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“Man, you guys cannot stop talking about him. He is a dangerous presence and, you know, it’s just like candy by the bushel.”

That’s what Hillary Clinton – who possibly didn’t know her mic was live – told MSNBC last Monday night. The former First Lady was of course talking about Donald Trump, and the media’s interest is a byproduct of the public’s fascination.

But if the media and voters “can’t stop talking about him,” America’s entrenched political aristocracy (on both sides of the aisle) wishes everyone would just shut up. While Democrats fear Trump as a kind of threat to the ideals and values that supposedly underpin American democracy, for the GOP this is an existential threat. Trump’s success has sent the establishment back to the drawing board and if he wins the nomination outright, the party will die.

That’s not to say it won’t be resurrected, but it would be an enormous blow in the short-term.

This is complicated by the fact that Republicans are facing a tough choice with Obama’s Supreme Court nomination. Here’s NBC outlining the GOP’s set of “Sophie’s Choices”:

On Trump:

• Acquiesce/surrender to Donald Trump, who is on track (though it’s not a slam dunk) to obtain a majority of Republican delegates. The problem here? Almost every poll we’ve seen shows Trump to be the weakest GOP candidate to face Hillary Clinton.
• Fight Trump to stop him from getting the 1237 delegates he needs. The problem? Trump has talked about “riots” if he’s leading in delegates but is denied the nomination, and we don’t think he’s kidding.

On SCOTUS:

• Oppose the older and more moderate Garland (even hearings and consideration of his nomination), and hope that Republicans don’t lose the 2016 election, which would result in, say, a President Hillary Clinton nominating younger and more liberal replacement.
• Relent on Garland, knowing the opposition hurts your vulnerable Senate incumbents up for re-election (Kelly Ayotte, Mark Kirk, Ron Johnson, Rob Portman, Pat Toomey), but welcome the wrath of the GOP base.

Bear in mind, this isn’t a criticism of the GOP. Those are the choices they actually face in the months ahead, and there are no right answers. 

Not mentioned are other concerns. For instance, if the Republicans “surrender” to Trump, they risk reputational damage. That’s not a comment on Trump – clearly he’s struck a (loud) chord with large swaths of the electorate – but the simple fact is that most establishment Republicans do not want to be associated with him and it’s not out of some petty jealousy. Well maybe it partly is, but part of it is that the GOP doesn’t believe that in the long-run, what Trump says should represent the party line. Perhaps the party should look at Trump’s spectacular numbers and consider where they went wrong in terms of connecting with voters because as the soon to be “private citizen” Marco Rubio will tell you, “we misjudged some folks.”

On top of that, fighting Trump at the convention could be a disaster – and not just because of Trump’s “riots.” If the GOP stands up and essentially tries to nullify the people’s will, the party will make a fool of itself going into the national elections. That is, they would be playing from a position of weakness, especially if they end up nominating someone who didn’t even run. That could hand the election to Hillary which, if you’re a conservative, is the worst outcome possible.

As it turns out, some Republicans are war-weary when it comes to the frontrunner. Here’s Politico with more:

While some Republicans insist on standing firm against the businessman, more and more are contending that it’s time to reach a point of acceptance — and that a drawn-out primary or convention battle could be worse.

 

“I’m soul-searching right now,” said Penny Nance, president and CEO of Concerned Women for America, who last year explored the possibility of launching an anti-Trump campaign. “There’s still a pathway to defeating him, but it’s getting harder to see that.”

 

“We’re at a turning point,” conceded Randy Kendrick, wife of Arizona Diamondbacks owner Ken Kendrick and a major contributor to the stop-Trump effort.

 

“It’s a fork in the road — a political fork.”

 

 

At a posh resort in Palm Beach, Fla. — just minutes from Trump’s Mar-a-Lago estate — many of the Republican Party’s biggest donors discussed whether to continue shelling out millions on an anti-Trump offensive that so far has done little, if anything, to halt his rise. Many of those gathered, including New York hedge-fund manager Paul Singer and members of the Chicago Cubs-owning Ricketts family, have been the primary funders of Our Principles, a super PAC that spent heavily to defeat Trump, plastering Florida and other states with TV ads that portrayed him as a heartless businessman. Several of the donors reiterated their hope that Cruz or Kasich could still somehow win, sources familiar with the gathering told POLITICO. But others indicated they would be open to supporting Trump in the general election.

 

Another factor: Though Trump remains wildly unpopular with the establishment, many in the party hierarchy now lack a figure to support. While Kasich has a virtually impossible path to the nomination, Cruz, who has devoted his Senate career to poking his finger in the establishment’s eye, is seen as an unpalatable choice.

 

The confusion in the party’s top ranks has left Republicans divided about whether to keep up the anti-Trump offensive at all, or line up behind him.

Again, there are no “right” answers and every political party faces existential threats at one time or another. But the Trump “problem” is particularly vexing for the GOP. 

Perhaps the best move for Republicans would be to embrace the candidate American voters have chosen for the nomination and watch gleefully as a GOP “problem” quickly becomes a “problem” for Hillary Clinton and the Democrats in the national election. Something tells us the polls which show Trump faring worse than any other Republican candidate against the former Secretary of State might be just turn out to be wrong come November.

via Zero Hedge http://ift.tt/1SZnNgf Tyler Durden

Submitted by Simon Black via SovereignMan.com,

If you haven’t seen the 2015 Best Picture nominee, The Big Short, I strongly recommend it.

The Big Short is based on Michael Lewis’ book which examines how such an extraordinary financial crisis gripped the world in 2008, and the handful of people who saw it coming.

The movie opens asking a very simple question about the global financial meltdown:

Wall Street missed it; the Federal Reserve missed it; the government missed it; every major financial institution missed it; the homebuilders missed it.

So how is it that a handful of people were able to see it coming? How could they see what nobody else saw?

Easy. They looked.

For anyone who actually looked, it was obvious that the banking and housing boom in the early 2000s was built on a house of cards. The data was all there.

Given the financial establishment’s astonishingly short-term memory and capacity to make even bigger mistakes than ever before, we now find ourselves in a very similar position today.

Once again, the financial system is in desperate condition. And the data is all there for anyone who cares to look.

Let’s look at a few of the numbers together.

Back in 2008, much of the calamity was caused by an implosion of “subprime loans” in the housing market.

These were frequently no-money down loans at teaser interest rates made to people with poor credit and limited income.

Banks made these toxic loans with your money.

The best example of this was probably Johnny Moon, a homeless man with no income or employment history who was able to borrow more than $600,000 to speculate in real estate.

The total value of these subprime loans was a whopping $1.3 trillion.

Not much has changed.

In 2016, instead of loaning money to subprime home buyers, the financial system is now loaning money to bankrupt governments.

They’ve even managed to go beyond “no-money down”, and are actually paying governments to borrow money at negative interest rates.

Japan is as great example.

Even though Japan’s national debt exceeds 200% of GDP, and it takes over 25% of tax revenue just to pay interest on the debt, the Japanese government is able to borrow money for ten years at negative interest.

This means that investors are GUARANTEED to lose money. It’s worse than no money down. And it’s total madness.

The bigger issue is that the size of this bubble is an astounding $7 trillion, far bigger than the subprime bubble in 2008. And it grows larger by the day.

To expect that this will turn out any differently is foolish.

Back in 2008, US government debt was “only” $9.5 trillion. The Federal Reserve’s balance sheet was $850 billion. Interest rates were over 4%.

So at least they had some capacity to slash interest rates and fight the crisis using traditional policy tools.

Today, US government debt exceeds $19 trillion, well in excess of 100% of GDP.

They have to borrow money just to pay interest, and they have entire pension funds that are on the brink of bankruptcy.

The Federal Reserve’s balance sheet has exploded to $4.5 trillion, and interest rates are barely above zero.

The government has no means to bail anyone out, including itself. And the Fed has no capacity to print more money and expand its balance sheet without causing a major currency crisis.

Simply put, the bubble is just as insane as in 2008, but much bigger. And the financial establishment has no ammunition to fight it.

If you want a more detailed comparison of the 9 most ominous similarities between 2008 and 2016 click here to watch today’s video podcast.

I’ll even tell you about the Danish sex therapist who was actually paid interest to borrow money.

 

via Zero Hedge http://ift.tt/1R49aqD Tyler Durden

Whenever Marc Faber appears in the financial media, in this case Bloomberg TV, one can expect the usual fire and brimstone sermon of how micromanagement of the global economy by central bankers will lead to disastrous results, something which we agree with wholeheartedly and as of two months ago, so did virtually every billionaire at Davos. Recall that just at the end of January, the WSJ when reporting from Davos said that “The world’s central banks can’t save us anymore. That was the message from some of the world’s most prominent investors at the World Economic Forum in Davos, Switzerland, on Friday. Their mood here was irritated, bordering on affronted, with what they say has been central-bank intervention that has gone on too long.”

Somehow we doubt these same billionaires are quite as irritated, or quite as negative on central bank intervention two months later when thanks to, drumroll, central bank intervention, the Dow Jones has staged the biggest quarterly rebound from its lows since 1933.

Anyway, back to Faber, who – sure enough – ponders the idiocy of the IMF’s counterfactual statement today, when Lagarde said the world economy would be worse off without negative interest rates:

… they will always say, if we hadn’t done this and hadn’t done that, it would be much worse.  They have no proof for this assertion.  In my view, it would have been better to let the crisis, already the first one in 2000, run its course and prevent the colossal credit bubble that was built up that then led to an even bigger crisis, and now they’re doing the same mistake.

He then goes on to slam NIRP and the upcoming helicopter money:

… the magicians at central banks, they always come out with a new trick and these negative interest rates that we have today, this is for the first time in recorded human history from the times of Babylon up to today that we have negative interest rates, and it’s not going to end well.  That, I can tell you.  But the sequence of how it will not end well, I’m not so sure.  But they still have a lot of ammunition.  What they can do is helicopter money.  In other words, they can send you and Mr. Bloomberg and me and everybody, say a check for $10,000, and that is like throwing gasoline into a fire…. will it help the economy?  That is the question.  It won’t help in the long run.  You cannot grow an economy by just throwing money at people.

On what policies he would prefer instead:

… the less policies, the better it would be.  We all learned at school that the free market and the capitalistic system is the best allocator of resources, and now what we have is the worst allocation of resources because it’s the government that tells you how these resources are allocated and they continuously expand their interventions, and I can tell you, I started to work in 1970.  In the 70’s and early 1980’s, central banks actually never came up in discussions.  They have now become like the messiah, and everybody watches what the central banks do and in the end, in my view, they will have, from a long term perspective, no impact whatsoever.  Now can they move markets short term?  Yes, but maybe not in the direction they want to.

None of these are necessarily new as Faber’s position on these topics has been well known in advance. However, what surprised us was how clear Faber’s political outlook is.

This is what he said:

You can buy the Singapore stock market with a four percent dividend yield. Well, Singapore is a relatively sound economy.  It’s diversified and it’s well run, unlike the U.S., unless, of course, the U.S. is run by Mr. Trump.  Then the U.S. will improve.

 

HYDE:  But Mr. Faber, I mean, we’re seeing from Donald Trump’s potential policies that he wants to slow international trade between the United States and other countries.  Surely that’s going to be a block upon free markets.

 

FABER:  Well, I agree that it is negative if you have restrictions on a free market.  That, I agree entirely.  But you have to equally see that the U.S. has essentially given in on a lot of things that benefit other countries.  If you look at, say, the growth, 2000 to today, which countries have done relatively well?  The emerging markets have done fantastically well.  Their GDP has gone up substantially.  The standards of living have gone up substantially.  They have accumulated large reserves, and so forth.  The U.S. and Europe and Japan, relatively speaking, have been declining, and that, the statistics are visible from industrial production in emerging economies.  It’s doubled in the last 12 years.  Global trade, you look at the share of emerging markets, it’s gone up.  The developed world, the U.S., Europe, Japan, it’s gone down and so forth.  So I think that maybe we have to find a way to have a more balanced approach to global trade.  I’m not saying protectionism, but the more balanced approach that is fair to the developed world.

 

BARTON:  Are you really a fan of Mr. Trump, Marc?  Do you really believe…?

 

FABER:  It is all relative.  Given the alternatives, I would vote for Mr. Trump, because he may only destroy the U.S. economy, but Hillary Clinton will destroy the whole world. Look at her nation building in the Middle East, how successful that has been. 

He is right.

(If the video below does not work, click here)

via Zero Hedge http://ift.tt/1WwT88R Tyler Durden

On Thursday night, we brought you a first-hand account of what’s really going on in subprime auto.

According to a reader who works in the industry, the securitization machine may be grinding to a halt for deals that are stuffed with loans to borrowers with low (or no) FICOs. Here’s an excerpt:

“I work for a smaller but fast growing auto finance company [and] we grew from opening the doors in 2013 to having a $250 million portfolio as of today. Things for the last 3 years have been booming and it seemed like there would be no end to our growth. We were rated by S&P in January and were ready to start securitizing our portfolio.

 

On March 1st I came into the office to find out that they had started layoffs. These people were fairly new and were in departments that the executive staff has now deemed unnecessary.

 

I had a meeting with my boss who told me my job is safe but due to us not being able to securitize we were freezing hiring going forward but we were hopefully done with layoffs.”

So why would a company not be able to securitize the loans on its book? Well presumably because someone, somewhere gets the feeling that demand for auto-backed ABS is going to dry up in the months ahead.

There’s evidence from both Experian and the NY Fed (see here) to suggest that the market is getting riskier. More auto loan originations are going to borrowers with shoddy credit and loan terms are looking more and more stretched by the quarter. Investors may fear that the credit cycle is about to turn and when it does, you don’t want to be anywhere near the double B tranches in subprime auto – even if you can get 9%.

With all of the above in mind, we bring you the following chart from Deutsche Bank which shows that 60+ day delinquencies for subprime auto ABS have now risen above crisis levels to 5.16% – levels we haven’t seen since 1996.

But don’t worry, even though Deutsche Bank does admit that it “raises eyebrows” when delinquencies for subprime are at their highest levels in two decades even as unemployment has plunged (so maybe those “jobs” people are getting aren’t that great after all), you shouldn’t worry, because it’s all about overcollateralization these days:

While it does raise eyebrows to see delinquencies exceed levels seen during the financial crisis at a time when unemployment is below 5%, we think subprime auto ABS structures remain well protected due to robust levels of hard credit enhancement, and structural features that increase credit enhancement as the transactions pay down.

For reference, 2015 saw about $25 billion in subprime auto ABS supply.

via Zero Hedge http://ift.tt/1pRmIMb Tyler Durden

Submitted by Lance Roberts via RealInvestmentAdvice.com,

 

The past two week’s have been full of Central Bank interventions starting with the ECB last week and culminating with a more accommodative Fed and BOJ interventions this week.

As stated earlier this week:

“The Fed currently finds itself in a tough spot from a “data dependent” standpoint. Last December, when the Fed Funds rate was increased, the Fed discussed the potential for further rate hikes in 2016 as inflation and employment data strengthened. With that data improving, along with the strong rebound in the financial markets, the Fed runs the risk of losing credibility if they DO NOT hike rates again on Wednesday OR give a very strong indication they will do so at the next meeting.”  

I was wrong. The Fed jumped into the boat with the ECB this week by not only ignoring the recent spate of stronger employment and inflationary pressures, but by lowering economic forecasts and reducing the number of rate hikes this year from 4 to 2. This was, in effect, “Yellen’s Bazooka.” Given the more “accommodative posture,” it is not surprising the financial markets decide to jump into the boat with her.

With the markets currently trading above the 200-dma, the next big resistance levels will be the downtrend that started last summer as shown below. Not surprisingly, this rally is occurring with both fundamental and economic data substantially weaker which continues to restrain the Fed from a further tightening of monetary policy. Or, “bad news” is “good news” for now.

With that, this week’s reading list takes a look at various the Fed’s recent actions and whether Yellen has been able to “cage the bear” for now.

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1) Janet Yellen Still Operating In Denial by Stephen Gandel via Forbes

“On Wednesday, the Federal Reserve decided to keep rates where they were for another month, and indicated that it was only likely to raise rates twice in the next year and four times in 2017. The change brings the Fed’s own rate expectations closer in line to what the market was predicting before this week’s FOMC meeting.

 

Nonetheless, the Fed has a history of tricking it self into believing the economy is stronger than it really is—something that has happened a lot during this recovery. And there is reason to believe it is doing so again. If that’s the case, the Fed could be living in denial about its ability to raise interest rates.”

• But Also Read: FOMC Doesn’t Believe Own Data by Jeffrey Snider via Alhambra Partners
• And Read: Is The Fed’s Tightening Cycle Almost Over? by Matthew Klein via FT AlphaVille
• Don’t Miss: Yellen’s March Madness by Macro Man
• More: Was There A G-20 Accord Or What Spooked The Fed by Guy Haselmann via ZH
• Interesting: Currency War Relief From Fed by Randall Forsyth via Barron’s

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2)  Private Sector Debt & Slowing Economy by IronMan via Political Calculations

“The U.S. Federal Reserve released its latest Flow of Funds report for the U.S. economy on 10 March 2016. Let’s run through a short checklist to see what it tells us of the relative health of the U.S. economy….

 

Falling or negative acceleration of private sector debt?

Check.

 

Falling real GDP growth rate?

Check.

 

Let’s go to the chart….”

• But Also Read: Stock Crash Coming by Ken Goldberg via The Street
• And Read: Earnings Estimates Are Still Falling by Eric Bush via GaveKal Research
• Further Reading: Recessions Lead To Prosperity by John Tamny via Forbes
• Interesting: Economic Growth Reaching Limits by Gail Tverberg via Our Finite World

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3) Markets Are Quiet…Too Quiet by Russ Koesterich via Blackrock

• Over the past four weeks, stocks have staged an impressive rebound from their February lows. The equity rebound of the past month is a classic “relief rally,” where investors are relieved conditions are not as bad as they previously feared.
• This one has been partly predicated on hopes that China is stabilizing, which helps explain the sharp rise in commodity prices given that China is the biggest commodities consumer.
• Unfortunately, signs of real improvement in China are scant. While the U.S. appears to be stabilizing, the Chinese economy remains challenged.
• Given the still uneven pace of global growth and tighter financial market conditions, volatility may too be low. This, in turn, suggests the potential for a rise in volatility — which would imply another bout of stocks selling off.

• Also Read: Things Aren’t That Bad by Philip Van Doorn via MarketWatch
• But Also Read: World Headed For Bear Market by Nomi Prins via Daily Reckoning
• Interesting: Fear Indicator Surges To Record High by Josh Lukeman via ZH

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4) El-Erian: The Road We Are On Is Coming To An End by Ben Moshinsky via BI

“Policymakers will either watch helplessly as the world sinks into a mire of financial volatility and political collapse, or they’ll find a way to unlock the piles of corporate cash sitting on the sidelines, reinvigorating growth.

 

At the moment, it’s a coin flip. ‘The road we’re on is coming to an end,'”

• Also Read: A Look At The Latest JOLTS Report by Tyler Durden via Zero Hedge

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5) Is The Oil Correction Over by Marc Chandler via Real Clear Markets

“The losses in the May sweet light crude oil futures today have not done much technical damage to the near-term outlook. The contract has been struggled most of the last week to sustain gains above $40.

 

A break of last week’s low of $38 a barrel could be an early indication of the three-legged correction since mid-January has run its course.

 

The first downside target is near $36.75 and then $35.60. Note that the May contract is set to close below the five-day moving average (~$39.40) for the first time since February 24. The RSI is turning, and the MACDs may turn lower in the coming days.“

• And Read: Oil Prices Should Fall, Possibly Hard by Art Berman via Forbes

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OTHER GOOD READS

• What Happened To The Invisible Hand by Vitaliy Katsenelson via Contrarian Edge
• Huge Hendry On China Devaluation by Julia La Roche via Business Insider
• The Behavioral Aspects Of Planning & Investing by Victor Ricciardi via SSRN
• Bearishness Strictly For Informed Optimist by John Hussman via Hussman Funds
• The Fed’s Folly Festers Further by David Stockman via Contra Corner
• High-Risk Regime’s 6-Month Anniversary by Salil Mehta of Statistical Ideas
• A Broadening Market Top In Place by Doug Kass via Real Clear Markets
• Increasingly Inefficient Bubbles by Jeff Snider via Zero Hedge
• Bridgewater: Biggest Mistake In Investing by Rupert Hargreaves via ValueWalk
• Robo-Advisors Clinging To Dangerous Dogma by Jesse Felder via The Felder Report
• Calmer Days Ahead For Oil Prices via Dana Lyons via Tumblr

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BONUS: INVESTORS INTELLIGENCE GUIDE TO TECHNICAL ANALYSIS

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“The four most dangerous words in investing: This time is different” – John Templeton

via Zero Hedge http://ift.tt/1pRkAUA Tyler Durden