October 20: Daily Contrarian Reads

The US Consumer Is A Debt Mule, Not The Engine Of Growth

The upshot is that when consumer credit is combined with government transfer payments the total amounts to about 43 percent of all consumer spending. Put differently, almost a third of U.S. growth relies on increasing debt in one form or another.

The Dollar Funding Shortage: It Never Went Away And It’s Starting To Get Worse Again

Very quietly, in the last few weeks, cross currency basis swaps (CCBS) related to the dollar have reversed their rise and started moving deeper into negative territory… again. This might not be of much interest to buyers of global equity markets at this point, but it is signaling ominous signs of growing funding stress in the financial “plumbing”. As Bloomberg notes  “cross-currency basis swaps, which money managers and corporate treasurers outside the U.S. can use to borrow in dollars, remain close to the widest levels since January even after quarter-end, when such financing strains typically dissipate. The market was a key indicator of stress during the financial crisis, and while it’s nowhere near the alarming levels of that era, it’s still garnering the attention of analysts.”

Here They Come—VC Burn Machine Out of Cash 3.5 Months After IPO

Let’s get this straight: Layoffs are not a sign of growth for a young money-losing company whose hoped-for explosive growth somehow had justified a “unicorn” valuation not long ago. But that’s what’s happening at Blue Apron, three-and-a half months after its IPO.

Here It Comes—-Another Government Shutdown Looms On December 8

As Bloomberg points out, given the rancor within the Republican ranks, and a lack of trust among Democrats – fostered by the president’s penchant for burning bridges – not only will the Trump White House be forced to punt on all of its major legislative priorities, but it may not be able to avert what would be the first federal government shutdown since 2013, as squabbling lawmakers struggle to find common ground on immigration reform, disaster-relief spending, taxes, Obamacare (subsidies) and preserving funding for Planned Parenthood.

Wall Street Banks are Starting to Sound the Alarm on a Stock Market Correction

The S&P 500 hasn’t seen a correction in almost two years. But a growing chorus of Wall Street strategists says one could be right around the corner. The most recent firm to sound the alarm is Bank of America Merrill Lynch, which forecasts a pullback of at least 10% — the historical definition of a correction — by Valentine’s Day 2018. And while the firm lays out a long list of sell signals, it highlights a couple elements in particular as the biggest market risks right now.

McCain As Metaphor For The Last Days Of The American Empire

Some people are living symbols, sheer embodiments of a concept that fits their persona as snugly as their skin: e.g. the Dalai Lama personifies Contemplative Piety, Harvey Weinstein is the incarnation of Brazen Vulgarity, and John McCain’s very person exudes the sweaty blustery spirit of Empire. His entire history – born in the Panama Canal zone, son of an admiral, third-generation centurion, the War Party’s senatorial spokesman – made it nearly impossible for him to be other than what he is: the country’s most outspoken warmonger and dedicated internationalist.

When Risk Is Underpriced—-Perhaps Considerably So

The absence of market volatility and the rising probability that a flash crash may occur — a theme I steadfastly have endorsed in my Diary — were important elements of this weekend’s news flow. Indeed, these three articles are variations on the same theme.

Heads Up! Top Red Ponzi Banker Warns Of “Minsky Moment”!

China will fend off risks from excessive optimism that could lead to a “Minsky Moment”, central bank governor Zhou Xiaochuan said on Thursday, adding that corporate debt levels are relatively high and household debt is rising too quickly. A Minsky Moment is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures. The theory is named after economist Hyman Minsky.

The Falling Productivity of Debt, Debt And More Debt

From 1981 through just prior to the global financial crisis, marginal productivity of debt fell from over 70 cents to under a dime. A freshly borrowed dollar added less than 10 cents to the economy (by the way, we think GDP is a flawed measure of the economy, in the same way that the amount someone eats is a flawed measure of his wealth).

Iran Ain’t Got No Nuke Weapons Program—-So Why Does The Media Keep Saying It Does?

When it comes to Iran, do basic facts matter? Evidently not, since dozens and dozens of journalists keep casually reporting that Iran has a “nuclear weapons program” when it does not—a problem FAIR has reported on over the years (e.g., 9/9/15). Let’s take a look at some of the outlets spreading this falsehood in just the past five days.