March 16: Daily Contrarian Reads

Where The Crisis Starts—-In The Massively Bloated $8.1 Trillion Corporate Bond Market

It may take you by surprise, but the U.S. corporate bond market has more than doubled in the space of eight years. Consider that at year end 2008, high yield and investment grade bonds plus leveraged loans equaled $3.5 trillion. Today we’re staring down the barrel of an $8.1 trillion market. The age-old question is, and remains:  Does size matter? …….. Consider that in 2011, a (then) record $741 billion was sold into the IG market. As an endless encore, in every single year that followed, issuance has shattered the prior 12-month record. Last year alone witnessed $1.28 trillion in issuance. As for all the rate hike anxiety permeating the airwaves, 2017 also appears to be in it to win it — $254 billion was sold in the first two months of the year, $20 billion more than the same period in 2016. Investors might soon have to call upon Archimedes’ concept of exponentiation to sufficiently capture how very large the numbers have become.

These 10 Classic Signs Show that the Stock Market is ‘Bubbly’

Gluskin Sheff’s David Rosenberg is concerned about a stock market bubble. In a note on Friday, Rosenberg shared 10 reasons to be cautious on the US stock market, which are also classic signposts of market tops……

America’s Age Of Folly—-From Vietnam to Regime Change In the Middle East

The United States has been growing progressively insane for a long time. For my generation, the realization descended upon us in the 1960s when the military/security complex convinced Americans that if we permitted Vietnamese nationalist leader Ho Chi Minh to unify Vietnam, the dominoes would fall until the Communist World Revolution had us in its grip. This despite the fact that Stalin had killed off the Trotskyist world revolutionaries and declared “Socialism in one country.”……America’s participation in the Vietnam War lasted for a decade or thereabouts. The extraordinary carnage and war crimes served no interest other than the power and profit of the military/security complex and the paranoia of the arbiters of US foreign policy. No lesson learned, we have spent the entirety of the 21st century to date repeating the mistake.

The Donald Is Playing With Fire—Permits CIA To Run Drone Wars Separate From Pentagon

President Donald Trump has given the Central Intelligence Agency secret new authority to conduct drone strikes against suspected terrorists, U.S. officials said, changing the Obama administration’s policy of limiting the spy agency’s paramilitary role and reopening a turf war between the agency and the Pentagon…..The Obama administration put the military in charge of pulling the trigger to promote transparency and accountability. The CIA, which operates under covert authorities, wasn’t required to disclose the number of suspected terrorists or civilian bystanders it killed in drone strikes. The Pentagon, however, must publicly report most airstrikes.

Bond “Carnage” hits Mortgage Rates, Aims at Housing Bubble 2.0

US government debt took another beating today. As prices fell, yields rose to new multi-year highs. The 10-year Treasury yield rose 5 points to 2.625%, the highest since September 2014, when it just briefly kissed that level. At this pace, the yield will soon double from the record low of 1.36% in July last year…..The 30-year Treasury Bond Price Index has plunged 14% since early October. Hence the “bond massacre”…… And mortgage rates have risen every trading day but one since February 27! Today, the 30-year fixed rate, according to Mortgage News Daily, “is easily up to 4.375% on top tier scenarios with a growing number of lenders moving up to 4.5%.” That’s the highest rate since April 2014. And it’s up over a full percentage point from the 3.34% low quoted last July.

Ryancare’s Fatal Logical Flaw

The Congressional Budget office today reported that 24 million people would lose health insurance coverage under the Ryancare bill. Mainstream Republicans were not pleased to hear that. But let’s look at this figure a bit more closely. When we do, it becomes apparent that the Republicans have created their own problem. They are trying to keep Obama’s definition of healthcare policies while repealing Obamacare. That is not only an exercise in illogic. It is an exercise in futility…..Eliminating the mandate to buy is important. But eliminating the mandate restricting what you can buy is at least as important.

Ron Paul on Why Trump’s Syria ‘Surge’ Will Fail

It does not appear that President Trump or his advisors have thought through what happens next if the US military takes possession of Raqqa, Syria. What is the endgame? Maybe the neocons told him it would be a “cakewalk” as they promised before the 2003 Iraq invasion. Part of the problem is that President Trump’s advisors believe the myth that the US “surge” in Iraq and Afghanistan was a great success and repeating it would being the victory that eluded Obama with his reliance of drones and proxy military forces. A big show of US military force on the ground – like the 100,000 sent to Afghanistan by Obama in 2009 – is what is needed in Syria, these experts argue. Rarely is it asked that if the surge worked so well why are Afghanistan and Iraq still a disaster?

Thomas Hoenig on How to Revive Glass-Steagall

U.S. financial firms should partition their investment banking activity, putting it into a separate “intermediate holding company” with its own board, management and capital, Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig said Monday. The companies could even have a special class of stock, he said. Hoenig’s plan, which would require new legislation, wouldn’t exactly recycle the Glass-Steagall Act, he told reporters after his speech at the Institute of International Bankers conference in Washington. But it could meet the Trump administration’s goal of enacting a modern take on the law that divided banking functions for more than six decades, he said. Glass-Steagall’s repeal in 1999 opened the door to the creation of modern megabanks.

The Oil Price Stumble And Other Signs of ‘Risk-Off ‘Returning

It suggests a fundamental re-evaluation of the oil position, meaning supply and demand factors. We know the supply side pretty well, leaving the “reflation” hope for the other part up in the air. And like 2014, it seems as if those who have piled into the long side do so with the mistaken impression that the economy locally or globally is about due for its long sought boost. The Federal Reserve, quite disingenuously, continues its quiet policy of not correcting this perception when it includes the “rate hikes” as a matter of assumed confirmation for that view.

History Note: Why The Neocons Are Wrong About WWI—-There Were No Good Guys

In The Atlantic in 2015 Frum offers this picture of the Herculean battle that has been periodically waged between the Wilson administration as the champions of democracy and our vile adversaries, including Imperial Germany: “Any aggressive illiberal power must fear the United States as the ultimate potential check on its aspirations. So it was with Germany in 1917. So it is with Iran today.” With an equivalent uninformed arrogance, Hanson tells us in a column (in 2012) that German governments caused “three German wars,” all since 1870. One might ask VDH whether the other side had anything to do with any of these conflicts. Another illustration of this pontificating about a subject the author know nothing about is Fred Siegel’s comments in Weekly Standard (in 2011), that the US should not have hesitated so long in declaring war on the “anti-democratic” Germans. This action came just as the bad guys were about to pounce on us. As far as I could tell, Siegel was referring to a contingency plan that the Germans like every other European power had put together for dealing with possible enemies in a hypothetical war; the plan that Siegel hyperventilates over had been ditched several years before the War began.