March 22: Daily Contrarian Reads

Shearing The  Retail Sheep Yet Again—-This Entire Rally  has Been Institutions Selling To Homegamers

Finally, here is the breakdown of institutional, HF and retail client flow prior to US election through present. What it clearly shows is that the whole rally has been one “great rotation” from selling institutional investors to buying “animal spirited” retail traders. And when institutions sell enough, the bottom from the market is pulled, retail panics to sell as the S&P tumbled, institutions reload, and the whole cycle repeats.

How OPEC Lost The War Against Shale, In One Chart

Today, in a note released by Goldman titled “OPEC: To cut or not to cut, that is the question”, the firm presents a chart which shows just as graphically how exactly OPEC lost the war against US shale: in one word: the cost curve has massively flattened and extended as a result of “shale productivity” driving oil breakeven in the US from $80 to $50-$55, in the process sweeping Saudi Arabia away from the post of global oil price setter to merely inventory manager.

It’s The Supply Side, Stupid! Why The Great Keynesian Experiment In Monetary Stimulus Failed

The problem is primarily global economic potential, on that point even the interventionists have finally agreed. The Great “Recession” in other words was never actually a recession, it was instead a giant and permanent rupture in global economic function. Orthodox economists have no idea why even if they now recognize it for that condition. This is the so-called “supply side” where “stimulus” is exclusively intended for aggregate demand; if the supply side is so impaired then it is no wonder demand side stimulus failed to stimulate.

$3 Trillion of Corporate Debt Coming Out Of Hiding—- Operating Leases to be Added To Corporate Balance Sheets in 2019

From a practical perspective, operating leases are pretty much the same as debt.  They reflect a contractual obligation on the part of one counterparty to make defined stream of cash payments to another over a set period and with an implied interest rate embedded in the payment stream.  In fact, within a bankruptcy context operating leases are treated exactly the same as debt and rank pari passu with the other general unsecured obligations of a business.  That said, accounting rules treat operating leases differently than debt and do not require them to be included as a liability on a company’s balance sheet.  That is, until 2019. As Bloomberg points out this morning, starting in 2019 new accounting rules, called IFRS 16, will force companies to include operating lease commitments as part of their reported debt obligations.  And while the end result will have far-reaching implications, the biggest will be the addition of roughly $3 trillion in debt to corporate balance sheets.

Stealing from the Citizenry: How Government Goons Use Civil Asset Forfeiture to Rob Us Blind

In jolly old England, Robin Hood stole from the rich to give to the poor. In modern-day America, greedy government goons steal from the innocent to give to the corrupt under court- and legislature-sanctioned schemes called civil asset forfeiture. In fact, according to The Washington Post, “law enforcement took more stuff from people than burglars did.” This is how the American police state continues to get rich: by stealing from the citizenry.

The Twisted Logic Of Washington’s Russia-Gate Hysteria

As Rep. Adam Schiff tries out for the lead role in a remake of the Joe McCarthy hearings by maligning specific Americans as suspected Russian moles, some of the actual evidence argues against the Democratic notion that the Russians own President Trump and other key Republicans……Deep inside its article on Flynn’s Russia-connected payments, the Post wrote, “RT balked at paying Flynn’s original asking price. ‘Sorry it took us longer to get back to you but the problem is that the speaking fee is a bit too high and exceeds our budget at the moment,’ Alina Mikhaleva, RT’s head of marketing, wrote a Flynn associate about a month before the event.” So, if you accept the Democrats’ narrative that Russian President Vladimir Putin is engaged in an all-out splurge to induce influential Americans to betray their country, how do you explain that his supposed flunkies at RT are quibbling with Flynn over a relatively modest speaking fee…..Wouldn’t you think that Putin would have told RT’s marketing department that the sky was the limit in paying off Flynn because the ever-prescient Russian president knew from his Ouija board in 2015 that Flynn would be the future national security adviser under President Trump?

“This Is Going To Blow Sky High” – Observations On Canada’s Housing Market

I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there!  I was blown away.  Bubbles are largely psychological.  This crowd was tangible proof of that.  15k people in one spot listening to Americans explain why real estate in Toronto is an exceptional investment.  The whole experience was horrifying.  The crowd was very well-dressed, middle- to upper-middle class (from appearances), and super excited to hear how much money could be made if you just buy real estate (most of them clearly already owned).

Trump’s Skinny Budget—-Wasting Waste Cuts On More Waste

President Trump’s proposed budget takes a big step towards draining the swamp in Washington. This is the first time since the Reagan era that a president has sought a wholesale demolition of boondoggles. On the other hand, Trump’s defense and homeland security spending increases will squander bounties that should be reserved for taxpayers, not bureaucrats and bombs.

The CIA’s 60-Year History of Fake News and Corruption Of American Writers

……..And of course one of the ways that they keep people in line, as you say, was through the money. So in terms of the official magazines that the CIA created and presided over, the British spy who overthrew Mosaddegh, he would have been, in June of 1953—his name was Christopher Montague Woodhouse—he would have been working on the CIA magazine for London, Encounter. He would have empowered the two editors, one American, one Brit, Stephen Spender on the British side, Irving Kristol on the American side, both working out of London; one paid through secrecy of the British state, one paid indirectly through the CIA. The spy overseeing this, Woodhouse, he would have then turned in the late summer towards overthrowing the democratically elected leader of Iran, Mohammad Mosaddegh. And then later, he’s also feeling so good about this system of, what essentially you have are coups as covert ops and then long-term soft-power propaganda, also on the covert ops side of the CIA and British secret services. So he feels so good about this that he’s later on a contributor to Encounter. So magazines like Encounter, they were created in Paris, they were created in Italy, they were created all over Europe; and then they spread to the Nordic countries, they spread to the Third World.

Trouble In The Singapore Pink Sheets—–Rising Dollar and Tepid Economies Spell Trouble For EM Junk Bonds

So much debt had been created out there in the world up until the “rising dollar” as if going back to the EM “miracles” of the mid-2000’s was at least possible. Even if the developed world might labor under some unexplained “new normal”, surely the EM world would continue on with high growth and “rebalancing” predicated on the assumed wealth attained during those pre-crisis years. At the time it was categorized as “reach for yield”, but that doesn’t begin to describe the imbalance of financial factors. So much of the world’s credit remains tied to an economic paradigm that no longer exists, and for which only in the past few years have “investors” begun to catch on.