Month: May 2017

No, Trump Won’t Change the First Amendment, But It Matters That People Want To

Trump RallyPresident Donald Trump’s willingness to alter the terms of the First Amendment as part of his desire to censor critical press of him is firmly established: See his constant complaints of “fake news” (to be fair, his complaints are sometimes correct) and his desire to “open up libel laws.” The president has no direct influence over the content of libel laws because they’re state-level laws. There are many pivotal Supreme Court rulings on the relationship between libel laws and the First Amendment protections of free speech and a free press. Trump would have to rewrite the First Amendment in order to get what he wants.

Trump is not going to be altering the First Amendment. Let’s just start with that. Even if he weren’t an extremely divisive president, it would be quite the uphill battle. But it is worth taking note at how establishment officials looking to maintain influence within the Trump administration respond. It’s worth separating out what is possible from what is likely.

The coverage of Sunday interview between ABC’s Jonathan Karl and White House Chief of Staff Reince Priebus on This Week seems designed for the purpose of keeping this fight between Trump and the press on front burner, as if the president’s absence from the White House Correspondents Dinner and counter-rally didn’t already have that effect.

Priebus knows that Trump isn’t changing anything about the First Amendment and that there will be no changes to libel laws in the near future. But he is not willing to say that. He can’t. He won’t. So during his Sunday interview with Karl he says “It’s something we’ve looked at. How that gets executed or whether that goes anywhere is a different story.”

We don’t know what “looked at” means (perhaps a Google search of pages that explain state libel laws?), but some media analysts are concerned about the implications that this might actually happen. It probably won’t, but the media benefits from playing up this conflict as much as Trump does.

Let’s take a look at where that conversation shifted after talking about libel laws, because that’s where I’d rather we were paying attention. Trump has also said he would like to criminalize flag-burning, which Priebus also vaguely defended in a similar fashion. There is a lot of popular support for laws against burning flags, though when truly pressed, a majority of Americans tend to come down against a constitutional amendment. The wording of the poll question matters.

Trump is not alone in his desire to change the First Amendment in ways that benefit his particular world view, and if nothing else, his efforts should be use as an object lesson. Priebus complains that the press has been irresponsible in its reporting. This is not a new complaint from government officials targeting the press. In the wake of the Edward Snowden revelations, the New York Times itself (a noted Trump target) hosted commentary by Michael Kinsley suggesting there needed to be some sort of oversight over what the press was allowed to publish.

Americans have a remarkable facility for looking for exceptions to the First Amendment and deciding that some controversial or unpleasant statements simply are not valid forms of speech. On the other side of the aisle, there’s a concerted push to invalidate the Supreme Court’s Citizens United decision by attempting to amend the Constitution to deprive corporations of legal personhood and of their right to free speech.

And we more prominently have the current push to insist that “hate speech” does not qualify as “free speech” and the belief by many poorly educated Americans (some of whom are actual politicians who should know better). These comments by Priebus should be reminders that if and when there are restrictions placed on the free speech of American citizens, it’s the leaders of government who will be calling the shots. We have a president who is thin-skinned and self-interested. We also have any number of political operatives who are willing to play along with him in order to maintain power.

That is all to say, in the event the First Amendment does face the threat of actual new restrictions it will bear the stamp of “public interest.” It will be a lie, but not as obvious a lie as what Trump is trying to sell. Guys like Priebus (on both sides of the aisle) will happily sell the Bill of Rights down the river if it will help facilitate the type of government control over society that they want. The Trump administration may deregulate businesses on the one hand, and that’s great, but they really have no interest in making the government less powerful.

Back in December, Matt Welch provided a useful five-step process in countering Trump’s bad ideas. It’s definitely worth reading here.

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Pierre Andurand Blames CTAs For His Hedge Fund’s Worst Draw-Down Ever

Authored by Mark Melin via ValueWalk.com,

Bullish on oil, Andurand Commodity Fund Manager Pierre Andurand looks around the world for justification of his long exposure. Since the start of 2017, patience has been emphasized by the famous French oil trader, perhaps best known for his previous BlueGold Global Fund management, who is now struggling with an -11.6% loss year to date as of March and is in the middle of the worst drawdown in the life of the fund, a March investor letter reviewed by ValueWalk reveals.

Pierre Andurand

Pierre Andurand – A hedge fund manager with a strong track record finds himself in an inevitable drawdown

When he started his career at the BlueGold Global Fund, generating on average 60% performance each of the four years he managed it, he had a charmed career. Andurand then ventured out on his own, and his gift for reading the oil markets, judging by numeric performance, revealed an amazing talent.

That talent was confirmed in 2014 when the oil market had its most precarious price drop in history, moving from $108.51 June, 2014 to end that year near $55 per barrel, almost cutting the price of oil in half over the course of just six months. Pierre Andurand caught the end of this trend, delivering investors 38.1% on a year that saw the S&P GSCI Crude index drop by 42.6%.

Andurand’s general beating of the crude oil benchmark, and his noncorrelated switching of positions, is his hallmark. After a strong 2016 when the fund was up 22.1%, Andurand, now with $1.3 billion under management, looks to understand causation for the fund’s recent drawdown, a setback that hits all fund managers at some point, with the exception of Bernie Madoff.

BlueGold Global Fund

 

BlueGold Global Fund – Sentiment and non-economic algorithmic players are driving prices lower, says Pierre Andurand

The recent oil market sell-off is not attributable to fundamental changes in the supply and demand equilibrium, the hedge fund’s letter told investors. The issue is more a shift in sentiment, also known as soft data.

“It is possible that the oil market continues to be spooked by the extreme volatility and lack of consistency in high frequency tanker tracking data,” he wrote. “Intra week/month large swings in export/import volumes have been supporting heightened skepticism about the OPEC agreement.”

Andurand isn’t buying the OPEC won’t honor its agreements line, however.

“It is clear to us that OPEC remains committed to the output reduction and based on the latest communication from the cartel,” he wrote, emphasizing a primary point that fundamental supply is going to support prices across several platforms, including US crude and shale production. He had previously predicted the OPEC oil deal and now says that will hold.

He looks at China and cites “market fears” that the “intensity” of Chinese oil buying, where excessive leverage rules the day, “has softened slightly.”

The market sell-off is missing the larger picture, he proclaims.

“Market participants remain extremely focused on micro developments like US crude inventories while the big picture has been telling us a different supply story for quite some time,” he wrote. “In fact, the gradual tightening of crude oil spreads has led to the release of expensive onshore and offshore inventories globally.”

So what could be driving prices lower?

Andurand looks at the algorithmic traders and places blame on their non-economic outlook for the price movements. “Without consistent and significant draws invisible onshore inventories, we remain stuck in a trendless and choppy market with CTA flows eclipsing the gradual improvement in fundamentals,” he wrote, pointing to an oddity.

He is not the only analyst to point to CTAs as being responsible for oil price volatility, but both analysts did not cite available open source data. Typically trend following CTAs enter markets during periods when trends are evident, not during choppy markets. Data is mixed on the subject. Depending on the time frame some oil analysis on CTA signals indicates that the market has not generated signals. Niels Kaastrup-Larson’s Trend Barometer, which measures markets for medium to strong trends, shows indecisive markets. Short term CTAs or proprietary traders might have flipped their positions, but certain mid- to longer- term trend models have not given an indication that the time to take action in a particular market has occurred. It is possible that short-term traders have overwhelmed the market, but there are reliable data points that back up this notion that has not been cited.

When reached and asked to provide a source or data support for the notion that CTA flows were strong in a choppy and trendless market, Andurand through spokesperson John Hamlin declined to comment.

“While the price action year-to-date has proven to be extremely frustrating, our bullish outlook for oil prices has not changed,” he told investors experiencing the largest drawdown in fund history. “We maintain the view that front month oil prices will reach new highs over the next few months as fundamentals improve considerably going into the summer.”

Keep the faith, is Pierre Andurand's message. All great investors endure pain. That’s part of the process.

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Bank Stocks Tumble After Trump Says “Open To Breaking Up Big Banks”

What Treasury Secretary Mnuchin giveth, President Trump taketh away…

0810ET: *MNUCHIN SAYS `THANK ME’ FOR RECENT RISE IN BANK STOCKS

 

0951ET: *TRUMP SAYS HE’S ACTIVELY CONSIDERING BREAKING UP BIG BANKS

As Bloomberg reports, President Donald Trump said he is actively considering breaking up giant Wall Street banks, giving a push to efforts to revive a Depression-era law separating consumer lending and investment banking.

“I’m looking at that right now,” Trump said Monday in an interview with Bloomberg News in the Oval Office. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”

The reaction is clear as the machines dump the Big banks…

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Trump Says “Would Be Honored” To Meet With Kim Jong-Un, Willing To Raise Gasoline Tax

In a surprising foreign policy pivot, President Trump told Bloomberg during an Oval Office interview that he would meet with North Korean leader Kim Jong Un “if the circumstances were right.”

“If it would be appropriate for me to meet with him, I would absolutely, I would be honored to do it,” Trump said Monday in an interview with Bloomberg News. “If it’s under the, again, under the right circumstances. But I would do that.” It was not immediately clear what circumstances Trump considers “right.”

The US president added that “most political people would never say that,” regarding his willingness to meet with the reclusive Kim, “but I’m telling you under the right circumstances I would meet with him. We have breaking news.”

Kim’s regime, a source of heightened geopolitical tension over the past month, has repeatedly defied the US and international sanctions with continued development of its nuclear and intercontinental ballistic missile program. It would mark the North Korean leader’s first summit: as Bloomberg adds, Kim has never met with a foreign leader since taking charge after his father’s death in 2011 and hasn’t left his isolated country.

In January, Trump vowed that he wouldn’t let North Korea develop a nuclear weapon capable of reaching the U.S. mainland, and North Korea has labeled American military moves in the region as acts of “intimidation and blackmail.” North Korea has continued to test missiles this year, and last weekend the communist country arrested a third US citizen.

* *  *

On a separate matter, Trump said he’s willing to raise the U.S. gas tax to fund infrastructure development and called the tax overhaul plan he released last week the beginning of negotiations.

“It’s something that I would certainly consider.”

Fix chimes in with another soundbite from Trump, according to which the president believes “one mistake he made was on healthcare.”

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30Y Treasury Yield Bursts Above 3.00% After Mnuchin Comments

Following comments by Treasury Secretary Mnuch this morning that ultra-long bonds could "absolutely" make sense for America, the Treasury curve has jumped and steepened dramatically…

 

With 30Y yields back above the 3.00% Maginot Line.

 

Following the biggest short-squeeze in history… In fact the stunning swing in sentiment in the last 8 weeks (with almost $62 billion in 10Y Treasury shorts dumped) is shocking to see, smashing Speculative Positioning from its shortest ever to its longest in over 9 years…

 

It is perhaps not entirely surprising that sell-offs are a little more aggressive than normal.

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Why Democrats Are Delighted With The Republican Spending Bill

Why were Democrats unable to hide their enthusiasm for the latest Omnibus spending bill proposed by House Republicans? Simple: because, as the Washington Examiner’s Philip Klein writes, “Dems basically got everything. It’s like they control House, Senate, & WH rather than the other way around.“

Some big picture details:

  • Deal totals just over $1 trillion
  • Deal allows for an increase of $12.5bn in defense spending, which is 18bn less than Trump requested. However, if Trump makes strides with Isis, an addition 2.5bn will be made available.
  • Includes permanent fix to fund coal miners’ health care instead of a temporary extension.
  • Democrats win: There will be no wall funding; instead Trump will get $1.5bn in border security funds, which is half the original request; it will be used to support existing infrastructure.
  • Democrats win again: Puerto Rico will receive an emergency injection for Medicaid health insurance supports
  • Democrats win again2: Planned Parenthood, a key issue for Democrats, will be saved from cuts, while the National Institute of Health will see a $2bn hike in funding.
  • Democrats win again3: Cuts in the Environmental Protection Agency appear avoided for the remainder of the year.
  • Democrats win again4: The omnibus funds California high speed rail

Additionally as Bloomberg adds, “Republicans failed to get a number of conservative provisions in the bill, including one that would have blocked the Labor Department’s fiduciary rule limiting financial advice to retirees.”

Also snuck inbetween the cracks there’s also a new $100 million fund to counter Russian influence in Europe.

The deal also includes a 2% increase for national parks, including nearly $40 million in new funding to address deferred maintenance and construction needs. More than 70 anti-environmental policy riders in the bill were defeated.

Amusingly, the package would provide $68 million extra in local law enforcement funds to reimburse New York City and other localities for protecting Trump.

Democrats, predictably, loved the spending bill which is sure to add hundreds of billions to the US deficit: “This agreement is a good agreement for the American people, and takes the threat of a government shutdown off the table,” Senate Minority Leader Chuck Schumer said Sunday night in a statement. “The bill ensures taxpayer dollars aren’t used to fund an ineffective border wall, excludes poison pill riders, and increases investments in programs that the middle-class relies on, like medical research, education, and infrastructure.”

House Minority Leader Nancy Pelosi also praised the deal, saying that Democrats won the removal of about 160 partisan riders. “The bill also increases funding for wildfire and federal highway emergency relief, and for Puerto Rico’s underfunded Medicaid program,” she said in a statement. Under the tentative deal, the island would get some relief with $295 million in unspent money for territories for a limited time, said a congressional aide.

As expected, Republicans were just as eager to cover up the fact that they rolled over:  “We couldn’t be more pleased,” Vice President Mike Pence said in an interview on CBS “This Morning.” He called the deal “a bipartisan win for the American people” that included funding for a significant increase in military spending and a down payment on border security.

“We have boosted resources for our defense needs without corresponding increases in non-defense spending,” House Speaker Paul Ryan said in a statement. He said the measure will make the U.S. “stronger and safer.”

But not all: Republican Representative Jim Jordan, chairman of the House Freedom Caucus, was quoted by Reuters saying he and other conservatives likely would not back the measure because it does not fulfill their promises to voters. “I’m disappointed,” Jordan told CNN. “We’ll see how it plays out this week but I think you’re going to see conservatives have some real concerns with this legislation.”

Bloomberg’s summary:

Overall, the compromise resembles more of an Obama administration-era budget than a Trump one. The National Institutes of Health, for example, would see a $2 billion boost, reflecting the popularity of medical research among lawmakers. The deal includes $990 million for famine aid, along with a $1.1 billion boost for disaster recovery funds.

The House Rules Committee has scheduled a hearing for 3 p.m. Tuesday to consider advancing the bill, including setting procedures for a floor vote. That said, there does remain a chance for a government shutdown in October. Trump has sought $54 billion in defense increases paired with $54 billion in domestic cuts. Republican leaders may be less willing to bow to Democrats without the excuse of being more than halfway through the fiscal year.

Finally, as Bloomberg adds, Congress and the president will also need to agree on a debt ceiling increase in the fall, and White House budget director Mick Mulvaney has said he wants to use the debt ceiling to impose new spending restraints.

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RBOB “In Danger Of Breaking Down” Amid Record Gasoline Contango

June 2017 gasoline futures are traded at the biggest discount ever to the July contract this morning…

As the front-month futures tumbles to its lowest since September.

As Bloomberg reports, Mizuho Securities' Bob Yawger warns its "not a good sign that gasoline is so weak, so close to Memorial Day and driving season… gasoline in danger of breakdown today."

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Climate Change, Scientism and the Politics of Certitude

GlobalWarmingQuestionsThe balance of the scientific evidence supports the claim that man-made climate change is happening. That being said, there are many uncertainties with regard to how fast the climate might warm over the course of this century; how much it might warm; how fast sea level will rise; and so forth.

Climate scientists try to get a handle on the trajectory of climate change using computer climate models. When compared to observational temperature trends, the models’ outputs have been somewhat less than robust. University of Alabama at Huntsville climatologist John Christy, who is a long-time skeptic of projections of future catastrophic warming, finds that computer model temperature increases average about 3-times greater than the actual temperature trends. A January 2017 paper in the Journal of Climate by researchers who unquestionably represent mainstream climate science corrected for satellite data trends and the inclusion of stratospheric cooling and also found that the models are warming 1.7-times faster than the observational temperatures.

In his column, “Climate of Complete Certainty,” New York Times opinion writer Bret Stephens sought to account for the skepticism of high percentage of Americans toward the dire warnings from environmentalists about impending catastrophic climate change. Stephens accepts that man-made warming is real; however, he observes that much else is still a matter of probabilities. From his column:

That’s especially true of the sophisticated but fallible models and simulations by which scientists attempt to peer into the climate future. To say this isn’t to deny science. It’s to acknowledge it honestly. …

Claiming total certainty about the science traduces the spirit of science and creates openings for doubt whenever a climate claim proves wrong. Demanding abrupt and expensive changes in public policy raises fair questions about ideological intentions. Censoriously asserting one’s moral superiority and treating skeptics as imbeciles and deplorables wins few converts.

None of this is to deny climate change or the possible severity of its consequences. But ordinary citizens also have a right to be skeptical of an overweening scientism. They know — as all environmentalists should — that history is littered with the human wreckage of scientific errors married to political power.

As it happens, hundreds of thousands of climate activists this past weekend participated in the Peoples Climate March in Washington, D.C., along with subsidiary marches in 300 other cities. It is evident that many progressive marchers would eschew Stephens’ warning against marrying uncertain science to politcal power and are entirely certain that climate change requires the complete transformation of the U.S. economy and society along more communitarian lines. It is not too much to say that environmentalists’ apocalyptic climate rhetoric helped elect our current president.

The New York Post is reporting the nasty progressive backlash against Stephens who aim to get him fired from the Times.

For more background on the human wreckage of scientific errors made by political environmentalists see my book, The End of Doom: Environmental Renewal in the 21st Century. I also reprise failed predictions of impending environmental catastrophe from the first Earth Day in 1970.

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These Three Charts Are Warning the Market Could Soon Experience an “Event”

The markets are speaking, but no one is listening.

The single driver of the stock market since election night is the hype of a Trump-policy driven economic boom. The economy is booming, but based on expectations NOT actual policy changes.

This is a critical distinction.

Stocks are MOST susceptible to violent drops (or even Crashes) when illusions are shattered. The illusion of major changes to the US economy is about to be shattered.

The markets are already telegraphing this.

The single most important stock market index for assessing “risk on” vs. “risk off” is the Russell 2000. What the Russell 2000 does… the rest of the market soon follows.

On that note, the Russell 2000 has just staged a final blow off push to the upside. And. It. Failed. The momentum here has shifted and we could drop to that red box (a 5% drop) in a matter of days.

Put simply, this chart is telling us that the market has just entered “risk off” mode.

Then there’s the Dow Jones Transportation Index.

This is THE most economically sensitive index for the markets. Transports “get” the economy better than any other group of stocks.

On that note, Transports are telling us that the economy is not in fact booming… it’s basically just treading water, no matter sentiment says. In fact, we’ve got a very nasty Head and Shoulders pattern forming here.

If the economy was really roaring, Transports would be soaring. They’re not. If anything, they’re getting ready to drop 1,000 points in the next 30 days.

Finally, and most importantly, there is High Yield Credit or Junk Bonds. These represent the credit cycle. When credit growth is strong here, financial conditions are strengthening in the financial system and risk does well.

When credit growth is weakening, or worse, contracting here, financial conditions are worsening in the financial system and “look out below.”

On that note, Junk Bonds are rolling over and preparing to break out of a textbook perfect bearish rising wedge pattern. This is telling us that the entire move from the February 2016 bottom is about to come unraveled. We could easily see stocks drop 10% from current levels if this pattern is confirmed.

These three charts, taken together, suggest the markets are about to experience an “event” in which risk comes unhinged. When this happens, the markets will adjust VIOLENTLY to the downside.

To pick up a FREE investment report outlining three investments that you could make you a ton of money when the markets collapse… 

CLICK HERE NOW

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

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