October 26: Daily Contrarian Reads

When Disruption Becomes Its Own End

These companies fight for market share with bleeding-edge pricing to “disrupt,” but equity holders and creditors, instead of punishing companies for it, fall all over them and bid up their shares and bonds, and thus encourage them to do this.

Here They Go Again! Another "Growth" Head Fake

It was misconception sometimes by design, an almost honest error created by circumstances. The economy had been so bad for so long, six years going on seven by 2014, that it was merely assumed any upturn would be the upturn. So even when growth underwhelmed that year, those calling it “robust” and “strong” were projecting those words onto what they really believed was an intermediate stage before those terms would really apply.

Volatility: The World’s Only Undervalued Asset Class

Risk is an ever-present condition that cannot be eliminated, though it can be shifted through time and redistributed in form. In today’s market many believe that they have achieved protection over risk, but they actually are becoming its servant. And when investors and quant strategies such as risk parity and volatility trending are all increasingly on the same side of the volatility boat, the odds favor that the boat likely will tip over.

Raqqa Destroyed to Liberate It, And The Bogeyman Of ISIS

I asserted, as a former soldier and war correspondent, that IS would collapse like a wet paper bag if proper western ground forces attacked their strongholds in Syria and Iraq. This week, the western powers and their local satraps finally took action and stormed the last IS stronghold at Raqqa. To no surprise, IS put up almost no resistance and ran for its miserable life. The much-dreaded IS was never more than a bunch of young hooligans and religious fanatics who were as militarily effective as the medieval Children’s Crusade.

Thanks For The Recovery, Fed! Top 10% Net Worth Up $700k, Bottom 80% Down

......the recovery is only a recovery for the wealthy.  As the chart below from the Fed's own Survey of Consumer Finances shows, all the record growth in household net worth has gone to the top 20% of income earners since 2007 while the remainder have seen declining net worth.

In The Shadows Of Black Monday – “Volatility Isn't Broken… The Market Is”

Volatility is now an input for risk taking and the source of excess returns in the absence of value. Lower volatility is feeding into even lower volatility, in a self-perpetuating cycle, pushing variance to the zero bound. To the uninitiated this appears to be a magical formula to transmute ether into gold… volatility into riches… however financial alchemy is deceptive. Like a snake blind to the fact it is devouring its own body, the same factors that appear stabilizing can reverse into chaos. The danger is that the multi-trillion-dollar short volatility trade, in all its forms, will contribute to a violent feedback loop of higher volatility resulting in a hyper-crash. At that point the snake will die and there is no theoretical limit to how high volatility could go.

Now Comes The Reckoning: Italy Faces Bond Shock As ECB Tapers

Saddled with mountains of debt and a looming election, the southern European nation will likely struggle to find buyers for its government bonds when the European Central Bank stops snapping up Italian debt over the coming years, according to Christian Schulz, European economist at Citigroup. That means yields are set to rise, potentially strangling the country’s nascent recovery.

Niger, Plus......Imperial Washington Is Conducting Secret Military Missions All Over Africa

U.S. troops are now conducting 3,500 exercises, programs, and engagements per year, an average of nearly 10 missions per day, on the African continent, according to the U.S. military’s top commander for Africa, General Thomas Waldhauser. The latest numbers, which the Pentagon confirmed to VICE News, represent a dramatic increase in U.S. military activity throughout Africa in the past decade, and the latest signal of America’s deepening and complicated ties on the continent.

Stagnation Nation: Middle-Class Wealth Is Locked Up in Housing and Retirement Funds

This chart provides key insights into the differences between middle class and upper-class wealth. The majority of the wealth held by the bottom 90% of households is in the family home, i.e. the principal residence. Other major assets held include life insurance policies, pension accounts and deposits (savings). What characterizes the family home, insurance policies and pension/retirement accounts? The wealth is largely locked up in these asset classes.

Bubble Denial… Just As It May Finally Be Peaking

It makes perfect sense though. Bubbles always suck everyone in before they implode. The financial media, like CNBC, become cheerleaders for the bubble. Bears turn to bulls. And almost everyone goes into bubble denial. But mark my words here: This third and final bubble (fourth if you count 1987) is now the biggest and most obvious bubble in this boom since 1983. And it’s as overvalued as at the top of 1929!

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