August 4: Daily Contrarian Reads

Here It Comes— K-Street And Congress Are About To Bailout ObamaCare

Democrats and even many Republicans want Mr. Trump to continue the subsidies in any case so they don’t have to take responsibility for the failing exchanges. Insurers also want the cash, and is there a worse lobby in Washington? Insurers worked to defeat the GOP’s health reform and now they want the same Senators to bail them out. Sometimes we fantasize about endorsing single-payer simply to put the insurers out of business…….Senate Minority Leader Chuck Schumer is demanding that Republicans help him bail out the insurers, and the GOP’s Lamar Alexander is ready and willing.

The Banking Crisis Is All Fixed—-Mega-Banks Blow 100% of Earnings on Share-Buybacks & Dividends

Nonsense! That’s in essence what FDIC Vice Chairman Thomas Hoenig told Senate Banking Committee Chairman Mike Crapo and the committee’s senior Democrat, Sherrod Brown, in a letter dated Tuesday, according to Reuters. The senators are trying to find a compromise on bank deregulation. If banks wanted to increase lending, they could easily do so without lower capital requirements, Hoenig pointed out. Rather than blowing their income on share-buybacks or paying it out in form of dividends, banks could retain more of their income, thus adding it to regulatory capital. Capital absorbs the losses from bad loans. Higher capital levels make a bank more resilient during the next crisis. If there isn’t enough capital, the bank collapses and gets bailed out. But banks that increase their capital levels through retained earnings are stronger and can lend more.

America Is on the Verge of a Thundering Debt Crisis

Another day, another record high for the Dow… now above the 22,000-point mark for the first time in history. And based on the CAPE ratio – a valuation measure that compares stock prices to the average of the past 10 years of inflation-adjusted earnings – the S&P 500 is more expensive than it was right before the 1929 crash. No volatility. No worries. If there is a train wreck coming, investors think they are all on the bus…..

Shades of 2008: UK and US Savings Rate Plunges, Debt Comes Full Circle

Albert Edwards at Societe Generale says January 2008 is here again! UK and US household debt excess comes full circle.

Is Another Lost Decade Ahead?

Deleveraging from our debt overhang will take decades. The impact of aging demographics across the developed world is only just beginning to slow both labor force growth and productivity, and this trend will only strengthen in the coming years. Likely, we have entered a period of secular stagnation heavily impacted by lingering debt overhangs, persistent demographic shifts in savings preferences, and increased efficiency of capital…these longer-run trends, which are powerful and long lasting, and will impact our economic outlook for many years to come.

How To Restore America’s Productivity Growth: Get Off The (i)Phone!

But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?…perhaps it can be summed up simply as “Put The Smart-Phone Down!

What Ponzi Scheme? Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption

We’ve frequently argued that public pension funds in the U.S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers…all while actual, if immediately intangible, underfunded liabilities continue to surge.  As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College.  As part of their study, Boston College reviewed 170 public pension plans in the U.S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%. Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.

Red Suzerains Getting Anxious:Fear of Japan-Style Economic Bust Drives Crackdown on Deals

President Xi Jinping’s top economic adviser commissioned a study earlier this year to see how China could avoid the fate of Japan’s epic bust in the 1990s and decades of stagnation that followed.

The Electric Car Mania—-Another State Fueled Fad

Electric Car Fever is now upon us. Laws are being passed – the Brits being the latest – mandating the production of electric cars by outlawing the production of cars powered by internal combustion. This will get old fast, too. King Canute could decree that the tide not come back – and politicians can decree that we’ll all be driving electric cars by “x” year, not too far from now. But wishing – and decreeing – can’t overcome reality. It can just make things really expensive and difficult for us.

The US Establishment Against The Rest Of The World

The US ruling class feels threatened by the international changes prompted by President Trump. It has just united in order to force him under the guardianship of Congress. In a law which was voted almost unanimously, it has re-introduced sanctions against North Korea, Iran and Russia, and has unraveled the investments of the European Union and those of China. For them, it is essential to block the President’s policy of cooperation and development and to return to the Wolfowitz doctrine of confrontation and suzerainty.