‘Trader Vic’: Global Liquidity Inflating Stocks

March 22, 2013

Veteran trader and outspoken author Vic Sperandeo says Fed fueling artificial growth and a good stock market, but not much else.

[This interview originally appeared on HardAssetsInvestor.com and is republished here with permission.]

Victor "Trader Vic" Sperandeo, a widely known commodities trader, author and head of Alpha Financial Technologies, has survived more than a dozen bull and bear markets since starting on Wall St. in 1968. HAI Editor Drew Voros caught up with Sperandeo to discuss current financial markets and why commodities are underperforming. For Sperandeo, it comes down to what he describes as socialism in our monetary policies and a concerted effort to mask what the real rate of inflation is in America. As an investor, he is more interested in capital preservation than trying to invest in what he sees as artificial growth and a stock market riding the back of the Fed’s monetary easing.

Hard Assets Investor: We’re seeing monetary easing spreading and increasing throughout the world. Why hasn’t it been more beneficial for commodities, or gold for that matter?

Vic Sperandeo (Trader Vic): Sometimes people make statements and they really don’t know what they're saying. In this case, I believe this is 100 percent accurate. The world is trending towards socialism. Governments are trending towards controlling the means of production, which is socialism, and taxing people to pay for the spending that governments want to spend.

You don’t have fiscal policy in sync with monetary policy, because monetary policy is as easy as it can get at this point in time. The world has never seen anything like this kind of printing. The reason that it’s good for stocks is that corporate America takes advantage of that. Their earnings come from cutting costs, not higher demand.

This liquidity is not having any meaning to Main Street because of higher taxes. We just had a tax increase. The White House has threatened more taxes. Demand is also slow because median incomes have dropped about 10 percent in the last five years. Part of that is people getting fired and part of that is inflation. So the real culprit to the middle class is inflation. But that’s never talked about. So the point is, consumers—although they will buy the basics and they will occasionally splurge—they are really not spending because they're worried.

And then is the other half of the problem: If you try to raise money, you have go to venture capitalists. You don’t go to banks because they don’t take risk. Commercial banks don’t take risks, in general. The VC says, “OK, give me a pro forma expense and revenue report.” How can anybody do that today, when we don’t know what Obamacare is going to cost, what regulations are coming? If I wanted to raise money today, I could not give you a pro forma expense statement of what employees would cost me, because I don’t know what Obamacare is eventually going to cost. It’s impossible to plan.

So you have Main Street making less and being taxed more, and you have a lack of business certainty about what their future is going to bring, which is hurting demand for commodities.


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