August 10: Daily Contrarian Reads

Further Signs Of: It’s All Falling Apart, Right On Schedule

However, this one, has gone on far longer than people much smarter than I even dared think. But again, no one ever contemplated (let alone believed) central banks would print money ex nihilo to be used to purchase stocks, corporate bonds, government debt, and more and not only get away with it, but be sanctioned and applauded for doing so. It’s been an adventure in sheer surreality, as well as sheer stupidity, all at the same time. But, as they say, the consequences for doing just that (i.e., QE and all its iterations) are appearing to show in an ever growing list of realities. That is, for those willing to look.

“Visions Of Cataclysms”: Why Eric Peters Is Starting A Long-Vol Fund

And yet, on Friday night, in a notable change to the low-vol regime, Interactive Brokers announced it would hike volatility product margins ahead of what it warned could be a 100% surge in the VIX, a move which will be promptly copied by most if not all trading platforms. Will this then become a self-fulfilling prophecy – should maringed out traders decide it makes more sense to close out vol shorts than to add more cash – it is too early to know, however, in a separate confirmation that the current low-vol regime may be ending, last week JPM’s quant strategy team reported that “following robust performance in 1H ‘17, PnL of short vol premia stagnated over the past month… We see further risk for short vol from both rate increase as well as CB balance sheet renormalization.

Red Ponzi Alert: China’s Minsky Moment Is Imminent

History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We layout the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world.

Neocons Leverage Trump Hysteria To Promote More Wars

A savvy Washington observer once told me that the political reality about the neoconservatives is that they alone couldn’t win you a single precinct in the United States. But both Republicans and Democrats still line up to gain neocon support or at least neocon acceptance……Part of the reason for this paradox is the degree of dominance that the neoconservatives have established in the national news media – as op-ed writers and TV commentators – and the neocon ties to the Israel Lobby that is famous for showering contributions on favored politicians and on the opponents of those not favored.

This Time It’s A Bubble In Rentals

I’ve written before about the high-rise crane craze in Seattle, but that’s nothing compared to New York and Dallas, that are adding 27,000 and 25,000 units, respectively. Chicago is adding 7,800 units despite a shrinking population and rents decreasing 19 percent…….Not surprisingly, Fannie Mae and Freddie Mac are financing this rental housing boom. I wrote recently, the GSEs made 53% of all apartment loans in 2016, down from their combined 68% market share in 2012. “So, their conservator, The Federal Housing Finance Agency (FHFA), recently eased the GSE’s lending caps so they can crank out even more loans.”

Rand Paul Slams Asset Forfeiture—–Turns Justice System Upside-down

Innocent until proven guilty” is the bedrock of American jurisprudence. Civil asset forfeiture, a legal process in which the government confiscates your property without a guilty verdict, turns that justice on its head. Take the case of the Motel Caswell in Tewksbury, Massachusetts. In 2009, owner Russ Caswell found himself the target of a civil forfeiture claim by the federal government and his local police department, even though he had never been accused – much less convicted – of a crime. It should also be noted that, historically, the motel had a good working relationship with the police, even providing them with free rooms for stakeouts and contacting them about suspicious activities. The government’s basis for seizing the property? Fifteen “drug-related incidents” over a 14-year period – out of around 196,000 rooms rented.

Canary on The Nippon—-The Impact of Aging Populations, Crushing Debts And Stagnating Growth

Based on the simple reflection that arithmetic is more than just an abstraction, we offer a modest observation.  The social safety nets of industrialized economies, including the United States, have frayed at the edges.  Soon the safety net’s fabric will snap.This recognition is not an opinion.  Rather, it’s a matter of basic arithmetic.  The economy cannot sustain the government obligations that have been piled up upon it over the last 70 years.

Teva’s Tumble Shows The Flip Side of Leverage

It’s easy to dismiss warnings of growing corporate leverage as an abstract concern of little near-term consequence. But on Thursday, Teva Pharmaceutical Industries Ltd. gave a real-life example of the pitfalls of using borrowed money to juice profits. If revenues don’t increase quickly enough, the downside is fast and furious. This is true years in the future, when borrowing costs go up, but it is true even now, in a low-yield world.

Trump: Do What Gorbachev Did—Get Out of Afghanistan!

Media reports claim President Donald Trump let loose on his generals behind closed doors, blasting them royally for their startling failures in Afghanistan, America’s longest war. The president has many faults and is a lousy judge of character.  But he was absolutely right to read the riot act to the military brass for daring to ask for a very large troop and budget increase for the stalemated Afghan War that has cost $1 trillion to date…… My solution to the 17-year war:  emulate the example of the courageous Soviet leader, Mikhail Gorbachev.  He pronounced his Afghan War unwinnable, told his angry generals to shut up, and ordered the Red Army out of the war in Afghanistan.

Washington’s Allies At Work: Saudi Arabia To Behead 14 For Participating In Anti-Government Protests

Saudi Arabia, the Gulf kingdom ruled by an absolute monarchy and key United States ally, is planning to behead 14 men for participating in anti-government protests after what Amnesty International called a “grossly unfair mass trial.” “By confirming these sentences Saudi Arabia’s authorities have displayed their ruthless commitment to the use of the death penalty as a weapon to crush dissent and neutralize political opponents,” Samah Hadid of Amnesty International said.