortia Band. Allfour planets are inhabited by similar life forms; however, each behaves very differently.

Capitalus: The inhabitants of Capitalus mostly behave objectively, valuing natural and human resources based ontheir barter values to society. Capitalian production and productivity have grown over time with a generallyincreasing population and because every now and then there is a technological breakthrough. Increasingproductivity, economies-of-scale and innovation continually drive wages lower on Capitalus, along with the prices of goods, services and most assets. Capitalians do not mind declining wages and prices, however, because affordabilityremains relatively constant while leisure time increases. Capitalian wealth naturally flows toward societal utility andso hard workers and innovators tend to become wealthier than others. Capitalians do not care about money per se,only how it will be valued in exchange for future consumption. So, Capitalians tend to consume what they need and

1 Wallace Stegner; The Spectator Bird; 1976; page 23; Penguin Books.

Capitalus

Policus

MediusRestivus

Distortia Band

Bankus


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desire, are able to save most of what remains of their wages, and invest and donate the balance. Capitalians allowpoliticians to oversee services that must be executed in the public domain and they fund government accordingly.

Policus: There are very few inhabitants of Policus, (Pollutants), yet the planet has significant gravitational pull.Policus and its moon, Bankus, transform the light emitted from Capitalus into hot air, and together they emit

pollution outward towards Medius and Restivus (e.g. the values of natural and human resources are based on

complex models that, theoretically, promise to perpetually improve conditions for all galaxy inhabitants). Fromtime to time the pollution from Policus overwhelms the galaxy. Then, all planets except Capitalus begin to revolvearound Bankus. Bankus then morphs into a Black Hole and ultimately explodes, leaving only Capitalus unaffected.

Medius: The inhabitants of Medius are extremely sophisticated; however, they seem incapable of original thought.Medians are unaware of Capitalus and so they record and analyze data emitted only from Policus and Bankus, andthen transcribe that data for the inhabitants of Restivus. When Policus explodes, bewildered Medians investigate.

Restivus: Restivus is in the dark. Accordingly, Restivuse Guys think productivity and sustainable wealth rise or fallbased on sophisticated-looking analyses emitted from Policus and Bankus and transcribed by Medius. Money is thusworshiped on Restivus and so it is created continually without limit (by Bankus). Restivuse Guys earn credits, (calledwages) for their work, and they amass more credit over time so their children can inherit their debts. They fightover resources because no one is sure who really owns them. When Policus explodes, Restivuse Guys get angry.

This little Fable has a moral, again borrowed out of context from Wallace Stegner: You cant trust optics but youcan depend on appetite. 2

Private incentives do not die regardless of how much some at the top may want them to,and these private incentives will ultimately distribute wealth back to the factors of production wherever they areand regardless of how hard powerful men acting together try to stop it.

Meet Our Little Friend

Investors may like finding consensus around which values may congeal but life makes no promises. Novembersremarkable events were very much anticipated and feared by the markets. Some came and went without immediateconsequence (US mid-term elections); others did not (European sovereign bailouts). Did investors know more atmonths end then at its beginning? Yes, but many investors were stunned by what they learned, which is why wethink they clung desperately to dubious policy strategies being touted by unarmed sentries guarding the gatehouse.

Watching some public policy arguments among highly regarded policy makers, economists, media members andinvestors makes water boarding seem like a walk in the park. The second- and third-order theoretical publicdiscussions about QE, inflation and deflation dance around what all investors know (or should know) to be the mainpoint the gloomy math behind global debt service. It wont matter soon. The general level of topical analysis,

tortured logic and blatant misinformation is being reconciled in real time by natural economic behavior. Anyonewith a sense of time and fairness, from billionaires to the unemployed, should be pleased.

Unsustainable economic distortions that emanate from a flawed and unfair global monetary system and frommisguided public policies that perpetuate that system can only be exposed and challenged once it becomesapparent to all that balance cannot be restored using the same means. That time has arrived. As the New YorkTimes recently acknowledged; were not going to shop our way out of this mess. 3

2 Wallace Stegner; The Spectator Bird; 1976; page 40; Penguin Books.3 The New York Times; November 28, 2010; Week in Review; Economic Fix-Its; David Segal; page 1.


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A transformation to a new global monetary system has begun and will only be popularly recognized once those mosthelped by the old order stop accruing benefits from it. This has started in European countries forced into austerityor default by ostensibly more solvent members of the EU. Germany either has to refinance peripheral economies oradmit its largest banks are insolvent. Such is the current phase of the Great Credit Unwinding, wherein the processof refinancing overwhelming debt is popularly scrutinized. We think this process will become more apparent in alldebtor economies including the US, where an abundance of outstanding credit is meeting a dearth of outstandingmoney with which to repay it. US states and homeowners will soon be as stressed as Greece and Ireland.

The biggest beneficiaries of the current system have been large banks and unproductive members of societies.Banks have been able to effectively lend money into existence, which placed them at the center of power.Unproductive members of society (including us and probably you) have been given incentives to stay unproductive.

Centrist politics, including that of most established political parties representing the vast majority of G7 nations, hasbeen executed for a generation based upon theory unsupportable by logic. Those calling themselves conservativeor liberal support virtually identical economic policies. Most progressive Keynesians seeking to use government asan honest broker that ensures safety nets and balanced opportunities for all should blame themselves for driving

the wealth gap wider, not narrower. Most thinking of themselves as laissez faire free market conservatives shouldblame themselves for defining their free market as one in which governments continually print money so they canthen amass it without risk of failure. There is very little difference, in our view, that separates those operating in theestablished political class across established nations. This is proven repeatedly when they circle their wagons todefend their exorbitant privilege by gutting financial reforms and then, ultimately and despite their loud and oftenemotional rhetoric against it, continue manufacturing and throwing more money at flashpoints.

You there, sipping Chardonnay in your second home as you vote Democrat/Labour to balance your moralelectrolytes, the less individuals have and the longer they are unemployed, the more hardship they and theirchildren will incur from printing more money. As it stands, a line worker cannot save his wages AND maintain his

standard of living. So then why on Earth would you argue in favor of banks and bondholders and against lettingcredit and wages find their own clearing price? The working class would find work sooner on a competitive globalwage scale once credit is fully collateralized. Are you ignorant or scared?

And you there, pounding on your stock and bond portfolios or standing in your 5,000 square foot home, votingRepublican/Tory and demanding that government get out of your pocket! Dont you realize you have been thebiggest beneficiary of the governments perverse and selfish policy of allowing banks to manufacture and distributeunreserved credit without limit and then stepping in when necessary so the prices of your assets wont decline? Youare luckier than a four-leafed horseshoe. Sit down, shut up and teach your children that yes, they should learn thevalue of money, but no, the stuff in your bank isnt it.

The debt distribution system practiced by all established governments is morally reprehensible, as is borrowingmoney that can never be paid back to creditors in currency with the same purchasing power. But this is the systemof incentives as constructed in the West. Are we immoral for doing what it takes to provide for our families in thissystem? Are we patriots for borrowing too much today so that we can consume too much and maybe let retailersand global manufacturers hire more people? Or, is it time to acknowledge that a system that promotes constant andincreasing public indenture is worthy of failure?

But we digress. We were arguing that large banks and unproductive members of society have been the biggestbeneficiaries of the bank-centric monetary system practiced by established economies. It is our contention that themost unproductive members of societies have been those that do not produce capital, we included. Banks are at the


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top of the worthless list. They systemically short money as they issue claims on it that are not reserved. So, whenbanks in the aggregate stop producing more money (via unreserved lending), the system goes in reverse (allmeasures of money naturally tend to revert to the quantity of reserves or base money). Central banks exist to createreserves when the lending cycle goes in reverse. This provides a dangerous, unsustainable social structure.

Though QBAMCO does not create capital you should not be surprised that we do not consider ourselves worthless.Our particular raison dtre is to seek to provide capital holders with the benefit that banks should provide, butdont -- a means to maintain and increase wealth in the true sense. As it stands, if it wants to retain its purchasingpower, amassed wealth cannot deposit money in banking systems or in the currencies that banking systems conjure.This great distortion is at the center of a delusional G7 economic infrastructure, populated with institutionalizedapologists working each day to stay in business by perpetuating this flawed system.

We allowed a moral tone to invade a discussion about money, markets and economies -- usually a sign of weakness,laziness, ignorance or investment ineptitude. Get over it. Morality is the foundation of money and markets,especially in a fractionally reserved economic system that demands self-delusion, especially in a global economydefined by handicapping the impact of credit on asset values across all markets. Money has no soul; credit must.

The only people living on Capitalus in the real world today are those producing capital assets and reinvesting theirwages back into them. It is a small percentage, especially in the West. Most investors living on Restivus do not seethat the Western credit pendulum has swung as far as it can go and will soon swing back hard towards true capitalproduction. Some investors have begun to move their wealth off the paper money grid or are investing it withunlevered capital producers. They should live to spend, or even to lever their wealth with paper money, anotherday. So meet our little friend, Mr. smooth-talking, highly-regarded professional world improver. It is common sense.

Global Economic Tensions

There should be no room for emotion or patriotism at the thought of the G7 asking its creditors for more time. The

essence of the relationship between surplus and debtor economies is as creditor and debtor, and as we are alllearning in Europe presently, trying to extend payment is natural behavior for distressed debtors and creditors alike.As we have been long discussing, it is likely that global debtors will default to global creditors -- the only question iswhether it will be in real or nominal terms. We continue to bet that it will be in real terms. Greek and Irish bailoutsso far continue to confirm the merits of that wager. The solvency of German banks is at the center of that calculus.

China and other creditor economies know their currency reserves will be toast in real terms. Chinas public responseto the most recent round of official USD debasement was predictable. Last month, Dagong, a Chinese rating agencylargely controlled by official channels, downgraded the creditworthiness of the US Treasury:

Dagong believes that the occurrence and development process of the credit crisis in the U.S. resulted from thelong-standing accumulation of the contradictions in its economic system; the U.S. debt burden can be relievedonly to a certain extent through large-scale printing and issuance of the U.S. dollar; however the consequentdecline of the U.S. dollar status and national credit will block the debt revenue channel which is vital to theexistence of the United States to a greater extent. The potential overall crisis in the world resulting from the U.S.dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances thatnone of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the U.S.will continue to expand the use of its loose monetary policy, damaging the interests (of) creditors. Therefore,given the current situation, the United States may face much unpredictable risks in solvency in the coming one to


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his sheriff in Blazing Saddles threaten to shoot himself if the bad guys didnt let the girl go. Are the best policyminds in America corrupt or stupid? Neither, we think. They are merely trying to buy time.

Writing in the latest issue of Foreign Affairs , Harvards Joseph S. Nye seems to speak for all centrist policy makerswhen he admits the hegemonic decline of the US is upon us but argues it will be replaced by power sharing amongeconomic powers. 5

It was no surprise then when World Bank President and former US Trade Representative Robert Zoellick wrote aneditorial in the Financial Times November 8 suggesting the G20 should consider employing gold as an internationalreference point of market expectations about inflation, deflation and future currency values, and noted; althoughtextbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.

We agree that the US retains economic, diplomatic (and military) leverage and that it will remaina global power, but the stage is clearly being set to accommodate a new world order. US policy makers know the gigis up. We think they are actively negotiating valuations, alliances and trade treaties that will include a new globalmonetary regime.

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The price of gold bullion, which represents anti-dollar sentiment, ran higher for a few days and then settled backafter all the usual extrapolating chatterers weighed in. Mainstream media provided space for reasonable discussion.A week after Zoellicks column Jim Grant forcefully argued the merits of Austrian economics in the New York Timesand for the return to a gold-exchange standard in whole or in part. Even US stock-centric CNBC gave time to JimRickards to frame contemporary markets in nominal versus real terms and to argue for a new gold-based monetaryorder. (We must take this time to disagree with those that argue it is possible to have a global currency partially backed by gold. We dont see how this would be possible when we go through the iterations. For example, we havea $100 bill and we decide that we prefer to hold gold. Lets say dollars were to be 50% backed by gold and so we

exchange our $100 bill and receive $50 of gold and, we presume, a $50 dollar bill. We then get back in line andexchange our $50 bill for $25 of gold and a $5 bill and a $20 dollar bill. And so on. Clearly, partial backing is aconcept lacking any foundation in logic or practicality. A precondition of a gold standard must be redeemability.Anything less than 100% redeemable is easily gamed.)

Nodoubt it was released the week following the QE2 announcement to quell fears among USD reserve holders. Thepublic firestorm following Zoellicks column was immediate and created a reflexive public echo chamber that

affected asset prices.

As November continued and as the opening bell continued ringing each day, the markets and their professionalobservers began focusing on more immediate matters: rising corporate earnings => economic data that didnt getobviously worse => stock and bond markets that didnt get noticeably worse => the potential for building broadeconomic confidence => the potential for consumers to begin borrowing and spending again => the potential that if consumption were to rise then it might be possible to delay detonation of the debt bomb => and finally inNovember, the good prospects for holiday shopping. A tough news month without a crash. Good going, gents.

But the reflexive nature of hard data and its consensus public interpretation has its limits. Views and news do notdefine ongoing currency and real asset values and they certainly do not persuade others across the globe to forgotheir economic incentives. Such is the risk investors take in not appreciating the fundamentals -- the downside of

5 Foreign Affairs; The Future of American Power - Dominance and Decline in Perspective; Joseph S. Nye, Jr.;November/December 2010.

6 Robert Zoellick; Financial Times; November 8, 2010


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indebtedness; the importance of the ongoing transformation from G7 hegemony to global power sharing; and therisk in not appreciating the connection between the two or the speed with which the transformation is progressing.

Time is an asset Western policy makers are very short. On November 19, Ben Bernanke, the man himself, made apoint of stepping to the microphone and saying clearly: As currently constituted, the international monetarysystem has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments bysurplus countries, which can result in persistent imbalances.

There it is. Ultimately there is nothing to counter bond math. Western policies that have supported the markets fordecades are failing. The confederation of Western central banks is splintering because it is not equipped to providesolace to their indebted populations, unless they inflate away the burden of public and private sector debt. The Fed,as the manufacturer of the product that has been the benchmark for all global value, is out of bullets. Policy makersare quickly reaching the point at which they will either have to declare they are all-in (abandon any pretense of austerity), or let their economies credit begin to fail.

Although we would like to see the US grab the bull by the horns -- formally devalue the Dollar, inflate away the

burden of debt repayment, and then make the USD a hard currency again -- neither policy makers, the press, nor wewould be able to influence those capable of making it happen as much as global wealth holders would. Fiscal andtrade policies merely shift wealth. Only workers and true capitalists in an economy can create it. So even if prevailing Western sentiment remains intact to the bitter end; and even if, by some twisted logic, politicians withprinting presses think they provide a better and more sustainable economic system than people at all levels beingable to work and save their wages; it would not matter. The current floating rate, whack-a-mole paper moneyregime is already in the process of failing and being replaced.

Shooting Wayward Messengers

The established Western media, so cynical and ambitious when it comes to exposing personal and public policy

failings in the political world, continued sitting on its collective thumb in November, nodding dutifully like bobbleheads, not questioning the tortured logic (or fairness) of policy that seeks to get US consumers to go deeper intodebt. The liberal media did not understand that the biggest losers from central bank policy actions are theunemployed and the right-wing media did not understand that it is already too late for austerity measures.

The established media deserves criticism. To be clear, we would agree that the press should enjoy full rights of freespeech without limitation, and further should not be forced or even expected to serve the public good. Against thisbackdrop, we believe that through abundant incuriosity, risk aversion that comes with corporatism, and/or anundisclosed willingness to appeal to certain constituencies over others, left- and right-leaning established media iscollectively demonstrating willful negligence towards the public it claims to serve. It is either guilty of conspiracy

with the political dimension, guilty of utter ignorance, or guilty of exercising its right to act in its best interest at theexpense of its readers. As investors, it matters not to us which. We only judge its product.

Our view is based on personal experience and observation. We have occasionally shared our macroeconomicopinions and suggestions privately with several well-known centers of influence in the press. Our purpose has notbeen to be quoted, but to provide a credible outlook not widely known. For example, this past July, at the request of a highly regarded economic analyst for a top daily publication, (lets call him John Smith), we wrote a piece aboutthe dangers of trying to perpetuate an economic system that promotes unreserved credit, and how we thought agold-exchange standard would eventually replace it. Ultimately, he agreed with his editor that our arguments werenot comprehensible enough for our readers.


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He was probably right that our piece would not be understood by his audience -- not because it would be overanyones head -- but because it was an argument to which his readers had not yet been exposed. We dont knowwhy he did not choose to make the argument comprehensible by educating readers about another economicdiscipline some argue explains current economic cause and effect more elegantly than that being theorized andaccepted by most economists and practiced by policy makers. Nevertheless, he graciously pledged to return to the

subject at a later date.Our next interaction with John Smith was in October following our praise of a recent column:

QB, October 14: we think the Fed (or the markets) will ultimately revalue the USD/Gold exchange rate. Werethe Fed to do it, (which it should to gain control over timing and pricing), it could maintain authority over theglobal monetary system by conducting open-market monetary operations at a market-based exchange price. Infact this would actually be monetary policy, as opposed to credit policy (interest rates) it and other central bankshave been employing. We have been modeling a Shadow Gold Price that uses the Bretton Woods equation(Monetary Base divided by official gold holdings). The SGP puts the USD at about $8,000/oz. presently.

JS: We are not going back on gold.

QB: I respect your conviction. Ive rarely been that sure of anything.

JS: You seem to be quite sure of many things. I know of no serious academic economist who takes the return togold seriously, with the possible exception of Bob Mundell. You would also have to close the Fed down first.Anything is possible, in the long run. But a return to gold in the near term seems to me inconceivable.

QB: Was it Peter Ustinov who said if the world should blow itself up the last audible voice would be that of an expert saying it cant be done? I see your serious academic economists and raise you a 35:1 debt to moneygap and the only strategy your experts are coming up with is to transfer or issue more debt. As you say, I supposeanything is possible -- we could grow in real terms enough to overcome that gap and trend. Im betting against it.

And I dont think the pressure to perform is on me or other wealth holders in the West and in emergingeconomies migrating towards harder money. Its on policy makers holding burning matches. Economics, notpolitical economics, must prevail.

We suspect that exchange, along with others arguing our same points, prompted him to write publicly two weekslater about why there will not be a return to the gold standard. You should not be surprised that we felt his piecewas loaded with false choices and sensational leaps in logic. Some samples along with our comments, below:

JS: One obvious objection (to a fiat currency devaluation vis--vis gold) is that this would generate hugewindfall gains to holders of gold.

QB: So what? Is it okay for ongoing windfall gains to accrue to the fractionally-reserved banks at the expense of the factors of production?

JS: A peg to gold may prove radically destabilising for any currency if other significant countries failed tosustain domestic monetary and financial stability.

QB: Precisely. If your country endorses stable monetary and financial systems and other countries do not, arational person would expect the former to eventually assume the wealth of the latter.

JS: there could then be floods of gold into or out of a currency that is well managed.


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QB: And that is the point: under a gold standard, currencies are neither well nor poorly managed. They are notmanaged at all. The people that form the economy determine the value of their currency.

Mr. Smith and most all other notable economic columnists in established media may disagree with us about how aneconomy should operate, which would be fine. However, we take exception to the implication they put forth eachday that the established economic construct is based on good science. It is ultimately based on subjective, self-serving politics that requires constant intervention and the purposeful distortion of economic equilibria. We dontneed better economic managers or econometric models. We dont need bank apologists like Mr. Smith. We need asystem that allocates capital and resources more fairly.

This columnist is surely finished with QBAMCO, as it should be. After all, most Medians are unaware of Capitalus.But it seems Capitalus is not finished with Mr. Smith. Three weeks after he declared to us that the world would notgo back to gold and only a week after he publicly asked and answered speculation of such heresy to his satisfaction,Bob Zoellick decided to run his opinion piece about a new monetary construct that should consider gold.

Harrumph! went Mr. Smith and other experts as they argued Zoellick never called for a gold standard, which of

course was true but not the point. Zoellick has spent the last twenty years as a high level diplomat interacting andnegotiating among and on behalf of G7 interests. He is very precise with his words and his timing. We interpret hispiece as a public admission by G7 economies that they know the USD-centric global monetary order must bechanged. To admit so publicly was to move that inevitability further down the timeline. To be blunt: we think the USasked China for more time. His very specific public acknowledgment that the current monetary order is worthy of alteration should not have been summarily dismissed by the financial press.

Or by reasonable investors. In 21 st century investing, wherein current perception is the only definable reality(efficient market theory anyone?), there is no room to extrapolate an event that hasnt occurred already from areasonable sample set, and no room to imagine an event that has not yet been declared. The shift to a newmonetary order would (will) be a fat tail event. Like Talebs Black Swan, it doesnt exist yet in the consensus mind,but unlike his Black Swan it is possible to know that it actually does exist.

Whether the subject at hand is the ultimate resolution of public and private debt or more immediate options facingdistressed European sovereigns, the established financial press is off point. Whether or not it collectively believes ithas no place inserting itself into public opinion that might be disruptive to government policies, (to paraphrase GoldMeir, it shouldnt be so modest, its not that influential), it is obvious to us that mainstream media does not seem torecognize that without public pressure to act proactively, G7 policy makers will not have the final say abouteconomic outcomes; their creditors will. Whether they know it or not, (we presume not), Western media have beenserving the interests of foreign and domestic creditors and undermining the interests of their governments anddomestic debtors.

All is not lost. We have noticed journalists struggling with what must be a constant barrage of cogent logic comingfrom people like QBAMCO and we assume they must be asking themselves why some of the worlds most successfulinvestors like Soros and Paulson are exchanging their paper currencies for gold. On November 25, New York Timescolumnist Floyd Norris published a dialectic that attempted to uncover the attraction to gold. 7

7 New York Times; November 25, 2010; Gold Fever: Pondering the Causes; Floyd Norris.

Norris seemed togenuinely try to walk laymen readers through some of the (oversimplified) points and history that would temptpeople to buy gold. He discussed a general distrust of elites that feeds the current gold fever and even threw G.Gordon Liddy of Watergate fame into the mix, perhaps to invoke a sense of crazy goldbuggery (It is part religion,


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part politics). Norris did not include the very unemotional global fundamentals driving the gold price higher andthus his conclusion (and sentiment) did not make sense. But that is not our point. What matters is that the mediahas no choice but to become acquainted with macroeconomic fundamentals driving economics, trade, asset valuesand politics. It will get there soon.

The egos and ambition of national journalists are no different from those of politicians, asset managers orinvestment bankers. Whether the financial media finally get it before or after unforeseen events occur does not,in the end matter to investors. Such events will occur anyway. But with each gash exploding in the dyke that holdsback natural economic law, the financial media is getting closer to asking policy makers a follow-up question or two.When this begins, it wont be long before economic reconciliation begins.

Paul Brodsky Lee [email protected] [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

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QB Asset Management - Towards Capitalus - Nov. 2010