March 31: Daily Contrarian Reads

What, Me Worry? Margin Debt Hits All-Time High But Wall Street Says Borrow On

The amount investors borrowed against their brokerage accounts climbed to $528.2 billion in February, according to the most recent data available from the New York Stock Exchange, released Wednesday. That is up 2.9% from $513.3 billion in January, which had been the first margin debt record in nearly two years…….This isn’t a signal to me that markets are reaching an exuberant level like they did in the 1920s or 1990s, when speculation was rampant,” he said. “What our clients are doing is borrowing against the portfolios because interest rates are so low. They’re not leveraging up because they see the market exploding to the upside; they’re using leverage because they can pay it off at any time.” Don’t worry, clients are just borrowing against their portfolios because rates are low. Allegedly, they can pay this back anytime……..Excuse me for asking, but what if they spent the money?

Market Are Overlooking A Clear and Present Danger On the Dealer Lots

Economic cycles do not last indefinitely. While fiscal and monetary policies can extend cycles by “pulling forward” future consumption, such actions create an eventual “void” that cannot be filled. In fact, there is mounting evidence the “event horizon” may have been reached as seen through the lens of auto sales. Following the financial crisis the average age of vehicles on the road had gotten fairly extended so a replacement cycle became more likely. This replacement cycle was accelerated when the Obama Administration launched the “cash for clunkers” program which reduced the number of “used” vehicles for sale pushing individuals into new cars…… What the chart above shows is the number of cars sold currently now exceeds both the total increase in population and replacement needs of the existing population. In other words, the pool of available buyers is rapidly being depleted.

The Sleazy Origins of Russia-gate

An irony of the escalating hysteria about the Trump camp’s contacts with Russians is that one presidential campaign in 2016 did exploit political dirt that supposedly came from the Kremlin and other Russian sources. Friends of that political campaign paid for this anonymous hearsay material, shared it with American journalists and urged them to publish it to gain an electoral advantage. But this campaign was not Donald Trump’s; it was Hillary Clinton’s…..And, awareness of this activity doesn’t require you to spin conspiracy theories…..Indeed, you have the words of Rep. Adam Schiff in his opening statement at last week’s public hearing on so-called “Russia-gate.” Schiff’s seamless 15-minute narrative of the Trump campaign’s alleged collaboration with Russia followed the script prepared by former British intelligence officer Christopher Steele who was hired as an opposition researcher last June to dig up derogatory information on Donald Trump.

Red Ponzi In The Cross Hairs—-Trump Administration Lays Groundwork to Keep Big Tariffs on Chinese Goods

The Trump administration appears poised to cement China’s unfavorable status in trade cases, making Chinese goods eligible for higher U.S. tariffs well into the future. U.S. officials are preparing a review of China’s “market-economy status” under the World Trade Organization, according to official documents on the Commerce Department website. The review is expected to be announced as early as this week, just days before a high-stakes meeting between President Xi Jinping and President Donald Trump.

Fed Doves Growing Dark Feathers——Rosengren Calls for Fed to Tighten at Every Other FOMC Meeting

Federal Reserve Bank of Boston President Eric Rosengren said the central bank should be prepared to raise interest rates a total of four times in 2017 to guard against overheating the U.S. economy. The policy-making Federal Open Market Committee should be ready to move again in June, September and December, unless incoming data push them off course, he said…..Rosengren, once a strong advocate for keeping rates lower for longer, is reprising the role he took up in late 2016 of pushing his colleagues to consider a slightly quicker path for tightening monetary policy as the Fed nears its goals on unemployment and inflation.

History Note: Mises  On Liberal Nationalism

In the current discussion about immigration, Ludwig von Mises is often invoked by libertarians as a staunch proponent of free trade in the broad sense that pertains to the free movement of goods, capital, and labor. Mises has even been proclaimed by some libertarians as an advocate of open borders. However, Mises’s views on the free migration of labor across existing political borders were carefully nuanced and informed by political considerations based on his first-hand knowledge of the deep and abiding conflicts between nationalities in the polyglot states of Central and Eastern Europe leading up to World War One and during the subsequent interwar period. Thus Mises did not evaluate immigration in terms of purely economic optima such as maximizing the productivity of human labor, irrespective of the political context. Rather, he assessed the effects of immigration from the viewpoint of the classical liberal regime of private property. My purpose in this short essay is to set forth Mises’s views on immigration as he developed them as an integral part of the classical liberal program he elaborated. I shall not attempt to criticize or evaluate his views.

LIBOR Pains——Signaling New Troubles Ahead 

Since mid 2015, 3 month LIBOR has soared from a low of approx 22.5 basis points to its current level of 115 basis points – i.e., it is now more than 5 times higher than two years ago. The “ouch” is explained further below…… One of the components of the global debtberg that has grown at a particularly breath-taking pace in recent years is corporate debt. As we have often mentioned in these pages, we regard it as a major Achilles heel of the Bernanke echo bubble……

Even CBO Confesses—-Fiscal Catastrophe Ahead Owing To Exponential Debt Growth In The U.S.

In a just released report from the CBO looking at the long-term US budget outlook, the budget office forecasts that both government debt and deficits are expected to soar in the coming 30 years, with debt/GDP expected to hit 150% by 2047 if the current government spending picture remains unchanged…….The CBO’s revision from the last, 2016 projection, shows a marked deterioration in both total debt and budget deficits, with the former increasing by 5% to 146%, while the latter rising by almost 1% from 8.8% of GDP to 9.6% by 2047.

Washington Has a Clear Choice: Trump/GOP Need To Stop Trashing The Iran Nuclear Deal

Actually, most of the tangible benefits in sanctions relief have gone to improving the economy for every day Iranians. And far from being a “dangerous” and “unmitigated disaster,” the deal has been successful in rolling back Iran’s nuclear program and in easing regional tensions. The rhetorical abuse visited upon the JCPOA doesn’t bode well for the survival of the deal. And even the relative moderates in the Trump administration – people like Secretary of Defense James Mattis and Secretary of State Rex Tillerson, frequently described as the “grown-ups,” in contrast with the opposing bloc of “ideologues” – seem more hawkish than pragmatic on Iran. In other words, the Trump White House exists in an echo chamber of negativity toward the JCPOA. The deal’s survival depends on deliberate administration support and a measured understanding of its benefits.

Now It’s Getting Real——Freedom Caucus Stands Up to The Donald

President Trump on Thursday used Twitter to rip into the conservative House Freedom Caucus, which quickly returned fire as Republicans turned on one another a week after the collapse of their ObamaCare repeal plan.Trump threatened to primary the Freedom Caucus members who torpedoed the American Health Care Act, handing Trump a stinging legislative loss in his administration’s first 100 days……Conservatives opposed to the ObamaCare repeal bill quickly fired back, criticizing Trump for becoming a victim of Washington’s “swamp” and reminding the White House that it’s healthcare plan polled a dismal 17 percent.