November 2: Daily Contrarian Reads

It Doesn’t Matter Who Wins The Election—-The Next Crisis Is Baked In The Cake

Friday was one of those days where you walk away from the screen for a minute and come back to find a completely different market. All it took was the FBI finding a trove of new Clinton emails, thus breathing new life into the Trump campaign and throwing what was a foregone conclusion back into doubt. Stocks tanked and gold popped, illustrating Wall Street’s preference in the upcoming election. It will be this way until the vote, especially if polls continue to tighten and the outcome remains uncertain. So there’s no point in obsessing over fundamentals for now. Nothing real will matter until we find out who gets to mess things up going forward. Sort of like the original Ghost Busters where the demon/god says “Choose the form of the destructor.”

Inside The September Income And Spending Report—–Income Still Slowing

Personal Income and Spending continue to suggest only further weakness. While there is a whole lot of caution necessary when analyzing this data due to its susceptibility to large revisions, there is still only further deceleration on both sides of the consumer. Nominal Disposable Personal Income (DPI) was up just 3.4% year-over-year in September 2016, below the 3.8% average of 2015 and the 3.7% average so far of this year (including September). DPI averaged 5.5% from 2003 to 2007 and 5.7% from 1992 to 2000. What should be truly concerning is that nominal DPI averaged 4.0% during the worst parts of the dot-com recession, October 2001 through September 2002.

Thanks For The Help! Ukrainian Oligarchs Fatten on $45 Billion Of IMF/UU/Washington Bailouts

As in the US, the corruption starts (and ends) at the top, and the value of Ukrainian President Petro Poroshenko’s assets soared despite economic crisis and conflict while those of other tycoons shrank in an annual wealth list published Friday. The 50-year-old Western-backed president’s business empire ranges from chocolates to media holdings still under his control. Poroshenko – a prominent fixture of the Panama Papers – retains control of a top TV channel and has failed to follow through on his promise to sell off his Roshen chocolate empire due to a lack of foreign interest and a dearth of rich-enough investors in Ukraine itself.

Why Mario Is Sweating—-European Banks Stuck With $1.3 Trillion of Bad Loans, KPMG Says 

Eight years after Lehman Brothers’ collapse sparked the financial crisis, Europe’s banks still have 1.2 trillion euros ($1.3 trillion) of non-performing loans and will probably be stuck with them for decades to come, according to KPMG LLP….Anemic economic growth across the region is making it harder for lenders to off-load toxic assets, hurting profitability while banks also come under pressure from tougher capital rules and fines for misconduct….European lenders are battling to cut soured loans as they face evaporating income from lending amid negative interest rates from the European Central Bank

The Terrifying End Game Of Central Banking

They’re buying government bonds and mortgage bonds. Some central banks are going so far as to buy corporates, too. But worse, some central banks are increasingly buying stocks. Not for the same reasons as you or me, not to make a calculated risk of capital in the reasonable expectation of return. No way. They’re doing it for all sorts of half-baked, Econ 101 textbook reasons, to stimulate demand, whet risk appetites, and somehow get the growth that’s eluded them so far. In other words, we’re investing for retirement, or to get the things that they want, or to provide for our families. They are buying stocks in a doomed effort to move a massive, million-ton macroeconomic needle two spaces to the left.

Our Two-Speed Economy—Bad And Less Bad

Actual and meaningful acceleration for the US economy would be marked by 6% or even 8% growth at this point. Alternating between bad quarters and less bad quarters is just more of the same depression contraction, where the cost in GDP (time) is now at least $2.2 trillion (to the low 3% long run baseline) and very likely double that (to the historical 3.5% long run baseline). By any reasonable standard, 2.86% isn’t good even if on the surface it is better.

Halloween Nation

Over the weekend, the astounding news story broke that the FBI had not obtained a warrant to examine the emails on Weiner’s computer and other devices after three weeks of getting stonewalled by DOJ attorneys. What does it mean when the Director of the FBI can’t get a warrant in a New York minute? It must mean that the DOJ is at war with the FBI. Watergate is looking like thin gruel compared to this fantastic Bouillabaisse of a presidential campaign fiasco.

The So-Called OPEC Cartel Whiffs Again——Marathon Talks, No Deal

A weekend marathon of talks between major oil producers failed to finalize plans to implement an output cut, threatening the viability of an agreement reached last month to reduce production by as much as 2%.

Turkish Police State Cracks Down, Again

Turkey shut more than a dozen news outlets and tightened its anti-terrorism laws in an expansion of its crackdown following the botched July 15 coup. The government also fired more than 10,000 additional people from jobs in the education, health and justice ministries as part of its effort to purge the civil service of employees with alleged links to the U.S.-based preacher it accuses of masterminding the takeover attempt.

What Is To Be Done? How About An America First (For Peace) Movement

In the midst of an election in which the issues are largely ignored in favor of sensationalism and smears, the anti-interventionist voter is pretty much at sea. Hillary Clinton’s demagogic Russia-baiting of Trump as a Kremlin “puppet” augurs a foreign policy that will take us back to the arctic winter of the cold war, circa 1950. On the other hand, the GOP nominee, for all his encouraging “America first” rhetoric and his stated unwillingness to get into another arms race with the former Soviet Union, would likely take us into other quagmires – ISIS, China, Iran – and, in any event, cannot be trusted……So what is to be done?