July 7: Daily Contrarian Reads

The Great Fed Portfolio Shrink Is Coming Soon

Federal Reserve officials in June readied plans to start slowly shrinking the central bank’s large portfolio of bonds and other assets in the next few months, and the debate since then over when to launch the plan has increasingly pointed to September. Several officials said the Fed had sufficiently prepared markets to initiate the run-off “within a couple of months,” according to the minutes of the central bank’s June meeting released on Wednesday. Some others said waiting longer could them give more time to figure out why inflation has slowed and that moving sooner might wrongly signal they were moving more aggressively to raise interest rates.

Tesla’s Heading For A Competitive Shock From Volvo, BMW, Ford, et. al.

Volvo, the auto maker that spent 90 years polishing a reputation for safety, indicated Wednesday it is mounting an ambitious challenge to Tesla Inc.’s electric cars. But the even tougher news for Tesla’s billionaire founder, Elon Musk, is that the Scandinavian company isn’t the only deep-pocketed rival planning to compete with the Silicon Valley pioneer. Nearly all global vehicle makers are mounting their own electric-car push, powered by ever-cheaper prices for batteries, stricter emissions rules and lucrative government incentives for customers.

Brick-and-Mortar Meltdown in June: Who Got Crushed?

Today, premium-denim designer and retailer True Religion Apparel with 1,900 employees filed for Chapter 11 bankruptcy. Its celebrities-endorsed products are sold in its 140 True Religion and Last Stitch retail stores and in struggling brick-and-mortar department stores, including at Bloomingdale, Nordstrom, and Saks Fifth Avenue…….As so many times in retail bankruptcies, there’s a private-equity angle. Private-equity firm TowerBrook Capital Partners had acquired True Religion for about $835 million in 2013. It took just four years of stripping out assets and piling on debt to reach this magic point.

How The Democrats’ Russia-gate Obsession Threatens War

Some leading Democrats in Congress are eager to turn the summit meeting between Donald Trump and Vladimir Putin away from avenues for improvements in U.S.-Russian relations, even if that means deflecting it toward World War III…..Meanwhile, Senate Democratic leader Chuck Schumer criticized the lack of a “specific agenda” for the Trump-Putin discussion and tweeted “the first few things that come to my mind” — with 10 items denouncing Russia and not a single step to help avert a nuclear war between that country and the United States.

Get Able-Bodied Americans off the Couch

America doesn’t have a worker shortage; it has a work shortage. The unemployment rate is at a 15-year low, but only 55% of Americans adults 18 to 64 have full-time jobs. Nearly 95 million people have removed themselves entirely from the job market. According to demographer Nicholas Eberstadt, the labor-force participation rate for men 25 to 54 is lower now than it was at the end of the Great Depression. The welfare state is largely to blame. More than a fifth of American men of prime working age are on Medicaid. According to the Census Bureau, nearly three-fifths of nonworking men receive federal disability benefits.

Is The Second Shale Boom Grinding To A Halt?

There are some early signs that the shale boom is once again coming to a halt, beaten back by another bear market. The oil rig count declined by 2 last week, the first decline in six months. It is too early to tell whether or not this is a trend – it is one data point, after all – but if the surging rig count starts to flatten out or even decline a bit, it would provide a huge lift to the oil market.It would also suggest that U.S. shale can’t continue to grow at such a rapid clip with oil prices below $45 per barrel. Shale is often likened as the new “swing producer,” that is, a source of supply that ramps up and down on short notice in order to balance the market. Reasonable people can debate that moniker, but if forthcoming data in the next few weeks shows that shale is slowing down, it would appear that prices in the mid-$40s are the threshold around which shale turns on and off.

Bubble Finance Alert:  Fed Grows Worried Its Loose Policy’s Fueling Financial Instability

The Federal Reserve’s most recent interest rate hike came amid worries that keeping policy loose was posing increasing risks to financial stability and the economy. Fed officials indicated a determination to continue raising rates even with muted inflation levels, which they considered to be temporary and likely to rise over the long run to a targeted level of 2 percent, according to a summary from the June meeting of the policymaking Federal Open Market Committee.

Red Ponzi Update: How China’s Debt Binge Threatens Australia

The aftermath of China’s enormous corporate debt bubble could well be one of them. For some years now China’s economic growth has been underpinned by an explosion in corporate lending. China has accounted for half – yes half – of all new credit created globally since 2005 according to the New York Federal Reserve. That’s a huge share for an economy that now only accounts for about 15 per cent of the global economy. Alarm bells rang last August when the International Monetary Fund pointed out the trajectory of credit growth in China was eerily similar to countries that experienced painful post-debt boom adjustments in the recent past. This includes Japan in the 1980s, Thailand prior to Asian Financial Crisis and Spain prior to the European debt crisis.

Imperial Foreign Policy—Advise, Assist, Arm

Now, just below the radar, the US military is engaged in an ever-increasing number of “advise-and-assist” missions, supplemented by major arms deals and CIA-run drone strikes, that commit the US to long-term intervention in Africa and the Middle East. And Donald Trump, unlike Barack Obama, is happy to cede operational control – to “let the war fighters fight the war,” as Stephen Bannon told CNN.

Mind The Financial Rot Hiding Inside German Banks

With the Italian banking system in the spotlight, analysts have highlighted that Germany’s lenders are still not out of the woods, saying shipping loans and too many bank branches are some of the very real problems they are currently facing. German officials repeatedly tell EU members from the south of Europe to restructure their banking systems but industry experts believe they have a problem of their own as federal elections approach. “Germany is overbanked, too many banks, very little consolidation has taken place,” Carsten Brzeski, chief economist at ING Germany, told CNBC via email on Wednesday.