July 26: Daily Contrarian Reads

No More “Cash On The Sidelines”: Private Client Cash Levels Drop To Record Low

One can finally put all references to “cash on the sidelines” in the trash can, not only for purely logistical reasons (when someone buys a stock, the seller ends up with the cash), but also from a purely cash allocation basis. According to the latest BofA flow show report, Michael Hartnett writes that as of the latest week, private client cash – i.e., high net worth individuals, or those who still allocate capital to single-stocks and ETFs on a discretionary basis (unlike the broader US public which has long ago given up on the stock market), is now at a record low, taking out the cash levels observed in the period just prior to the last market peak in 2007: “GWIM cash allocation % AUM falls to all-time low of 10.4%.”

Even Schwab Is Warning Retail Clients Of “Danger Signs Rising”

You know it’s bad when even the traditional ‘pumpers’ are getting anxious. While obviously counched in its own “well maybe that’s not totally terrible” spin, reading the following from Charles Schwab suggests Liz Ann Sonders, Brad Sorensen, and Jeffrey Kleintop were all struggling to defend any bullish position and perhaps more desperate to CYA in case reality doesn’t match their hard-sold perception…

Intel Veterans Challenge ‘Russia Hack’ Evidence

Forensic studies of “Russian hacking” into Democratic National Committee computers last year reveal that on July 5, 2016, data was leaked (not hacked) by a person with physical access to DNC computers, and then doctored to incriminate Russia.Key among the findings of the independent forensic investigations is the conclusion that the DNC data was copied onto a storage device at a speed that far exceeds an Internet capability for a remote hack. Of equal importance, the forensics show that the copying and doctoring were performed on the East coast of the U.S. Thus far, mainstream media have ignored the findings of these independent studies……..

Now Comes The Deleveraging—-How Big?

One of the primary problems, not only in the U.S., but globally, is that government spending has shifted away from productive investments that create jobs (infrastructure and development) to primarily social welfare and debt service which has a negative rate of return. According to the Center On Budget & Policy Priorities, nearly 75% of every tax dollar goes to non-productive spending. 

Will Plunging Store Rents Slow the Retail Doom-and-Gloom?

In the 16 prime retail corridors in Manhattan, ground-floor vacancies surged from a year ago to 203 vacant stores, according to The Wall Street Journal, citing Cushman and Wakefield. Fifth Avenue between 42nd and 49th streets topped the list with a vacancy rate of 33%. On Fifth Avenue between 49th and 60th streets, where asking rent is $3,116 a square foot, the vacancy rate rose to 14.5%. A smallish 1,000-square-foot shop would have to pay $3.1 million a year in rent. That’s one heck of a big nut to have to jump over, with only 1,000 square feet of space.

Trump’s Foreign Policy Mishmash

President Trump’s foreign policy has been an incredible mishmash of contradictions, perhaps partly a result of unsuccessful tactical concessions to keep his political enemies forever guessing his real intentions. But the underlying reality is that many of his personnel choices have created an organizational chart that would fit the agenda of a neoconservative president……Trump has appointed a great many advisers and administrators at odds with his America First vision, people such as National Security Advisor H.R. McMaster; Fiona Hill of the National Security Council staff; Ambassador to the United Nations Nikki Haley; and Secretary of Defense James “Mad Dog” Mattis. None of them share Trump’s overall vision of having the United States step back from day-to-day running of the world and engaging in never-ending wars, refocusing the nation on rebuilding its infrastructure and job creation.

Dodge Construction Index Shows Weakening Trend in Mature Market

Construction starts rose four percent in June according to the Dodge Index of New Construction. For the second quarter, construction starts are down substantially. The overall trend is also down, indicative of a mature market.

The Value of Everything—–It’s 1789 France Redux

We are looking more and more like France on the eve of its revolution in 1789. Our classes are distributed differently, but the inequity is just as sharp. America’s “aristocracy,” once based strictly on bank accounts, acts increasingly hereditary as the vapid offspring and relations of “stars” (in politics, showbiz, business, and the arts) assert their prerogatives to fame, power, and riches — think the voters didn’t grok the sinister import of Hillary’s “it’s my turn” message?

The Unending Failure of the Afghan War

Sixteen years have passed and we are still fighting a war in Afghanistan which is not only the longest in American history (at a cost approaching $1 trillion and the blood of thousands of brave soldiers), but one which is morally corrupting from which there seems to be no exit with any gratification but shame. was necessary to invade Afghanistan to destroy Al Qaeda following 9/11, but once it was defeated we should have departed, leaving behind some residual forces to clean up the mess. Instead, we decided to introduce democracy, a totally alien concept to a land historically governed by tribes, and which no foreign power has ever been able to govern or fully conquer for long.

Spectre Of China’s Dollar Debt Could Haunt the Fed

China’s dollar bonds are now almost a third of the emerging market total dollar issuance, up from a quarter in September 2015 and less than 5 percent before the Fed first began printing money in December 2008. A fifth of China’s dollar bonds mature within a year, according to BIS data. More than half are due in the next five, Thomson Reuters data show. If U.S. borrowing costs start rising as a result of the Fed’s exit from its unconventional monetary policy, that debt would have to be rolled over at higher costs, chipping away at the real economy in China.