July 27: Daily Contrarian Reads

The Congress’ Horrid Sanction Bill—An Ode to Hypocrisy, Groupthink, Smugness and Cronyism

The Republican-controlled Congress couldn’t get it together on healthcare, infrastructure, immigration, or much of anything else, but, hey, they got together with the Democrats on a Russia sanctions bill: the “Russia, Iran, and North Korea Sanctions Act.” If you read the text, the proportion of moral preening, rheotorical rodomontade, and blustering bloviation is unusually high, even for a bill with Lindsey Graham’s and John McCain’s imprint all over it. That it also manages to violate the terms of the Iran deal is an extra added bonus.

A ‘big fall’ in Markets is coming as Traders put Record Cash to Work

In global markets, all signs of sentiment are pointing up. And it’s that very unbridled enthusiasm that could spell their downfall…… First, private client cash levels have dropped to a record low as a percentage of total assets, according to data compiled by Bank of America Merrill Lynch…….Institutional investors are also holding the lowest levels of cash since the start of the eight-year bull market, survey data compiled by Citigroup show. The measure now sits at less than one-third of a multi-year high reached in 2016.

Draghi Lied—-“Whatever It Takes” Did Not Do the Job

Once that became clear(er), the ECB in 2014 went insane. Not in a Weimar Germany sort of way that many people think about for QE and LSAP’s (large-scale asset purchases), but they leapt beyond all sense of prior propriety. As of the latest figures, under the three big current programs since that time, the ECB has purchased €1,961,374,000,000 in assets (€1.64 trillion under PSPP, or QE; €224 billion CBPP3, the covered bonds; €100 billion corporate bonds). It certainly seems as if we should be worried about hyperinflation, but even Mario Draghi can’t find where all that effort ended up. At the ECB’s latest policy meeting, he admitted what should have been obvious last year, and the year before. The media, by and large, allowed itself to be fooled by oil prices into thinking the nearly €2 trillion in so-called stimulus was just delayed.

The Great Moderation Which Wasn’t

……..Lahart goes on to add that job growth and corporate profits also seem stunned into submission. And then he goes for the jugular: “In the years since the financial crisis, the Federal Reserve and other central banks have acted like overprotective parents of a toddler, rushing in whenever the economy looks as if it might stumble. That risk-averse behavior has extended to businesses, making them unwilling to take chances.”The WSJ goes on to report that at no time in at least 30 years has not one of the three major stock indexes in the U.S., Asia and Europe avoided a five percent decline in a calendar year…until what we’ve seen thus far in 2017, that is. Is it any wonder the ranks of those who would profit from stocks declining have fallen to a four-year low? Why bother in such a perfect world?

There Are More Zombie Companies In Europe Now Than In Pre-Lehman Times

While these purchases have enabled companies to continue to operate and invest, aiding a recovery in the European economy, the bank’s purchases have been credited for keeping ailing companies alive, hence the name “zombies.” The ECB started purchasing corporate bonds in June 2016 as part of its “corporate sector purchase program” (CSPP) and, as of June 7, 2017, its CSPP holdings stood at 92 billion euros, the bank said. In a note examining “The rise of the Zombies” BofA Merrill Lynch’s credit strategists Martin, Ionnis Angelakis and Souhair Asba noted that 9 percent of non-financial companies in Europe (by market cap of Stoxx 600) are zombies, with “very weak interest coverage metrics.”

How The Dems Became The Perpetual War Party

The transformation of the Democratic Party into the perpetual war party – accelerated by the Russia-gate hysteria – is personified by Rep. Barbara Lee who voted against the “war on terror” resolution in 2001, as Norman Solomon explains…….

In the Footsteps of Rome: Is Renewal Possible?

Is renewal / recovery from systemic decline possible? The history of the Roman Empire is a potentially insightful place to start looking for answers. As long-time readers know, I’ve been studying both the Western and Eastern (Byzantine) Roman Empires over the past few years. Both Western and Eastern Roman Empires faced existential crises that very nearly dissolved the empires hundreds of years before their terminal declines. The Western Roman Empire, beset by the overlapping crises of invasion, civil war, plague and economic upheaval, nearly collapsed in the third century C.E. (Christian Era, what was previously A.D.) — 235 to 284 C.E., fully two hundred years before its final dissolution in the fifth century (circa 476 C.E.)

Yes, There is Volatility—-Post Earnings Moves At Record Levels

If you want to make money in the stock market, you’d better nail earnings season. Or else. The reason is simple: Quarterly results are exerting unprecedented influence over stock returns and, by extension, portfolio performance. In recent quarters, reporting companies have seen their shares move four times the normal daily average, the most in the past 18 years, according to data compiled by Goldman Sachs. That’s the type of volatility for which traders have been starved in a market that’s been sapped of the price swings that normally create moneymaking opportunities.

Bond Bubble Brews as Central Banks retreat from QE

Bob Michele, a bond fund veteran, is more worried than he has ever been. The head of global fixed income at JPMorgan Asset Management, the US fund house, has spent almost four decades investing in bonds. The 57-year-old, who oversees a $432bn pot of fixed-income assets, is gearing up for the most demanding period of his career.“The next 18 months are going to be incredibly challenging. I am not an equity investor, but I can just imagine how equity investors felt in 1999, during the dotcom bubble,” he says, referring to the bubble that emerged in technology stocks in the late 1990s and burst spectacularly at the turn of the century. The Nasdaq Composite, the index, lost 78 per cent of its value in the 18 months after the tech bubble collapsed.

Trump, on New Aircraft Carrier, Urges More Corporate Welfare

“Call that congressman and call that senator, and make sure you get it,” Trump said Saturday at the commissioning of the Gerald R. Ford, the Navy’s newest aircraft carrier. “We must end the defense sequester once and for all.”……The president has said he wants to expand the Navy’s fleet to 350 from the 276 deployed today. He committed to ending the defense sequester, a hard cap on spending, shortly after taking office.