December 14: Daily Contrarian Reads

The Fed’s $90 Trillion US Net Worth Estimate For Q3 2016 Isn’t All That

Obviously, if consumers don’t respond in spending or “aggregate demand” due to asset prices (at least in the positive; we know very well the asymmetry of net worth that is outright contracting, as in 2008-09), it is yet one more piece of statistical evidence that shows the denominator in the unemployment rate as the part of that ratio determining the economic course. In other words, it is income not wealth; and all theory aside, more wealth does not lead to more spending that creates a trickle down of income growth. Perhaps under different circumstances that could be the case, but it is abundantly clear that in the past two decades there isn’t a good or even arguable correlation.

Red Ponzi Alert: China Stocks Sink Most in Six Months as Property Concerns Build

Chinese stocks slumped the most in six months on worsening concern about the outlook for the property market and as curbs on insurers’ equity investments spurred selling. The Shanghai Composite Index fell 2.5 percent to 3,152.97 at the close, its biggest loss since June 13. A measure of property companies tumbled 3.5 percent after China Vanke Co.’s president predicted home sales will drop “significantly” in the coming year. Gree Electric Appliances Inc. sank 6.1 percent. Foresea Life Insurance Co. said it won’t increase its holdings in Gree and will gradually sell the shares, while the insurance regulator suspended Evergrande Life’s entrusted stock investment.

US Budget Deficit Doubles As November Spending Hits All Time Monthly High

While it is unclear if the recent increase in government spending and the resulting increase in the budget deficit, has been a factor in the recent string of better than expected US economic data, at 2pm on Monday the US Treasury announced that in November, the government’s budget deficit rose to $136.7 billion, nearly double the $64.5 bilion deficit reported in the same month of 2015, which however was largely a function of a calendar quirk.

Can Trump End The Reign Of Bubble Finance—–Lessons From The Financialization Of GE

Also on Mr. Trump’s new advisory board – which is supposed to help the president-elect bring jobs back to America – is former General Electric CEO Jack Welch. Welch could provide an equally rich illustration of the “financialization” trend. He took a Main Street manufacturing and engineering firm – one of the most admired in the world – and turned it into a bubble-finance company. After 600 acquisitions, GE was heavily in debt and deeply in the finance business. GE Capital – the company’s financial services unit and the tail that now wags this dog – has 35,000 employees and capital of half a trillion dollars. GE shares sold for $60 at the beginning of this century. Now, after the biggest wash of free money the stock market has ever seen, shareholders have been soaked; the stock is worth only half what it was in 2000.

The Dow Is The Most Overbought In Over 20 Years—4th Most Overbought In 100 Years

The Dow Jones Industrial Average has only been more overbought than it is today four times in the last one hundred years….Having risen for 21 of the last 25 days, The Dow is the most overbought since 1996:

Stop the CIA Coup—The Deep State Comes After President-Elect Trump

The CIA is up to its old tricks: overthrowing a democratically elected government. Only this time it’s our government. As they are now legally allowed to do ever since the law against covert CIA propaganda in the United States was repealed, the Agency has leaked to the Washington Post reports – via anonymous third parties – of its alleged assessment of a Russian campaign to hand Donald Trump the White House…..The reaction of the Trump transition team was swift and cutting: “These are the same people that said Saddam Hussein had weapons of mass destruction. The election ended a long time ago in one of the biggest Electoral College victories in history. It’s now time to move on and ‘Make America Great Again.’”

War on ‘Fake News’ Is Part of a War on Free Speech

Those calling for bans on “fake news” are not just trying to censor easily-disproved Internet hoaxes. They are working to create a government-sanctioned “gatekeeper” (to use Hillary Clinton’s infamous phrase) with the power to censor any news or opinion displeasing to the political establishment. None of those wringing their hands over fake news have expressed any concern over the fake news stories that helped lead to the Iraq War. Those fake news stories led to the destabilizing of the Middle East, the rise of ISIS, and the deaths of millions.

How One Bad Deal Is Destroying The World’s Oldest Bank

It was there, at the Four Seasons Hotel des Bergues, that three of Europe’s top bankers gathered to plot a hostile bid to buy and break up Dutch bank ABN Amro in what became the biggest bank takeover, worth €71 billion (then $101 billion). The deal will go down as one of humankind’s worst business transactions. It led to government rescues of what was then the biggest bank in the world, Royal Bank of Scotland, and the biggest bank in Belgium, Fortis, as well as taking out Dutch bank SNS Reaal. Now its legacy threatens the oldest bank in the world.

London Prices Falling Down—–More Bubble Fractures

London home prices are having their worst December in six years, led by weakness in prime areas in the capital that is likely persist into 2017. Rightmove said on Monday that asking prices fell 4.3 percent from November to 616,160 pounds ($775,500), with inner London dropping 6 percent. The property website operator said the bubble in prime London “continues to deflate,” and it sees prices there declining 5 percent next year.

Why A Global Trade War Is Baked Into The Cake

I have been warning about the increasing likelihood of a serious global trade war for quite some time. That warning is now my baseline scenario. Unless there is an immediate de-escalation of rhetoric and a return to rational thinking, a very destructive global trade war is baked in the cake.