March 23: Daily Contrarian Reads

Honeymoon Over—Market Now Fear Trump Stimulus Won’t Happen

For the first time since the election, markets are doubting they will get the pro-growth policies of tax reform and stimulus promised by President Donald Trump and the Republican Congress. The repeal of Obamacare appears to have hit some snags and the GOP brought out Trump earlier Tuesday to serve as pitchman to House Republicans who may have been wavering ahead of Thursday’s vote. Whether he won votes or not is unclear, but markets certainly took the lack of clear majority support as a negative.”I think it’s certainly interesting the market is questioning it, based on the limited amount of votes the Republicans can afford to lose in the House. It suggests if you thought this party would be voting as a block on the key agenda items, that might not be the case,” said Mark Cabana, head of U.S. short rate strategy at Bank of America Merrill Lynch. “It might be a lot more fractured party than many might have anticipated.”

Russophobia At The New York Times—-All The News That Fits Under A Tinfoil Hat

On Saturday, the Times devoted most of its op-ed page to the Times’ favorite conspiracy theory, that Trump is Vladimir Putin’s “Manchurian candidate” though evidence continues to be lacking. The op-ed package combined a “What to Ask About Russian Hacking” article by Louise Mensch, a former Conservative member of the British Parliament who now works for Rupert Murdoch’s News Corporation, and a connect-the-dots graphic that when filled out shows the Kremlin sitting atop the White House. But the featured article actually revealed how flimsy and wacky the Times’ conspiracy theory is.

All The Curves Not Fit to Print—-By The Fed!

the mainstream is confused about exactly what rate hikes mean, then they are not alone. We know very well what they are supposed to, but the theoretical standards and assumptions of orthodox understanding haven’t worked out too well and for a very long time now. The benchmark 10-year US Treasury is today yielding less than it did when the FOMC announced their second rate hike in December. Thus, despite two rate hikes in between, the 10-year is largely nowhere. This is not the only place where we can observe such lack of direct action. More importantly, eurodollar futures have accomplished much the same price history. That is far more of a problem for the orthodox framing because eurodollar futures are supposed to be a direct reflection of those rate hikes, or at least the effects of them on money rates in the future. Though there may not be a one-to-one relationship, should there not at least be some relationship?

Is this the Sound of the Bottom Falling Out of the Auto Industry?

Let’s hope that the problems piling up in the used vehicle market — and their impact on new vehicle sales, automakers, $1.1 trillion in auto loans, and auto lenders — is just a blip, something caused by what has been getting blamed by just about everyone now: the delayed tax refunds. In its March report, the National Association of Auto Dealers (NADA) reported an anomaly: dropping used vehicle prices in February, which occurred only for the second time in the past 20 years. It was a big one: Its Used Car Guide’s seasonally adjusted used vehicle price index plunged 3.8% from January, “by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble.” The index has now dropped eight months in a row and hit the lowest level since September 2010. The index is down 8% year over year, and down 13% from its peak in 2014.

Meet Rep. Adam Schiff—- Grifter, Racketeer, Warmonger

The House Intelligence Committee’s reenactment of the McCarthy hearings dramatized Marx’s famous aphorism that history repeats itself, “the first time as tragedy, the second as farce.” The only thing this circus was lacking was ringmaster Rep. Adam Schiff (D-California”) rising to declares that “I have in my hands a list!” War was on the minds and lips of the Democrats. Rep. Denny Heck (D-Washington) compared Hillary Clinton’s loss to the 9/11 attacks, because the killing of over 2,000 people on American soil is just like the publication of emails that exposed the corruption at the heart of Democratic party politics. Oh, and “the attack didn’t end on Election Day” – because isn’t that a Russian hiding under your bed?

Turning Point For Stocks? Tuesday Was The Worst Day For The Stock Market In 6 Months

The post-election stock market rally is officially over.  After hovering near record highs for the past couple of weeks, U.S. stocks had their worst day in six months on Tuesday.  For quite some time it has been clear that the momentum of the post-election rally had been exhausted, and a pullback of this nature was widely anticipated.  But even though stocks fell by more than 1 percent during a single trading session for the first time since last September, it is going to take a whole lot more than that to bring stock prices back into balance.  In fact, stocks are so overvalued at this point that it would take a total decline of about 40 to 50 percent before key stock valuation measures return to their long-term averages.

The American Dream: An Endangered Ethos

That helps explain one part of the chart below which was generously shared with me by one Dr. Gates. Longtime readers of these missives will recognize the nom de plume of my inside-industry economic sleuth. His first take on this sad visual, was that, “The heart of the American Dream has stopped beating.” Did that stop your heart as it did my own?

New President—-Same Echo Chamber of Bad Fiscal and Monetary Policy

Given the altar at which current day politicians’ worship – that of power, influence, and self-promotion – it seems unlikely that this new Congress and President are inclined to make the difficult choices that might ultimately set the U.S. economy back on a path of healthy, self-sustaining growth.  Rather, debt and deficits will grow, and the enthusiasm around overly-optimistic economic forecasts and temporal improvements in economic output will fade as has been the case in so many years past.  Although a new political regime is in store and it brings hope for a new path forward, the echo chamber reinforcing bad policy, fiscal and monetary, seems likely to persist.

Surging Five Star Movement In Italy Means  Big Trouble For The Euro

Italy’s anti-establishment and anti-euro party Five Star Movement (5SM) represent the greatest threat to euro area stability, analysts told CNBC on Tuesday, as the populist party surged ahead of its political rivals in the latest opinion poll, putting it on course to be the biggest party if elections were called…. Grillo, who has campaigned for Italy to hold a referendum on the single currency if elected, has overseen 5SM’s support grow to 32.3 percent, according to an Ipsos poll published in daily newspaper Correa della Sera on Tuesday. “If Five Star Movement could secure 30 or 40 percent of the vote then of course that would be extremely worrying for the euro area’s stability. Whether they can gain an absolute majority… we’ll have to wait and see.”

America’s Hopelessly Dysfunctional Democracy

Democracy in America has become a hollow shell. The conventional markers of democracy–elections and elected representatives–exist, but they are mere facades; the mechanisms of setting the course of the nation are corrupt, and the power lies outside the public’s reach.