January 24: Daily Contrarian Reads

Donald Trump’s Inaugural Address—–One Of The Great Ones Of History

But Trump’s speech was different from any previous inaugural address. He spoke directly to his political base. He did not try to pull the country together in some kind of vague, pie-in-the-sky, common-ground political rhetoric. He threw down the gauntlet from the very beginning. Standing in front of the Capitol building, surrounded by former Presidents and politicians, he said that everything they had done in the past has been a way to extract power from the American people and to feather their own nests. This, of course, is exactly what they have done. Nobody had ever said this before in an inaugural address. He made it clear that this is a turning point. Again, always in the past inaugural addresses have called for unity. He did not call for unity in general. He called for unity on his terms, governed by his agenda. He called for the transfer of power from the halls of Washington back to the people. The rhetoric was confrontational to a degree that I would not have expected.

A World On The Edge Of A Precipice—–Why Trump Can’t Save It

“The new US Administration has taken over with the conviction that they will “make America great again.” I really hope they will succeed because a strong US would be good for the world. Sadly, the odds of achieving that admirable objective are totally stacked against them. At the end of the next 4 years there is a risk that this Administration will be more hated than any government since Carter and probably even more hated than Carter.

Trump-O-Mania In The Stock Market Is Based on An Illusion

Speculative markets have always been vulnerable to illusion. But seeing the folly in markets provides no clear advantage in forecasting outcomes, because changes in the force of the illusion are difficult to predict…..But these numbers are illusory. The US has a policy of overall inflation. The US Federal Reserve has set an inflation “objective” of 2% in terms of the personal consumption expenditure deflator. This means all prices should tend to go up by about 2% per year, or 22% per decade. The Dow is up only 19% in real (inflation-adjusted) terms since 2000. A 19% increase in 17 years is underwhelming, and the national home price index that Case and I created is still 16% below its 2006 peak in real terms. But hardly anyone focuses on these inflation-corrected numbers.

What Will Prick the “Leveraged Share Buyback” Craze?

According to the report, share buybacks have exceeded free cash flow after dividends (FCF) since 2014 among Fitch-rated companies, “with most companies using debt to cover the shortfall, underscoring a more aggressive stance across the sector.” The numbers are huge. This table lists the ten companies that bought back the most shares, blowing $138.8 billion over the last 12 months:

Advice To President Trump—-Break America’s Addiction to War And Debt

This week US B-2 heavy bombers attacked Libya.  US forces are fighting in Somalia, Yemen, Pakistan and parts of Africa.  For what? No one is quite sure.  America’s foreign wars, fueled by its $1 trillion military budget, have assumed a life of their own. Once a great power goes to war, its proponents insist, ‘we can’t be seen to back down or our credibility will suffer.’Trump will struggle to find a face-saving retreat from these unnecessary conflicts and shut his ears to the siren songs of the war party and deep state which just failed to stage a ‘soft’ coup to block his inauguration. Waging little wars against weak nations is a multi-billion dollar national industry in the US. America has become as addicted to war as it has to debt.

The Corporate Borrowing/ Buybacks Binge Continues—–But It Won’t End Well For Bondholders

This is basically taking money from debt buyers to pad the pockets of equity holders. It has no obvious benefit to the company’s long-term prospects; in fact, quite the opposite. As Fitch Ratings said in a report on Thursday, “leveraged share buybacks and other shareholder friendly actions are an ongoing risk to bondholders as borrowing costs remain historically low.”

How The NYT Hid The Numbers For The ‘Hottest Year on Record’

I just got done combing through a New York Times report titled, “Earth Sets a Temperature Record for the Third Straight Year.” The number of relevant numbers in this article is: zero. We are not told what the average global temperature was, how much higher this is than last year’s record or any previous records, or what the margin of error is supposed to be on those measurements. Instead, we get stuff like this….They should have been in the first paragraph, but at least they’re in the third paragraph: “This puts 2016 only nominally ahead of 2015 by just 0.01C—within the 0.1C margin of error—but….” There’s stuff after the “but,” but it’s just somebody’s evaluation. Even this report can’t give us a straight fact and leave it alone.

Trump Has No Magic Wand—–Why An Economic Boom Isn’t Possible

The problem, as usual, is that economists, analysts and politicians don’t understand the real causes of our economic malaise since 2007, including Trump. It’s not primarily business regulations, or higher taxes. Altogether, U.S. personal and business taxes combined are less than any major country in Europe, or Australia or Canada. The problems are…Slowing demographic trends (a factor even more prevalent in Europe and East Asia)….and unprecedented levels of debt and entitlements (here and everywhere else). And there’s nothing near term President Trump can do about either of those things!

Bomber Barry—-More Military Spending Than Any Other President

The reality is that Obama has increased U.S. military spending beyond the post-World War II record set by President George W. Bush. Now that Obama has signed the military budget for FY2017, the final record is that Obama has spent an average of $653.6 billion per year, outstripping Bush by an average of $18.7 billion per year (in 2016 dollars). In historical terms, after adjusting for inflation, Obama’s military spending has been 56 percent higher than Clinton’s, 16 percent higher than Reagan’s, and 42 percent more than the U.S. Cold War average, when it was justified by a military competition with a real peer competitor in the Soviet Union.  By contrast, Russia now spends one-tenth of what we are pouring into military forces, weapon-building and war.

Marine Le Pen: The EU is Dead But Doesn’t Know It Yet

The far-right National Front leader Marine Le Pen said on Sunday that France has to leave the European Union as she claimed that staying in the bloc is no longer a viable option for the country. Speaking in an interview with France’s BGNES, Le Pen said the EU is dead but it does not know this yet, stating that the bloc has failed in economically, socially as well as security-wise.