March 27: Daily Contrarian Reads

The Swamp Drains Trump

The Washington political scene is looking less like The Apprentice and more and more like the old Marlon Perkins Wild Kingdom show, with giant crocodiles slithering down the muddy banks to encircle Donald Trump paddling fecklessly in his leaky dugout while a chorus of angry birds shrieks in the surrounding treetops. Yes, it really looks that bad all of a sudden for Ole Number 45, the Golden Golem. RussiaGate is flaring to a toxic shock level event. Everything that spun out of Monday’s House Intelligence Committee hearing made all parties look bad. The spooks are everywhere and nowhere. The spooks are leaking to the press. The president is tweeting instead of governing. The two parties are literally at war in congress, and the news media is playing it all like a Stockhausen cantata for kazoo and trashcan lid.

Rush to Judgment: Evidence That Russians Hacked DNC Is Collapsing

The allegation – now accepted as incontrovertible fact by the “mainstream” media – that the Russian intelligence services hacked the Democratic National Committee (and John Podesta’s emails) in an effort to help Donald Trump get elected recently suffered a blow from which it may not recover. Crowdstrike is the cybersecurity company hired by the DNC to determine who hacked their accounts: it took them a single day to determine the identity of the culprits – it was, they said, two groups of hackers which they named “Fancy Bear” and “Cozy Bear,” affiliated respectively with the GRU, which is Russian military intelligence, and the FSB, the Russian security service. How did they know this?……Yet as Jeffrey Carr and other cyberwarfare experts have pointed out, this methodology is fatally flawed. “It’s important to know that the process of attributing an attack by a cybersecurity company has nothing to do with the scientific method,” writes Carr.

The Retail Apocalypse has Officially Descended on America—3,500 Stores To Close In Next Few Months

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months. Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess.

Subprime Auto Loans Crushed Worse than in 2009

Subprime auto loans, a big force behind booming car sales in recent years, are getting crushed by defaults, particularly those originated between 2013 and 2015 when the proportion of subprime loans began to surge while underwriting standards became loosey-goosey, as private-equity-backed auto finance companies with a ravenous appetite for risk, subprime, and securitization elbowed into the market, amid the exuberance of the greatest credit bubble in history. “Bad deals are made in good times,” says the old banking saw.

Q4 Earnings—-A Bad Season Not Matter How You Slice It

With nearly all of the S&P 500 companies having reported their Q4 numbers, we can safely claim that it was a very bad earnings season…..As late as October, analysts were projecting $29 in earnings for the S&P 500 in Q4 2016. As of the middle of the earnings reports last month, that estimate suddenly dropped to just $26.37. In the month since that time, with the almost all of the rest having now reported, the current figure is just $24.15 – a decline of over $2 in four weeks. Therefore, 29% growth is hugely disappointing because it wasn’t 55% growth as was projected when the quarter began.

After AHCA Debacle—-Debt Ceiling Struggle Comes Next

The annual wrangling around the debt limit was set to disappear, pundits thought, since Republican control of both the executive and legislative branch would effectively make any showdown over such a silly exercise an own goal…..But the difficulty Republicans have had mustering support for the American Health Care Act shows intraparty disputes are as significant now as they were under Democratic President Barack Obama. Regardless of whether the bill passes, the difficulty shows that internal party discipline is minimal. Quietly when everyone’s focus was on the health bill, Sen. Rob Portman dropped a bill that would force a dollar-for-dollar reduction in spending — over 10 years — for every dollar that the debt limit was raised.

Housing Bubble 2.0 Update

Here and now, houses have never cost more to the end-user, mortgage-needing, shelter-buyer due to historical prices and the rate surge.  Based on decades of data in this note, a reversion to the mean is inevitable, soon……and increased cost of debt service, sky-high auto and revolving debt, out-of-control healthcare expense, retail spend deceleration, and variety of other headwinds blowing stiff this spring and summer…

Durable Goods Sideways—The Nine Year Slog Continues

Though conditions this year are improved as compared to this time last year, none of the economic accounts so far including durable goods register anything more than a sign change. The manufacturing economy may no longer be in recession after two years or more of it, but that isn’t turning out to be what people seem to think it should be. But those expectations are wrong now, and more importantly have been for years. In truth, durable goods with or without February 29, 2016, are as consistent today as they have been going back to 2013 (or 2012 in the case of other statistics). There is no growth, and no indication as yet that there will be.

The US Has The World’s Highest Per Capita Health Care Spend

For many years now, the American healthcare system has been flawed. As our chart illustrates, U.S. health spending per capita (including public and private spending) is higher than it is anywhere else in the world, and yet, the country lags behind other nations in several aspects such as life expectancy and health insurance coverage.

Field Of Stock Market Dreams

The stock market rally has been lacking something over the last several years. Rising stock prices are typically accompanied by rising capital expenditures. But over the past several years this has not been the case, as capital expenditures have effectively stalled as stock prices have soared to new all-time highs. Looking forward, a long overdue pick-up in capital spending will be required to keep the stock market going to the upside. Conversely, if business investment ends up contracting, it would effectively take wrecking ball to the post-crisis stock market rally along with it.