December 6: Daily Contrarian Reads

Countdown To December 14—-Now Comes “International Developments” And The Dollar Crisis

As of today the writing-on-the-wall is that the Federal Reserve will indeed raise interest rates on Dec. 14th. To paraphrase one Fed. official when asked to explain their reasoning earlier in the year, “Others are telling them to just “do it.” And in that reasoning lies the real problem. For if anyone (let alone the Vice Chair) thinks that in 2016 the Fed. has the control, firm footing, and economic tailwinds as to just “do it” because it needs to be done in today’s climate? Is naive at best – willfully ignorant at worst. The time to “do it” has long past. And this December may be a December to remember. We’ll all know soon enough, I’m afraid.

Global Bond Bubble Cracking—-UST 30-Year Down 15% Since June

The situation in government bonds – variously labeled with “bloodbath,” “rout,” “carnage” “meltdown,” or similar propitious terms – continued on Thursday. Already in November – so not counting the “carnage” today – the Bloomberg Barclays Global Aggregate Total Return Index lost 4% or $1.7 trillion, according to Bloomberg, “the deepest slump since the gauge’s inception in 1990.”

The Last Hurrah Of QE And The Financial Bloodbath Ahead

Importantly, the predominant consequence from the 2016 QE bonanza was to spur global bond Bubbles to precarious speculative “melt-up” dynamics. Yields around the world collapsed indiscriminately to record lows. Japanese 10-year yields sank to negative 30 bps. German bund yields dropped to negative 19 bps and Swiss yields to negative 63 bps. Having issued bonds going back to 1693, UK Gilt yields dropped to a record low 52 bps…….  There’s a major problem associated with destabilizing speculative “blow-offs:” They notoriously conclude with sharp reversals, catching everyone by surprise and unearthing all kinds of excesses and associated maladjustment. Coming in conjunction with mounting global anti-establishment fervor, political instability and President-elect Donald Trump, the current bond market reversal ensures uncertainty even more acute than normal: A historic bond market Bubble meets historic social, political and geopolitical uncertainty – not to mention uncharted territory with respect to global monetary policy and economic structure.

Carrier And The Slippery Slope

The reaction to Trump’s deal to keep 1,100 Carrier jobs in Indiana has ranged from outrage to adoration. There are so many layers to this Shakespearean drama that all points of views have some level of credence. I’m torn between the positive and negative aspects of this deal. If you’ve read Bastiat’s The Law and Hazlitt’s Economics in One Lesson, you understand the fallacies involved when government interferes in the free market. Politicians and their fanboys always concentrate on the seen aspects of government intervention, but purposely ignore the unseen consequences.

The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy

Barack Obama is one of the biggest “Keynesians” of all time, but unfortunately most Americans don’t even understand what that means.  In this article, I am going to share with you the primary reason why Barack Obama has been able to prop up the U.S. economy over the past eight years.  If Barack Obama had not taken the extreme measures that he did, we would be in the midst of a historic economic depression right now.  But by propping things up in the short-term, he has absolutely demolished our long-term economic future.  But like most politicians, Obama has been willing to sacrifice the future for short-term political gain.

Good Riddance—-Castro’s Gone and So Should the Cuba Embargo

President-elect Donald Trump is facing his first international challenge, the death of former Cuban dictator Fidel Castro. Unfortunately, Trump looks set to flunk the test. Anyone who believes in human liberty should welcome Castro’s passing. Whatever the alleged social progress of his communist regime—in fact, it left the Cuban people mired in poverty—cannot justify a half century of repression. There’s no excuse for imprisoning and executing political opponents, despite the hagiographic nonsense spouted by some of Castro’s admirers.

Another “Top” Sighting: Rents Rolling Over In Top 10 Red Hot Apartment Markets

Frothy rental prices across the nation are showing signs of cooling, recent real estate data show, with the white hot markets of New York City and Washington D.C. offering modest relief to sticker-shocked renters. In its recent survey of nationwide rent conditions, data from apartment rental site Zumper said that the most expensive markets in the nation saw either flat prices or outright declines—demonstrating evidence of a potential top.

On Attaining Self-Destruct Velocity

One popular rationale for deficit spending by economic policy makers is that the effects of the fiscal stimulus will allow the economy to achieve escape velocity.  Under such a scenario, the economy would, somehow, be able to grow its way out of debt; the percentage of debt to GDP would come down. However, over the last sixteen years, and even more so over the past eight, the grasp for escape velocity has come up empty handed.  Debt has mushroomed while GDP has stagnated.  Yet, regrettably, the effects of Trumpflation and Trumpnado will likely accelerate this trend. Thus, rather than attaining escape velocity, like the Amazon jumper, the economy would attain self-destruct velocity.  Prepare accordingly for the extreme pain and agony that are coming.

Good Job, Governor Moonbeam!  California’s Unfunded Pensions Hit $1 Trillion, $93,000 Per Household

Stanford University’s pension tracker database pegs the market value of California’s total pension debt at $1 trillion or $93,000 per California household in 2015….. The database also provides a comparison of all 50 states, which finds that California has the second highest pension debt in the nation at $92,748 in pension debt per household in 2015.  Alaska came in at #1 with $110,538 in pension debt. 

The Deep State’s Regulatory Branch: Far More Powerful Than Congress and $2 Trillion In Compliance Costs

Who creates federal laws? Civics books say it is Congress, but the real answer today may be the executive branch. Earlier this year, James Gattuso and Diane Katz reported that just the 229 major regulations issued since 2009 added over $100 billion in annual costs (according to the regulatory agencies), $22 billion coming in 2015. With estimates of the total regulatory costs now exceeding income tax burdens at over $2 trillion annually, regulations were far more burdensome for many Americans than legislation.