Month: August 2016

Are Sex Offenders Allowed to Golf? They’re Not Sure

GolfSex offenders in Illinois are challenging the state law that bans them from entering parks, schools, places providing services for kids, and even “holiday events involving children.” The offenders say the rules are so vague that they can’t always tell if or when they are breaking the law.

For instance, if a sex offender plays a round of golf on a municipal course—a solitary, adult activity—is that legal (because kids aren’t around) or illegal (because it’s on parks department land, and therefore a park)?

WBEZ, Chicago’s NPR station, reports that the plaintiffs are arguing that the restrictions are so broad:

…it’s impossible to know what is or isn’t allowed and that means the laws violate the constitution. They’re asking a federal judge to immediately suspend certain restrictions on every registered child sex offender in the state of Illinois.

The absurdities of the sex offender laws are readily apparent in another situation one of the plaintiffs is using as an example. He would like to visit his granddaughter, but she lives within 500 feet of her subdivision’s playground. Is it legal for him to see her at her home?

State police told him he was allowed to visit as long as he walked straight from his car and back — but the local cops said he wasn’t allowed to be there at all.

While a case like this shows that the law’s interpretation is completely up for grabs, which is the plaintiff’s whole point. It also shows the law is completely pointless, period. Study after study of sex offender residency restrictions has found that they do not make kids any safer. And the idea that an offender has to make a beeline between the door of a home and the door of a car just highlights the make-it-up-on-the-fly nature of the rule. If a sex offender walks over to examine the rose bush next door and then gets into his car, has he posed a threat?

Never mind the fact that when I spoke with Warren Maas, president of the Minnesota Association for the Treatment of Sexual Abusers, a man who has treated sex offenders for decades, he said he’d never met one who had grabbed a child from the park, the very scenario that this whole restriction is premised upon.

Then there’s the caveat that sex offenders can’t “be present at or associated with a facility that provides services directed toward minors.” Can they go to a hospital where there’s a pediatric ward? Can they go to a library where there’s a children’s room?

These aren’t just rhetorical questions. A person found guilty of violating any of the provisions of the registry risks going to prison as if he had committed not just a minor infraction but a new sex crime. Recall the case of Josh Gravens, who missed registering his new home address by a day and was facing a possible 25 years in prison for it.

With consequences that dire on the line, the rules should be clearer than clear.

And if they actually made any sense in terms of keeping the public safe rather than just punishing our modern-day pariahs, that would be nice, too.

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Don’t Freak Out About Post-Convention Polling Bumps and Slides

Clinton accepts the Democratic nomination.You’ve probably already seen the articles declaring Hillary Clinton the winner of the last two weeks of dog-and-pony shows. A CBS News survey taken over the weekend (and thus after the Democratic convention ended) found her up seven percentage points on Donald Trump, which is indeed a sharp increase—as of July 14, the same poll had the soon-to-be nominees tied.

Candidates often see a bump immediately following their conventions. Choosing a vice president, giving a speech in prime time, getting publicly endorsed by high-profile supporters, and dominating the news cycle for four or five days are, as a general rule, good for a candidate’s short-term image. Some voters who weren’t paying a whole lot of attention to the process begin to tune in at convention time, and their weakly formed preferences can be swayed by what they see.

But these spikes don’t always stick. “The polls are more unstable during the convention season than at any other time during the campaign, according to research by political scientists Robert Erikson and Christopher Wlezien,” John Sides explained at The Washington Post. As The Huffington Post‘s senior polling editor, Natalie Jackson, pointed out, “you shouldn’t get too excited or upset about sudden shifts. Convention bounces are common, and often temporary.”

A vivid example comes from 2008, when the GOP convention happened around Labor Day. Note that Sen. John McCain’s RealClearPolitics average went through the roof after he introduced a mostly unknown but exciting-seeming running mate in Sarah Palin—and then note how quickly the bump evaporated in the weeks that followed:

Real Clear Politics 2008 presidential polling average

We are, however, entering into the period when the polls will grow increasingly predictive. The nominees are set, so pollsters can name them instead of asking about generic Republicans and Democrats. Many partisans who supported a different candidate during the primaries become comfortable saying they’ll vote for the now nominee, since the only other options is someone from a different party. And as we get closer to November, less engaged voters start to tune in and the proportion of undecideds starts to shrink.

Right now the polls are not particularly reliable. But give it a few weeks.

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The Burrito Index: Consumer Prices Have Soared 160% Since 2001

Submitted by Charles Hugh-Smith via PeakProsperity.com,

In our household, we measure inflation with the "Burrito Index": How much has the cost of a regular burrito at our favorite taco truck gone up?

Since we keep detailed records of expenses (a necessity if you’re a self-employed free-lance writer), I can track the real-world inflation of the Burrito Index with great accuracy: the cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.

That’s a $160% increase since 2001; 15 years in which the official inflation rate reports that what $1 bought in 2001 can supposedly be bought with $1.35 today.

If the Burrito Index had tracked official inflation, the burrito at our truck should cost $3.38—up only 35% from 2001. Compare that to today's actual cost of $6.50—almost double what it “should cost” according to official inflation calculations.

Since 2001, the real-world burrito index is 4.5 times greater than the official rate of inflation—not a trivial difference.

Between 2010 and now, the Burrito Index has logged a 30% increase, more than triple the officially registered 10% drop in purchasing power over the same time.

Those interested can check the official inflation rate (going back to 1913) with the BLS Inflation calculator by clicking here.

My Burrito Index is a rough-and-ready index of real-world inflation. To insure its measure isn’t an outlying aberration, we also need to track the real-world costs of big-ticket items such as college tuition and healthcare insurance, as well as local government-provided services. When we do, we observe results of similar magnitude.

The takeaway? Our money is losing its purchasing power much faster than the government would like us to believe.

Comparing Burritos to Burritos: A Staggering Divergence of Reality and Official Inflation

According to official statistics, inflation has reduced the purchasing power of the dollar by a mere 6% since 2011: barely above 1% a year. We’ve supposedly seen our purchasing power decline by 27% in the 12 years since 2004—an average rate of 2.25% per year.

But our real-world experience tells us the official inflation rate doesn’t reflect the actual cost increases of everything from burritos to healthcare.

The cost of a regular taco was $1.25 in 2010. By official standards, it should cost a dime more. Oops—it’s now $2 each, a 60% increase, six times the official rate.

The cost of a Vietnamese-style sandwich (banh mi) at our favorite Chinatown deli has jumped from $1.50 in 2001 to $2 in 2004 to $3.50 in 2016.  That $1.50 increase since 2004 is a 75% jump, roughly triple the official 27% reduction in purchasing power.

So let’s play Devil’s Advocate and suggest that these extraordinary increases are limited to “food purchased away from home,” to use the official jargon for meals purchased at fast-food joints, delis, cafes, microbreweries and restaurants.

Well, how about public university tuition? That’s not something you buy every week like a burrito. Getting out our calculator, we find that the cost for four years of tuition and fees at a public university will set you back about 8,600 burritos. Throw in books (assume the student lives at home, so no on-campus dorm room or food expenses) and other college expenses and you’re up to 10,000 burritos, or $65,000 for the four years at a public university.

University of California at Davis:

2004 in-state tuition $5,684 
2015 in state tuition $13,951 

That’s an increase of 145% in a time span in which official inflation says tuition in 2015 should have cost 25% more than it did in 2004, i.e. $7,105.  Oops—the real world costs are basically double official inflation—a difference of about $30,000 per four-year bachelor’s degree per student.

Here’s my alma mater (and no, you can’t get a degree in surfing, sorry):

University of Hawaii at Manoa:

2004 in-state tuition: $4,487
2016 in-state tuition: $10,872

Sure, some public and private universities offer tuition waivers and financial aid to needy or talented students, but the majority of households/students are on the hook for a big chunk of these costs. And remember that many students are paying living expenses, which doubles the cost of the diploma.

If you think I cherry-picked these two public universities, check out this article:

So the divergence between real-world costs and official inflation isn’t limited to burritos; it’s just as bad in items that cost tens of thousands of dollars.

The Official Fantasy of Hedonic Adjustments

In the official calculation of inflation, hedonic adjustments offset soaring costs: that 160% increase in the cost of a burrito is offset by the much lower cost for computers, especially when the greater processing power and memory are accounted for.

Clothing has also gotten cheaper, and this theoretically offsets higher costs elsewhere.

The problem with this is sort of calculation is that we have to eat every day and we have to pay higher education costs if we want our kids to remain in the middle class, but we only buy a new “cheaper” computer once every few years, and we don’t even have to buy new clothing at all, given the proliferation of used clothing outlets, swap meets, etc. (I do my annual clothing shopping at Costco: two pair of jeans for $15 each , one pair of shoes for $15, etc.)

The savings on $100 of new clothing per year or a $600 computer every three years does not offset the doubling or tripling of costs for items we consume daily or big-ticket essentials such as higher education, rent and healthcare.

Official Inflation: A Flawed Metric

Official inflation also assumes that consumers will actively substitute a cheaper alternative for whatever is soaring in price. If a burrito doubles in cost, then the consumer is supposed to buy a banh mi sandwich instead. (Oops, that doubled in price, too. So much for substitution gimmicks.)

The problem is pretty obvious: there are no alternatives for big-ticket essentials. There is no “cheaper” substitute for a four-year public university diploma or meaningful healthcare insurance. There is also no alternative to renting a roof over your head if you can’t afford to buy a house (or don’t want to gamble in the housing-bubble casino).

The scale of the costs matters. If I bought a burrito every working day (5 per week, with two weeks of vacation annually) for four years, that’s 250 per year or 1,000 burritos over four years. That’s one-tenth the cost of a university degree—assuming I can get all the classes needed to graduate in four years.

I can always lower the cost of lunch by making a peanut-butter-and-jelly sandwich at home rather than buying a burrito for $6.50, but there are limited ways to reduce the cost of a public university, which is already the “cheaper” alternative to private universities.

Even stripped-down healthcare insurance has soared in multiples of the official inflation rate.

Inflation in big-ticket items adds up to tens of thousands of dollars—costs that can’t be offset by choosing a cheaper mobile phone, cheaper clothing  or substituting a peanut butter sandwich made at home for a burrito at the taco truck.

Even if you skip buying lunch for four years, you’ve only offset 1/10th of the cost of a university diploma, a four-year stint in which the student lives at home and also eats peanut-butter-and-jelly sandwiches every day for four years (at least in in our barebones example of books, tuition and fees only, no dorm or university-provided food expenses).

As for healthcare: feast your eyes on this chart of medical expenses.

According to official inflation calculations, the $12,214 annual medical costs for a family of four in 2005 “should cost” $14,963 today in 2016.

Oops—the actual cost is $25,826, $10,863 higher than official inflation, which adds over $100,000 in cash outlays above and beyond official inflation in the course of a decade.

So let’s add the $30,000 per university student above and beyond inflation for two college students over a decade and the $100,000 in healthcare costs that are above and beyond inflation over that decade, and we get $160,000.

Since deductions for education and healthcare don’t completely wipe out income taxes, the household has to earn close to $200,000 more over the decade to net out the $160,000 to pay typical college and healthcare costs above and beyond what education and healthcare “should cost” if inflation in big-ticket items had actually tracked official inflation.

$100,000 here, $100,000 there and pretty soon you’re talking real money in a nation in which median household income is around $57,000 annually.

So if a household’s income kept up with official inflation over a decade, that household would have to earn at least $20,000 more per year just to keep pace with real-world, big-ticket cost increases.

That’s the problem, isn’t it? If the household’s wages only kept up with inflation, there isn’t another $20,000 a year in additional income needed to pay these soaring big-ticket costs. So the shortfall has to be borrowed, burdening the household with debt and interest payments for decades to come, or the kids don’t attend college and the household goes without healthcare insurance.

I’ve done some real-world apples-to-apples  calculations on our household’s costs of healthcare insurance, which we buy ourselves without any subsidies because we’re self-employed and we earn too much to qualify for ACA/Obamacare subsidies. (I would have qualified easily for the subsidies due to low earnings for the 20 years prior to Obamacare, but weirdly, as soon as ACA passed my income increased. Go figure.)

We’ve bought our stripped-down healthcare insurance from one of the more competitive non-profit providers, Kaiser Permanente, for the past 25 years. We’ve had the same plan (no meds, eyewear or dental coverage, and a $50 co-pay for any visit) for the entire quarter century. (Our plan is now grandfathered; the ACA equivalent is more expensive.) To keep the comparisons apples-to-apples, I compared identical coverage for the same-age person from year to year.

In 1996, the monthly cost to insure a 43-year old was $95. Now, the same plan for a 43-year old is $416 per month—more than four times as much for the same coverage.  If the costs had risen only in line official inflation, (52% since 1996), the monthly costs would be $145, not $416.

The cost of insurance for a 55-year old in 2008 was $325 per month. Today, the same plan for a 55-year old is $558, a 72% increase over a time span that officially only logged an 11% increase in inflation.

Last but not least, let’s look at a government-provided service—weekly trash pickup.  Since 2011, our trash fees have gone up 34.5%, compared to the official reduction in purchasing power of 6% since 2011.

Once again, real-world costs have soared at a rate that is almost six times higher than the official rate of inflation.

The reality is real-world inflation in big-ticket essentials is crushing every household that doesn’t qualify for government subsidies of higher education, rent and healthcare.

In Part 2: How To Beat Inflation, we examine a number of strategies for offsetting the soaring costs of everything from burritos to healthcare — with particular focus on the investments and actions you can take today, inside and outside of the markets, to preserve the purchasing power of your wealth from the nefarious "stealth tax" placed on your money by the kind of inflation discussed above.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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Just who is the enemy?

[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“..I sat at my desk wringing my hands, transfixed by the tragic slapstick of British politics..

“We are in the biggest domestic political crisis of my life..

“This is only the second time I can remember when the normal, trivial business of office life has stopped — and stayed stopped..

“I’ve witnessed a few surprising general election results, a few terrible terrorist events, a few sporting triumphs and defeats where we stopped and gawped and worried or marvelled for a little, but it never lasted long..

“The only other time I can remember when everything ceased was after 9/11..

“Another acquaintance, who holds a senior management job at a well-known company, reported feeling so lethargic and powerless he cancelled all but the most essential meetings and sat in his office staring at the news on screen, feeling increasingly out of control..

“Instead I went to work, and read more gloom about the UK economy. Sterling falling. Buyers pulling out of the property market. Decline in new job postings. And that is before the productivity catastrophe created by all this lethargy and all-round uncertainty..”

– Lucy Kellaway, ‘Carry on Post-Brexit, whether calm or not’, The Financial Times, 3 July 2016.

Ever since The Financial Times was acquired by the Japanese in the summer of 2015, its attitude toward the Establishment (that it partly forms) has hardened into ossified, dogmatic inflexibility. I felt so disturbed by Lucy Kellaway’s response to the Brexit vote that I felt compelled to write to her:

“Hi Lucy

“I’ve been reading my copy of the FT these last few weeks with a growing sense of disbelief – a sort of ‘Invasion of the Body Snatchers’ disbelief as you and your colleagues wail on about the collapse of everything you hold dear. Your piece today encapsulated that sense of rolling economic and cultural dread.

“I’m a fund manager, I live in London, I have a degree, I’m under 50 – and I voted ‘Leave’.

“Not one columnist on the paper has written in terms other than ones which are alienating, patronising, derogatory and spiteful to what I believe I voted for.

“I don’t know how often you get data about subscriber numbers but it would not surprise me if you sustain a large fall in readers when they’re next updated. I am thinking myself whether to maintain my own subscription – I don’t like paying top dollar to be insulted on a daily basis.

“If I am not representative of your “core”, who on earth can be?”

I didn’t get a response and, to be honest, I didn’t really expect one.

Two of the UK’s most influential financial journals of record – The Financial Times and The Economist – backed ‘Remain’ to the full extent of their journalistic resources, and lost. They now seem determined to talk us into recession. It would be a rather sad, pyrrhic victory if it came about.

Last Thursday, the FT’s senior investment commentator, John Authers, published a piece with the somewhat provocative title, ‘Central banks are not the enemy’. It included the following observations:

“..Trust is fragile and under attack. The urge to give the rich and powerful a hard kick links the UK’s vote to leave the EU, the nomination of Donald Trump and the rise of populist movements across Europe. Distrust of ruling elites is often justified but the breakdown in trust that is taking place today is different..”

“Monetary policy has stayed too loose for too long but that is not primarily a failure of central banks. Instead, it is a failure of politicians, who have avoided the spending commitments and deeper economic reforms, very painful at first, that would wean us off cheap money. And it is a failure of markets themselves, which freak out if denied their dose of easy money. Rather than ambitious power-grabbers, central bankers
strike me as awkward technocrats, deeply uncomfortable with the role that the abdication of responsibility by others has forced on them..

“Markets are not efficient, and are often wrong. I have made a career out of explaining this. But they are not part of a political process, and ignoring them is not an option. When they set the price at which we can borrow, or at which we can exchange currency, they create truths we have to live with. Without the basis of trust, which appears to be ebbing away, the economy loses its cornerstone. And not even all the bonds in
Christendom can rebuild it.”

The pain of the Brexit vote clearly still smarts over at Southwark Bridge. But the conflation of Brexit with the rise of Donald Trump, and European nationalism, is more than a little contentious. The philosopher John Gray has been one of the most incisive analysts of the UK’s decision to leave the EU:

“As it is being used today, “populism” is a term of abuse applied by establishment thinkers to people whose lives they have not troubled to understand. A revolt of the masses is under way, but it is one in which those who have shaped policies over the past twenty years are more remote from reality than the ordinary men and women at whom they like to sneer.

The interaction of a dysfunctional single currency and destructive austerity policies with the financial crisis has left most of Europe economically stagnant and parts of it blighted with unemployment on a scale unknown since the Thirties.

At the same time European institutions have been paralysed by the migrant crisis. Floundering under the weight of problems it cannot solve or that it has even created, the EU has demonstrated beyond reasonable doubt that it lacks the – capacity for effective action and is incapable of reform.

Europe’s image as a safe option has given way to the realisation that it is a failed experiment. A majority of British voters grasped this fact, which none of our establishments has yet understood.”

Mr Authers is surely right to point out that politicians are also partly to blame for the current global economic malaise, in having created a policy vacuum into which central bankers have stepped, however reluctantly. But I cannot accept his statement that the markets are not now part of a political process, nor that they play any real role in setting borrowing prices, when monetary policy and effectively all of the yield curve is under central bank direction. Most frustratingly, he does not choose to follow the trail of breadcrumbs in his argument to an existential question about the validity of central banking itself. So I decided to write to him, too:

“Dear John

“I hope this finds you well.

“As you rightly suggest, social media exchanges tend rapidly to become tribal and divisive, which is why I am writing to you privately in response to today’s piece ‘Central banks are not the enemy’.

“According to the Bank of England’s website, its mission is “to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.” How well they have delivered to this mandate since 2007 I will let you assess.

“In the light of this presumed objective, you may find the following note to one of my publishers interesting:

“I’ve been following with interest your, Bill Bonner’s and Jim Rickards’ exposure of fake money. First let me say that I totally agree with everything you have all written. I thought you might be interested in a concrete example.

“In 1971, as Nixon was embarking on his great economic experiment, my wife and I were in the process of buying our first house, a newly built three bedroom semi. As Warren Buffett remarked, “Price is what you pay, value is what you get.” Everything that can be reasonably described as capital has an intrinsic value. The intrinsic value of that house was that it provided a comfortable home for a young family. It was large enough to not feel claustrophobic. It had some private outside space, a drive on which you could park two cars and there was enough room to build a garage, although we couldn’t afford to do that. It was in a pleasant and safe environment with all amenities you would need, e.g. schools, doctors, a pub, an off-licence etc. That house is still there today. Its intrinsic value is pretty much the same today as it was 45 years ago. Perhaps a little less if its state of repair has deteriorated over the years or possibly a little more if the owners have added to it but no significant change.

“Money has no intrinsic value only extrinsic value. The value of money is simply what you can buy with it. In 1971 the house we bought cost £4,000. Today the same house would sell for about £200,000. That is an increase of a factor of 50 in 45 years or about 9% per annum. We tend to call this “inflation” but in reality it is “debasement of the currency”. How can we distinguish between the two? If I had bought the house in 1971 using gold I would have had to pay about 140 oz. If I wished to buy it today in gold it would cost me 190 oz. Given that the exchange rate between gold and fiat currencies has been manipulated to a low value over quite a long time span the price of the house in gold has hardly changed. If gold reaches £1,428 per oz in the not too distant future, which is a conservative estimate if you listen to Jim Rickards, the price will be identical in gold terms. Gold is a currency that can’t really be debased.

“You wouldn’t need to go far back in UK history to find a time when the punishment for debasing the currency was hanging and drawing. I believe it didn’t include quartering although I might be wrong. Perhaps reintroducing this punishment might concentrate the minds of those that dictate economic policy.”
—

The rest of my text to John Authers follows:

“You are right to suggest that central bankers are filling a void left by politicians. What concerns me is whether the institution itself is required, and whether, in the process of attempting to “maintain monetary and financial stability”, it is, in fact accelerating the destruction of all remaining faith in our monetary system.

“We allow markets to operate in just about every area of the financial system EXCEPT the setting of interest rates, which remains the exclusive privilege of the Bank. We are led to believe that a narrow clique of unelected technocrats led by a serial inflationist knows more about the economy and the 64 million people operating within it than those 64 million people themselves. We now face the prospect of the introduction of negative interest rates – a concept which I doubt even exists in most economics textbooks. If the Bank is trying to precipitate a) a run on the banking system and / or b) a run on the currency, it is certainly going the right way about it.

“By controlling interest rates and having facilitated QE, the Bank has undoubtedly affected both short term rates and bond yields. By impacting bond yields it is indirectly affecting equity prices too – no market is an island independent of other asset classes entirely. In a world of negative interest rates, savers and pensioners face an awkward choice between seeing their capital slowly evaporate in both real and nominal terms, embracing the credit, the derisory yield on offer, and the inflation risk of bonds, or risking their capital in an equity market arguably boosted unnaturally by QE and the distortions it has wrought elsewhere.

“At what point does the FT question whether the very concept of a central bank is fit for purpose any more? If Mark Carney and the MPC aren’t the enemy here, who on earth is? The experiences of Nazi Germany, Soviet Russia and Communist China showed the “demerits” of central planning. Why should we allow it to persist in our monetary system? If Government insists on maintaining a monopoly on the issuance of money, the very least it can do is protect its purchasing power. We are sleepwalking towards a religious experience for investors, and not, I suspect, in any good way.”

At the time of writing I had not received a response but, again, I didn’t really expect one.

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Saudis Slash Oil Prices For Asian Markets; So Much For Solving That Banking Liquidity Crisis

Shortly after we spoke yesterday about the banking liquidity crisis in Saudi Arabia caused by the “Saudi circ ref” (low oil prices -> budget deficits -> more oil pumping -> even lower oil prices), almost on cue, the state-owned Saudi Aramco, the worlds largest oil exporter, announced the largest price cut for Arab light sweet crude sold into Asian markets in 10 months.  Aramco priced September exports to Asia $1.10 per barrel below regional benchmarks which is a $1.30 cut vs. August pricing.  Oil pricing into Asian markets has come under intense pressure in 2016 as the battle for market share has intensified between the Saudis, Russians and Iranians (a topic we’ve covered extensively here, here and here).

Saudi Oil Price

Saudi prices cuts, which we fully anticipate to be matched by the Iranians, come as Iran continues to flood the market with supply in a race to return production to pre-sanction levels of 4 mm barrels per day.  Since international sanctions against Iran were eased in January, 1H16 shipments to Asia have surged with Japan’s purchases up 28%, India up 63%, South Korea up over 100% and China up 2.5%.  Mohsen Ghamsari, director of international affairs at state-run National Iranian Oil Co., said:

“Iran is exporting about 2 million barrels of its daily output of 3.8 million.  It has regained about 80 percent of the market share it held before the U.S. and European Union tightened sanctions on its oil industry in 2012.”

Iran has already boosted crude production 25% this year and aims to reach an eight-year high for daily output of 4 million barrels by the end of the year.

Iran Crude Shipments

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Liberty Links 8/1/16

22 links today. Enjoy.

Welcome to the 2016 DNC, Sponsored by Special Interests (It’s all so dirty, this is a must read, The Nation)

U.S. Trade Rep Insists TPP is Not Dead Yet (WARNING: Obama will try to pass the TPP in the lame duck, McClatchy)

Facebook Admits It Blocked Links to Wikileaks DNC Emails (Gizmodo)

Night of the Hollow Men: Notes From the Democratic Convention (Great summary of one of the DNC nights, CounterPunch)

Clinton Camp Laughs Off Questions About Press Conference Blackout (So hilarious, The Hill)

Why Clinton Might Have A Tough Time Flipping The Sanders Holdouts (FiveThirtyEight)

Nina Turner Weighing Offer to Join Green Party Ticket as VP Candidate (This would be big, Cleveland.com)

Dem Anxiety Hangs Over Clinton (The Hill)

The VA’s Luxury Art Obsession (Reporting by Open the Books, via Forbes)

What Did NBC News’s Chelsea Clinton Do for Her $600,000 Salary? (2014 article, but important to revisit, The Washington Post)

See More Links »

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Federal Appeals Court Upholds Criminal Charges Against 13 Year Old for Burping in Class

Straight to juvie...|||Andi Berger | Dreamstime.comThe scene is Albuquerque’s Cleveland Middle School, where a 13-year-old class clown is disrupting things by constantly burping during teaching time. So the teacher bounces him to the vice principal’s office, who has a sneaking suspicion that the kid is involved in selling pot on school grounds. The boy is made to take his jeans and shoes off but no drugs are found.

The kid—a pain in the ass in all likelihood, let’s be honest—is suspended for the rest of the school year. As over-the-top as that seems, there’s worse yet to come. He’s also criminally charged under an impossibly vague statute that reads n part:

“No person shall willfully interfere with the educational process of any public or private school by committing, threatening to commit or inciting others to commit any act which would disrupt, impair, interfere with or obstruct the lawful mission, processes, procedures or functions of a public or private school.”

And now, as George Washington University law professor Jonathan Turley writes,

Teachers and administrators have been criminalizing juvenile conduct rather than dealing with such issues with the students and their teachers…. the United States Court of Appeals for the Tenth Circuit has issued an opinion upholding one of the most ridiculous examples of the criminalization of our schools. The Tenth Circuit said that Albuquerque school officials and police were justified in ordering the arrest of 13-year-old boy who was burping in class. The Tenth Circuit ruled that the school officials and police officer were entitled to immunity for their excessive response to what was at worst a class clown.

When you encounter this sort of ridiculous overreaction on the part of school officials—which is then certified by even-more-august authorities—it is no wonder why Americans are losing confidence in major institutions of political, commercial, and civic life. These are not the actions of authorities who have belief in themselves and the things they run. They are the behaviors of a society in decline, to be honest, that no longer feels as if it can exercise power at any level except via banishment and extreme action.

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Italian Banks Crash Despite ‘All Clear’ From EU Stress Tests

For a few minutes at the open, mainstream business media persuaded itself that the EU stress tests had proved that everything was fine in Europe's banking system again. But very quickly, things went south with Italian banks – the center of the storm – reversing gains and then extending losses with Unicredit now down 8% (after being up 4%).

As Citi's Christian Schulz notes, "The 2016 stress test is unlikely to fully restore investors’ trust in the eurozone banking system, in our view."

And it seems he is right…

Monte Paschi is holding gains amid its massively dilutive capital raise, but this is noise across the stock's bid-offer.

Finally, we offer Macro-Man's sarcastic take on the EU stress tests as evidence of why EU banking stocks are sliding…

1)  In the latest European bank stress test, Monte dei Paschi ended up with Tier 1 capital of -2.4% in the most stressed scenario

 

2) Although there was no official pass or fail awards, a negative capital ratio is pretty clearly an epic fail

 

3) Having sold  €8 billion worth of stock since 2014, BMPS proposes to sell another €5 billion before year end…

 

4) …providing they can also unload €9.2 billion worth of NPLs turds off of their balance sheet first

 

5)  Since the imposition of negative rates in Europe (illustrated by the arrow), here is what the SX7E index has done
 

6)  So naturally, the stress tests did not measure the impact of more negative rates, only a move higher in rates

 

7) This is the equivalent of measuring the impact of a dog whistle on a deaf person

 

8) More European banks failed the Fed's stress test (DB and Santander) than the EBA version (albeit, as noted, there were not official pass/fail grades this time around.)

 

9) If you can believe it, DB scored half a percent better on the stress test than Barclays

 

10)  If you were wondering,  by far the highest score on the EBA stress test was achieved by NRW.Bank in Germany.   In a possibly related coincidence, their website looks like it's a school project for a middling web design student, though its career portal does offer applicants the opportunity to "venture into the fascinating world of finance!"

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You can't make this stuff up!!

via http://ift.tt/2aoNLMN Tyler Durden