January 25: Daily Contrarian Reads

Soaring Lease Returns Set To Wreak Havoc With Used Car Pricing and Auto Industry Profits

For months we’ve warned that declining used car prices could spell disaster for subprime auto securitizations (see “Slumping Used Car Prices Spell Disaster For Subprime Auto Securitizations”).  While it’s always difficult to predict the exact timing of when bubbles will burst, a combination of record-high lease returns in 2017 and 2018, combined with rising interest rates could imply that the auto bubble is on the precipice. As Bloomberg recently pointed out, strong used car pricing is a critical component required to prop up the overall auto market.  While American’s love their brand new cars, if used car prices become too soft then substitution can hurt new car sales.  Add to that the impact of falling residual values on the finance arms of the auto OEMs and you have all the ingredients required for an auto market meltdown.

Victory! Donald Trump Kills The TPP

It is official. The United States has formally pulled out of the Trans-Pacific Partnership, otherwise known to everyone as the TPP.As one of his first acts of business, President Donald Trump signed an executive order to make an exit from the TPP….To the surprise of no one, most of the TPP has nothing to do with trade at all. In fact, just five of the 29 chapters are related to trade. The remaining chapters are about corporate control, global big government and regulation of the Internet. It’s essentially the magnum opus of global government and crony capitalism.

Thanks Fannie Mae—–Needy Blackstone Investors Get $1 Billion Taxpayer Guarantee

Invitation Homes, the 2012 buy-to-rent creature of private-equity firm Blackstone, and now owner of 48,431 single-family homes, thus the largest landlord of single-family homes in the US, accomplished another feat: it obtained government guarantees for $1 billion in rental-home mortgage backed securities….The government agency that has agreed to guarantee the “timely payment of principal and interest” of these “Guaranteed Certificates,” as they’re called, is Fannie Mae, one of the government-sponsored entities (GSE) that has been bailed out and taken over by the government during the Financial Crisis. This is the first time ever that a government-sponsored enterprise has guaranteed single-family rental-home mortgage-backed securities, issued by a huge corporate landlord. It’s an essential step forward in financializing rents: taxpayer backing for funding the biggest landlords.

Conservatives in La-La Land

One of the fascinating characteristics of conservatives is how they are able to live in an alternative universe within their own minds, one that can easily be called la-la land. A good example of this phenomenon is conservative icon Max Boot, one of America’s most ardent interventionists and promoters of the U.S. national-security state’s domestic and foreign military empire. Lamenting the possibility that President Trump is going to initiate a “radical reorientation of America’s foreign policy,” Boot makes a remarkable statement in an op-ed appearing in yesterday’s Los Angeles Times, one that perfectly demonstrates the la la land in which he lives: For more than 70 years, the United States has been the world’s leading champion of free trade, democracy, and international institutions, particularly in Europe and East Asia……Is he for real? Does he really believe that?

Hillary’s Favorite Fed Dove Sprouted A Hawkish Plume 3 Days Before Trump’s Inauguration

The changing of the political guard in Washington shouldn’t overshadow some radical developments happening across town at the Federal Reserve, where it’s as if the doves have donned hawks’ feathers and flown the coop. Consider Fed Governor Lael Brainard, who as recently as September was expected to dissent against a majority on the Federal Open Market Committee in the event they voted to raise interest rates. So, it’s difficult to conceive why four months later, in a January 17 speech at the Brookings Institution, she was open to not only boosting rates more rapidly, but in reversing the long-held doves’ policy stronghold of reinvesting the proceeds of maturing securities held by the Fed on its balance sheet into more bonds.

How Barrack Obama Was Taken Hostage By The War Party

Obama in fact proved to be an interventionist. Bacevich summarizes the record in this way ”I think the place to begin is to remember that Barack Obama made two promises. The first promise was to end the Iraq War, which he dismissed as ‘the stupid war,’ and the second promise was to win the Afghanistan War, which he described as ‘the necessary war.’ Lo and behold, here we are eight years later and he has been unable to deliver on either promise.”

The $90 Billion Debt Wave Threatening The US Property Boom

A $90 billion wave of maturing commercial mortgages, leftover debt from the 2007 lending boom, is laying bare the weak links in the U.S. real estate market. It’s getting harder for landlords who rely on borrowed cash to find new loans to pay off the old ones, leading to forecasts for higher delinquencies. Lenders have gotten choosier about which buildings they’ll fund, concerned about overheated prices for properties from hotels to shopping malls, and record values for office buildings in cities such as New York. Rising interest rates and regulatory constraints for banks also are increasing the odds that borrowers will come up short when it’s time to refinance.

Washington’s Syrian War-Mongers—–Thank Heavens Hillary Lost

A new coalition of US-based organizations is pushing for a more aggressive US intervention against the Assad regime. But both the war in Syria and politics in the United States have shifted dramatically against this objective. When it was formed last July, the coalition hoped that a Hillary Clinton administration would pick up its proposals for a more forward stance in support of the anti-Assad armed groups. But with Donald Trump in office instead, the supporters of a US war in Syria now have little or no chance of selling the idea.

Health Insurance For All—-A Truly Ridiculous Idea

We’re going to have insurance for everybody.” Donald Trump is not alone. The majority of politicians in Congress (of either party) and private citizens (of any political persuasion) believe that everyone should have health insurance. What they disagree on is who should pay for it, what it should cover, what deductible it should have, what limits it should have, and whether the government should require people to have it….But even the most ardent foes of the Obamacare would probably still say that everyone should have health insurance. But should they? Does everyone need health insurance? Some people do. Some people don’t. Should everyone want health insurance? Not necessarily: it is an individual decision that depends on a particular set of circumstances that an individual is in.

The Crisis In India—–A Saga Of Bad Money And Statist Dirigisme Run Amuck

Oppression, exploitation, extreme stress, and the resulting millions of untimely deaths every year possibly make the story of the post-independent India one of the biggest crimes against humanity. Alas, it is getting worse. As I explored in earlier updates, Indian institutions were designed to be run by the British. With them no longer at the helm, these institutions have mutated over the last 70 years to accommodate the underlying irrationality, tribalism, and superstitions of India. They have slowly but surely crumbled away, decaying and becoming degraded. Indian democracy today is simply mob rule, its educational system little but propaganda, and its citizens are mere cogs in the service of the State. Indian institutions, including the Supreme Court, are far from independent. They are yes-men to India’s prime minister, the demagogue Narendra Modi.