Schwab: “New Accounts Are At Levels We Have Not Seen Since The Dot Com Bubble” As Millennials Rush Into Stocks

We can now officially close the book on the “cash on the sidelines.”

One week ago, we reported that in the latest weekly survey of Bank of America high net worth clients, the cash allocation had fallen to an all time low of just 10.4%, below the previous record low of 11% in April 2007 as everyone is “forced” to dance in this market, in which the music is still playing.

Now, in a separate confirmation of what Deutsche Bank recently classified as market “froth”, Jonathan Tepper points out that the stock euphoria has finally spread to the retail investor.

Case in point: in its Q2 earnings results, Schwab reported that after years of avoiding equities, Schwab clients opened the highest number of brokerage accounts in first half of 2017 since 2000.

This is what Schwab said on its Q2 conference call:

New accounts are at levels we have not seen since the Internet boom of the late 1990s, up 34% over the first half of last year. But maybe more important for the long-term growth of the organization is not so much new accounts, but new-to-firm households, and our new-to-firm retail households were up 50% over that same period from 2016.

In total, Schwab clients opened over 350,000 new brokerage accounts during the quarter, with the year-to-date total reaching 719,000, marking the biggest first-half increase in 17 years. Total client assets rose 16% to $3.04 trillion.

Schwab also adds that just like in the case of Bank of America’s HNW private clients, the net cash level among its clients has only been lower once since the depths of the financial crisis in Q1 2009:

Now, it’s clear that clients are highly engaged in the markets, we have cash being aggressively invested into the equity market, as the market has climbed. By the end of the second quarter, cash levels for our clients had fallen to about 11.5% of assets overall, now, that’s a level that we’ve only seen one time since the market began its recovery in the spring of 2009.

While some of this newfound euphoria may be due to Schwab’s recent aggressive cost-cutting strategy, it is safe to say that the wholesale influx of new clients, coupled with the euphoria-like allocation of cash into stocks, means that between ETFs and other passive forms of investing, as well as on a discretionary basis, US retail investorshas never been more “all-in” stocks than they are now.

But wait, there’s more: throwing in the towel on prudence, according to a quarterly investment survey from E*Trade, nearly a third of millennial investors are planning to move out of cash and into new positions over the coming six months. By comparison, only 19% of Generation X investors (aged 35-54) are planning such a change to their portfolio, while 9% of investors above the age of 55 are planning to buy in.

Furthermore, according to a June survey from Legg Mason, nearly 80% of millennial investors plan to take on more risk this year, with 66% of them expressing an interest in equities. About 45% plan to take on “much more risk” in their portfolios.

In other words, little by little, everyone is going “all in.”

Ironically, Schwab’s own economists were forced to caution its clients that the party may soon be ending as we discussed last week in “Even Schwab Is Warning Retail Clients Of ‘Danger Signs Rising‘:”

A solid earnings season should contribute to a continuation of the bull market in stocks. Dangers are lurking, however, and the possibility of a decent-sized pullback has grown over the past couple of months, in light of monetary policy and geopolitical uncertainties. While we would likely view such a move as healthy, it can be disconcerting. Stay diversified and be prepared to guard against overreacting to any such move.

Because if there is anything retail investors are known for, it is avoiding “overreacting” to “decent-sized pullbacks.” As for those 45% of Millennials planning to take on “much more risk” at the all time highs in the S&P, good luck.

via Tyler Durden

Trump Throws Trans Troops Under the Bus [Podcast]

On today’s podcast, Reason’s Nick Gillespie, Katherine Mangu-Ward, Matt Welch, and Andrew Heaton discuss the trans military ban, Trump’s management casualties, and free speech on Twitter.

The president is making a lot of noise and staff shuffling, but not much legislative progress. Good news? Yes and no.

“A big upside for [libertarians] is that Trump seems to be not very good at executing these [illiberal] maneuvers,” says Mangu-Ward, citing the travel ban. But low trust in government “oddly doesn’t seem to lead to calls for less government.”

They also discuss whether Twitter is the new battleground for free speech.

And should we add Trump to Mount Rushmore or just blow it up?

Audio production by Ian Keyser.

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from Hit & Run

Ruling Against Facebook Ban Suggests Trump’s Twitter Blocks Are Unconstitutional

Phyllis Randall, chair of the Loudon County, Virginia, Board of Supervisors, banned Brian Davison from her Facebook page for just 12 hours. But according to a federal judge in Alexandria, that brief banishment in February 2016 was enough to violate Davison’s First Amendment rights. The ruling, published last week, reinforces the logic of a recent federal lawsuit claiming that Donald Trump engages in unconstitutional viewpoint discrimination when he blocks critics on Twitter.

Randall banned Davison, a local gadfly, from her “Chair Phyllis J. Randall” Facebook page after he posted a comment suggesting that members of the Loudon County School Board had taken official actions that benefited their relatives. “If the Supreme Court’s First Amendment jurisprudence makes anything clear, it is that speech may not be disfavored by the government simply because it offends,” writes U.S. District Judge James Cacheris, a Reagan appointee, in his decision siding with Davison. “The suppression of critical commentary regarding elected officials is the quintessential form of viewpoint discrimination against which the First Amendment guards. By prohibiting Plaintiff from participating in her online forum because she took offense at his claim that her colleagues in the County government had acted unethically, Defendant committed a cardinal sin under the First Amendment.”

Cacheris rejected Randall’s contention that her Facebook page “is merely a personal website that she may do with as she pleases.” He notes that she and her chief of staff created it shortly before she took office, that it it lists her official position and contact information, and that she uses it primarily for official purposes such as describing the supervisors’ work, implementing their policies, documenting her appearances as a representative of the county government, and communicating with her constituents. “I really want to hear from ANY Loudoun citizen on ANY issues, request, criticism, compliment, or just your thoughts,” she says in one post. “However, I really try to keep back and forth conversations (as opposed to one time information items such as road closures) on my county Facebook page (Chair Phyllis J. Randall) or County email (”

Randall’s posts are generally addressed to “Loudon”—i.e., the general public in her county. The forum that she created on Facebook was open to everyone except for Davison, who by her own account offended her by criticizing her colleagues on the school board. “Plaintiff is the only person Defendant has ever banned from her Facebook page,” Cacheris notes. Since Randall reconsidered that decision the next day, “the consequences of Defendant’s actions were fairly minor.” Even during the 12 hours when Davison was banned, he could still read and share Randall’s posts, although he could not comment on them or send direct messages to her.

Cacheris nevertheless thought Randall’s violation of the First Amendment was clear enough to grant Davison the declaratory judgment he requested. “Defendant acted under color of state law in maintaining her ‘Chair Phyllis J. Randall’ Facebook page and banning Plaintiff from that page,” Cacheris concludes. “Defendant’s actions violated Plaintiff’s right of free speech under the First Amendment to the United States Constitution and Article I, § 12 of the Constitution of Virginia.” Although Cacheris did not say so explicitly, Davison’s temporary exclusion also seems to implicate the First Amendment right to petitition the government for a redress of grievances, since she blocked him from one of two channels she identified for that purpose.

Donald Trump’s Twitter account is similar to Randall’s Facebook page is several significant ways. Although he created it years before he was elected president, the profile now identifies him by his public position and official address, and he uses the account mainly for official purposes, including the announcement of decisions, such as the appointment of a new FBI director and a ban on transgender soldiers, before they have been revealed elsewhere. Administration officials help maintain the account, which they explicitly describe as a way for Trump to communicate with his constituents.

All are welcome to participate in this forum except for the disfavored few who have said something that offended Trump, which is clearly a form of viewpoint discrimination. Like Davison when he was banned from Randall’s Facebook page, the critics Trump blocks on Twitter can still see what he says, but they cannot directly participate in the debate it provokes on that platform. In short, if Cacheris is right that Randall’s banishment of Davison was unconstitutional, it is hard to see how Trump’s blocking of disfavored Twitter users can be legal.

from Hit & Run

“It’s Better To Turn Cautious Too Soon…”

Authored by Simon Black via,

One of the greatest investors in the world is getting worried…

Howard Marks is the billionaire founder of Oaktree Capital, one of the largest and most successful investment firms in the world.

A few times each year Marks write up his thoughts about financial markets– he calls them ‘investment memos’.

And he just released his latest one with a very clear message: it’s time to be cautious.

From Marks’ memo…

I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses.

Marks admits this bull market could continue. But he’s happy taking chips off the table in today’s particularly dangerous market.

Asset prices are high across the board – the S&P 500 is trading at 25 times trailing 12-month earnings compared to a long-term median of 15 – and prospective returns are low.

Meanwhile, we’re also seeing record-high complacency amongst investors.

Just this morning the Wall Street Journal published data from Yardeni Research showing that percentage of ‘bearish’ investors who believe that the market will fall is near its lowest level since 1987.

The Volatility Index (VIX), a statistic which measures ‘fear’ in the market place, is at its ALL-TIME lowest point in its entire 27-year existence – hitting 8.84 last week, compared to above 80 in 2008.

The VIX hit 8.89 on December 27, 1993. From Marks:

The index was last this low when Bill Clinton took office in 1993, at a time when there was peace in the world, faster economic growth and a much smaller deficit. Should people really be as complacent now as they were then?

Compare that today, where market pitfalls abound…

  1. North Korea is threatening to nuke the US
  2. Donald Trump is firing his entire cabinet
  3. The Federal Reserve has dropped interest rates to record lows and drowned the world in trillions of dollars of cash
  4. Debt levels are at record highs
  5. Entire banking systems, especially in Europe, are in need of massive bailouts
  6. The US government will run out of money in less than 90-days and hit the debt ceiling once again

Marks points out an important thing to remember about the VIX… It doesn’t say what volatility will be, only what investors think volatility will be. And the crowd is almost always wrong.

We’re eight years into the current bull market. Stocks have been rising for eight straight years– the second-longest winning streak in history behind the S&P 500’s 417% gain between December 1990 and March 2000.

And investors seem to see nothing but clear skies ahead.

And their false sense of security is pushing them to take on greater amounts of risk.

For example, junk bonds today yield just 6%.

In other words, pitiful, low quality companies that few analysts expect them to even remain in business are able to borrow money at just 6%.

That’s insane.

We recently wrote about Netflix losing $2 billion over the past 12 months. Yet the company’s stock price continues soaring to all-time highs.

In May, Netflix issued more than a billion dollars in debt at a rate of just 3.625%.

Would you loan money to a company that loses $2 billion a year in return for 3.625% ?

The answer is probably no. Marks shares his thoughts on Netflix’s debt:

Is it prudent to lend money to a company that goes through it at such a prodigious rate? Will Amazon or Google be able to loosen Netflix’s hold on its customers? Is it wise to buy bonds based on a technology position that could be overtaken? Positive investor sentiment has taken the company’s equity value to $70 billion; what would happen to the bond price if worries about rising competition took a bite out of that one day? Should you take these risks to make less than 4% per year? In Oaktree’s view, this isn’t a solid debt investment; it’s an equity-linked digital content investment totally lacking in upside potential, and it’s not for us. The fact that deals like this can get done easily should tell you something about today’s market climate.

In addition to appetite for their bonds, the “FAANG” stocks – Facebook, Amazon, Apple, Netflix and Google – are priced for perfection.

Netflix trades for nearly 240 times earnings. Amazon’s price-to-earnings ratio is over 190.

The market believes these stocks have cemented their leadership positions and cannot be unseated. But the future is always uncertain.

And throughout history, plenty of “can’t lose” companies – like Kodak, Xerox, Yahoo, etc. have fallen from grace.

I’d encourage you to read Marks’ full memo here. It’s one of the longest he’s ever written.

And remember to be prudent today…

There’s a global glut of liquidity. Asset prices are sky high across the board.

Investors are happily taking large risks for low returns. And they’re as complacent as they’ve ever been.

This is the type of behavior that takes place closer to a market top than a market bottom.

So it’s OK to take some money off the table today. Yes, you may miss out on future returns.

But you can also be 100% certain that money will be safe when the markets turn… And you’ll have more cash to take advantage of any bargains.

To repeat Marks’ initial warning… It’s better to turn cautious too early than too late.

Do you have a Plan B?

via Tyler Durden

Olympics to Return to Los Angeles, Scaramucci Dumped Already, Arpaio Found Guilty of Criminal Contempt: P.M. Links

  • Joe ArpaioGod help all Angelinos: The Summer Olympics will be returning to Los Angeles in 2028.
  • Anthony Scaramucci is already out as President Donald Trump’s communications director. I hadn’t even memorized how to spell his name yet.
  • The son of Nashville’s mayor died of a drug overdose over the weekend.
  • Former Maricopa County, Arizona, Sheriff Joe Arpaio has been found guilty of criminal contempt of court for ignoring a federal judge’s order to stop his immigration round-ups.
  • Qatar has filed a legal complaint with the World Trade Organization about the boycott other nations have launched against it.
  • Pulitzer Prize-winning playwright and actor Sam Shepard has died at age 73.
  • Hackers were quickly able to breach an electronic voting machine and reprogram it to Rick-Roll folks at the Def Con cybersecurity conference in Las Vegas.
  • Hackers also got their hands written material from several HBO shows, including apparently the next episode of Game of Thrones.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

from Hit & Run

July Jolts: Tech Tops, Trannies Trounced, Dollar Demolished, & VIX Record Low

Just seemed appropriate…


July was a month of extremes across asset classes…

  • Nasdaq Composite surged over 3.5% – best month since Feb 2017 (up 11 of last 13 months)
  • FANG Stocks spiked 10% – best month since Oct 2015 (up 11 of last 13 months)
  • Dow Transports tumbled over 3.5% – worst month since Brexit (June 2016)
  • VIX hit a record intraday low of 8.84
  • 30Y Treasury Yields rose 6bps – the biggest monthly rise since Nov 2016
  • WTI Crude spiked 9%, back above $50 – best month since April 2016
  • FX 'VIX' surged – biggest spike since Nov 2016
  • Dollar Index weakest since Dec 2014 –  worst month since Jan 2017 – longest losing streak since 2011

And finally

  • US Economic 'Hard' Data slumped for the 4th month in a row – longest losing streak since Sept 2010, lowest monthly close since Feb 2009

*  *  *

Quite a divergence between Tech and Trannies this month… (record highs former and two-month lows latter) – Trannies are down 9 of the last 11 days for the biggest drop since Brexit (June 2016)


Ugly close though…


5th record close in a row for The Dow… Thanks to Boeing!! (on the month Boeing accounted for 310 of The Dow's 570 point gain)


VIX crashed to an all-time record intraday low during the month after The Fed statement…but after last week's modest turmoil in tech, VIX has remained elevated…


However, as Nasdaq has soared  – SOMEONE has been buying downside protection…

To its most extreme level since November


The Tech sector outperformed on the month with retailers bouncing back from an early month bloodbath to end green…


FANG Stocks exploded higher by over 10% in July – the best month since Oct 2015 thanks to a yuge 22% gain in NFLX (and AMZN briefly helped). However, the last three days have started to show some strains (worst since the last week of June)


And this happened…From $29.44 to $13.10 in 5 months


The dollar index suffered its fifth monthly loss in a row (worst since Jan)

This is its longest losing streak since 2011… (lowest monthly close since Dec 2014 for Bloomberg Dollar Index)…

The Dollar Index broke below 93 for the first time since May 2016

  • EURUSD  (up 5mo in a row) – best month since Mar 2016
  • GBPUSD (up 4 of last 5 mo) – highest monthly close since July 2016 (right after Brexit plunge)
  • USDJPY biggest monthly drop since Jan 2017
  • USDCAD (down 3 mo in a row) – lowest monthly close since May 2015

As BofA notes, the DXY is now off more than 9% from the highs of December and is not that far from the lows of May last year. Meanwhile positioning has completely flipped around with investors having gone from long to short the USD and EUR positioning having gone the other way.

The main reason for the USD weakness, in our view, is the downgrading of US growth expectations both care of a sluggish Q1 (a mixed Q2), a reduced probability of big tax cuts, soft inflation prints and more robust growth elsewhere.

The risk reward on the USD therefore seems to be shifting. Expectations on US in terms of growth, inflation and fiscal policy are now pretty low, while positioning is clearly the other way around. For the catalyst, we probably need to see stronger US growth and/or some better inflation prints to bring a December Fed tightening back on the cards. Interestingly the US economic surprise index has started to turn. Bond yields also seem to have found a floor too suggesting that it requires more negative surprises to drive them lower. Catching turning points in currencies is always tricky as they tend to trend but we are inclined to think we are not that far away for the USD.

Furthermore, Dollar 'VIX' soared in July…decoupling from the rest of the world's assets…


And as the dollar tumbled so the long-end of the yield curve was dumped with 30Y yields up 6bps – the biggest monthly rise in yield since Nov 2016…but notice that the short-end rallied…


July saw the biggest steepening in 2s30s since Nov 2016…


WTI Crude briefly tagged $50 handle in overnight trading but ended lower on the day, fell during the day, then ripped back above $50 as NYMEX closed.

After 4 straight down months, this was Crude's best month since December – up over 7%…

As the dollar free-falled (free-fell?) in July, so Gold gained – having its best month since February with its highest monthly close since Oct 2016

*  *  *

So what happens in August?


via Tyler Durden

Treasury To Issue Half A Trillion Dollars In Debt In Q4

In the first warning sign that the US Treasury is burning through more cash than previously expected, at 3pm today the Treasury Department announced that in its latest forecast of end-of-September cash balance it anticipated only $60 billion of cash on hand, nearly half the $115 billion it forecast in its previous report in May, according to the Department’s marketable borrowing estimates.  The treasury also expects to borrow $96 billion in net marketable debt in the current quarter, down from $98 billion forecast previously.

This drawdown in cash, and jump in government outlays, was to be expected following the latest Monthly Statement from the Treasury which showed a surge in government outlays, which hit a record high $429 billion in June, for reasons discussed previously.

However, the second, and more troubling warning sign was that in its initial forecast of calendar Q4 marketable borrowing needs, the Treasury now expects a near record $501 billion in net marketable debt to be issued from October through December. This amount will be nearly equal to the actual marketable debt borrowed in the last 4 quarters, which amounts to $527 billion. The full sources and uses can be found here.

Also, as shown in the chart below, this amount of upcoming quarterly issuance will be just shy of the previous record hit in the months of the financial crisis, and represents a dramatic change in the recent direction of declining borrowing.

Source: Reuters

The good news is that much of this debt will go toward building a cash cushion, as the projected debt needs are only $179 billion for the 4th calendar quarter, leaving an estimated $360 billion in cash as of December 31, 2017.

The Treasury also reported that in the April through June quarter, it issued $35 billion in net marketable debt, compared with its May prediction of $26 billion, and ended the quarter with a cash balance of $181 billion, down from the initial estimate of $200 billion. In April 2017, Treasury estimated net marketable borrowing of $26 billion and assumed an end-of-June cash balance of $200 billion.  The increase in borrowing was driven primarily by lower receipts.

via Tyler Durden

Federal Indictment Alleges Chrysler And UAW Execs Stole Millions From Employee Training Programs

For any UAW employees out there who still think their union is anything more than a ponzi scheme designed to effectively tax membership while enriching a few ‘bosses’ at the top of the pyramid, you should probably take note of a federal indictment that was filed late last week alleging that Chrysler executives conspired with UAW leaders to siphon millions in funds earmarked for employee training to line their own pockets.

As Automotive News points out, as of now, only two Chrysler employees have been charged but the indictment lays out a scenario in which many more charges could be levied against Chrysler employees and other high-ranking UAW officials who may have been involved.?

The indictment, unsealed last week, describes the alleged illegal dealings of former FCA labor relations chief Alphons Iacobelli, deceased UAW Vice President General Holiefield and his widow, Monica Morgan, a prominent Detroit photographer. Morgan will be arraigned in a Detroit federal court today, July 31. Iacobelli will be arraigned Tuesday, Aug. 1.


Federal investigators claim the three were at the center of a conspiracy from 2009 through 2014 that included Iacobelli personally pocketing $1 million and helping funnel $1.2 million from the UAW- Chrysler National Training Center to Holiefield, Morgan and other high-ranking members of the union.


The indictment specifically mentions at least eight unnamed people while vaguely mentioning “other” groups of people. Separately, federal officials announced fraud charges against former FCA financial analyst Jerome Durden, who is accused of creating false tax returns to hide payments to Holiefield, Iacobelli and other beneficiaries who were not identified.


“More could be charged,” said Peter Henning, a former federal prosecutor in Washington, D.C., and professor at Wayne State University Law School. Henning said it’s typical in investigations such as these for additional witnesses, informants and co-conspirators to be named after the initial round of arraignments.

So, what did they buy with their embezzled funds?

Alphons Iacobelli, Chrysler’s Labor Relations Chief, apparently really needed a brand new Ferrari and $100,000 pool in his back yard...

A $350,000 Ferrari 458 Spider

• Lease on a private jet

• 2 limited-edition Mont Blanc pens costing $37,500 each

A $96,000 swimming pool, outdoor kitchen and outdoor spa at his home in Rochester Hills, Mich.

• $73,000 in landscaping

More than $300,000 in personal credit card expenses

• Paid off a relative’s student loan for $44,491

…looks like it all turned out really nice.



Meanwhile, UAW Vice President General Holiefield and his widow, Monica Morgan, invested their stolen loot in jewelry, designer clothes and expensive vacations.

• Paid off the $262,219.71 mortgage on their Harrison Township, Mich., home. Less than a year later, Morgan took out a new mortgage for $130,000.

• Credit card charges of $200,000 for jewelry, designer clothes and furniture

• $30,000 in airfare for San Diego, Miami, Las Vegas and Los Angeles

4 nights at the Beverly Hills Hotel for $3,100 per night



But federal investigators appear to think the situation involved more than two people. In addition to the eight unnamed FCA executives or UAW leaders in the indictment, “other” groups of people are referenced as well.

The document says Bob King, who was UAW president from June 2010 to June 2014, told Iacobelli and Holiefield in 2011 that they could “go to jail” for giving union and charity business to Morgan, Holiefield’s girlfriend at the time. They married in 2012.


King, according to the indictment, instructed them to stop giving business to Morgan. The three allegedly reacted to King’s warning by setting up a new company in early 2012, the indictment said.


Other unnamed people, according to the indictment, were responsible for approving the illegal spending.


“It’s quite possible some of the unnamed people in the indictment are going to cooperate and provide information and testimony,” Henning said.

Of course, the UAW was ‘blindsided’ by these latest corruption allegations.

“The UAW is appalled at the allegations contained in the Department of Justice’s (DOJ) indictment, which constitute a betrayal of trust by a former vice president of our union. The UAW has zero tolerance for corruption or wrongdoing of this kind at any level,” according to the statement. “The UAW had absolutely no knowledge of the fraudulent activities detailed in this indictment until they were brought to our attention by the government. We nevertheless take responsibility for not doing more to exert our influence over the governance policies of the (UAW-Chrysler National Training Center), which might have uncovered this corruption sooner.”


Fiat Chrysler issued a statement saying the Auburn Hills automaker has cooperated fully with the U.S. Attorney’s Office and “intends to pursue all potential legal remedies against Mr. Iacobelli and any other culpable parties.”


“FCA US and the UAW were the victims of malfeasance by certain of their respective employees that held roles at the National Training Center (NTC), an independent legal entity,” the company said in a statement. “These egregious acts were neither known to nor sanctioned by FCA US. “

We simply can’t imagine why the OEMs can’t seem to turn a profit on their U.S. plants…

via Tyler Durden

Watch Live: Sarah Sanders Attempts To Explain What The Hell Is Going On At The White House

After the White House bombshell of the day dropped just one hour ago, in the form of Anthony Scaramucci’s sudden dismissal following just 10 days as the Communications Director, Sarah Sanders has the distinguished honor of taking the podium momentarily to attempt to explain to an anxious press pool what exactly is going on inside the White House. 

And while probably no one, including Sanders, has any real idea what the future holds for the White House, the “no WH chaos!” announcement from Trump earlier today is looking increasingly unlikely.


Tune in below for the fireworks:

via Tyler Durden

Police Wage War on Urban Dirt Bikes, Crush 62 Seized Vehicles in D.C.

dirt bike

In some cities, police are deploying bulldozers and aerial surveillance to combat the illegal activity of riding dirt bikes and ATVs through city streets. Despite few urban deaths from biking, law enforcement justifies their war by calling riders “malicious” and saying the sport poses serious danger.

Motorized dirt bikes and ATVs (all-terrain vehicles) are typically not street legal because they lack the necessary safety features to be driven on public roads like turn signals and brake lights. They are usually ridden in parks or rural areas.

Riding dirt bikes on city streets is also an inner-city trend found in D.C., Baltimore, New York City, and other major municipalities. Police claim that most bikes used for urban riding are stolen and/or not registered.

The hobby persists despite police crackdowns. Bikers claim that riding is part of their culture and that biker groups act as a sort of diversion program to keep members from spending money on drugs and guns.

Further, police are often not allowed to chase bikers, which seems to create a game of cat and mouse. As a result, bikers can ride in large “gangs” and disrupt traffic, often without any immediate consequence.

Just last month, bikers reignited their war with police when an estimated 100 bikes weaved through traffic in National Harbor, just outside of D.C. in Maryland. There were no injuries, but law enforcement accuses the drivers of wreaking havoc for about 30 minutes. Prince George’s County Deputy Police Chief George Nichols gave bikers an ominous warning: “This will not be tolerated. Don’t think you just got away with it. … You’re not safe. We are coming for you.”

A few weeks later, D.C. police crushed 62 dirt bikes and ATVs. Police Chief Peter Newsham told bikers that demolitions will continue “as long as they continue endangering the lives of everyone on our streets.” D.C. police told Reason that the bikes were crushed to keep them from returning to the streets and because they would be difficult to store.

While dirt bike riding can be dangerous and has been disruptive, there is little evidence that it’s a crisis. D.C. police told Reason that there were no casualties involving dirt bikes in 2015, 2016, or so far in 2017. There was only one crash that resulted in serious injury over that three-year period. Other crimes have been committed by dirt bike riders, but crushing bikes seems unlikely to prevent shootings or other dirt bikes from being stolen.

The war on dirt bikes is not isolated to the capitol. New York City tried to combat street biking last year with a publicized crushing of bikes. Police Commissioner Bill Bratton waved a checkered flag before a bulldozers decimated 69 of them. After the demolition, he justified the strange spectacle: “We want to send out a very strong message to the nitwits and knuckleheads who insist on operating these illegal vehicles … creating extraordinary danger not only for themselves but more importantly for the public.”

Bratton makes serious accusations against bikers, but does not have data to support his claims. The NYPD told Reason that they do not keep any data on accidents or fatalities involving ATVs.

Nearby Baltimore has tried many different tactics to combat riders. The city launched a four-man dirt bike task force last year, which they claim led to 45 arrests and 200 confiscated bikes. Previously, the city tried to end these illegal rides by shutting down popular roadways and using undercover cops. And calling this crackdown a war on dirt bikes is hardly an exaggeration—the police department uses an aerial surveillance system, technology meant for the Iraq War, to track down riders.

Some locals think the crackdown is working, others interviewed by The Baltimore Sun, have not seen a decrease in ridership. Again, fatalities resulting from dirt bikes hardly justify military technology: The Baltimore police told Reason that there were three deaths in 2015, two in 2016, and so far none this year.

In addition to police overemphasizing the safety risks of city riding, bikers and those that have spent time with them claim that they have also been falsely identified as thugs. A dirt bike documentarian, Lofty Nathan, told The Atlantic that dirt biking is a sort of “escape” for Baltimore’s inner-city riders:

“It’s simultaneously wholesome and meaningful, but also reckless and destructive. It depends what side you look from. What is important, is that in the context of the city, it is actually constructive for some of these kids…Marginalized communities will react to certain conditions, and they are just going to need to do something…It has to be rebellious but at the same time it could be a lot worse. In this community, it’s almost wholesome like the boy scouts.”

This sentiment was echoed in a five minute mini-documentary called “Wheelz Up” that chronicles dirt bike riders in D.C. The video is narrated anonymously by a rider who also says he works two jobs while finishing high school. According to the narrator, bikers are “just trying to have fun” and have been stereotyped by police. He says he paid for his bike in cash and continues to invest money in it instead of buying drugs.

While law enforcement in New York City, D.C. and Baltimore continue to wage war on bikers, Cleveland Mayor Frank Jackson recognizes that “people who ride dirt bikes are not all thugs.” The city is building a dirt bike and ATV park for riders, similar to a skate park.

from Hit & Run