Interviewed by Louis James, Casey International Speculator
Louis: Ladies and gentlemen, thanks for tuning in. We're here in Carlsbad,
California at the Casey Research Navigating the Politicized Economy
Summit. We've been talking a lot about politics and about investments, and
here with us is Karl Denninger. Karl, for those who
weren't with us here, can you give us the thirty-second version of your talk
Karl: Okay. The
presentation this morning was intended to focus on how we got into the mess
that we are in, where the distortions are, and more importantly, where the
most important elements of what is likely to come in the next couple of years
are going to emanate from. So if you wanted to look at it in thirty seconds,
it is in two places. It's in the household sector which everyone says has
de-levered and has not, factually, and it is in the explosion in medical care
spending, which is the most unappreciated area within the federal
government's realm. Although everybody talks about it, nobody actually looks
at where the underlying problem is within that realm.
L: Wow, that really was thirty seconds. Okay, let's take the
housing one, because I think that will surprise people a lot. The housing
bubble has popped, people think. Why are you saying otherwise?
because when you look at the facts, which unfortunately economics ultimately
L: Darn those
Karl: Yeah, darn
those facts and darn mathematics. What you find is that the total amount of
outstanding mortgage credit has declined by a little less than 10% from the peak.
Unfortunately, the value of homes has declined by about 30% from the peak.
And what this means is that the overall leverage in the housing sector has
actually gone up instead of down. So when people say that the housing market
has de-levered, what they're really saying is that the notional value of home
mortgages has gone down by some small amount. But it was at levels that were
utterly ridiculous before; and when compared against GDP, it is still 50% too
high. So we have another 50% decline, approximately, in the price of homes in
front of us – or we have a doubling of GDP. The latter is not likely to
happen anytime soon, so you take a look at what you think is the more likely
L: Okay, no
argument. It makes sense. Kind of scary. What about on the medical side?
Karl: Well, this is
the part of the economic picture that nobody wants to speak to, especially
within the Republican and Democrat parties, and even within the Libertarian
party. This is a little surprising because Gary Johnson, of course, has
talked about cutting 43% of the federal budget. The problem within the
medical system is that medical spending has gone from approximately $53
billion – and this, again, is just the federal government, not private
money – to $850 billion last year. That's from 1980 to today. That's
approximately a 9.3% compounded annual rate of growth. That means that the
rate of spending doubles every 7.7 years, which means that again, in fifteen
years we will be spending approximately $3 trillion by the federal government
on all medical services provided.
No we won't, because the entire federal budget is $3.8
trillion. So the real question here is not, "Can we fix Social Security
and Medicare?" (And all the politicians like to conflate these two
things to scare seniors.) Social Security is very easy to fix. You simply
index it to longevity, and the problem goes away. Medicare and Medicaid can't
be solved. You have to attack the medical system, not Medicare and Medicaid,
and until we do that we are faced with the realities of exponential credit
growth. Unfortunately, that means that somewhere in the next four to five
years there is a hard wall that we are going to hit at the federal level, and
the government is going to come apart if we don't do something about it.
L: And the
underlying factor there that's causing these cost increases? Is it the
bureaucratization of medicine, is it… ?
Karl: It's the
monopolization of medicine at all levels. Medical providers of all forms
– whether they be hospitals, physicians' practices, advanced
technologies such as MRI practices and things like this, or pharmaceutical
companies – all have protections in place at the federal level and at
the state level to some extent, that give them the ability to do things that
would be felonies if they were committed by anybody else. Just as one
example, you have to have a license to open an MRI in a new facility, a new
business in thirty-some states. This is under state laws that are called CON
laws – "certificate of need"–
Karl: Con is
probably the better word. The board that makes this decision is made up in
the majority of people who have a great interest in seeing the price of these
services remain very high. So if you come in and you say, "I want to
open an MRI center, and I'm going to charge $200 to scan your knee,"
where the current price is $2,000, you will not be given a license.
We also have the crazy distortions that show up in
situations like what happened out West recently, where a lady recently got
stung by a scorpion. She got an $80,000 medical bill from the hospital for
two doses of antivenin. The problem with this is that the antivenin was made
in Mexico. The factory is there. It costs $100 in Mexico; so it was marked up
some 4,000% by the provider of the drug, the distributor, in the United
States, and then marked up another ten times, so you have a 40,000% markup by
the time you get from the manufacturer of the drug to the patient. The
question that arises is how can that happen, and the answer is, the same way
that you can't go into Canada, buy up a whole trunk full of Viagra at $2 a
dose and bring it back across the border, destroying the $25 market price
here in the United States – and that is because it is a felony and you
will go to prison.
So we have in the United States put together a series
of laws that effectively protect practices that would be illegal for anyone
else to undertake in any other line of work. I ran an Internet company for
close to ten years, and if I did any of these things, I would be sitting in
prison right now. Until we stop this, the growth in cost will not go away.
And you cannot shift this into the states. For example,
Governor Johnson says he wants to block-grant Medicare and Medicaid to the
states. Ryan has said something somewhat similar to this with the vouchers
that he's talked about within his program. Taking a massive budget problem
and moving it from one place to another does not fix it any more than taking
a $20 bill out of your left pocket and putting it in your right makes you more wealthy.
We have a series of very powerful people in industries
that apply their lobbying prowess to our government, and they get these
protections put in place. This has come about over the last 30-40 years.
EMTALA is a part of this as well. That was a law passed by Ronald Reagan that
says that if you are an indigent and you have a heart attack, for example, as
you are walking down the street, they must treat you, irrespective of your
ability to pay. So this destroyed charity care within the United States and
now, as a result, your care is escalated in price by whatever it is that the
hospital has as unreimbursed.
L: That's really
interesting. I've always wondered why Moore's law doesn't seem to apply to medical
technology. You know, why is it that with technology, everything is faster,
better, cheaper every year – except in medicine it goes the other way?
Karl: Because the
medical industry has gotten special laws passed to protect them from the
forces of competition. This sort of a situation could never arise in a free
market, because somebody would come in and undercut whatever was being done.
If you could open up all the MRI centers that you wanted, you could go in and
get your arm or your leg or whatever scanned for a couple hundred dollars and
The nasty part of this is what it does even to routine
things that we all understand. Babies are born to millions of people every
year, for example. It's a very common procedure, of course. It takes place in
a hospital. If you take the 1963 cost of having a baby, including four
nights' stay in the hospital, and you inflate it by the Consumer Price Index
from 1963 to today, having that baby in the hospital should cost $950. Now,
anyone who has actually had a child at some time in the last 10 or 15 years
knows that you need to add at least one zero to that price if you are
actually going to the hospital to try to have a kid. So the real question
becomes how does a hospital get away with this, when
there should be another hospital down the road that says, "Well, gee,
you can have a luxury suite here for that kind of money. Why don't we just
have a really nice room and some very skilled doctors and you can have your
child and have that child here for $1,500?" And the answer is because
you have all of these protections that make that impossible. The market is
not allowed to work.
L: Okay, so
let's pull back to the big picture. Consider somebody looking at the US
economy today and trying to think about their investments and their life:
"How do I plan; what do I do?" You've picked two very special areas
from the broad context. Why and how does that fit into the big picture?
Karl: The big
picture is this: We have all lived for the last 30 years in a world where we
believe that the price of certain things will always go up – houses
being one of them, stocks being another. We have also lived in a time when an
insane amount of monetary inflation has taken place. Most people look at the
Consumer Price Index or some other government-provided thing, or they look at
M1 OR M2, the growth of the money supply, for example. But the truth is that
your credit card in your wallet spends exactly the same way as do the $100
bills or the coins that are found there. So what you really ought to be
looking at for the growth of the monetary base is the total amount of money and credit that is in the system, and add
those two together.
When you do that, you find a very ugly picture. We now
have $53 trillion approximately of credit instruments outstanding in the
United States economy. The growth of that monetary base has been from
approximately 150 to 175% of GDP back in the early 1980s, to 350% today.
Where has it gone? And the answer is into the S&P 500, which went from
100 in that timeframe to 1,400 today. It went into houses, which have gone up
at a massive radical of the Index itself, in GDP.
So, what is likely to come? Well, exponential series
only continue – and the trends in the economy that are driven by them
only continue as long as you can continue to find a greater sucker to put on
ever more debt in this particular case. That is no longer possible. We have
already found that out. The only place where that is happening today is in
student loans and in the federal government, so you only have two suckers
that are trying to prop up all of these asset prices. This will fail, and
when it does, you're going to see a massive amount of deflationary credit
contraction within the system as a whole. So from an investment perspective,
the answer is take duration risk out of your portfolio, because duration is
death if you happen to get caught on the wrong side of one of these events.
And the second thing is to shorten your swing generally and be prepared to
take advantage of conditions where you buy cheap and sell expensive. This is
how everyone always makes money.
The one thing that people need to keep in mind is that
the best investments are the ones that cannot be deflated, inflated, or
taxed; and what are those? Those are the ones that are sweat-equity based
things. So if you are able – everyone has a skill; let's say that yours
happens to be that you're a very good CNC machine operator. You know how to
make parts of a CNC machine, but a decent CNC machine costs $500,000. If
somebody gets in trouble because they over-levered themselves buying one, you
might be able to pick that machine up for $10,000-$15,000. During this time
period, that gives you a tremendous advantage over everybody else who is then
going to try to sell those parts into the economy. This is how you build real
enterprises and real wealth, because at the end of the day, the only way that
we build actual capital – which is what wealth really is when you get
down to it – is by mining something, manufacturing something, or growing
something. Everything else that we do – all of the leverage that we
pile upon leverage – is just claims on paper.
L: It's a shell
Karl: Yes; you're
just moving things around.
L: Okay, but
most of our audience are not machinists, they are investors.
L: Can you give
us some examples of how as an investor you would
play this, given what you see unfolding?
Karl: You look for
special circumstances. You look for instances where companies have been
beaten down or sectors have been beaten down far beyond their intrinsic
value, and that is when you try to pounce. If you are not able to actually go
out and set up your own business because you don't want to – if you are
a passive investor in other people's businesses, for example – then you
want to look for those opportunities. You want to look for things that are
mispriced. Right now, everything looks expensive relative to value. This is
one of the problems today. I can look at a dozen different industries and I
can say, where is the real value, for example, in
Amazon? It's a company that has a sky-high valuation, a couple hundred times earnings, and it is all predicated upon the exponential
increase in growth of their sales. Well, that's a very nice premise, but it
is eventually going to fail. The problem, of course, with trying to short a
stock like that is that it can go up far longer than you can remain solvent.
You get margin-called out, then you end up being
proved right, which doesn't do you any good at all. So trying to be on the other
L: Sorry, do
you ever short?
Karl: Oh, yes. All
the time. During '08 and the early part of '09, I was massively short a lot
of things, including banks. Washington Mutual was a great example: they were paying
dividends out of money they didn't have. When you identify companies that are
doing things that cannot continue, then that is an excellent opportunity on
the short side. But what you need to be realizing there is that money
management is the key to success no matter whether or not you are right or
wrong, because timing is extremely difficult to get accurate. From an
accuracy perspective, you don't have to be right all the time, you just need
to be right half the time, but your money management has to be excellent,
because otherwise you will find yourself being vindicated – but after
you have been forced to exit whatever it was that you were trying to do.
Right now, it's very hard to find examples of companies that I think are
undervalued on a relative value basis compared to their equity prices.
There was one example very recently, though –
Sprint, which everyone thought was going bankrupt. I wrote several articles
and said that I believed they had to break the glass, which is what happens
when you're the underdog and you're being shredded. You need to look at what
you can do that's different, how you change the paradigm in the marketplace.
And they did exactly that. They went to a true unlimited-data pricing model,
they brought the iPhone and other high-end smartphones into their prepaid
service – which nobody was doing at that point in time – and it
has been rewarded by not only the change in their stock price, but they were
also able to refinance a lot of long-term debt that threatened to damage the company
or perhaps take it out of business. The bankruptcy risk is now essentially
– or at least from my perspective – off the table, and the stock
price has gone up dramatically. So there's always an opportunity in these
kinds of dislocation events. You just have to be very careful that you don't
jump on a bandwagon. Facebook's another example. People thought Facebook was
going to be the second coming of Jesus, and of course it has cratered.
L: 800 PE.
Karl: I looked at
the S1, and then I looked at my own experience. I have an online trading
forum. I run a blog. I run advertising on those things. I looked at the
advertising and the number of clicks that were coming in from both the
desktop users and from mobile users. As the world is transitioning more
towards the handheld, the person with their cellphone, I said, "Okay,
how are these guys ever going to make any money in this second paradigm when
I can see that I'm getting 3% of my revenue from 30% of my use on the
handheld side?" And the answer is, "How are they ever going to
monetize this?" If they can't turn this into money, then all the great
plans in the world are worth nothing. And I also look at the fad factor
there, because look what happened to MySpace, just as another example.
Another teenage fad scheme that seemed to be working out very well for the
people who ran it, and now nobody even knows what that name is.
interesting the way you describe your views in what you see coming. It sounds
an awful lot like Doug's Greater Depression – "the rock and a hard
place; there's no real way out." The reality of politicians embracing
the harsh medicine they would need to, to change something significantly just
doesn't seem to be there. Is that right, or is there a way out of this?
Karl: Not an easy
one, no. And one of the problems you have is that because of the way
geometric series work, if you wait another doubling time, you have to double
the amount of damage you have to take. Back in 2000 is when I first started
looking at this stuff and started writing about it. I had given a couple of
interviews during the late 1990s after I sold my Internet company. I had said
I thought Amazon was a $2 stock. It actually bottomed at $4 during the depth
of the tech crash. And I also pointed out that these companies had claimed
the gross domestic product of the world in their S1s – something like
60 times over. That meant that essentially all of them were going to end up
zeros because you can't have more than 100% of anything, right? That of course
turned out to be true as well, but the real question there was what was the structural imbalance in the economy at that point
in time? And the answer was about 10%. So at the 2000 point in time, we
needed to be willing to take about 10% off the economy, off GDP, in order to
correct this, and about 10-15% off the size of the federal government in the
budget. Fast forward to 2007 after we, instead of
doing the right thing under George Bush, did the wrong thing and blew another
bubble, and now the correction that had to be taken was about 20%. Well, 20%
is approximately equal to the decline that you saw during the Great
Depression in the 1930s from top to bottom, and it's a horrific contraction
both in the size of the government and also in the size of the consumer economy.
Now let's put four more years on this. Today, the imbalance is closer to 40%.
Karl: So how far do
you go before the market gives up on this? I can put a mathematical number on
where we hit the wall from a standpoint of federal revenues and federal
expenditures. What I can't tell you – and nobody can tell you –
is exactly how long does this go on before people in the bond market in
particular say, "We're not going to play this game anymore." Look
at where the positioning is right now. The Federal Reserve, through Operation
Twist, has essentially dumped all of their short-term securities. So they own
no short-term Treasuries at all for all intents and purposes, but they are
70% of the long-term market from 10 years on. That's a serious problem,
because now the liquidity's been destroyed in there from the standpoint of
the investor. If you end up with a market that is not really a market
anymore, then you end up in a situation where somebody has all of the levers
and can push and pull them. But what people have to realize and understand is
that when you emit more credit into the economy – which the banks did
during the 2000s and which Bernanke is doing now – you are not actually
gaining anything. It is a hidden tax on everybody in the economy – on
all of the capital that has previously been produced and reduced to money,
all of the assets, and on all of the people and their earnings, because you
are deflating their purchasing power. And by doing this, you make it less
possible for them to pay taxes in the future – and at the end of the
day, only employed people pay taxes. So the sustainability of government
comes down to "Can people afford to be hired?" It's not just a
question of whether or not you can go out and you can find a business case to
hire another employee. It's also a question of whether or not the person can
afford to take the job.
L: Okay, well
these are different specifics, but it sounds very much like Doug. On the
other hand, I'm not hearing anything about precious metals from you. Does
that fit into your picture?
Karl: Yes and no.
The problem with precious metals – I would like to separate them into
two groups, okay? Silver, for example, although it's considered a precious
metal, also has an industrial purpose.
L: As does
Karl: As does
platinum – well, platinum particularly, because of the catalytic
converters and everything else. Silver, however, is used in all kinds of
electronics. Gold to a small extent, but for the most part, gold is either a
numismatic metal or is conceived as a store of asset value as opposed to
something that is used in manufacturing.
The problem with metals is not that they are not in and
of themselves a stable store of value. A one-ounce gold bar in your hand will
never be anything other than a one-ounce gold bar in your hand. However,
unfortunately, what we've done is financialized the
trading and the execution of all of these things. So the value of a one-ounce
gold bar in your hand is no longer set by the number of one-ounce gold bars
that exist. It is now set by the number of futures contracts that happen to
trade over the CME every day. And because we have financialized
these things, it is impossible to discern what the actual value is of the
underlying asset that sits behind these contracts.
There are a number of people who will argue that all of
this is a manipulation game that is played by the large banks in order to
hold down the price. The truth is that any producer that has a single scintilla
of intelligence will sell forward all of his expected production over the
life of his mine the minute he determines what that expected production is,
as long as it is above his cost, because it locks in his profit. So If I have
a cost of production of $500 an ounce out of a particular mine for gold, and
the current price on the market is $1,700 an ounce, I'd be out of my mind not
to short all of the contracts that I expect to deliver over the next two
years into those contracts, because I have guaranteed myself a
$1,200-an-ounce profit. Why would I take the market risk that the price may
collapse in the meantime? I'll take the $1,700 right now, thank you very
much. So the question to ask for people in the mining business in particular
is, "Does your balance sheet reflect the pretax operating margin that
you have from your claimed cost of production versus today's price in the
open market? And if the answer's no, please explain why." [Chuckles]
L: Okay, two
different directions here – the mining and the metals themselves. Do
you see gold as a means of protecting wealth in case of serious crisis? Or is
it a barbaric relic?
Karl: I don't think
it's either. I think that gold is probably a means of stable return measured
against real things. In other words, if I look at the economy not in terms of
dollars, but in terms of the number of miles I can move in my car with the
fuel that I put in the tank or the number of loaves of bread I can bake with
bushels of wheat or the amount of corn that I can use to either eat or feed
animals or whatever have you, then yes, I believe there is some stability
there. And if you look at history, I think that you will find that that bears
out fairly well – that when you compare against actual things, there is
a decent correlation of protection. What I think people are a little off the
ball on is that they are all using gold – and other precious metals to
a lesser extent, ones that have industrial use – as a means to try to
hedge what they see as a potential hyperinflationary scenario. And the
problem with hyperinflation is that in a fiat-currency realm – where
all money is debt – somebody has to take the debt up in order to be
able to hyperinflate the currency. The only way
that that doesn't happen that way is if they were to change – well, if
Ben Bernanke was, for example, to send everybody a $500,000 check unbacked by anything, which under current law he cannot
do. Congress could change the law and allow him to do this, and that is
exactly what happened in Weimar Germany. The German government decided to
just start issuing unbacked bills. But what
happened immediately after that was that all lending ceased, because one
could no longer price the time duration value of money. And so you have to be
very careful with that kind of an expectation, because if you look at
history, history says that the hyperinflation for all intents and purposes,
very high levels of inflation already happened. What would you call something
going up in price by a factor of 14 over the space of 25 years? I would call
that a hyperinflation, and yet if you look at the S&P 500 from 1980 to
today, that's exactly what occurred.
L: Okay, but I'm
still not sure I have an answer. In the Weimar Republic, you could buy things
with gold that you couldn't buy with wheelbarrows full of marks. So it did
provide protection for the people who had it.
Karl: Yes, but not
in nominal terms, and see, that's the important factor. If people are looking
at the price of gold in dollars as a means of protecting their wealth, there's
a huge problem there that is likely to arise because government – well,
we saw what happened in the 1930's. Government just made it illegal to own
gold, so you protected your wealth, but you couldn't touch it for 40 years.
Well, you're likely to be dead before you can get to it again if something
like that happens. The other problem is that government can always put a
confiscatory tax on any kind of alleged capital gains, and then if the
currency was to collapse, we would probably end up with entirely electronic
[money]. That would mean that you wouldn't be able to perform any kind of
exchange other than through barter without it being able to be attached to
the tax system. So if you're looking at it from the standpoint of protection
of assets, then I think it does have a place in a portfolio. If you're
looking at it from the standpoint of price in nominal currency terms –
you have to be very cautious.
Just as a lot of people expect gold to be $5,000 an
ounce, $10,000 an ounce, $20,000 an ounce, it could be $200 an ounce. The
difference is that if it's $200 an ounce, the price
of a house that was $500,000 is probably $50,000. So the relative value
change is the same, but people will look at that and say, "Oh, my God, I
lost 75% of my money." No you didn't – you didn't lose anything in
purchasing-power terms. I think you have to be careful as to what purpose you
are putting to this. And the miners are just simply a way to put a leveraged
bet into the market in that regard.
L: Right. What
about other commodities? How does energy fit in to your picture?
Karl: Energy is a
huge problem. And it links with defense, and again, this is an area that the
government doesn't like to talk about. We spend $750 billion a year
approximately on defense. About half of that is spent outside the United
States, and we do it because we have this problem with Saudi Arabia and other
Arab oil sources. And oil – like every commodity that comes out of the
ground or is grown – gets priced at the margin. In other words, the
last barrel of oil that you want to burn is the price you will pay for all of
them. So if we were to lose access to that oil, oil would likely be $500 a
barrel in an afternoon. And that would, of course, do what to gas prices? It
would also be terrible for things such as food prices because, of course, the
trucks have to bring the food to your grocery store. So the real question
here is how do we link these things together in a way that works? And the
answer is long term, we have to stop being stupid about energy policy. We
have spent 40 years with our head in the sand on this. There are solutions to
this problem. We knew how to fix this in the 1960s, believe it or not, and we
refused to take those actions. There is a nuclear technology called thorium
that has the ability to provide all the energy that we need for the next
10,000 years in the United States. We built one of these reactors at Oak
Ridge in the 1960s, and we proved that it works.
L: But it didn't
make a good weapons byproduct.
Karl: That's where
the problem came from. You see, you can't make nuclear bombs out of the
byproducts that come out of thorium reactors. So we shelved it in favor of
the uranium fuel cycle, with all of the problems it has, including the
drastic dangers that we saw played out at Fukushima and almost at Three Mile
Island. But the other side of this is that thorium happens to be somewhere we
really wish it wasn't. It's in coal, and it is responsible for almost all the
lung cancers that are caused by coal-fired power plants because thorium is an
alpha emitter, and alpha emitters, when they get into your lungs cause lung
We could very easily – and I've penciled this out
on the back of an envelope, and it works – we could take the thorium
out of the coal, use it as a power source, and then turn the coal into synfuel. The Germans perfected this process, and there is
actually now a commercial plant running in South Africa by a company called
Sasol. It is in commercial production, and it is producing synthetic diesel
fuel at a blended cost. Now, they're not using nuclear power as the power
source for it, just conventional power of about $60 a barrel. Now that
happens to be 30% cheaper than what oil is going for right now. Why are we
not doing this when we have 400 years' worth of coal reserves at present
rates of consumption? The answer is that if you were to try to transfer
petroleum into this, we would have to double the amount of coal that we use.
That's uneconomic for a lot of reasons. I mean, how much strip mining would
you like to do? But what if you could take the thorium out of the coal, use
that for the power source, and thereby use the same amount of coal that we
use today, and replace all of our foreign petroleum requirements? And the
answer is, you can do exactly that. We just have
this fixation with dual use when it comes to nuclear energy. We demand to be
able to get bombs out of what we do, and that's why we're on the path that we
are on. It's foolish.
L: And not
likely to change without things breaking first.
Karl: We won't
change it; but interestingly enough, the Chinese are already working on this,
so we are going to get leapfrogged again. India is also working on thorium as
a power source, but they're intending to use the fuel in a more
conventionally designed reactor than a liquid fluoride salt. The
liquid-fluoride-salt design has a number of advantages, both practical and
from an energy perspective. One of the problems with conventional nuclear
power is that the heat that it produces is very low quality. That's why you
have to put the plants near oceans and big rivers and lakes, because you need
huge amounts of cooling water in order to keep the thing under control.
Liquid-salt thorium plants run at 650° Celsius internally, which is a
much higher-quality heat source, so your thermodynamic efficiency is better.
Only about a third of the energy that comes out of a nuclear power plant
actually ends up as electricity. The rest is thrown away, and that's a result
of the fact that the quality of the heat that it makes is relatively poor.
L: Okay, we've
covered a wide range here. Any closing thoughts or main takeaways?
Karl: I think the
key takeaway is that the government and the politicians are not going to do the
right thing until they're forced. This means that you have to always be on
guard for a potential dislocation event. We are in an especially dangerous
time right now, because we have total gridlock in Washington, DC. That's
going to persist through the election, and as a consequence, as it was in
2008, this is the time when a flock of geese can go flying into the engine of
your plane and cause severe problems that you don't have any tools with which
to combat. I look at the next two to three years as being the most likely
time for a massive dislocation event that comes out of the markets, because I
don't believe that our politicians are going to do anything effective about
those two areas that need to be dealt with – specifically, the
medical-cost issues and the energy issues. And if we don't fix those, we're
in big trouble. But the possibility of something coming out of Europe, in
particular, over the next 60 days cannot be discounted. And if it does occur,
it's going to be especially ugly, because we're just not equipped to deal
with it right now.
L: Thank you
very much. Words to the wise.
Karl: Thank you.
Karl Denninger was one of 28 financial luminaries who offered
timely market commentary at the Navigating
the Politicized Economy Summit last September in Carlsbad, California.
You may not have been there, but you can still hear every minute of all the
presentations – which include actionable investment advice – with
the Summit Audio
Collection (over 20 hours' worth in all).