The government’s worthless numbers

It looks like subprime auto loans — you know, the thing that has kept automakers on a growth binge for years now — are now defaulting at rates not seen since the worst of the financial crisis.

According to S&P Global Ratings, nearly 5 percent of subprime borrowers are behind more 60 days on their loans. The rate in January 2010 was slightly above 4 percent.

Apparently after the subprime mortgage meltdown housing lenders were forced to make sure that the borrowers could actually repay their debt (what a concept!).

But, that same mandate doesn’t apply to auto loans.

Oddly enough, this bit of bad news comes on the heels of supposedly great economic news. News that is so positive that the Federal Reserve is raising interest rates again. In the statement, the Fed said this was the last one for a while and was backing off because it wanted to make sure the workers getting back on their feet had plenty of room to get into this awesome economy.

Irreversible damage — the U.S. economy cannot be repaired

As I outlined in my article The false economic narrative will die in 2017, the mainstream media has been carefully asserting the propaganda meme that the Trump administration is inheriting a global economy in “ascension,” when in fact, the opposite is true. Trump enters office at a time of longstanding decline and will likely witness severe and accelerated decline over the course of the next year. This fits exactly with the basis for my prediction of the Trump election win — conservative movements are indeed being set up as scapegoats for a global economic crisis that international financiers actually created.

Plus, it doesn’t help that Trump keeps boasting about the farcical Dow hitting record highs after his entry into the White House. Talk about the perfect setup…

It pays to be a contrarian

I was taught by contrarians before me that when the press — especially financial press — starts talking about one thing, it’s time to look to do the opposite.

Currently, we’re looking at the great Dow 20,000 headline that has reached every financial publication and constitutes a ‘watch’ on all the financial networks.

People say it’s the Trump Rally. Or simply the fact that Clinton and the Democrats will not be in power anywhere in Washington for at least two more years.

This kind of optimism may play well in the press, but it doesn’t play well in your investment portfolio. Just as everyone is talking about a giant rally and an accelerating recovery, it could all fall flat. Then the press will be talking about some “Great Crash” or the fact that the markets were overvalued all along and this was just a matter of time.

Federal Reserve is now initiating the economic end game

For years, alternative economic analysts have been warning that the “miraculous” rise in U.S. stock markets has been the symptom of wider central bank intervention and that this will result in dire future consequences. We have heard endless lies and rationalizations as to why this could not be so, and why the U.S. “recovery” is real.  At the beginning of 2016, the former head of the Dallas branch of the Federal Reserve crushed all the skeptics and vindicated our position in an interview with CNBC where he stated:

“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly.” [Referring to the results in the stock market after the Fed raised rates in December.]

Who’s behind the war on cash?

There is little more destructive to the health, wealth, happiness, well-being and liberty of the populace than when the government makes policy to make its citizens’ lives better, protect them from crime, make their children safe or help them preserve their wealth.

Case in point: Last week, India’s Prime Minister Narendra Modi suddenly banned its largest bank notes —  500 and 1,000 rupee notes (500 rupees equals $7.50) — declaring that they would cease to be legal tender at year end and requiring them to be deposited in banks by that time. This has thrown the nation into turmoil.

To grasp how devastating this move is to the Indian people, one must understand how different India’s economy is from most of the rest of the world.

When this goes it will be fast and furious

Sometimes I like to take a “bottom up” view of what’s happening in the markets.

That means I look at a few stock stories and see if there’s a larger trend and if that trend is reflected on a larger scale.

I didn’t mean to do this in recent days, but with earnings season in full swing — and the election — a couple things caught my eye that all seem to point to trouble, where the market and the economy seem to be ignoring this reality.

First, let’s start with some recent earnings from what I would call stocks that are bellwethers in their sectors.

Caterpillar (NYSE: CAT) came in with yet another bad quarter and has guided lower for the year. CAT is a great indicator of global economic growth because its equipment is used to build and repair infrastructure.

Legal scams

(I began publishing my monthly newsletter The Bob Livingston Letter™ in 1969. The following is an excerpt from the November 1998 issue in which I alerted readers of The Letter about the derivatives scam that was then still new but was coming to light via the failure of Long Term Capital Management. I warned at the time that such a scam could crash the world economy. LTCM, started in 1993 by disgraced Salomon Brothers executive John W. Meriwether, took in more than $1 billion from celebrities, business owners, individuals connected to the finance industry and the Italian central bank, and by the beginning of 1998 had returned $2.7 billion to investors even though its net worth was only about $1.7 billion. But the Asian financial crisis of 1997 began to take its toll on the asset markets and by summer LTCM had lost $461 million and was hemorrhaging money.  Unable to secure financing, and rejecting an offer from Goldman Sachs, AIG and Berkshire Hathaway as too low, LTCM was headed for collapse. The Federal Reserve stepped in in September and organized a bailout to the tune of $3.625 billion. The bailout contributions came from Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P. Morgan, Morgan Stanley, Salomon Smith Barney, UBS, Société Générale, Paribas and Credit Agricole. Ironically, Bear Stearns and Lehman Brothers declined to participate. Many believed at the time, myself included, that the bailout would only encourage large financial institutions (that later became known as “too-big-to-fail” banks) to assume more risk with the confidence that the Fed would bail them out as well. Turns out that it did. In 2008, Lehman Brothers’ collapse initiated the financial crisis that resulted in the Great Recession under which we continue to languish. Lehman’s collapse was related to its use of derivatives, and the Fed stepped in and bailed out all the big banksters – except Lehman — that Lehman’s failure almost took down. I’ve often wondered why the Fed let Lehman fail while bailing out all the other banksters and AIG. Was it payback for Lehman’s not participating in the bailout of LTCM? There was some speculation at the time that it was indeed payback.)