April 5: Daily Contrarian Reads

Last Two Times After Our Dear Government Reported Data Like This, Stocks Crashed

In terms of GDP, the fourth quarter was revised up slightly, but there were adjustments for prior quarters, and overall GDP growth for the year 2016 remained at a miserably low 1.6%. We’ve come to call this the “stall speed.” It’s difficult for the US economy to stay aloft at this slow speed. As Q4 gutted any hopes for a strong finish, GDP growth in 2016 matched the worst year since the Great Recession. And corporate profits, despite a stock market that has been surging for years, are even worse. A lot worse. They’ve declined for years. In fact, they declined for years during the prior two stock market bubbles, the dotcom bubble and the pre-Financial-Crisis bubble. Both ended in crashes.

Stockman Issues Urgent Warning: Trump is Doomed

David Stockman, Reagan’s former budget director, has issued an urgent warning. There’s a HUGE event this month that could send shockwaves through the Trump administration. This is a much BIGGER story than anything you might hear in the mainstream media. If he’s right, there’s a bloodbath coming in just a few days.

On The Anniversary of Wilson’s Folly: Are We Headed for a Replay of World War I?

Today [Sunday] marks the one-hundredth anniversary of Woodrow Wilson’s message to Congress asking for a declaration of war against the Central Powers. Thus the Great War began – a conflict that destroyed European civilization and set the stage for the rise of Bolshevism, Nazism, and the death of millions in World War II. Wilson was the embodiment of the dominant ideological theme of the twentieth century: State-worship. In both the foreign and domestic realms, the great “progressive” President represented the twin aspects of statist ideology: war and the centralization of political authority………..Despite considerable opposition from both parties, the Trump administration has already made the first moves to defuse rising tensions with Russia and forestall a 1914-like conflict. Trump has instructed the US military to focus on defeating ISIS rather than overthrowing Syrian strongman Bashar al-Assad, reversing US policy under the Obama administration: both Secretary of State Rex Tillerson and UN Ambassador Nikki Haley have made public statements affirming this new stance. Assad, backed by Russia, has been in Washington’s crosshairs since George W. Bush’s presidency: here is yet another flashpoint where conflict with Russia has been avoided.

The Trump Tower Hackers Unmasked—It Was Obama White House National Security Advisor, Susan Rice

Once again it appears that Trump was right: the conspiracy theory that a close Obama associate worked to “unmask” the Trump team, resulting in the ongoing media spectacle over “collusion” between Trump and the Kremlin, has been confirmed, first by Mike Cernovich, and now by Bloomberg itself.As noted last night, Journalist and author Mike Cernovich dropped an exclusive bombshell – naming Obama’s National Security Advisor Susan Rice as the official responsible for the ‘unmasking’ of the incoming Trump team during ‘incidental’ surveillance. This was apparently discovered after the White House Counsel’s office reviewed Rice’s document log requests…..


The answer is that ‘hole’ we referred to above has arrived but it is a much worse chasm because of the industry financing options that have been foisted on the unsuspecting, tapped out US buyers since the “cash-for-clunkers” slight of hand. The industry has created a minimally two year hole in the market that will flood used and new auto supply inventories while buyers are effectively locked out!……….Auto Leasing has exploded since 2015 and now approaches 35% of all sales. The Lease terms are normally 2-3 years with questionable residuals being used to achieve low lease rates on highly priced units. We have now entered the period where those initially leased units are being returned – in massive. Meanwhile, those Buying versus Leasing have been financing over much longer terms. Ford detailed this with the following charts for their units sold.

Red Ponzi Fracturing: China’s Q1 Defaults The Highest Ever

China’s deleveraging push has racked up the most defaults on corporate bonds ever for a first quarter, and the identity of the debtors is pretty revealing. Seven companies have defaulted on a total of nine bonds onshore so far in 2017, versus 29 for all of last year, according to data compiled by Bloomberg. In a sign of the struggles facing China’s old economic model, most of them depend on heavy industry and construction. While it’s still far from a crisis point, the defaults shows how policy makers’ efforts to reduce the liquidity that had propelled the bond market until late last year is exacting casualties.

Why The Market Is Floundering

After a stellar quarter for US equities, stocks have unexpectedly slumped on the first day of Q2 despite “whispers” of pent upmutual fund reallocation into risk assets that would take place today. So why are stocks lower,  besides “more sellers than buyers” and “money going back to the sidelines” of course? For a comprehensive assessment of what is going on below the surface, here is RBC’s Charlie McElligott (who as a reminder warned on Friday about the Double Whammy in the April Effect) looking today’s rates reversal, the shift to “anti-beta” leadership and the “momentum factor” reversal, all of which explain the bad start to the second quarter.

What Can Stop The American Empire? The Coming Economic Collapse

Despite the widespread hope among libertarians, classical liberals, non-interventionists, progressive peaceniks, and all those opposed to the US Empire that it may have some of its murderous reins pulled in with the election of Donald Trump, it appears that such optimism has now been dashed.  While the hope for a less meddlesome US foreign policy is not completely extinguished and would never have existed had the Wicked Witch of Chappaqua been elected, a number of President Trump’s foreign policy actions, so far, have been little different than his recent predecessors. President Trump’s biggest blunder was his acquiesce to the Deep State’s coup of General Michael Flynn, the most Russian friendly among Trump’s foreign policy entourage.  Since Flynn’s abrupt departure, there has been little talk of a rapprochement with Russia, but instead there has been continued saber rattling by the war mongers that Trump has, unfortunately, chosen to surround himself with.

The Blithering Idiocy Of Keynesian Central Bankers—The “Natural Rate of Interest” is Academic Tommyrot

The blatant nonsense inherent in the above article is apparent in one second flat, just by looking at the chart. The natural interest rates can never be negative. Here’s why: A negative rate implies things like one would rather have 90 cents tomorrow than a dollar today. That’s illogical. Rather than accept negative rates, one could simply sit on money. Don’t confuse negative natural rates with storage charges for safe keeping. Storage charges are a service fee, not a natural interest rate. Also, the idea the Fed or anyone else can divine the natural rate is in and of itself preposterous. The free market could, not a collective bunch of self-appointed economic wizards. Finally, these self-appointed wizards not only think they can determine the natural rate, they arrogantly believe they know when to override that rate.

Trump’s Emerging foreign Policy—–An Unstable Brew of Contradictions and Chaos

President Trump’s emerging foreign policy is one of contradictions and chaos, caught up in a combination of old establishment orthodoxies and some fresh recognition of reality but without any strong strategic thinker capable of separating one from the other and leading the administration in a thoughtful direction…..But Team Trump also is hobbled by its inability to break free from many of the groupthinks that have dominated Official Washington for the past quarter century…. This enduring neocon/liberal-hawk strength – reflected in what all the “important people” know to be true – has left senior Trump officials still pandering to the Saudis and the Israelis; repeating the neocon mantra that “Iran is the principal source of terrorism” (though that is clearly not true given the support for Al Qaeda and other Sunni terror groups coming from U.S. “allies” such as Saudi Arabia and Qatar); and falling into line with the NATO’s hype of Russia as the new global villain.

What Happens When Stocks, Home Prices and Even Used Cars Drop by 50%

Have you ever thought about what comes after the bubble?  Since the last financial crisis, the U.S. national debt has nearly doubled, corporate debt has doubled, stock valuations have reached exceedingly ridiculous extremes, the student loan debt bubble has surpassed a trillion dollars, we are facing the largest unfunded pension crisis in U.S. history, and in many parts of the country (particularly the west coast) we are facing a housing bubble that is even worse than the one that burst in 2007 and 2008. And even with all of these bubbles, U.S. GDP growth has been absolutely anemic.  Even if you believe the grossly manipulated numbers that the federal government puts out, the U.S. economy grew at a “miserably low” rate of just 1.6 percent in 2016…