June 27: Daily Contrarian Reads

Next Global Crash could arrive ‘with a Vengeance’

A new financial crisis is brewing in the emerging economies and it could hit “with a vengeance”, an influential group of central bankers has warned. Emerging markets such as China are showing the same signs that their economies are overheating as the US and the UK demonstrated before the financial crisis of 2007-08, according to the annual report of the Bank for International Settlements (BIS). Claudio Borio, the head of the BIS monetary and economic department, said a new recession could come “with a vengeance” and “the end may come to resemble more closely a financial boom gone wrong”.

Terrorists In White Turbans—-The UAE’s Torture Camp In Yemen

At least 18 prisons have been documented in southern Yemen, most of which are run by the United Arab Emirates – a member of the Saudi-led coalition in Yemen and one of the U.S.’ “key allies” in its Middle Eastern counter-terrorism operations. Within these prisons, more than 2,000 Yemeni men are said to have disappeared – those who have survived have recounted nightmarish torture tactics within the black site facilities. In one detention complex in the city of Mukalla, inmates have been packed into shipping containers covered in human feces and blindfolded for weeks at a time. Others at the same facility reported being sexually assaulted, while others were sent to the “grill” – where detainees are tied to a spit and spun over a circle of fire.

“It’ll Be An Avalanche”: Hedge Fund CIO Sets The Day When The Next Crash Begins

While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to “go to cash”, none have dared to commit the cardinal sin of actually predicting when the next crash will take place. On Sunday a prominent hedge fund manager, One River Asset Management’s CIO Eric Peters broke with that tradition and dared to “pin a tail on the donkey” of when the next market crash – one which he agrees with us will be driven by a collapse in the global credit impulse – will take place. His prediction: Valentine’s Day 2018.

Monetary Central Planning Run Amuck—-Japan’s Bond Market Has Ground to A Halt

The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work. As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero.

Who Tried to Kill Putin 5 Times

Putin is routinely described by Western journalists as someone who wants to restore the old Soviet system, or at least restore the empire that extended over the countries of the Warsaw Pact, but what isn’t recognized is that he opposed the failed coup that sought a Soviet restoration: he resigned from his KGB office when the coup plotters briefly took over. And so Stone asks him, “But in your mind, did you still believe in communism? Did you believe in the system?” Putin answers: “No, certainly not. But at the beginning I believed it … and I wanted to implement it.” So when did he change? “You know, regrettably, my views are not changed when I’m exposed to new ideas, but only when I’m exposed to new circumstances.” Here is Putin the pragmatist, the man of action, who wants results and not theories: “The political system was stagnating,” he says, “it was frozen, it was not capable of any development.” Just like East Germany, which he had recently come from. And therefore he concluded that “the monopoly of one political force, of one party, is pernicious to the country.”

The Technicolor Swan

When I think of the Democratic Party these days, the image instantly comes to mind of little Linda Blair playing the demon-possessed child in the classic horror movie, The Exorcist (1973), most particularly the scene in which she spews a stream of pea soup-like projectile vomit into the face of kindly old Max von Sydow, as Father Merrin, the priest come to rescue her.

Bailouts Are Back: Italian Taxpayers To Foot €17 Billion Bill As Rome Bails Out Another Two Insolvent Banks

Late on Sunday, Italy passed a decree that will effectively sell the good part of the two banks to Intesa, Italy’s second-largest and best-capitalized bank. Intesa said last week that it would be willing to buy the best assets for a token price of €1 as long as the government assumed responsibility for liquidating the banks’ large portfolio of sour loans. As a result, Italy said it would commit as much as €17 billion in taxpayer funds to clean up the two failed “Veneto” banks in one of Italy’s wealthiest regions and support the takeover of their good assets by Intesa Sanpaolo SpA for a token amount. After an emergency cabinet meeting on Sunday, Finance Minister Pier Carlo Padoan said the Italian government will provide Milan-based Intesa with about €5.2 billion euros to allow it to take on Banca Popolare di Vicenza SpA and Veneto Banca SpA assets without hurting capital ratios, The European Commission, in a separate statement, said it approved the plan for the two banks and that it is in-line with state-aid rules.

Uber’s ‘Theranos Moment’

There comes that moment where the veiled threats against logic such as the go-to excuse of “it’s different this time” are exposed against the harsh light of reality for all to see with such clarity, “it’s different this time” is precisely the apt statement to show why it was all fallacy to begin with. Uber™ has just had that moment, and the resulting fallout as I’ve iterated before: Will. Be. Legend. To think, let alone, believe that the current implosion (and yes, I mean implosion) will be isolated within Uber is as much of a fantasy as was believing: “it’s different this time.” Why? Because: It is precisely that.

The $1.5 Trillion Tax Change Flying Under The Radar

Republicans looking to rewrite the U.S. tax code are taking aim at one of the foundations of modern finance—the deduction that companies get for interest they pay on debt. That deduction affects everyone from titans of Wall Street who load up on junk bonds to pay for multibillion-dollar corporate takeovers to wheat farmers in the Midwest looking to make ends meet before harvest. Yet a House Republican proposal to eliminate the deduction has gotten relatively little sustained public attention or lobbying pressure. Thanks in part to the deduction, the U.S. financial system is heavily oriented toward debt, which because of the tax code is often cheaper than equity financing—such as sales of stock. It also is widely accessible. In 2015, U.S. businesses paid in all $1.3 trillion in gross interest, according to Commerce Department data….

Trump Cedes Power To Generals And Deep State Apparatchiks Because They Rule Anyway

For many years, the intelligence community has operated in this way. According to Michael J. Glennon, a law professor at Tufts University and a former legal counsel for the Senate Foreign Relations Committee, a group of several hundred unelected bureaucrats dominate national security policy. During Glennon’s time as counsel, national security officials drafted legislation, endorsed or opposed measures at hearings and markups and lobbied to codify their positions into law. Created by President Truman, the apparatus that includes the CIA, NSA, NSC, and the Joint Chiefs has displaced Congress and the president’s authority in matters of national security, while also becoming less politically accountable, given all the secrecy that shrouds most of their actions.