August 8: Daily Contrarian Reads

Let This Be Your Final Warning: When Stock Overvaluations Get This Extreme, A Crash Always Follows

Watch out for your exposure to U.S. stocks. That’s the message of history, even if it isn’t the message of Wall Street analysts and strategists. As stock prices soar to new heights, the S&P 500 Index has now reached levels of overvaluation only ever seen during the dot-com bubble and in 1929 — an eye-watering 31 on the measure known as the “Shiller PE” ratio. But even if we fudge the numbers and exclude the depressed earnings from the global financial crisis a decade ago, we still get a reading of 25.5. That’s still way up there, and in almost 150 years, every time stocks have gotten anywhere close, they’ve come crashing down again.

The Black List Is Back—-Mainstream Media Anti-Russian Hysteria Deep Sixes Expose Of Browder/Magnitsky Fraud

Why is the U.S. mainstream media so frightened of a documentary that debunks the beloved story of how “lawyer” Sergei Magnitsky uncovered massive Russian government corruption and died as a result? If the documentary is as flawed as its critics claim, why won’t they let it be shown to the American public, then lay out its supposed errors, and use it as a case study of how such fakery works?Instead we – in the land of the free, home of the brave – are protected from seeing this documentary produced by filmmaker Andrei Nekrasov who was known as a fierce critic of Russian President Vladimir Putin but who in this instance found the West’s widely accepted Magnitsky storyline to be a fraud.

Central Banks Are To Be Blamed For Impending Disaster

Notoriously bearish strategist Albert Edwards believes the UK is sitting on a ‘massive credit bubble that is primed to burst’ as another recession looms. The Société Générale global strategist said the recent sharp decline in household saving ratios (SR) in the UK and the US was last seen in 2007 just before the global financial crisis. This week, the US saw a substantial downward revision to its SR, with 1.5% lopped off the estimates taking the ratio to 3.8%, a level which Edwards claimed was last seen prior to the recession.

In Epic Letter, Elliott’s Singer Rages Against Everything From Passive Investing To “Safe Spaces”

After reading Elliott’s 2Q 2017 investing letter, it seems that Paul Singer shares our views on this particular topic having described passive investing as a “blob which is destructive to the growth-creating and consensus-building prospects of free-market capitalism” and one which is “in danger of devouring capitalism.”

How The Neocons Have Hijacked Trump’s Russia Policy

The platform committee rejected a plank to pull us deeper into Ukraine, by successfully opposing new U.S. arms transfers to Kiev.Improved relations with Russia were what candidate Trump had promised, and what Americans would vote for in November.Yet, this week, The Wall Street Journal reports: “The U.S. Pentagon and State Department have devised plans to supply Ukraine with antitank missiles and other weaponry and are seeking White House approval … as Kiev battles Russia-backed separatists … Defense Secretary Mattis has endorsed the plan.”

They’re Back—–CLO Debt-On-Debt

The last financial crisis cleared out an alphabet soup of complex credit products. One type, however, has returned in droves in recent years, although popularity is now threatening their viability. This product is collateralized loan obligations, or CLOs, which buy portfolios of risky, leveraged loans often used by private-equity firms in buyouts. In the U.S., new CLO volumes have outstripped pre-crisis totals since 2014, while Europe is catching up to its previous levels fast. But returns from the loans they buy are getting squeezed as money from retail and institutional investors rushes in alongside CLOs to snap up loans. That could bring CLOs to a painful halt again.

The Coming Debt Ceiling Battle: Three Nightmare Scenarios

This easily got lost amid all of last week’s other Washington-related craziness: Treasury Secretary Steve Mnuchin told Senate Minority Leader Chuck Schumer (D-NY) that Democrats should provide the votes the Trump administration will need to pass the increase in the federal debt ceiling required by the end of September. Say what? Mnuchin’s strategy, if you can call it that, is incredibly…and almost comically…politically naive. Congressional Democrats were thoroughly vilified by Republicans during the Obama administration whenever they voted to increase the debt ceiling and those votes were used as examples of fiscal profligacy by their GOP election opponents. There’s simply no way Schumer is not going to take advantage of the opportunity to do the same to Republicans this time around.

Teva Gets Toasted—–What’s Behind the Pharma Share Meltdown

The three primary drug wholesalers in the US account for $400 billion of pharmaceutical sales per year. Drugs – the legal variety – are a disproportionate part of the US economy. According to the Commerce Department, drugs account for about 12% of total US wholesales……..In 2015, unexpected competition began to set in where wholesalers try to gain market share among independently owned pharmacies by cutting their pricing on generics. And in order to be able to cut prices, wholesalers are pushing drugmakers for better deals.

Where The Jobs Were: Waiters And Bartenders Topped The List

already showed that contrary to the strong headline payrolls print, the sole source of job gains in July was part-time jobs, which rose by 393K in the month, the biggest monthly increase since September 2016, as full-time jobs sunk by 54K. Which is why it should not surprise that of the 209K jobs added according to the Establishment survey, the sector that added the most jobs was the “food services and drinking places“, i.e. “waiters and barenders” category, which added 53,000 jobs, the highest monthly increase since March 2014. There have now been 89 consecutive months without a decline for waiter and bartender jobs, the strongest sector for US employment. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week.

Inside The July Jobs Report—-2014 Redux

Though these are historically low levels for payroll increases, they are about equal to 2006 and the peak of that unusually weak, housing bubble-assisted “growth” period. The Establishment Survey grew also by 1.5% that year, following 1.9% growth in 2005 (equal to the 1.9% rate in 2015). Not only that, the unemployment rate had ended 2005 at 4.9%, and declined throughout the next year equally to 4.4% by that December (the unemployment rate ended 2015 at 5%, and is now also 4.4%).