“Sandwich Crisis Deepens”: Subway Closes 500 Stores In 2018

The accelerating demise of Subway, the world’s largest restaurant chain, will one day be just another case study of how to run a once-spectacular business empire into the ground, as Americans quickly abandon this iconic sandwich chain in droves, seeking healthier and fresher, or just simply “different” food alternatives.

For the first time in its 52-years of operation, the company contracted in 2016, shuttering 359 US locations, which was the most significant retrenchment in its history. In 2017, the company closed another 800+ US locations, as details emerged that some one-third of shops in the US could be unprofitable.

Subway’s crisis could be linked to many factors: demographic shift, healthy eating trends, a disgraced ex-spokesman charged as a pedophile, and or managerial shifts. As we explained in December, it is only the tip of the iceberg for Subway’s closures, as we stated it is the “beginning of a crisis.”

And according to a new report from Bloomberg, the sandwich chain continues to close US stores at a record pace (which is not saying much as it has only had 2 full years of net closures in its entire history). Not even one month into the second quarter, management already announced that as many as 500 stores are closing across the country. While it is evident that Americans did not spend their Trump tax cuts on Subway sandwiches, the company is shrinking its North American footprint for greater opportunities in the U.K., China, India and Latin America, Bloomberg said. Last year, the chain closed +800 stores, bringing its total U.S. count to around 25,908 — well off the highs of 27,103 in 2015.

“We want to be sure that we have the best location,” Chief Executive Officer Suzanne Greco, 60, said in a phone interview. “We focused in the past on restaurant count. We’re focused now on strengthening market share.”

Store count isn’t everything,” she added. “It is about growing the business.”

Greco told Bloomberg that the company is struggling to increase sales in the U.S. as newer, more modern fast-food chains are crowding out the industry.

 

More from Greco:

“Subway had been hurt by fierce competition in the U.S., including from a resurgent McDonald’s Corp., whose domestic system sales rose 3.4 percent last year, according to data from researcher Technomic. Subway fell 4.4 percent. It’s also now faced with supermarkets and gas stations that are selling more grab-and-go fare, putting immense pressure on Subway to be faster and more convenient. Along with the closures, some locations are being relocated, and Subway is now using data from SiteZeus to choose better real estate.”

While the US segment clearly topped out in 2015, Greco told Bloomberg that her concentration today is on international expansion. She added the fast-food chain will add more than 1,000 locations outside North America and will primarily focus on the U.K., Germany, South Korea, India, China, and Mexico.

In summary, the compounding effect of store closures, eatery trends, waning restaurant industry, and poor advertisement choices, have ultimately dethroned the world’s largest restaurant chain, and now forced the company into a contraction phase for the third year in a row. And, as a last-ditch effort to preserve momentum and prevent further hemorrhaging of the sandwich empire, management has opted to shrink the North American segment for more, costlier opportunities abroad.

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Cops Charge 13-Year-Old Girl, 14-Year-Old Boy with Crimes for Sexting

KidA 14-year-old boy from Barrington, Rhode Island, has been charged with distributing child pornography after he shared inappropriate pictures of a 13-year-old female classmate with friends. The girl has also been charged—albeit with the lesser crime of disseminating indecent material.

The two teens swapped nude photos of themselves using Snapchat, according to eastbayRI.com. The boy then saved the images, showed his friends, and even created a fake Snapchat account in the girl’s name. One of the girl’s classmates saw the account and alerted authorities at Barrington High School, including School Resource Officer Josh Melo. Earlier this month, the police charged the boy with felony distribution of child pornography and cyberstalking, and the girl with the minor offense of “sexting.”

What the boy did was very bad, and “cyberstalking” might technically fit the bill here, given the fake account. But it still seems harsh to threaten a 14-year-old with jail time and registry on the sex offender list. What he did was wrong, but it’s hard to argue he’s a predator, or a danger to other kids.

In an op-ed for The Providence Journal, attorney John Grasso wrote that the police could have charged the boy with sexting instead of child pornography, as they did with the girl.

If convicted, the boy will be a felon and a registered sex offender — everlasting consequences that I suspect this boy was unaware of when he allegedly decided to use cyberspace to pass around sexually explicit photographs of a girl his same age to other kids his age. …

Sexting exists as an option to law enforcement when the police decide to exercise discretion. Child pornography is a felony that puts jail on the table. Sexting is a status offense. Kids who commit status offenses don’t go to jail. Child pornography requires sex offender registration. Sexting specifically does not. Child pornography is the very deep end of the cyberspace quicksand.

The girl is getting off easier, with the sexting charge. But charging her at all seems like a grave mistake. The only real wrong here was the fake account, and the pictures being shared without permission. The boy did that—the girl was just the victim.

Melo, the school resource officer, did not respond to a request for comment, but told eastbayRI.com this:

Officer Melo said there are Barrington Middle School students who have social media accounts and share information with more than 1,000 “friends.” He said it is very likely that the local students only know a few hundred of the contacts and could be communicating with other individuals who are dangerous.

“We know sex offenders are using these apps to talk to young kids,” said Officer Melo. “People are trying to befriend the kids online.”

This notion—that the internet is a particularly dangerous place where sex offenders are constantly targeting and grooming children—is a classic example of a moral panic. The sex offender registry is full of people who didn’t actually commit sex-related crimes (like the boy in this story), and sex offenders have lower recidivism rates than just about any other group of criminals. According to the Bureau of Justice Statistics, “The single age with the greatest number of offenders from the perspective of law enforcement was age 14.” That’s because there are many kids getting in trouble for having sex with kids, and fewer adults.

Our zeal to punish kids for inappropriate but perfectly normal teen behavior doesn’t make them safer from sex offenders—it turns them in to sex offenders. That’s something everyone should keep in mind, especially given the public’s current enthusiasm for putting more cops in schools as part of a noble but misguided effort to prevent mass shootings.

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Louis Rossetto Is Wired for Optimism: New at Reason

Louis RossettoWhile still an undergraduate at Columbia, future Wired magazine co-founder Louis Rossetto co-authored a 1971 New York Times Magazine cover story on “The New Right Credo.” In his view, liberalism, conservatism, and “leftist radicalism” had all proven to be bankrupt political philosophies, leaving their “refugees” to coalesce under a new banner: libertarianism. More recently, he is author of Change Is Good: A Story of the Heroic Era of the Internet, a crowdfunded novel he published with legendary designer Erik Spiekermann. Reason‘s Nick Gillespie talked with Rossetto about his new book and how his political predictions hold up in the era of Donald Trump.

View this article.

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Leaders Of Two Koreas Will Meet Friday Morning At The DMZ

In a meeting that’s widely viewed as a preamble to a historic summit involving President Trump and North Korean leader Kim Jong Un, the leaders of the two Korea’s – North Korean leader Kim Jong Un and South Korean President Moon Jae-in – are preparing to meet at the border at 9:30 am local time on Friday.

Friday’s summit will take place in the Peace House in in the border town of Panmunjom, located in the heart of the demilitarized zone.

Korea

Im Jong-seok, the chief of staff for President Moon, provided a full itinerary of the meeting – which will involve the ceremonial planting of a pine tree on the border – to Bloomberg:

  • Kim to walk across border to South
  • Kim to review South Korean military’s honor guard after walking together with Moon
  • Moon, Kim to start summit at 10:30am local time Friday
  • Moon, Kim to have lunch separately after morning meeting
  • Moon, Kim to plant pine tree on border after lunch
  • Moon, Kim to walk together around border before afternoon session
  • Two Koreas to sign, announce agreements after summit
  • Moon to host banquet for Kim from 6:30pm at peace house
  • No Plan to extend summit to Saturday for now
  • S. Korea: undecided whether Kim’s wife will accompany; hopes Kim’s wife to join dinner
  • Kim Jong Un’s sister part of North Korean delegation
  • S. Korea says issues related to denuclearization can’t be fully resolved at the inter-Korean summit; S. Korea would consider the summit a success if the North’s intention of denuclearization is included in the agreement

Meanwhile, South Korean Foreign Minister Kang Kyung-wha credited President Trump with bringing the two Korean leaders together for Friday’s summit during an interview with CNN’s Christiane Amanpour that’s slated to air Thursday night.

“Clearly, credit goes to President Trump,” Kang told CNN’s Christiane Amanpour in Seoul. “He’s been determined to come to grips with this from day one.”

During the summit, Kim will become the first North Korean leader to cross the DMZ.

The detente between the two countries was an unexpected – but welcome – development, Kang said, for which President Moon also deserves credit. According to her, the combination of tough rhetoric and sanctions was key in bringing the North to the table.

Kang told Amanpour that the détente was unexpected. “I think we’re all surprised. Obviously pleasantly surprised. I think by all indications we are headed towards a very successful summit between my president and Chairman Kim tomorrow.”

She said that Moon’s determination also played a role in the thaw. In her analysis, the combination of tough rhetoric and economic and travel sanctions were instrumental.

President Trump’s rhetoric, of course, has shifted on North Korea as a summit became a more real possibility.

In August, he threatened “fire and fury like the world has never seen.” In September, he said “Rocket Man s on a suicide mission.” This week, he said that Kim Jong-un had been “very open and I think very honorable.”

Kang admitted Presidents Moon and Trump have at times had “different messaging,” but insisted that they maintained close consultations.

At the end, the message was North Korea will not be accepted — never be accepted as a nuclear power.”

Kang said that, if the two leaders can produce a written statement of understanding “on a broad set of issues”, then the meeting would be considered a success.

When asked what would constitute success for President Moon’s summit with Kim, Kang suggested a joint statement of understanding “on a broad set of issues” including denuclearization, peace, and relations between the two countries.

“If we can get — put in writing the North Korean leader’s commitment to denuclearization, that would be a very solid outcome.” She said that it would be “unrealistic” to expect sudden movement toward a formal peace treaty between the two countries.

They have formally been at war since the 1950s, restrained only by an armistice agreement. “You need to create the reality of peace by removing hostilities… And then when there is sufficient confidence on both sides, then you are ready to sign a peace treaty.” Sanctions on North Korea, she said, will not be eased until Kim takes “visible, meaningful steps” toward denuclearization.

Trump reaffirmed earlier during an interview with Fox News that, while there’s still a chance the US-North Korea talks might not happen, the two sides had picked out three possible dates and five possible locations for the summit.

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Mick Mulvaney Says What Everyone Already Knew: Lobbyists Gain Access to Politicians by Making Donations

Mick Mulvaney, the director of the Consumer Financial Protection Bureau and head of the White House Office of Management and Budget (and possibly President Donald Trump’s next chief of staff), landed in hot water this week for saying, on camera and in front of an audience, that lawmakers are more likely to listen to lobbyists who have made political contributions.

It is true, of course, that lawmakers are more likely to listen to lobbyists who have made political contributions. If it weren’t, one would be left to wonder exactly why so many unions, corporations, and interest groups cut so many massive checks to members of Congress every two years.

Specifically, what Mulvaney said—referring back to his time as a member of Congress, while speaking to a gathering of bankers in Washington, D.C.—was: “We had a hierarchy in my office in Congress. If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.”

Those 36 words are being treated as proof-positive that Mulvaney is bought and paid for by whichever powerful special interest was able to write the check with the most zeroes on them. The swamp has won. The game is rigged. Democrats in Congress have called for Mulvaney’s resignation, and Sen. Elizabeth Warren (D-Mass.), who designed the all-powerful financial regulatory post Mulvaney now heads, has said those remarks are proof the Trump administration is the “most corrupt” in American history.

Warren might be right—the president playing golf and receiving foreign dignitaries at country clubs and resorts that he personally owns is certainly unprecendented—but that conclusion has little, if anything, to do with Mulvaney’s admission of something that everyone who pays attention to politics already knows.

In fact, Mulvaney’s comments are perfectly in line with his boss’ realpolitik views on the relationship between money and political power. Remember when then-candidate Donald Trump was asked during the GOP primary debates about his history of donations to Bill and Hillary Clinton? That’s a cardinal sin in the GOP, and it was meant to expose Trump as a phony Republican. But Trump shrugged and gave a honest answer. “I give to everybody,” he said. “When they call, I give. And you know what? When I need something from them two years later, three years later, I call them. They are there for me.” And that’s not the only time Trump has said something like that.

That moment during the primaries was treated, briefly, as if it should somehow disqualify Trump from the campaign. As if a requirement for being president is an implicit agreement to go along with the lies that we’ve all agreed to tell ourselves about modern American politics. The idea that campaign contributions don’t influence policymaking belongs right up there with “entitlements are solvent for the long-term, America has achievable foreign policy goals in the Middle East, and every vote matters.” In fact, some of the most significant friction between Trump and the Washington establishment has been over the lies that the president sometimes refuses to tell, rather than all the obvious ones that he does.

Maybe there’s some value to maintaining this illusion, as Jonathan Chait suggests. “People in government might have always given their donors more influence over their decisions, but they at least pretended that was not the case in public,” Chait writes. “The Trump administration is not even bothering to put up a façade.”

But wasn’t that more-or-less the best argument for voting for Trump? He’s brash, chaotic, and in over his head, but lots of Americans went to the polls and said they preferred that to Hillary Clinton, an anthropomorphic façade in a pantsuit.

More to the point: if our politics have become corrupted by a pay-to-play mentality, isn’t it better for everyone to have it out in the open? That’s the only way it will change.

That’s why we should not regard Mulvaney’s remarks as just another gaffe, or another case of a Trump administration official “saying the quiet part loud and the loud part quiet.If Mulvaney is being truthful about how members of Congress view their relationship to deep-pocketed donors—and there’s no reason to believe he was lying—that doesn’t mean there’s no cause for concern. By one count, $6.5 billion was spent on the presidential and congressional elections in 2016, shattering the previous record of $6 billion that was set in 2012 (which, in turn, broke the record of $5.3 billion set in 2008, and so on and so forth). This is not going to stop, even though it would seem like every dollar spent getting someone elected to public office could be put to better use by doing almost literally anything else with it.

Yet, the money keeps flowing. Which can only mean one thing: All that spending is paying off in some way. Politically powerfully special interests don’t get to be that way by wasting their resources, after all.

What to do about this? One option might be to make more rules governing money in politics. But the people making those rules will be the very same individuals already compromised by the current system. More practically, the current Supreme Court seems unlikely to reverse the Citizens United ruling—and even if it did, campaign finance rules merely redirect political rent-seeking to other channels.

That rules and structure can’t keep money from influencing politics is most obviously true, ironically enough, in the very agency that Mulvaney now runs. The CFPB was designed to be completely insulated from the political process. It doesn’t even get its budget from Congress, as it is funded directly from the Federal Reserve. That would keep banking special interests from buying off the lawmakers who control the purse strings, or so it was thought. Those rules made the CFPB unaccountable to Congress, but they obviously have not shielded the agency from political influence—something even Warren would have to admit now.

The only way to get money out of politics is to get politics out of money. That’s easier said than done, of course, but unwinding the federal government’s ability to influence corporate balance sheets is the only surefire way to keep those corporations from trying to use the government to do exactly that. If you’re upset about Mulvaney’s remarks this week, and you believe he is telling the truth about government for, by, and of the lobbyists “who gave us money,” then the only solution is less powerful government.

When politicians no longer have the ability to make or break a business, they will spend their money trying to influence the people who do: consumers.

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Simon Black On “The Coming Boom In Gold Prices…”

Authored by Simon Black via SovereignMan.com,

In June 1884, a local farmer named Jan Gerritt Bantjes discovered gold on his property in a quiet corner of the South African Republic.

Though no one had any idea at the time, Bantjes’ farm was located on a vast geological formation known as the Witwatersrand Basin… which just happens to contain the world’s largest known gold reserves.

Within a few months, other local farmers started discovering gold… kicking off a full-fledged gold rush.

Just over a decade later, South Africa became the largest gold producer in the world… and the city of Johannesburg grew from absolutely nothing to a thriving boomtown.

This area is singlehandedly responsible for 40% of all the gold discovered in human history – some 2 billion ounces (or $2.6 trillion of wealth at today’s gold price).

And while the Witwatersrand Basin is still being mined to this day, it’s not as active as it used to be.

Gold production in Witwatersrand peaked in 1970, when miners pulled a whopping 1,000 metric tons of gold out of the ground.

A few decades later in 2016, the same area produced just 166 tonnes– a decline of 83%.

That’s not unusual in the natural resource business.

Whereas it takes nature hundreds of millions of years to deposit minerals deep in the earth’s crust, human beings only require a few decades to pull most of it out.

This creates the constant need for mining companies to explore for more and more major discoveries.

Problem is– that’s not happening. Mining companies aren’t finding anymore vast deposits.

According to Pierre Lassonde, founder of the gold royalty giant Franco-Nevada and former head of Newmont Mining–

If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million-ounce gold deposit, at least ten 30+ million ounce deposits, and countless 5 to 10 million ounce deposits.

But if you look at the last 15 years, we found no 50-million-ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits.

So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know.

Bottom line: gold discoveries are dwindling.

Part of the reason for this is that mining companies aren’t investing as much money in exploration.

According to S&P Global Market Intelligence, major mining companies (excluding those in the iron ore business) have been cutting their exploration budgets for years.

By the end of 2016, exploration budgets hit an 11-year low.

And this has clearly had an effect on new discoveries.

This is all because the gold price has been relatively flat for the past several years.

Investors have lost interest. And the mining companies, eager to cut costs, have pared back their exploration budgets as a result.

But this is where it gets interesting: natural resources are cyclical. They go through extreme periods of BOOM and BUST.

When gold prices are high, major mining companies scramble for new discoveries.

Eventually when they start mining those deposits, though, the supply of gold increases, pushing prices down.

As the price falls, the miners’ profit margins fall, which causes investors to lose interest and the miners to reduce production.

This causes supply to fall, prices to increase, and the cycle starts all over again.

In a way it’s almost comical. And that brings us to today. Well, technically yesterday.

We’ve been seeing for more than a year that interest rates have been rising.

Yesterday afternoon the yield on the 10-year US Treasury note surpassed 3% for the first time since 2014.

And oil prices have been rising steadily as well.

Financial markets don’t like this combination– it means that inflation is coming. Big time. And stocks plummeted worldwide as a result.

Now, that immediate reaction was probably a bit too panicky.

But the deep concern that inflation is coming (or has already arrived) is completely valid.

Inflation is a HUGE problem. And the traditional hedge in times of inflation is GOLD.

But remember– new gold discoveries have collapsed in the past 15 years.

And, as Lassonde said above, there are few discoveries on the horizon to make up the difference.

These companies can’t just go out and start a new mine, either. Even if they found a promising deposit, with all of the bureaucratic red tape, it would take seven to nine years to start producing gold.

So when demand for gold really starts to heat up, the supply won’t be there.

And this could really cause the gold price to soar. (Silver could rise even more… but we’ll save that for another time.)

Now, there are plenty of small, highly speculative companies, known as ‘junior miners’ who specialize in exploring for new deposits.

And when the gold market is in a frenzy, juniors with great deposits tend to be acquired at ridiculous prices by the major miners.

Now, I’m not suggesting you load up on junior miners– you can make a lot of money if you know what you’re doing, and LOSE a lot of money if you don’t know what you’re doing.

These are tiny, extremely high-risk companies often run by sharks and con-men.

As Doug Casey writes in his novel Speculator, they’re great and taking YOUR money and THEIR dream, and turning it into THEIR money and YOUR dream.

Fortunately there are safer ways to take advantage of this looming imbalance between supply and demand in the gold market.

Physical coins are an easy option.

Gold coins typically sell at a price that’s higher than the market price of gold– to account for the work involved in minting the coin.

This price difference is known as the ‘premium’.

And when gold becomes popular, the premiums often increase too.

This means you can make money both from the rise in gold prices, as well as the increased premiums.

Avoid anything obscure– stick to the most popular gold coins like Canadian Maple Leafs.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide.

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Gartman Shorts The Nasdaq

With Dennis Gartman refusing to commit to either the bullish or bearish case in recent days, algos have meandered listlessly, without direction, and so has the broader market. That is about to change because in his latest note, Gartman has a present to all those who delight in either trading alongside the “world-renowned commodity guru”… or against him:

But first, here are Gartman’s comments on  Facebook’s blowout earnings:

Much shall today depend upon how the market responds to the strangely bullish earnings and sales figures reported last night by Facebook, from which we are to believe that the company’s problems with the exposure of personal data  has had little if any effect. This is nonsense! Facebook users everywhere are using their “accounts” less frequently and advertising efforts are becoming fraught with problems. You know this; we know this; everyone knows this, but yet the figures released by the company tell us otherwise.

At any rate, FB’s shares rose sharply after the announcement, carrying the NASDAQ futures sharply higher with them. At this point, as we write, the NASDAQ futures are trading 28 “handles” higher, or a bit less than ½% higher and are running into resistance. However, they are doing so on truly negligible volume, continuing the process of volumes rising as prices fall and volumes falling as prices rise.

This is not how bull markets trade; it is, however, how bear markets do. Our strong propensity then is to be a seller into strength and especially so as the CNN Fear & Greed Index has risen over the course of the past two or three weeks from single digit “Fear” levels to the high 30’s-low 40’s, or back to “neutrality.” In bear markets, usually the best that markets can do is make their way from egregiously over-sold levels to neutrality. Rarely can they make their way toward truly over-bought circumstance.

Which brings us to Gartman’s New Reco:

NEW RECOMMENDATION: We’ve been abundantly bearish of equities for the past several weeks, but we’ve failed to put that bearishness to test “officially” in a recommendation and so we shall do so this morning, wading in to sell the NASDAQ futures anywhere above $6560 as it trades $6564 as we write and finish TGL. We’ll risk 1.5% on the trade and we look for $6000 to be taken out to the downside sooner  rather than later. Indeed, should 6400 be taken out today we’ll add to the position immediately

While there is a distinct chance that Garty may be correct, his last trade recommendation fiasco, in which his short oil trade was stopped out in less than 24 hours, suggests that he isn’t, and instead the free money is to the upside.

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Stormy Daniels Lawsuit Sees Michael Cohen Taking the Fifth and Trump’s Lawyers Heading Back to Court: Reason Roundup

“Based on the advice of counsel, I will assert my 5th Amendment rights…” It looks like President Trump may be right about his “fix-it” guy and personal lawyer Michael Cohen. Trump said last week that he was confident Cohen wouldn’t “flip” on him (a statement that’s implication of guilt either went over Trump’s head or level of care). On Wednesday, Cohen invoked his Fifth Amendment right against self-incrimination in a civil lawsuit filed by Stormy Daniels over alleged hush money paid by Cohen to keep quiet about a decade-old tryst with Trump.

“Based on the advice of counsel, I will assert my 5th Amendment rights in connection with all proceedings in this case due to the ongoing criminal investigation by the FBI and U.S. Attorney for the Southern District of New York,” declared Cohen.

In addition to Daniels’ lawsuit, Cohen now faces a federal investigation. Testifying in the civil suit—in which Daniels seeks to void the contract brokered by Cohen on the grounds that one party (Trump) claims to have no knowledge of it—could come back to bite him (or Trump) in the criminal case.

“Talking, when you’re the subject of an investigation, when they are thinking that this contract was a federal crime … is incredibly reckless,” lawyer Ken White (better known around these parts as Popehat) told NPR. “The only sensible thing to do is shut up and not make it worse.”

That’s not been Trump’s opinion on pleading the Fifth, at least not in the past. “The mob takes the Fifth,” Trump said at one 2016 campaign rally. “If you’re innocent, why are you taking the Fifth Amendment?”

Here was Daniels’ lawyer’s response:

Trump’s lawyer is scheduled today to tell the court how the president, who is also named in Daniels’ lawsuit, plans to respond. U.S. District Judge Kimba Wood “scheduled a noon conference to hear how lawyers are preparing to review large amounts of data for attorney-client privilege after the April 9 raids on Trump’s lawyer, Michael Cohen,” notes the Associated Press. The lawyer has previously said in a letter that Trump “will make himself available, as needed, to aid in our privilege review on his behalf.”

FREE MINDS

Protecting online free speech from Congress. Today, Congress is slated for a showdown on “The Filtering Practices of Media Platforms.” Like any foray by legislators into technology, the efforts are unlikely to lead anywhere good. But it’s an important topic, as digital publications and platforms face shifting legal liabilities for their content monitoring and filtering practices in the wake of FOSTA becoming law.

“Public attention to this issue is important,” suggests the Electronic Frontier Foundation (EFF), as “calls for online platform owners to police their members’ speech more heavily inevitably lead to legitimate voices being silenced online.” EFF submitted a statement to the House Judiciary Committee, which will conduct today’s hearing, arguing against Congress encouraging stricter online censorship.

We all want an Internet where we are free to meet, create, organize, share, associate, debate and learn. We want to make our voices heard in the way that technology now makes possible. No one likes being lied to or misled, or seeing hateful messages directed against them or flooded across our newsfeeds. We want our elections free from manipulation and for the speech of women and marginalized communities not to be silenced by harassment.

But we won’t make the Internet fairer or safer by pushing platforms into ever more aggressive efforts to police online speech. When social media platforms adopt heavy-handed moderation policies, the unintended consequences can be hard to predict. For example, Twitter’s policies on sexual material have resulted in posts on sexual health and condoms being taken down. YouTube’s bans on violent content have resulted in journalism on the Syrian war being pulled from the site. It can be tempting to attempt to “fix” certain attitudes and behaviors online by placing increased restrictions on users’ speech, but in practice, web platforms have had more success at silencing innocent people than at making online communities healthier.

FREE MARKETS

TV prices could soar under Trump’s tariffs. After years of tumbling prices, we can expect to start seeing televisions get more expensive again. President Trump’s proposed tariffs on all sorts of Chinese imports would include a 25 percent tax on TVs and parts used to make them. The Consumer Technology Association predicts the Chinese TV tariff would not only raise rates for Chinese-made TVs by 23 percent but cause a price hike of 4 percent on all TVs sold in America. In 2017, 35 percent of all imported flat-screen TVs and components came from China, the association says.

QUICK HITS

LOOKING FORWARD

Bad news for sentencing reform in Trump commission nominee. Trump has nominated William “Bill” Otis to the U.S. Sentencing Commission, the non-partisan group tasked with “reduc[ing] sentencing disparities and promot[ing] transparency and proportionality in sentencing” through data collection, analysis, and dissemination. Cato researcher Jonathan Blanks thinks this is a bad idea, noting that during Otis “has continuously lambasted bipartisan efforts to reduce sentences and remains a stalwart proponent of the ‘tough on crime’ rhetoric of the 1980s, warning of great crime waves that will follow widespread sentencing reduction. Otis marshals no empirical evidence for his claims—because there isn’t any.”

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Euro Rebounds, Reclaims 1.22 As Draghi Downplays Soft Econ Data

One look at the recent Citi Eurozone Economic Surprise Index, which as shown below, recently plunged to 6 year lows, confirming that Eurozone economic growth recently hit a brick wall and has been in freefall (largely due to the collapsing Chinese credit impulse)…

… is sufficient to explain why most traders were expecting a more dovish Draghi to emerge from today’s press conference. Instead, Draghi once again surprised with his bubbly optimism, downplaying the clearly soft economic data.

Specifically, the ECB president said that he expects economic growth to remain solid, and underscored the hawkish case by stating that he expects “solid, broad-based growth.” In a follow up question, Draghi attributed some of the recent slowdown in economic data to “one-off” factors, which would read as fairly positive for the outlook. Specifically, he blamed the weather, and – once again – the timing of Easter:  “Some normalisation was expected, mostly due to temporary factors, for example cold weather, strikes, timing of Easter”.

He also cited continued strength in data flow on an absolute basis – he summarizes with the line “caution, tempered by unchanged confidence.”

Having touched on FX volatility in recent press conference, Draghi was also asked a question about recent FX moves, although he swerved away from an outright comment on EUR, saying the ECB did not discuss exchange rate volatility and does not comment on recent EUR weakness despite given an opportunity.

Commenting on the presser, ING said that Draghi’s optimism may encourage Euro bulls, and adding that Draghi “not expressing too much concern over recent softening” in economic data has helped the euro and may encourage investors who are bullish on the currency: “EUR passes its first test on Draghi’s comments” according to ING analyst Viraj Patel.

According to ING, the message is that euro-zone growth outlook “remains solid and broad-based could excite some lingering EUR bulls” Patel said, and added that “reading between the lines, one could see these are levels that the ECB are comfortable with.”

He concluded that lower EUR/USD levels will be seen by bulls as “an attractive entry point to go long again ahead of the June” ECB meeting, although notes that hard economic data will determine conviction.

Sure enough, in response to the ECB’s lack of concerns about the economy and FX volatility, the EUR jumped, rising above 1.22.

 

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Ford Will Stop Selling Nearly All North American Cars; Refocus Only On Trucks And SUVs

As Ford pushes ahead to achieve its profitability target of 8% by 2020, a level that would once again place it ahead of Chrysler-Fiat in the Detroit automaker profitability depth league tables…

Ford

… the company announced Thursday that it’s shuttering the last of its US sedan brands as it shifts its focus to international markets, trucks and SUVs. It is a drastic move, as the company will be phasing out sedan models that have a long history with the company, including models like the recently revamped Ford Taurus.

The closures are expected to save Ford $25.5 billion by 2022, Ford Chief Financial Officer Bob Shanks told reporters on Wednesday during the company’s first-quarter earnings call. When the company is finished with the cutbacks, the only non-SUV, non-truck cars Ford will sell in North America will be the Mustang and the as-yet-unannounced Focus Active, according to TechCrunch, which pointed out that the closures were “a long time coming.”

Currently, Ford sells six sedans and coupes in North America: the Fiesta, Focus, Fusion, C-Max, Mustang and Taurus. This lineup hits multiple segments, from the compact Fiesta to the mid-size Focus, C-Max and Fusion to the full-size Taurus. The Mustang stands alone as the lone coupe.

It’s likely Lincoln’s sedans will also disappear, though this was not explicitly stated in today’s press release. Lincoln currently sells the mid-size MKZ and full-size Continental — both share platforms with Ford counterparts. If Ford is phasing out development of sedan platforms, Lincoln will likely suffer, too.

This reduction in traditional cars was a long time coming. North America consumers have increasingly turned to crossovers, trucks and SUVs over sedans and small cars. A trip to any parking lot will likely produce more evidence to this movement. There are several factors involved, from more fuel-efficient and better-equipped trucks and SUVs to improved safety ratings and ride qualities of these vehicles.

The company also reaffirmed that it will soon install hybrid-electric powertrains on its F-150, Mustang, Explorer, Escape and the upcoming Bronco.

The turnaround comes as domestic sedans have led the dropoff in new car sales that has continued this year; the company will now focus exclusively on higher margin models, as Bloomberg  writes:

“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said on an earnings call Wednesday. “We aren’t just exploring partnerships; we’ve now done them. We aren’t just talking about ideas; we’ve made decisions.”

Ford finds itself on a road similar to the route Fiat Chrysler Automobiles NV followed to pass Ford in North American profitability. Fiat Chrysler CEO Sergio Marchionne now wants to eclipse General Motors Co. before his retirement in 2019.

For Ford, these higher margin vehicles mean not only canning its previous sedan efforts, but also failing to invest in new sedans for the North American market in the future. A similar fate looks like it could be on the way for Lincoln, as well:

Ford said it won’t invest in new generations of sedans for the North American market, eventually reducing its car lineup to the Mustang and an all-new Focus Active crossover coming next year. By 2020, almost 90 percent of its portfolio in the region will be pickups, SUVs and commercial vehicles.

That means the end of the road for slow-selling sedans such as the Taurus, Fusion and Fiesta in the U.S. The automaker conspicuously left the Lincoln Continental and MKZ sedans off its hit list, but since those models share mechanical foundations with Ford siblings, their futures also are in doubt.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”

New CEO Jim Hackett is pressing ahead with these changes as Fiat Chrysler CEO Sergio Marchionne’s success at turnaround the company’s moribund profitability has him now gunning to surpass General Motors in profitability by the time he retires in 2019. By 2020, almost 90% of Ford’s North American portfolio will consist of pickups, SUVs and commercial vehicles.

Of course, the changes will likely take a few years to produce results.

Ford’s profit margin should “bottom out” this year, Hackett said on the call. The Asia Pacific region will probably lose money in the second quarter before returning to profit in the back half of the year. The company also is reviewing its strategic plans for South America.

“Everything will be on the table” to fix Ford, Shanks told reporters at the company’s headquarters in Dearborn, Michigan. “We can make different investments, we can partner, we can exit products, markets — and we will do that.”

One factor that had been contributing to investor pessimism has been commodity costs, which Ford expects will be a $1.5 billion headwind this year. About $500 million of that came in the first quarter, Shanks said. The automaker began the year flagging to investors that pricier raw materials including steel and aluminum would contribute to profit declining in 2018.

Ford’s first quarter adjusted earnings rose to 43 cents a share, topping analysts’ average estimate of 41 cents. Ford’s automotive revenue increased to $39 billion, higher than the average projection for $37.2 billion from a Bloomberg survey.

And while Shanks, the chief financial officer, warned that certain markets, like the company’s Asia business – where it was slow to break into the Chinese market – could see profitability bottom out during the second quarter, it’s expected to rebound during the second half of the year.  For now analysts are optimistic, althought they expect it will take a few years for the turnaround at Ford to bear results.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”

“It’s not that the market has permanently given up on good news ever happening at Ford,” said David Whiston, an analyst with Morningstar Inc. who recently lowered his rating on the stock to the equivalent of a hold. “But most people aren’t expecting it until late 2019 or 2020 and that brings up the wild card of, ‘Will we be in a recession by then?’”

Still, even once Ford fixes its problems in the North American market, it still needs to play catch up in China if it ever hopes to outmaneuver its Big Three rivals.

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