December 5: Daily Contrarian Reads

The Donald's Foolish Fed Appointee Hits Bitcoin Because It's Not "Backed"!

Randal K. Quarles, a Trump administration appointee to the Federal Reserve Board of Governors and Vice Chair for bank supervision, has given a lengthy speech (“Thoughts on Prudent Innovation in the Payment System”) that directly targets Bitcoin as a danger to the monetary and financial system. To reiterate, an official speaking for the nation's central bank that manages the global reserve currency – the institution that has long bragged about its power to bail out the entire world with the magic powers of the alchemist – has put down Bitcoin for being untrustworthy, unbacked, and unsound.

The Giant Vol Short----The New Toxic Asset Trade

In the beginning of the talk, Fournier and Grant discuss how volatility has been artificially suppressed for so long that it's essentially become an asset class unto itself. Investors have devised all these new volatility targeting strategies - like risk parity, for example, that have generated outsize returns since the financial crisis. But many don't recognize the underlying risks. With so much money piled into the short-volatility trade, a large enough spike could trigger extremely painful selloffs in both bond and equity markets.

What To Do About North Korea---Make A Deal, Not War

Why? Because the concessions Kim is demanding are not beyond the utterly unacceptable. What does Kim want? Initially, he wants a halt to U.S.-South Korean military exercises, which he sees as a potential prelude to a surprise attack. He wants an end to sanctions, U.S. recognition of his regime, and acceptance of his status as a nuclear weapons state. Down the road, he wants a U.S. withdrawal of all forces from South Korea and international aid. Earlier administrations — Clinton, Bush II, Obama — have seen many of these demands as negotiable. And accepting some or even all of them would entail no grave peril to U.S. national security or vital interests. They would entail, however, a serious loss of face.

The Tax Bill: Nothing Has Yet Been Passed Except Hot Air And Gas

The jubilation that was rendered by the "market" over the past week, crystallizing in rocket-ship rides to all-time-highs, cheers and celebration, as the Senate worked feverishly into the wee hours of Saturday to finally write in enough giveaways of pet cows, pigs, and other assorted farm animals to deliver the President a much-needed "win" was both surreal, as well as comical.

The Great Unwind---How Central Bankers Are Propelling The Markets Toward A Rough Ride

I laugh every time I hear that the quantitative tightening, the shrinking of the Fed’s balance sheet, is going to appear on autopilot. They are deluding themselves if they don’t think that this is a form of tightening when on Day 1, headed into this experiment of unravelling and shrinking of the balance sheet, the Fed owned 33% of all mortgage-backed securities in the country – They are deluding themselves. It remains to be seen if the Fed is going to remain agnostic to all data and continue shrinking the balance sheet while they continue to increase interest rates at the same time. It is double tightening if you think about it.

The New-Style Mercenary Armies of Washington

Today, PMCs are operating more than 90% of all drones that US Air Force and Navy have together, they are also engaged in reconnaissance missions, data analysis, along with developing of promising technologies and materials, on top of providing routine military training, convoy escorts, and air cargo support. In May 2007, the US government disclosed for the first time the total amount of funds allocated for PMCs by American intelligence agencies, with the total amount reaching 33.6 billion dollars. In January 2015, the US Central Command published statistics on contract employees of PMCs, specifying that CENTCOM alone employs more than 43 thousand individuals that fulfill all sorts of contracts, of which no more than 17 thousand are American citizens, with the rest being natives of UK and Australia.

The Crypto-Bubble Is Getting Ugly

Here's the latest sign that the massively fraudulent ICO market is headed for a collapse. Tezos’s investors are still waiting to learn when they can expect to receive the digital tokens that they paid a premium for during the company’s record-setting crowd sale. But as reports of abuse, internal strife and outright embezzlement have surfaced in the press, three groups of angry investors have filed class action lawsuits accusing the company of fraud and securities violations.

Bubble Busters----From The Red Ponzi To The GOP Tax Cut

Nine years of extreme monetary and fiscal stimulus fueled quite a boom. Interest rates were pegged way too low for too long. The seemingly obvious risk now is that market yields surprise to the upside. Despite the boom and artificially suppressed debt service costs, the federal government has nonetheless posted ongoing large budget deficits. I never bought into the late-nineties notion that budget surpluses were sustainable – that our nation would soon pay down all its debt. It was all a seductive Bubble Illusion.

Cherry-Picking The Intel Data Toward War With Iran

Although nobody knows exactly where Donald Trump intends to go with his campaign of seeking confrontation with Iran, his administration already has provided disconcerting parallels with the techniques an earlier U.S. administration used in selling its launching of a war against Iraq. Among these techniques is the cherry-picking of intelligence not to inform policy-making or to enlighten the public but instead to inculcate false perceptions among the public and thereby to muster support for a policy already chosen.

Not Even Close---Why No One's Prepared For What's Really Coming

I hate to break it to you, but chances are you're just not prepared for what’s coming. Not even close. Those frightened by today's over-inflated asset prices fear how quickly the current bubbles throughout our financial markets will deflate/implode. Who knows when they'll pop?  What will the eventual trigger(s) be? All we know for sure is that every bubble in history inevitably found its pin. These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they're going to be the most destructive in history when they finally let go.

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.