Is Trump’s Pick for Budget Director a David Stockman Redux?
his 1986 memoirs, “The Triumph of Politics,” David Stockman wrote: “The politicians were wrecking American capitalism. They were turning democratic government into a lavish giveaway auction. They were saddling workers and entrepreneurs with punitive taxation and demoralizing and wasteful regulation.” For the four years he served as President Ronald Reagan’s budget director, Stockman fought for his vision of sustained economic growth and social progress through sound money, lower tax rates and curtailment of federal spending, welfare and subsidies to private interests….Unfortunately, he lost his dream of a true Reagan revolution because many congressional politicians refused to implement the big spending cuts that had to be matched with the big tax cuts…..Little has changed today. Yet there is some reason for optimism, as President-elect Donald Trump has just nominated a lawmaker who seems to want to pick up the work just where Stockman left it 30 years ago at the Office of Management and Budget. That guy is Rep. Mick Mulvaney, a South Carolina Republican and a founding member of the House Freedom Caucus.
Market Top Warning——IPOs Had Their Worst Year Since 2003
Stock indices are frolicking in record territory….So it would seem that the IPO market would be hot. But for IPOs, 2016 has turned out to be a fabulously terrible year….. 2016, only $24 billion was raised in US-listed IPOs, according to Dealogic – the worst year since 2003. Even during the Financial Crisis, IPOs raised more money than in 2016: $30 billion in 2008 and $27 billion in 2009.
A 1% Higher Mortgage Rate Changes Everything—Here’s Why
Bottom line: A 1% rate surge changes everything. Especially, considering the macro housing market – demand and prices – is controlled by the incremental buy or sell pressure…….The rate surge took away 11% of purchasing power, which will drag on house prices. It comes as houses cost the most ever to the end-user, shelter-buyer (see FOUR charts below)….The average $361k builder house requires nearly $65k in income assuming a 4.5% rate, 20% down, and A-grade credit. Problem is, 20% + A-credit are hard to come by. For buyers with less down or worse credit, far more than $65k is needed.
Death In Istanbul—-The Syrian “Blowback” Intensifies
If you think the assassination of the Russian Ambassador to Turkey, the same day terrorist attack in Berlin, and the announcement the next day of an agreement by Russia, Turkey, and Iran to end the Syrian civil war are all a monumental coincidence, then you haven’t been paying attention…..The Syrian catastrophe, and now the Islamist assault on Turkey, is yet another case of deadly “blowback.” For years, the US and its Saudi and Gulf state allies have been funding “moderate’ Islamists in an effort to overthrow the government of Syria’s Bashar al-Assad, with Israel a silent partner in this regime change operation. Along with the Western media, which has bought into the myth of the Syrian opposition as a benevolent force, the Saudi propaganda machine has been working overtime to portray what is happening in the region as a “holocaust” perpetrated solely by Assad. This is simplistic nonsense of a sort our media is peculiarly susceptible to: they are always looking for Good Guys versus Bad Guys, Innocence versus Evil, in a world made up almost entirely of grays and shades of black. And of course the fact that our own intelligence services – notably the CIA – have been in bed with Syria’s Islamists (all of them “moderates,” to be sure!) may account for the favorable publicity they’ve been getting in the Western media.
The Priceless Parable of Price Discovery
hope you agree the story of the day the NYSE didn’t crash harder is a classic. But it doesn’t resonate as much as it once did. Since October 19, 1987, the stock market has operated in an increasingly contained vacuum thanks in large part to overly-easy monetary policy. That makes the following story, generously gifted to me in its unabridged form by Cashin, the most relevant of the day as we look to the new year with stocks at record highs. The two main characters of this timeless tale are Charles Lewis Tiffany and John Pierpont Morgan.
Italy Bank Rescue Won’t Fill $54 Billion Hole on Their Books
Italian banks need at least 52 billion euros ($54 billion) to clean up their balance sheets, much more than the rescue package proposed Monday by the government. The shortfall is an estimate of how much lenders would have to increase loan-loss provisions to allow for the sale of bad debt, according to data compiled by Bloomberg. It includes the 8 billion euros of provisions UniCredit SpA has said it will add before selling 18 billion euros of its worst loans and uses that ratio as a proxy for the gap at other banks. The total also includes the 5 billion euros Banca Monte dei Paschi di Siena SpA has been struggling to raise in recent months.
India’s Small Businesses Facing ‘Apocalypse’ amid biggest Financial Experiment in History
India’s vast informal economy has been reeling since 8 November, the morning after India’s prime minister, Narendra Modi, announced the sudden voiding of the country’s two most-used bank notes. It is the largest-scale financial experiment in Indian history: gutting 14 trillion rupees – 86% of the currency in circulation – from the most cash-dependent major economy in the world. More than a month on, India’s Reserve Bank has issued around 1.7 billion new notes, with less than one-third the value of what was removed. The sixth-largest economy in the world is running on 60% less currency than before. Lines outside banks continue to stretch, and India’s small business lobby says its members are facing an “apocalypse”. But Modi insists he isn’t done.
HIBOR Tops 10%—-Renewed Financial Tremors Hit Red Ponzi Is
Though the mid-September surge in HIBOR abated, overall money rates in Hong Kong (including, importantly, for Hong Kong dollars) kept rising overall even as CNY dropped precipitously. It could be said that Chinese authorities were using HIBOR on an upward trajectory to make sure that CNY didn’t fall farther than it “should” have, but such an argument would amount to yet another “jobs saved” fallacy. What I see clearly on the chart above is not attempted control, but instead growing systemic illiquidity forcing a greater loss of it.
Cold War Hysteria vs. US National Security
Thus far, no actual facts or other evidence have been made publicly to support allegations that the hacking was carried out on the orders of the Russian leadership, that Russian hackers then gave the damaging materials to WikiLeaks, or that the revelations affected the electoral outcome. Nor are Russian President Putin’s alleged motives credible. Why would a leader whose mission has been to rebuild Russia with economic and other partnerships with the West seek to undermine the political systems of those countries, not only in America but also in Europe, as is charged?…..Still worse, since the election these allegations have inspired a growing Cold War hysteria in the American bipartisan political-media establishment, still without any actual evidence to support them. One result is more neo-McCarthyite slurring of people who dissent from this narrative. Thus a New York Times editorial (December 12) alleges that Trump had “surrounded himself with Kremlin lackeys.”
Bubble Era Deception—–Yellen’s Whopper’s And Others
In both instances, she hedged her comments on equity valuations by comparing them with the interest rate environment. In May of 2015, Yellen said equity-market valuations “are quite high” and today she claims they are “within normal ranges”? The data shown in the table below clearly argues otherwise…..Interestingly, not only are equity valuations currently higher than in May of 2015 but so too are interest rates. Further concerning, how does one define “normal”? Does a price-to-earnings ratio that has only been experienced twice in over hundred years represent normal? Do interest rates near historical lows with the unemployment rate approaching 40-year lows represent normal? Is there anything normal about a zero-interest rate monetary policy and quadrupling of the Fed’s balance sheet?
