The Next Big Short – – Jeff Bezos’ Brobdingnagian Bubble

If you have forgotten your Gulliver’s Travels, recall that Jonathan Swift described the people of Brobdingnag as being as tall as church steeples and having a ten foot stride. Everything else was in proportion – – with rats the size of mastiffs and the latter the size of four elephants, while flies were ‘as big as a Dunstable lark’ and wasps were the size of partridges.
Hence the word for this fictional land has come to mean colossal, enormous, gigantic, huge, immense or, as the urban dictionary puts it, ‘really f*cking big’.
That would also describe the $325 billion bubble which comprises Amazon’s market cap. It is at once brobdangnagian and preposterous – – a trick on the casino signifying that the crowd has once again gone stark raving mad.
When you have arrived at a condition of extreme ‘irrational exuberance’ there is probably no insult to ordinary valuation metrics that can shock. But for want of doubt consider that AMZN earned the grand sum of $79 million last quarter and $328 million for the LTM period ending in September.
That’s right. Its conventional PE multiple is 985X!
And, no, its not a biotech start-up in phase 3 FDA trials with a sure fire cancer cure set to be approved any day; its actually been around more than a quarter century, putting it in the oldest quartile of businesses in the US.
But according to the loony posse of sell-side apologists who cover the company – – there are 15 buy recommendations – – Amazon is still furiously investing in ‘growth’ after all of these years. So never mind the PE multiple; earnings are being temporarily sacrificed for growth.

This post was published at David Stockmans Contra Corner by David Stockman ‘ December 31, 2015.

What Populism Is And Isn’t

Here we go again.
Franklin Roosevelt infamously redefined the meaning of the wordliberalism in the 1930s to mean more and more government control of the economy. This was in complete contradiction to what the word had meant for centuries, as defined by people like Jefferson: less government control of the economy.
Now advocates of more government control over the economy want to redefine populism as Trumpism. I hope they don’t get away with it this time. My definition of a populist is someone who wants what is best for the poor, the middle class, and ultimately all Americans ( the Latin root of the word means the people). By definition, a populist is someone who is not working on behalf himself or herself or other special interests. Since most government officials are closely allied with special interests, this leaves out most government officials.

This post was published at Ludwig von Mises Institute on DECEMBER 31, 2015.

Bill Clinton Made $8 Million From Speeches To Companies With Matters Pending Before Hillary’s State Dept

One of the ways Donald Trump has been able to curry favor among an electorate that’s increasingly fed up with business as usual inside the Beltway, is to appeal to voters’ ingrained belief that everyone in Washington is effectively beholden to outside interests and campaign donors.
By virtue of his self-funded campaign, Trump isn’t beholden to anyone – or at least that’s what he’ll tell you.
Perhaps more than any other candidate, Hillary Clinton raises eyebrows when it comes to conflicts of interest. As we documented extensively earlier this year, contributions to the Clinton Foundation have come under scrutiny, especially after the charity said it would refile five years of tax returns after failing to properly account for donations from foreign governments.
As IB Times reported back in May, Hillary Clinton’s State Department approved $165 billion in arms deals to nations who had previously given money to the Clinton Foundation. The charity also received some $7 million in donations from the MIC which benefited directly from State Department arms export approvals:

This post was published at Zero Hedge on 12/31/2015.

Junk-Bond Debacle has Bond Fund Investors Feeling like it’s 2008 Again

The recent announcement that Third Avenue Focused Income Fund would undergo an orderly liquidation has investors on edge about junk bonds.
Fortunately, the Third Avenue fund, with its high-concentration in triple-C rated and unrated debt, was likely unique inthe dangers it presented to investors.
But in the wake of this junk-bond debacle, the market is repricing even higher-quality yield-producing securities, and this is hurting income-oriented mutual funds that are mandated to deliver yieldwherever they can find it – from bonds, stocks and other sources.
Problems not limited to junk bonds
The market is demanding more yield from even mildly risky assets, which entails reducing their price. If a security used to cost $100 and paid $2 (for a 2% yield), investors now may decide that such an instrument should yield 3%. In that case, they would drive the price down to $67.
Investors may reprice assets in this way for a number of reasons. For example, they may think U. S. Treasury yields are going up. That must send other securities’ yields up, and prices down, since yield-generating securities are judged against Treasurys.

This post was published at David Stockmans Contra Corner on December 29, 2015.

On The Liberation’ Of Ramadi: 80% Destroyed, 30% ISIS Held

The vital capital of Iraq’s Anbar Province, once a city of half a million people, Ramadi has in the past seven months fell to ISIS, was surrounded and bombarded, and now (mostly) recovered by Iraq. As Iraqi officials tout their victory, however, it seems what they really won is a big repair bill.
Gen. Mahlawi said operations in Ramadi were paused for today because of the weather, and estimated that ISIS still controls about 30% of the city, such as it is. This is a surprising admission, as Iraq claimed total victory in the city days ago.
Defense Minister Khaled Obeidi, meanwhile, told the cabinet Ramadi had been turned into a ‘ghost town,’ and that 80% of the city is effectively destroyed. The Education Ministry said 260 schools were destroyed in the fighting, and would cost $500 million to rebuild by themselves.

This post was published at David Stockmans Contra Corner on December 31, 2015.

Congress’ Misguided Iran-Bashing

The Obama administration has expressed its intention to make a needed correction, albeit only a partial one, to a badly flawed and misdirected piece of legislation that was an emotional response to fears about terrorism and that will do little or nothing to achieve its stated objective. The legislation, which was a rider on an omnibus spending bill that President Obama signed into law a week ago Friday, selectively reverses part of the visa waiver program under which citizens of some countries do not need to go through the time-consuming process of obtaining a visa before visiting the United States for tourism or business.
Iran is not one of those countries, but its economic interests will be indirectly affected. Secretary of State Kerry has told Iran in a letter to the Iranian foreign minister that the administration will use its waiver authority and other lawful tools to prevent the new visa rules from contradicting the sanctions-relief provisions of the recent agreement to restrict Iran’s nuclear program.
About the only good thing about the new legislation is that it implicitly recognizes that the earlier hysteria over refugees and the fear of terrorists in their midst was misplaced. None of the known foreign terrorists who have entered the United States came here as refugees.
But then one has to note immediately that neither were any of those terrorists kept out by having to apply for a visa. This is true of, among others, the woman involved in the San Bernardino shootings, the incident that probably has contributed more than any other to the current emotions and fears in the United States about terrorism.

This post was published at David Stockmans Contra Corner on December 31, 2015.

The Inescapable Trap of the ‘Dollar Short’ – – – Brazil Edition

For bond ratings agencies, finding a bottom is pretty much their job. In other words, they are supposed to map out and understand, as best as may be possible through regressions and equations, the forces that might define a worst case. By direct implication, a worst case probability is determined by at least some ray of hope, some perhaps buried light at the end of a tunnel.
Brazil has been downgraded rather regularly in the past few months. On December 16, Fitch downgraded the country’s sovereign debt to junk, BB with a negative outlook. Earlier in September, S&P had already cut its ratings on Brazil to junk, the first to effectively unwind what Brazil’s rapid rise in the 2000′s had seemingly delivered: investment grade status achieved notably in 2008 and more than that, recognition of economic and financial maturation. The events of 2015 tellingly no longer just threaten to unwind the progress, they are actively exposing the fable behind it all along.
Not be left out, Moody’s on December 9 placed Brazil on ratings watch for its own downgrade undoubtedly to junk, presenting the South American former powerhouse a glimpse of the full ratings trifecta. The reasoning was and is entirely simple; nobody can see a bottom.
Fiscal and economic activity indicators continue to sharply deteriorate with no clear sign of when they will bottom out. Rapidly and materially worsening macroeconomic conditions are leading Moody’s to reevaluate the extent to which the fiscal and economic performance will conform to the assumptions supporting Brazil’s rating at Baa3. The likelihood of a turnaround in Brazil’s economic and fiscal performance now appears unlikely in 2016, and the key assumptions underlying our Baa3 rating – a return to GDP growth of around 2% and a primary surpluses [sic] of a similar magnitude beyond 2016 – also appear to be at risk.
What Brazil is facing right now is in almost every way worse than the Great Recession. Already there are comparisons inside Brazil to the Great Depression. It may not be yet that far along, but everything is continuing month after month in that direction which can only leave observers wondering when.

This post was published at David Stockmans Contra Corner on December 30, 2015.

Now Comes The Great Unwind – -How Evaporating Commodity Wealth Will Slam The Casino

The giant credit fueled boom of the last 20 years has deformed the global economy in ways that are both visible and less visible. As to the former, it only needs be pointed out that an economy based on actual savings from real production and income and a modicum of financial market discipline would not build 65 million empty apartment units based on the theory that their price will rise forever as long as they remain unoccupied!
That’s the Red Ponzi at work in China and its replicated all across the land in similar wasteful investments in unused or under-used shopping malls, factories, coal mines, airports, highways, bridges and much, much more.
But the point here is that China is not some kind of one-off aberration. In fact, the less visible aspects of the credit ponzi exists throughout the global economy and they are becoming more visible by the day as the Great Deflation gathers force.
As we have regularly insisted, there is nothing in previous financial history like the $185 trillion of worldwide credit expansion over the last two decades. When this central bank fueled credit bubble finally reached its apogee in the past year or so, global credit had expanded by nearly 4X the gain in worldwide GDP.

This post was published at David Stockmans Contra Corner by David Stockman ‘ December 30, 2015.

The Explosive Growth Of Luxury And Debt – -A Leading Indicator?

In 1979, as a law clerk to a Federal district court judge in Baltimore, I earned a whopping annual salary of $17,500. For a newly minted law-school graduate, the compensation was well below the starting salary at major law firms, but I was nonetheless able to live reasonably well and, memorably, launched a wine collection that year by purchasing a bottle of 1973 Chateau Petrus.
Petrus – a first growth Pomerol from Bordeaux – is, perhaps, the most famous (and expensive) red wine in the world. My bottle was not from an especially good vintage, but it had sentimental value, since I graduated from college in 1973.
I finally opened my Petrus in 1998, convinced I had kept it too long. Once the wine had time to breathe, it opened up remarkably and was like drinking liquid silk. This was a great wine in an off year. I wondered: what would Petrus be like in a stellar year?
The amusing part of the story? The price tag was still on the bottle: a modest $19.95.
What caught my attention was a recent e-mail advertisement from a prominent New York wine merchant offering a 2000 Petrus. Today’s price was a less modest $4,295.00. Per bottle. Wine guru Robert Parker scored the 2000 Petrus at a perfect 100 and noted that it would be drinking quite well until at least my 115th birthday.
Do the math: a case of 2000 Petrus at that price runs $51,540. With tax and shipping, we’re looking at a price tag around $54,000. That figure is important, because it roughly equals the median income for a family of four, not to mention a price multiple of 215 times what I paid for my 1973 Petrus

This post was published at David Stockmans Contra Corner on December 29, 2015.

The Inescapable Trap of the ‘Dollar Short’ Is The Short; Russian Edition

Though most of Russia’s territory belongs in Asia, it would be difficult to characterize Russian finances as ‘Asian.’ Most of the dirty work is done in the financial centers of Moscow, but in the past year and a half under the ‘rising dollar’ paradigm, Russian financial existence may be more Asian than geography alone might permit. The similarities are perhaps deeper and more aligned than most seem to realize, a desperate proposition at this particularly moment in financial history.
Several years ago, Russian authorities made a very concerted effort to turn what might have been viewed as backward, secretive and banana republic-type banking and funding markets into if not Western-style powerhouses than at least accessible to those interests. On the outside, it appeared as if Russia was trying to modernize in order to be competitive within the current financial order. The Russian government went to great lengths to make it happen, including a building boom in Moscow pre-made with which to house its outwardly intended financial standing.
To do all that, city leaders are inviting business to glittering new skyscrapers, including the Mercury City Tower, which at 75 stories is the tallest building in Europe.
‘The idea is to upgrade the position of Moscow in ratings, to become closer to the leaders of innovation and to the big boys of international financial centers,’ Andrei V. Sharonov, the deputy mayor for economic affairs, who led a roadshow tour promoting the city in Asia, said in an interview.
That was early 2013, toward the end of what was believed then at least a moderately successful effort and a more stable global financial environment before the events of that summer. The Russian government, in both Medvedev and Putin, had built up the infrastructure and had made all the ‘right’ contacts:

This post was published at David Stockmans Contra Corner on December 30, 2015.

Shale Patch Running Out Of Survival Tricks – -Cash Crunch Straight Ahead At $35

In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well.
Those efforts, to the surprise of many observers, largely succeeded. As of this month, U. S. oil output remained within 4 percent of a 43-year high.
The problem? Oil’s no longer at $50. It now trades near $35.
For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are ‘not set up to survive oil in the $30s,’ said R. T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston.
The Energy Information Administration now predicts that companies operating in U. S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great.

This post was published at David Stockmans Contra Corner on December 29, 2015.

Global Deflation Intensifies – -Iron Ore Stockpiles Bulging, Prices Heading Into $20s

Iron ore stockpiles at ports in China are heading into 2016 at the highest level in more than seven months as expanding low-cost supplies and sputtering demand in the biggest buyer spur concern that a glut will persist, hurting prices.
‘Stockpiles have been on the rise because domestic demand is getting weaker and shipments from the major producers have increased,’ Dang Man, an analyst at Maike Futures Co. in Xi’an, said by phone on Monday. Mills have ‘been cutting production, which reduces demand for iron ore. So a lot of the stocks have remained at ports.’
Holdings rose 0.8 percent to 93.1 million metric tons last week in the final reading of 2015, according to Shanghai Steelhome Information Technology Co. The inventories are at the highest since May after expanding for four months.
Iron ore breached $40 a ton this month, hurt by surging low-cost supply from producers including BHP Billiton Ltd., Rio Tinto Group and Vale SA, weaker consumption and rising stockpiles. Mills in the country that supplies half the world’s steel reined in output as product prices sank and the onset of winter curbed demand already hurt by a cooling economy. Port holdings expanded 13 percent this quarter, the biggest gain since the first three months of 2014.

This post was published at David Stockmans Contra Corner on December 29, 2015.

Energy Patch BKs Heading For Liquidation, Not Restructuring And Resurrection

A growing number of energy companies that have filed or will soon file for bankruptcy court protection are likely to be liquidated, with their prospects diminished by the latest falls in natural gas and oil prices, according to distressed investors and restructuring advisers.
Companies that restructure crippling debt loads can often emerge from bankruptcy and start life anew, but with the latest fall in energy prices, even a freshly capitalised balance sheet may not be enough to save the company.
‘Even if you take away all the debt, it is not clear some energy firms can operate,’ said one restructuring specialist. ‘Their basic economics requires oil to be considerably north of where it is. They can’t reorganise.’
In the case of Walter Energy, which filed for Chapter 11 a few months ago, the group said it would run out of money by early 2016 and has opted for a sale of substantially all of its assets, the LCD unit of Standard & Poor’s said.
Not a single creditor will be repaid at all but instead will receive a share in the proceeds from the sale, people involved in the situation said.

This post was published at David Stockmans Contra Corner on December 29, 2015.

Time For Torches & Pitchforks – – -The Little Guy Is About To Get Monkey-Hammered Again

The reputations of Ben and Janet are going to be eviscerated in 2016. That’s because the US economy will slide into recession in defiance of every claim they have made for their snake oil monetary policies. The plain fact is, massive falsification of financial markets via their ‘wealth effects’ doctrine did not levitate main street prosperity at all; it just fueled another giant speculative mania in the Wall Street casino.
The prospect that the leaders of our monetary politburo are about to be tarred and feathered by economic reality might be satisfying enough if it led to the repudiation of Keynesian central planning and a thorough housecleaning at the Fed. Unfortunately, it will also mean that tens of millions of retail investors and 401k holders will be taken to the slaughterhouse for the third time this century.
And this time the Fed is out of dry powder, meaning retail investors will never recover as they did after 2002 and 2009. Moreover, the overwhelming share of main street losses will be the among baby-boom demographic – – sixty and seventy something’s who will be down for the count.
As Jim Quinn so graphically put it an the adjacent piece,
Investors are lazing around the waterhole like unsuspecting gazelles. This herd will be running for their lives in the near future, as danger is lurking.

This post was published at David Stockmans Contra Corner by David Stockman ‘ December 29, 2015.

Why Trashing Your Currency Doesn’t Create And Export Boom And instant Prosperity

As various central banks loosened monetary policy this year, some economists predicted another cycle of beggar-thy-neighbor currency wars, in which countries race each other to become the cheapest exporter.
But it hasn’t panned out that way, and now a growing body of evidence suggests why: A shift in trade dynamics is blunting the impact of a weak local currency.
This could be all the more relevant now, when the monetary policies of the world’s most powerful central banks – the Federal Reserve and the European Central Bank – are heading in very divergent directions, possibly taking the value of their currencies along with them.
When a country loosens its monetary policy, interest rates fall and investors tend to pull their money out in search of higher yields elsewhere, pushing down the currency’s value.
That is still happening. But the dynamic isn’t affecting trade flows as much as expected. What has changed is where businesses source the things they need to make the products they export. Manufacturers once found most components needed to make their goods at home. Now they increasingly look abroad for such inputs. As a result, exports now incorporate a lot more imports.

This post was published at David Stockmans Contra Corner on December 29, 2015.

Imperial Washington, Merchant Of Death – -US Arms Exports In 2014 Leap By 40% to $36 billion

WASHINGTON – Foreign arms sales by the United States jumped by almost $10 billion in 2014, about 35 percent, even as the global weapons market remained flat and competition among suppliers increased, a new congressional study has found.
American weapons receipts rose to $36.2 billion in 2014 from $26.7 billion the year before, bolstered by multibillion-dollar agreements with Qatar, Saudi Arabia and South Korea. Those deals and others ensured that the United States remained the single largest provider of arms around the world last year, controlling just over 50 percent of the market.
Russia followed the United States as the top weapons supplier, completing $10.2 billion in sales, compared with $10.3 billion in 2013. Sweden was third, with roughly $5.5 billion in sales, followed by France with $4.4 billion and China with $2.2 billion.
South Korea, a key American ally, was the world’s top weapons buyer in 2014, completing $7.8 billion in contracts. It has faced continued tensions with neighboring North Korea in recent years over the North’s nuclear weapons program and other provocations. The bulk of South Korea’s purchases, worth more than $7 billion, were made with the United States and included transport helicopters and related support, as well as advanced unmanned aerial surveillance vehicles.
Iraq followed South Korea, with $7.3 billion in purchases intended to build up its military in the wake of the American troop withdrawal there.

This post was published at David Stockmans Contra Corner on December 29, 2015.

How Donald Trump Saved a Small Georgia Family Farm (VIDEO)

Another reason to consider Donald Trump for President over some of the other losers like Rubio and the Democrat Marxists.

More details from the Atlanta Journal Constitution blog at this link.
Freaking awesome as I knew a lot of people who got hurt badly in the mid-1980′s farming collapse in South Georgia and had forgotten all about this story over the years. Thanks to those who wish to remind everyone that unlike Jeb! or Part Time Rubio, there are candidates running for office who actually do things to help real people and not lobbyists or the RNC.

This post was published at John Galt Fla on December 27, 2015.

Safe On The Sidelines – – -405 Days And Counting

The S&P 500 closed at 2052 on November 18,2014. That was 405 days ago, and despite the rips and dips in the interim the broad market average has gone nowhere.
So two of the Wall Street bromides that have lured punters into the casino since the March 2009 bottom are now failing. To wit, there have been about 33 attempts to rally off the dip during that period, but that gambit is self-evidently no longer working.
Likewise, fear of being left on the sidelines is rapidly abating; at some point soon safety on the sidelines will be hard to deny.

This post was published at David Stockmans Contra Corner by David Stockman ‘ December 28, 2015.

Eric Holder’s Law Firm Tied to Alleged Ponzi Schemer Martin Shkreli’s Stock Offering at Retrophin

Eric Holder, who stepped down this year as the U. S. Attorney General after six years in office, rejoined the law firm he had left to accept the top slot at the Justice Department. That firm is Covington & Burling, which operates a revolving door between the Justice Department and its own front door. In addition to Holder, Lanny Breuer, who headed up the Justice Department’s criminal division under Holder, also returned to Covington & Burling after a devastating report by ABC’s Frontline on how his division had failed to seriously investigate crimes on Wall Street. Making the round trip between the Justice Department and Covington & Burling in 2010 was Steven Fagell, former deputy chief of staff at the criminal division, and Jim Garland, former deputy chief of staff to Attorney General Eric Holder. Dan Suleiman, former deputy chief of staff to Breuer at the Justice Department, rejoined the law firm in 2013, the same year as Breuer.
While Holder was in the position as the top law enforcement officer in the land, the firm he would rejoin, Covington & Burling, was serving as ‘counsel to the underwriters’ of a stock offering by Retrophin, then headed by CEO Martin Shkreli, the man the Justice Department is now accusing of looting Retrophin, a pharmaceutical startup, in a brazen Ponzi scheme type of operation.
Covington and Burling lawyers, Donald J. Murray and Eric W. Blanchard, are listed on the Registration statement filed by Retrophin on December 18, 2013. The law firm’s web site lists Murray as the Chair of the firm’s Securities and Capital Markets Practice Group and Blanchard as the Vice Chair. The law firm’s web site also lists an Associate, Gustavo Akkerman, as representing the ‘underwriters in the initial public offering of Retrophin, Inc., a biopharmaceutical company focused on treatment of catastrophic diseases.’

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


The irony of the phrase ‘may the odds be ever in your favor’ is not lost on the readers of the Hunger Games trilogy of novels or the film adaption. Despite the grimness of the story, over 65 million copies of the books have been sold. The total box office take so far has exceeded $1.4 billion for the four movies. The dystopian series tackles real issues like severe poverty, starvation, torture, oppression, betrayal and the brutality of war. It doesn’t fit into the standard film making success recipe of feel good fluff, politically correct storylines and happy endings. Each film in the series gets progressively darker, with the final episode permeating doom and gloom. The books and the movies capture the deepening crisis mood engulfing the world today. And they realistically portray the world as a place where there are no good guys in positions of power. The ruling class, in all cases, is driven by a voracious appetite for supremacy, wealth, and control.
An Ambiguous, Confusing, Dangerous World The world is a morally ambiguous place where those in power and those seeking power utilize the influence of media propaganda and PR campaigns built around ‘heroes’ and ‘icons’ to psychologically control the masses, while enriching themselves and their crony capitalist sponsors. Endless war against the latest ‘bad guys’ further enriches the arms dealers and their political lackeys who joyfully use faux patriotism and nationalistic fervor to insist upon more boots on the ground, drones in the air, bombs dropped, and missiles launched.

This post was published at The Burning Platform on 27th December 2015.