April 10: Daily Contrarian Reads

Trump Betrays Trumpism—Actually Blows It To Smithereens

President Donald Trump has launched an attack on a Syrian air base in retaliation for the alleged sarin gas attack supposedly carried out by Bashar al-Assad’s government on Islamist rebels in Idlib. The irony is this contradicts every statement he ever made about Syria in the presidential campaign. Furthermore, this attack takes place barely 72 hours after the alleged incident, with no clear evidence that Assad was responsible. In ordering this strike – more than 50 missiles launched by US ships in the Mediterranean Sea – Trump has blown up a basic tenet of Trumpism to smithereens.

Q1 GDP Growth Spirals Toward Zero—-Per Atlanta Fed

The Atlanta Fed’s GDPNow model, which forecasts GDP growth in the US, dropped to 0.6% seasonally adjusted annualized GDP growth for the first quarter…..The forecast dropped by half from April 4, when it was still 1.2%. I added the red arrow to the chart to show just how fast and how far it fell in the past seven weeks, from 2.5% to 0.6%.

Bombs Away!

Close your eyes, click your heels three times, and tell me if you actually know what the fuck is happening in Syria. There’s an awful lot about the poison gas attack that doesn’t add up for the casual observer. It was only a week ago that the US enunciated a new policy that we would be content for Bashar al Assad to remain in power presiding over the Syrian government — after years of grousing and threats against him. Apparently Trump Central had concluded that Assad was a better alternative than another failed state in the Middle East with no government.

When Even The Fed Sees Bubbles—-What Happens Next

Of course, business media was quick to assert this is nothing to worry about, however, as CNBC’s Mike Santoli reports, traders shouldn’t be so quick to dismiss these comments from Fed officials. History shows when worries about valuation appear in these official minutes, stocks often struggle in the following year.

Not a Dot-Com Bubble, Not 2007, but a Nasty Mix of Both

When the market value of loss-making Tesla Inc. passed that of Ford Motor Co. this week, it was a perfect illustration of investors’ love affair with disruptive technologies. Investors seem to have forgotten another valuation comparison they should think about more often: In October 2008, the market value of Mattel Inc., maker of Matchbox toy cars, passed heavily indebted Ford.

The Biggest Stock Bubble In U.S. History

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

Rush To Judgment—-Some Obvious Questions About The Gas Attack In Idlib

A chemical attack on  Khan Sheikhoun doesn’t seem to fit into that scenario. Not only does it serve no obvious military objective, but it’s precisely the kind of atrocity that American hawks will latch onto and use as an excuse to continue and escalate the US military intervention in Syria at Assad’s expense. Cui bono (“who benefits?”) doesn’t always point to the true answer to a question, but in this case it’s reasonable to ask. The Khan Sheikhoun attack may very well have been carried out by the rebels themselves, in an attempt to keep the US further in the war, on their side. Another plausible explanation is that Syrian regime aircraft bombed a rebel facility where the chemical weapons were manufactured or stored, accidentally releasing them. It’s happened before. It’s how a number of American troops, possibly including me, were exposed to sarin during Operation Desert Storm in 1991.

The Real Surveillance Problem

But in fact, the real story—and scandal—of intelligence surveillance and incidental collection is not a fairly routine request by the national-security adviser (checked by procedures and rules), but rather the mass incidental collection and use of Americans’ communications without a warrant. Under Section 702 of the Foreign Intelligence Surveillance Act (FISA), countless Americans are subject to the same incidental collection that President Trump now thinks is a serious problem, and the rules for accessing and using those communications are far more lax than the Susan Rice process, and totally unrelated to foreign intelligence and national security.  This law is set to expire at the end of 2017, giving civil libertarians on both sides of the aisle to enact reasonable reforms just as they did in banning PATRIOT Act bulk collection in 2015.

What Could Possibly Go Wrong!

This time is different. Stocks will always go up. And pigs can fly. Given that pigs are highly intelligent, don’t bet against them. That said, investors might want to take at least the first two statements with a grain of salt.

5 Alarming Facts About America’s $1.3 Trillion in Student Loan Debt

The president of the New York Federal Reserve Bank sounded the alarm on Monday that the student debt crisis continues to mount. At a staggering $1.3 trillion, outstanding student loan debt is casting a financial pall on millions of Americans, according to a new study by the bank.