4 Contrarian Views

Bruce Krasting's picture


Note: Snowing like crazy 30 miles north of NYC - wind picking up as I write. The forecast for me is 12-18 inches. I'm hoping it pushes three feet.... Some odds and ends:


MS Pumps Japan


Morgan Stanley has a new report on GOOG. Not surprisingly, the folks at MS like the stock. They looked at the variables and concluded the shares could trade 20+% higher; they also have a bear case where the stock could be 16% down on the year. The graph of those expectations:




It's appropriate for MS to have a bull and a bear case, that's the nature of investing. MS does not always present a balanced view. I wrote about the firm's outlook for AAPL on 12/17. Back then, MS thought that AAPL could go no lower than $500 - an assumption that has proven wrong.




I bring this up to make a point about yet another MS pick. The folks wearing the spats are wild crazy in love with Japanese stocks. MS thinks that the TOPIX is a sure bet - no downside at all.




In fairness to MS, they are not alone with their extremely bullish view on Japan. In fact, they are in a monster crowd of folks, all of the whom see only higher stocks and smooth sailing. When was the last time that "everyone" was right?





The following is a pic of the first paragraph of a letter sent to Jeff Zients, the current head of the OMB. The letter was signed by a number of Republican big shots.


letter page one



The letter is an info request. It's a witch hunt headed in the direction of Jack Lew, Obama's candidate for Treasury Secretary. The suggestion is that Lew was derelict on a reporting requirement related to Medicare while he ran OMB. As near as I can tell, this is much ado about nothing. But, then again, there are those heavy hitter Republicans doing the asking.


I take this to be evidence that Lew is in for a hell of a battle with his confirmation hearings. This is going to get dragged out for as long as possible. We will not have a T-Sec for months. Too bad - there are a few issues on the calendar where a T-Sec might come in handy:


* March 1 - Up or down on the Sequestered amounts

* March 27 - Final date for a Continuing Resolution to avoid a government shut-down.

* April 15 -Agreed to date for a budget approved by congress and WH.

* May 27 - The Debt Ceiling must be raised - for real this time.

* The clock is already ticking on the last important issue. The world is going through a currency war. As of now, the USA is coming in third in this three-way war.


I get the sense from the markets and the press that these things are being ignored. Everything is on a smooth glide path - nothing to worry about. The USA doesn't need a T-Sec. Everything will work out fine, even if there is no hand on the rudder. Wait a few weeks on that conclusion.




The most significant financial event of 2012 was Mario Draghi's July speech. He said one word, "Unlimited", and the global markets were off to the races with no looking back. The guy just has to talk and tens of trillions of capital got down on its knees and gave thanks.

With that in mind, it should come as no surprise that Draghi can talk about FX in the vaguest of ways, and the markets quickly adjust to what the Supreme Leader wants. Mario's talking caused a lot of noise and back-filling in FX land this week.


I'm not buying it. I don't think Super Mario can get away with all talk and no action this time. The FX markets are wound very tight, and the players are flush with cash from the gains of the past six months.

If there is to be a test of Draghi, it will come before the end of the month. If the market pushes the EURJPN, USDJPN to new highs and the EURUSD catches a bid in the cross trading fray, then Mario will have to back up his talk with some action. That would be a first, an interesting one at that.

If the FX markets don't "obey" Draghi, what are the EU bond markets going to think? Will they call the Draghi bluff along with the FX guys? One would think so. That would also be interesting, and it ain't on anyone's playbook.




The Congressional Budget Office released a report of the financial status of Social Security this week. The report contained significant revisions from prior year’s estimates. The conclusions by the CBO stand at odds with the forecasts provided by the Trustees of SS in their report to Congress ten months ago.


The key conclusions by the CBO:


- The SS Trust Fund (TF) will reach its highest level in fiscal 2016. (The SS estimate is for 2022)


- The TF will achieve a maximum balance of 2.8T. The SS estimate if for $3.25T)


- The Trust Fund for Disability Insurance will be exhausted by Valentines Day, 2016.



The CBO concludes that the SSTF will top out six-years earlier than is now anticipated. The TF will achieve a maximum balance that is $425B lower than currently projected. In its upcoming report (April), the SSTF will have to make significant revisions to its prior projections. The SSTF can’t release a report that varies significantly from the conclusions by the CBO.


Who cares (Other than wonks like me)? After all, this is just paper - and Social Security doesn't add to the deficit - Right? At least that is what is repeated over and over. But it does add to the debt, and that is rapidly become a critical variable. Jeb Graham at IBD looked at the implications of the CBO report. Look how quickly cash is going out the door at SS. (Link)




The CBO is now confirming (what I have been saying for many years) that SS is going to be rapidly increasing its annual cash deficit. It will hit $75b in 2013. It will be $225 b in a decade. After that it goes ballistic. Every penny of these deficits must be financed by issuing more Debt to the Public.

They say that if something can be anticipated, it is not, by definition, a Black Swan. The unwinding of America's $5T of "Trust Funds" may not be a Black Swan event, but it does create a systemic risk. To my knowledge there is no one "out there" who thinks/writes about SS as a systemic risk. That probably means it is a systemic risk and because it will be a "surprise" to many people, it still could turn out to be a Black Swan.



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Bear's picture

Why would we need a T-Sec ... we have King O

steve from virginia's picture



There is government for and by the people ...


And there is government for and by tycoons and plutocrats.


We Americans are stuck with the latter. The plutocrats offer us toys, empty promises and abstractions (We're Number One! We Got Osama!), entertainments, bread and circuses. Meanwhile, these same plutocrats borrow immense fortunes and require the ordinary citizens repay the debts. This is not economic development it is theft.


The principles are good government are simple: encourage the ordinary citizens who are the actual producers of useful goods, wealth - if you will. Punish thieves severely to prevent them from overrunning the country. The higher the level thief, the more severe the punishment.


America runs backward: thieves are looked up to, obeyed like Gods, given positions of moral authority (Ayn Rand) meanwhile, the ordinary people are punished. All sorts of rationalizations are offered as to why this state of affairs must be continued, even as the collapse of the USA-style kleptocrat economy everywhere in the world is underway.


The rationalizers say it's very important that the Big Thieves steal the retirements of our elderly parents, brothers and sisters. "It is for the good of the country!" they cry ... just as the same people have stolen the futures of our children and grandchildren ... are in the process of stealing life, itself.


All I can tell you is ... fine! There is nothing I can do but sit in rage and fulminate on a computer ... however, it if should come to a pass where there is something that I CAN DO, where the instruments fall to my hands ... you had better run for your lives because I will feed you all head first into woodchippers.


And your families will be made to watch.



JuicedGamma's picture

I don't care what they call themselves, they are Dean Whitter, a division of Sears. Morgan Stanley ceased to exist years ago.

WTFUD's picture

Oh look Ben i can see your printing press from here!

WTFUD's picture

Oh look Ben i can see your printing press from here!

Ted K's picture

You're off on Lew nomination. He's orthodox Jew and in very deep with Netanyahu Shit on Gazans Incorporated. Israel will lean on the pussy Republicans to get Lew in Treasury like Bruce Krasting stalls on home improvements.

Joe moneybags's picture

"...there is no one "out there" who thinks/writes about SS as a systemic risk."

Really?  I've heard about SS going broke, and the huge fallout to follow, all of my life.  I'm sure that everyone here reading thses articles and comments has heard and thought long and hard about the systemic risk associated with a failing SS program.

pfairley's picture

Good article but too many pics & change of fonts makes me dizzy. 

silverdragon's picture

Democrat and republican nonesense.

Its a one party state!

Create some money backed by something so that people can trust it. And the whole spending trillions that you don't have each year is getting old.

farooq902's picture

Bruce. Great commentary as always but "everybody" that bought every dip for the past year in the S&P made a killing. Unfortunately not me but hey what a way to invest when your CB keeps creating massive liquidity. I suspect MS picks will flounder soon enough. Thank you.

Jendrzejczyk's picture

I'd be OK with 12 inches.

knukles's picture

I'm already there, it's the girth I'd like more of....

OpenThePodBayDoorHAL's picture

so...Zippy the pin d*ck?


willwork4food's picture

Only 12? There's medications for that..

Spastica Rex's picture

Came here just to see if this was here. Thanks!

Clowns on Acid's picture

Jacob Lew is utterly unqualified to to be T SEc., but when the bar has been lowered to accomodate wee Timmy Geithner....anybody is qualified.

I see Bruce is amazed that REPs would have any questions regarding Jacob Lew.

HoofHearted's picture

I tink Lew ought to get the Sean Egan treatment. If he as much as crossed the wrong box someplace, he ought ot be put on ice for at least 18 months. We need Jim Grant for T-Sec, maybe Jim Rickards. At least Rickards has thought about what is coming. 

RockyRacoon's picture

It's from the "anything Obama wants, we will obstruct" playbook.  Just politics, as they say.  A continuation of the same McConnell attitude from the first Obama administration.  Nothing to really get excited about.  The appointment of cronies and yes-men is in full force in Warshenden DC -- as usual.  It applies to both side of the proverbial aisle.  Kinda like the Benghazi brou-ho-hum.  The storming of embassies and killing of folks therein is not new.  It just gets a good work up from the media.  There were seven attacks on U.S. embassies and consulates during the Bush years, but what did we hear about those?  Nada.  I'm sure there was some sort of conspiracy associated with all of them to some degree or another.  In addition, the request for Chuck Hagel's financials is a brand new tactic that has never been used before.  Going harder and deeper seems to be the current modus operandi of political appointments.  The problem is that the setting of these precedents works both ways!  When the other party is the one in office we'll have another round of fabricated crises.  More of the same stuff.  Doesn't much matter who's in office.  The faux outrage is the real problem.



Absinthe Minded's picture

The other thing to consider is how interconnected the world is becoming. They had the internet during Bush's term but not nearly as much as we do now. Twitter, FB, and smartphones are world wide. The anti America stuff was a lot easier for TPTB to hide if they wanted to. Now, they can't control the news flow, hence the need to be able to silence anyone as needed.

nmewn's picture

I hear its gonna snow tonight, in NE, in February, what are the odds ;-)

knukles's picture

Aye laddie.  It never snows in New England in February.
Jesus H Fucking Christ
So what, I mean storms do happen.

May all the folks who'd trouble with Sandy bre held safe

nmewn's picture

Having never been in snow its hard for me to fathom the hysteria. I went to school with a kid from Buffalo NY who said a foot or two was common for them coming off the lake.

The whole thing seems like a "we got this under control FOR YOU" moment for me...down here when a hurricanes coming, we pretty much have a party and tell em to fuck off and arrest us.

They go away...who wants screw around with a bunch of drunks when there's camera men & lady reporters in RV's to ogle and get warm food from ;-)

willwork4food's picture

Allow me to give you an analogy then:

A little snow is no biggie, kinda fun; go out and throw snowballs at the neighbor's cat.  But blizzards are a whole different animal. You've experience hail, well imagine a hailstorm only miniture in size-constantly coming down at you with an attitude. A little wind can ice over the ground you're walking on in a heartbeat, let alone a bridge you are driving across. In a heavy storm you can be stranded very, very, quickly.


These cars where trying to leave from the night before.

nmewn's picture

Well I know its probably not a good idea to be walking or driving around in a blizzard or a hurricane...but local governments over-the-top response does give me pause.

When the governor of Mass. orders people off the roads under threat of fine or arrest because of weather, we've arrived at a distinctly different place with regards to governance and people. Same with Bloomberg, he's not so much worried about the people as much as he's worried about city employees removing the snow. The very people, who pay his & their salary.

Down here with an approaching hurricane they just say take a magic marker and write your name on your arm or hand if you're not going to evacuate, so they can identify your corpse. I think this is a much better idea (even though I don't do that either) as it doesn't infringe on my liberty to be an idiot if I want ;-)

Tippoo Sultan's picture

"The Honorable --"

"Honorable" indeed. These mandarins are anything but. The time is nigh to dispense with the Eighteenth Century salutations which then, pertained to a gentleman.

Those days are long behind us.

DeadFred's picture

With respect to the power of Mario's words I wonder about your assumption that the market reacted to his words. Could it be that the market (certain big players who knew the market was ripe for plucking did the dictating and Draghi said some words to give them opportunity? I know I'm a bit paranoid but really, we're his words that moving? The market seems ripe for a plucking of the bulls. I'm not sure if you can pluck a bull, I'm thinking it would be painful for both parties.

booboo's picture

Chuck Grassley is a republican too, not that it matters.

shallow_explorer's picture


1. to place side by side or near to each other



I wouldn't want to be "apposed" to any of these guys.

olto's picture


Thanks, as always, an below I pasted in(please, excuse me) another contrarian' view:

DEAR PAUL KRUGMAN Please Read This about Social Security Posted by Dan Crawford (Rdan) | 2/06/2013 02:24:00 PM , ,

by Dale Coberly

Please Read This
about Social Security

Dear Paul Krugman,

There was an indication the other day that you read Angry Bear, at least sometimes. I hope you read this, because it is important, and you have a better forum than I have.

I think the following facts would be game changers in the so-called "debate" about Social Security, if they become widely known and understood.

Social Security has nothing to do with the deficit...
In spite of tortured logic like that of Chuck Blahous who admitted grudgingly that "technically" Social Security does not affect the budget, but "in reality" if Congress has to pay back the money it has borrowed from Social Security, that will have an effect on the budget. This amounts to blaming granny for lending me her life savings. After all, if she hadn't lent it to me I wouldn't have spent it. Therefore it's her fault that I have to get a job or borrow money from someone else to pay her back.

... and therefore should not be part of the "deficit reduction" hysteria.
Again, in spite of logic so tortured it gives lies a bad name: The serious folks who are so very worried about the deficit sometimes admit that Social Security has nothing to do with the deficit, "but we need to cut Social Security to give confidence to the markets.” Because even though Social Security has nothing to do with the deficit, cutting it will show "the market" that we are serious about controlling our deficit.

Social Security is not going broke.
It can't go broke. It is paid for by the workers who will get the benefits. As long as they understand the value of protecting part of their savings from inflation and market losses... insuring at least a minimally decent retirement... they will want to be allowed to continue to pay for their Social Security.

The Trust Fund is NOT Social Security. It does not matter at all when it "runs out."
The Trust Fund is normally a reserve of one year's benefits designed to smooth the ebbs and flows of taxes versus benefits. It was allowed to grow following the 1983 increase in the payroll tax to about three times the normal size in order to allow the Boomers to help pay in advance for their own Social Security benefits beyond what would normally be paid by "pay as you go" financing. This corrected a potential "generational inequity." This enlarged Trust Fund was always supposed to run out of money about the time the Boomer cohort no longer put unusual stress on the pay as you go system. So far it is on schedule to do exactly that. The precise date that the Trust Fund returns to the normal level is completely unimportant to Social Security.

Pareto's picture

Isn't this a numbers problem, plain and simple?  in the 1950's there were, on average, approx. 3 kids per family, now there are only 1.6.  Its impossible to expect these kids to pay for either SS, or Medicare.  Has to be means tested.  But, even this isn't the killer.  The true immorality is forcing people to pay for other people's government pensions that are totally and utterly removed from reality and risk while the rest of the working world slaves for its retirement out of disposable income.  This is the bullshit that has to be reformed. There are no gurantees in life, but, the government gets theirs guranteed whether the market is up or in the toilet.  This is the kind of reform that needs to happen, IMO.

olto's picture


I don't know.

The Miser's picture

Good luck getting Paul Krugman to read this and understand it.  Paul Krugman is educated beyond his intelligence.  That is why they give him awards-to fool us.

malek's picture

Disinformation troll alert

Especially love this part
"protecting part of their savings from inflation"

LOL - you mean protecting from inflation as measured by the gov't-rigged CPI?

machineh's picture

'serious folks ... sometimes admit'

Who is he talking about ... himself?

If he's making $82 an hour on the internet from his kitchen table, then I guess he's 'serious folks.'

olto's picture


I didn't 'mean' anything in posting---I just came accross this piece where Bruce was involved in a legitimate discussion with his peers, and thought it might be interesting to see what comments would emerge by posting it here where he is held in such high esteem.

It is interesting and, I thank you for your comment----------

Rainman's picture

Social Security and Trust Fund should never be linked together in one description. How can CBO miss a deficit projection by $ 212 B.....within one year ?? I know, stupid question. They shoulda' invested in the stawks ponzi instead of the non-negotiable IOU ponzi run by Treasury. Full faith and credit, my ass ! 

dick cheneys ghost's picture

I thought GS ran the Treasury?

Itch's picture

The thing is Bruce, the last time Draghi made noises and the market ignored him, he made everyone pay remorselessly, i.e. he had his cake and ate it with little regard for table manners. I wouldn’t be so sure he wont be back for second helpings. Put that guy in a corner and he comes out inkjets blazing. Nah, I think what he really meant was “so, you want to call my bluff twice”? The dude doesn't like the Euro breaking everyone’s balls, if he did he wouldn’t have said anything. He’s building a reputation, best not get in his way. He wants his cake, and he wants to eat it.

disabledvet's picture

Eh. I think the US Federal Government has a lot of arrows in it's quiver when it comes to increasing revenue. Not the least is Obamacare..which is run by the IRS (cheat on your taxes...get no healthcare. That includes the Doctors I might add.) I was SHOWN the number of how much I would owe next year and, well..."it's huge." apparently that will be used to pay for all the people "who can't afford it" because "they're not doing the W-2 thing." don't know about you but "i smell a boondoggle." still...there is no better insurance than Government insurance...period..."hence your frustration with Social Security"? "it's a program that works"? Don't know...you tell me. If I can tax the benefit check...why can't I just raise taxes on the beneficiaries? Just a thought...

Jendrzejczyk's picture

The little pieces of "snow" floating around.

If you look real close, a few of them are actually miniature terrorist passports.

Fredo Corleone's picture

Are those drones, or the Winged Monkeys from Oz ? The Elmira Gulch musical theme score comes to mind, pertaining to drones in a snowstorm...


Almost Solvent's picture

Lady Liberty's flame or choom?