good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for monday november fifth two thousand and twelve bond speculators doubled their long exposure to u.s. ten year treasuries last week says reuters reporting the f.t.c. data while bloggers from zero hedge say this marks the highest position since march of two thousand and eight we'll hear from hedge fund portfolio advisor grant williams on what might be driving this move will also talk about what your view was elections zero and the fiscal cliff look like asia where he does his pondering most of the time and it has been a week since hurricane sandy hit the u.s. and from the one point nine million reported homes and businesses still without power last night to reports of some arming themselves with bows and arrows to

protect against looting we're seeing widespread urban devastation and what might this mean for rural renewal i'm talking farmland we'll talk about it and on the big night forecasters strain to make correct call so read the wall street journal headline about the moods business on us election night q election word speed. which is just because. there it is more collateral damage from negative real interest rates low explained let's get to today's capital account.

what can i say the next president of the united states will inherit trillions of dollars and debts and unfunded liabilities and this is money already spent or promised owed on things that no longer exist around expectations already priced in by the electorate as we have argued time and again on this show the country's public and private debt burden functions is a drag on economic growth when the money exchange for those liabilities is used for consumption or recklessly wasted on doomed investments and foolish ponzi schemes with this burden of the past on our shoulders we find it ever more difficult to soldier on into the uncertain future and joining me today though to help us navigate that future what it could look like and maybe make sense of this past is grant williams portfolio and strategy advisor for vote days investment management he's in san francisco but he's typically based in singapore so what can i say mr williams we're very happy here in the us of a to talk about all this it's good to

be great so let's start with something that struck me in your recent news letter you said that you were speaking at a panel an investor asked you a question how do i correctly assess risk of a given investment in the current market environment and you said this you said you can't because the market is broken every day we sit in the boardroom of old peasant singapore and try to figure out where and how to invest a partner's capital and every day it gets harder and harder to do i'm curious in singapore where you're based how does u.s. policy both fiscal and fed policy including zur factor into that view of yours. well i mean search is not a us policy it's a global phenomenon that we get we have this really look around the world the concept of easily only a. recent study in japan finance minister said recently that they were falling behind in cuba as some kind of rice might not budge about europe's going to have to it's own sake the only way out is to either let this thing fall apart or create copious amounts of money and they're trying to find a mechanism by which to do that and this is the same of governments for new

building markets to try and try and push investors further out the risk of giving them no return at all having cash in the bank is a very dangerous thing to do so we speak to its investors all around the world who are who assists trying to some way to find some kind of yield when you've got a ton of inflation we see no real real real returns really let's need to be up in the sort of three and a half or five percent range and that's a very difficult some time on this one here one thing because sitting here in the in washington we just are always harping on the fed we're always harping about is there but are you saying that in this global context where all there are many central banks are engaging in these same policies that the fed is just one part of that or do you see it as a more significant part then perhaps some other major players well that's certainly the biggest part of that i mean it's competitive debasement and heat the country with the weakest parent she wins right now everybody needs to base their currency. there but they're all saddled with these debts which is just car they told to get

rid of without inflation any other one so it was really to default with so they don't get the kind of growth that's going to help them get out of those debts organically so when faced with a choice of the full or inflate the it's the simplest and by far the most politically palatable solution is to inflate the public generally don't tend to notice that specially when they've given a lot of numbers like two percent of the c.p.i. which i think anybody paying attention clearly knows he is why understated yeah so then let's get more into that because you wrote the way you sum up kind of the impact of all of this is that when you're looking at how to price rask. how to accurately price things you say the price is wrong because of all these distortions it's a playoff game so the price is right which turns out is the u.s. and u.k. phenomenon so let's talk about an example of some that's wrong pricing ok we have a chart this is from your newsletter at temps now these are supposed to provide protection against inflation the principal on the interest payments rise with them placed in fall with deflation as measured by what you just mentioned the consumer price index this is the chart you published showing tips negative yields twenty

years out is the prize right and if not how far from right now it's clearly wrong and this is the this is this is herdman senses this is the herd mentality people two thousand i really shook up investors and there was a loss of trust there's a lot of loss of face and people are genuinely worried and so they're piling it's instruments that traditionally. have provided them safe chips as well. as u.s. treasuries another great example you know u.s. skyrocketing you know people almost as a knee jerk reaction jump into these things because in times gone by they provide a safe safe haven but in terms going by the debts and the problems we're not on government balance sheets so least visas from still provide that so you know as we've seen you know the the wild card it gets big taken on to these public balance sheets that people are running into that. it's crazy you know the swiss swiss farms

the swiss of k. dick currencies and you're emplaced to print unlimited amounts of swiss francs in order that people pay and yet the swiss can also borrow money from the public society is negative rights so the price is clearly wrong and all those things. and it's just a question of when they fall over but imminent is not the same as leverage for them while these things are inevitable they will also understand this a value we just don't know when that's going to happen and with that in the fair value is there any way to even begin to ascertain what would be their fair value without this herd mentality because looking at temps you mentioned that c.p.i. people don't trust that many people don't believe that accurately reflects inflation so where do we even begin. but that's it that's the sixty four thousand dollars question i don't think anybody really knows what truth anybody is i think we all have this creeping sense that the prices we're seeing are right and i don't think anybody takes the c.p.r. seriously for. anybody anywhere and yet that's the that's the number that you know

told it was paid off and all kinds of just months and again just continues and while we have both sides kind of aligned in that they don't want the system to fall over you can get away with these things but this whole thing is a confidence going source of the governments everywhere are desperately trying to create this confidence to get people willing to put their money back to work willing to invest the money taken out of the bank out from under the mattress and get it into into productive operation but the problem they've now created for themselves as soon as they achieve that as soon as they they create the sense of confidence that they you know it's ok we can take the money out of safety and we can start going out further on that risk as soon as they do that the first that's going to happen is people look at their holdings of government bonds and you look at the negative deals they can take that no they will look at the balance sheets of these institutions and they're going to sell and in a sense are so they're going out and at that point you know the fed on the other central banks lose control of interest rates and then we could see some some really draconian measures started to be forced out of necessity what do you think would

care about sort of that sort of a chain reaction of events. well santa suit frankly i mean the east prices are clearly wrong and we see you see headlines out of europe with people who are relieved that somehow they're going to find a way to keep the scene which don't seem too forceful just for them but let's assume they do find a way to keep receipts he said you see people running to books and there's only one person to write a check and so do their grades and that's germany so reaction is to really not say same circumstances but that is purely just most clear and i spoke about this. so-called see you mentioned earlier on. and that's that's where we are you people are genuinely afraid. now comes and they are running to the government for help and the governments are the guys with all the debts it's a crazy situation it is a crazy situation so then on that note would you say that a phenomenon like this where the national bank pegging its currency to the euro and

printing printing printing like crazy but the government being able to borrow a negative year olds and in some cases do you think that accurately reflects the demand for safety as well as liquidity and these are very uncertain times it does and obviously the one thing that government bonds do have going for them is because you can seek you know treasuries once they're incredibly liquid and people are prepared to give up some return just to have that liquidity grow but really if you think about it if i told you that you have a quality any commodity where the supply and the price for both at all time highs you kind of think that doesn't really states where you can which one i want and yet here we are we have we have government bonds because the world supplies all time highs. and prices all time highs and those things it can't last that i spoke about stein's law which is a very simple economic law that says if something kind of going for that it will stop and then it is simple it's beautiful but it's absolutely true you know

ultimately government bonds cannot stay at their all time high prices at all time are supplies forever. at some point gravity and seven research themselves and the process of the full significance of gravity and sanity to things the lagging today and central banks bend the laws of physics so my question are heavily indebted governments as well as their central banks with their easy policies are they essentially borrowing stability from the future and order to forestall volatility today that's absolute is it going well that's absolutely what we have to we have to put this in the context of the political so i don't simply this is wholesale it is very much a political moment and so politicians don't like constituencies that don't want volatility they don't borrow money from the future don't borrow safety from the future. for the future if if and wherever they can because ultimately as your guest on your previous show was saying that they could borrow this from the future as

those doesn't happen on their watch that's fine and so that's what was it was seeing this is tremendous intergenerational transfer of assets from kids and grandkids to you know. look it's wrong in every kind of way but this is this desperate need for stability and this year olds or correction when they have been part of the business cycle for hundreds of years i don't see what the big series other than the fact that they let this thing get so far out of greenspan's keeping interest rates so low that you know some you. let this thing gets. monster has now taken control of that part of actually flying since food business practices right and you know when we get back i want to hear about what you think about the u.s. elections because you're speaking about politicians they don't want volatility is so i'm curious how you think what you think is the significance of these elections in the u.s. especially from where you're based in singapore some more with greg williams in just

a moment and still ahead right here the mainstream media has been burning everyone with every single detail about the election but. is there any chance that they can the world be announcement over who was america's next commander in chief we'll tell you how the networks are working to avoid any mistakes and what they need first seen maybe reflected by then being economic times that's all in tonight's loose change but first our closing market numbers. climb in sochi the u.s. city and europe on the hosts of the twenty four teams which are the biggest. song

she. sang the. song. thank you. dog days of. the bride days it. was common. to see it's so true.

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was. welcome back in the u.s. any glance to a newspaper or a t.v. screen and it's just what you want selections all the time but how much time do they matter to say an investor sitting in singapore trying to figure out how to invest clients' money well lucky for us grant williams is here to help us understand that he is a strategy advisor for office and best management he is currently in san francisco not in singapore where is typically based but mr williams welcome back i want to know being raised in singapore are the u.s. elections a big deal to people in asia do they care or does it matter particularly i think people care you know i think i think you have to care about i think the important thing here is the after months of these elections and it seems we're getting very mixed signals everybody's very partisan democrats are actually convinced that a bomb is going to let you know publicans are absolutely convinced that romney's going to get it in the sun but i think what we see in asia is that whatever happens

you're going to have this terribly excited house senate white house and that's to be very difficult for to get things done and it seems to never certainly not in my living memory have supposed been so far apart and this complete lack of bipartisanship corporation middle. and so i think when you have a comes if obama gets back in i think the public could be very resentful of that it looks like they're going to have control of the house so to make things very difficult for him i think it's wrong to get senate democrats. to be similarly sad about it so whatever happens i think we're going to get some kind of gridlock. and that's really going to leave a friend just a bit i think he is the most important player in all of what he does to two thousand and fourteen and so you know we have this crazy situation where we can have a central bank asserting policy i think pro-business i think romney has money clearly is certainly the current business can and that seems to be the big issue facing

this is that we need is this. to feel more comfortable investing which they really don't my conversations are the best is around the time she's here people are are really uncomfortable with the current distro should their attitudes towards business look i'm not a republican or democrat asking you nice guy to comment on them but let's just do the best of times but i think the aftermath is going to the most important thing with the fiscal cliff approaching. that's going to suddenly become very very important everybody i think all of us attention to pay to it to now because it's all because you say everywhere you look it's all about the campaign but we're going to end up on november seventh with a new president and then suddenly december thirty first is going to loom very very large and if we do get this divided after march selection where both sides really really dislike seems to me to be taste and we don't want to work and don't want the other side to get their own way we could be in a situation where we found ourselves last august when they let the debt ceiling expire and we had tremendous policy as the markets when you don't expect so i think

their investors everywhere we do worry about this election we paid very very careful attention to it. but we're more concerned about the aftermath than which of the guys gets it ok and turns out the aftermath one large part of that too is the government debt and the deficits i mean that's a concern that i hear from so many people how is that period end especially in a region that funds so much of the u.s. borrowing in terms of the government at least. the interesting thing about zero zero we we as a continent went into this into this crisis and saw a bit of shape in the west and that was because back in ninety seven ninety eight we had the asian currency costs and you know there was tremendous forces you know there's a lot of damage done to a lot of these economies but it goes on the up until you get their balance sheets in much better shape and with the exception of japan which is a huge perception you know some of the smaller economies in asia singapore particularly where. better seats are in star health so health you know states than

those in. west and so we worry about us and we've been through it as soldiers in recent memory but the extent to which asia suffered was. far far smaller than a comparable situation should the united states to get done so passes so it really is to us it's all about the dance or what to do about it and the sense you know you're serving is that there really is nothing they can do about it at the moment except try and insulate that data was interesting and you know you're talking about the volatility in people's concern about volatility after the elections one thing we saw the speculative long exposure on the ten year treasury more than doubled in the past week to the highest position since march of two thousand and eight does that have anything to do you think with investors betting on volatility. like this i think everybody who is in these markets and pays careful attention i've yet to have a conversation anybody who doesn't think at some point the market's going to top out and it just feels like perhaps people are now thinking this could be an

inflection point and they're starting to try to save themselves i think they'll be very close stops on those positions i don't think people are so huge directional bet but around events like this we tend to get on ourselves so we tend to get to reactions and the bond markets sort of you write for credit crunch and just quickly before we go on this has you look at him too far land had him back to last and tell me tell our viewers quickly why. i think some of your thought is actually less than and someone will will if you're growing food for example you're always going to you are going to get c.p.i. you will get frustrated because food is an essential commodity it goes up people need to meet more people need to eat was asia more people need to eat higher up the food stamps we get a lot more people switching from a grain most diet to a protein based on and owing agricultural land makes all the sense in the world and it's something that people worry that it's gone too far and priced too high so they're not making any more arable land while gold. it's

a sensible so. you are going to let us go with what we saw we could choose caught you so much so we tried to get that and you were. i did you support us and we. run across the world you know you know we won't weather climate political jurisdiction doing that but we could get some kind of. return on that us very interesting some of said that that farmland dirt is like black gold maybe you'd agree to thank you so much for being on the show grant williams strategy advisor for help as investment management but it's a start. all

right let's wrap up with loose change dimitri co famous even though the elections are still a day away the mainstream media is obsessed with topping out so much election data out there it'll make your head spin. the two main candidates for president in two thousand and twelve are tied in my world this is the tired martha the pros it was forty seven point nine governor romney forty seven point four and the president does lead romney but it's narrowly in the margin of error forty eight forty seven among likely voters i don't think i've ever seen a race that has as everybody is as uncertain as they are it is there's been as much contradictory and conflicting poll data the president is holding on to an eight point advantage among women one shows them tied at forty eight percent if you look way down at the bottom there the others give the president i don't know somewhere between one and three point edge depending on which one you look at the. so an

obsession with polls an obsession with trying to forecast what is going to happen what's interesting is that despite trying to have the most up to speed data the media is also trying to avoid mistakes like we saw in two thousand where many were reporting that al gore had won when in fact he had not their efforts to avoid these mistakes have included them improving their modeling and they have more software in their consulting with political scientists erring on the side of safety allegedly when making a call but this meeting with trying to be i guess more precautionary what does this remind you of this no this is this is again this is directly a result of zero percent interest rates and quantitative easing ok i cannot stress this enough this is the story of the space time continuum and i'm not even kidding right that everything was already about now now now that everyone wanted everything yesterday another one of the day before yesterday ok because interest rates are so

low that we were sucking duration out of the of the space time continuum not just of the markets but of the future all right so that's why everyone's like yeah it's true it's true it was psyched up here i mean it's going over now you know here's the problem i have with this argument news organizations have always tried to get the information nation out quickly and fast and now they're just adding to their resources because they don't want to totally have a focus like they didn't two thousand which was about speed we didn't have negative interest rates are some zero percent interest rate first of all one so i don't get why there is this i think first of all. i don't believe the fox news is trying to avoid calling it early for whoever it was i don't think that they want to call it early and miss and be seen from jews want to color because part of their strategy and they said was you want to call the early for obama so they can secure their victory for their sycophantic president and then you want to get run over because that's why they decided they liked it even though they were against romney in two

thousand and eight right ok well done. the thing that i would add is that a lot of these news organizations totally messed up the supreme court decision on health care and they probably just want to their way up or down arms are going on there because they're not remember a lot of getting it wrong ok let's move on because this is pretty interesting it's not a secret that america is falling out of love with their cable companies even though many would say people in america are obsessed with their t.v. but in fact the number of people who are dropping their subscriptions are really affecting business. prior to twenty ten the pay t.v. industry never suffered a quarterly loss in subscribers but has repeatedly since then only three quarters of growth since two thousand and ten certainly a lot of people choosing not to subscribe to cable and using netflix instead are using the internet i've never seen a church really speaks to this to me as. a seismic home watchable. so they're talking about a seismic shift in people that are actually from going their cable boxes and for going to be and they're going online to get their streaming so as

a result time warner cable for example is driving attention to their high speed data and online streaming where more people are watching shows the company just reported and so that's where they saw some of this shifting but dimitri what's really interesting about this is used to work at cablevision where you never thought people were going to give up their t.v.'s right yeah that was actually interesting because i was part of a part of that over group brings you to your product to the it's important trying to show it was well it was small but we were focused on cable were looking towards the future and i want to think you know if you're able to be dead in a few you know five ten years whatever but i was surprised to see how resilient wasn't people really were fixated on their cable box when we do focus groups people are obsessed it's like a drugs on the one hand this is great because we're fighting addiction in the united states so who are breaking their addiction with t.v. it's a pacifier medication and it's also interesting that what's happening is that the budget side the the the the money side issue is what's driving people to cut the cord there's not so much that they don't want anymore they can't afford it it's the

economy isn't your it's forcing them to part with eventually they were going to cut their electricity bill although i know you don't want to certainly make them know that they could live without without electricity or gas and did i mention that we're on you tube and hulu both online video streaming to you we're on to it all right with that that's it for our show today thank you so much for watching be sure to come back tomorrow in the meantime you know you can follow me on twitter at lauren lyster you can like our facebook page you can watch any show you missed at youtube dot com slash capital account watch just in h.d. on hulu and for everyone here thank you so much for watching come back tomorrow and have a great night. down the. the official. language stream quality and enjoy your favorites. to watch only you need.

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