Pickle Fight Reveals the Destructive Pettiness of Texas Food Regulators

“Cottage food” laws let hobbyists sell baked and preserved goods in legal markets without regulatory interference. Unless, of course, the regulators try to get pedantic about the letter of the law.

As Reason columnist Baylen Linnekin reports in a piece for The New Food Economy, the Texas Department of State Health Services is claiming that only cucumbers can be called “pickles.” Any other fruit or vegetable preserved in brine or vinegar is not technically a pickle, the agency insists, and thus is not covered by the state’s cottage food law. The department has thus prohibited retirees Anita Patton-McHaney and James McHaney from selling pickled beets.

Here’s Linnekin:

According to the Department of State Health Services, a “pickle” is a “cucumber preserved in vinegar, brine, or similar solution, and excluding all other pickled vegetables.” In case that leaves any room for doubt, the agency makes things very clear in the FAQ posted on its website: “Only pickled cucumbers are allowed,” it says. “All other pickled vegetables are prohibited.”

“The purpose of food safety laws, including the Texas Cottage Foods Law, is to help make sure food being sold to the public doesn’t make people sick and that the people preparing food that could be hazardous have the training to do so safely,” says Chris Van Deusen, director of media relations with the Texas Department of State Health Services, in a recent email to me. “The law says pickles may be sold by unlicensed and uninspected producers but doesn’t mention other pickled products. Since we didn’t want to interpret something that wasn’t there, we used the most common definition of pickles when we implemented the law in 2013.”

The health department flak is being deeply disingenuous here. As Linnekin notes, what makes a pickled product safe is not the specific vegetable but the pH level of the solution. A pH below 4.6 means the solution is acidic, and acidic solutions kill harmful bacteria. While beets are naturally less acidic than some other vegetables, the “training” necessary to increase their acidity is also required for cucumbers, as well as carrots, okra, peppers, etc. You can learn this stuff online in a few minutes, or from cookbooks dating back to the 19th century.

Because the probability of infecting someone with a bacteria like the one that causes botulism (which is what most people worry about when canning and preserving veggies) has less to do with the vegetable than with the method of preparation, insisting that only pickled cucumbers are covered by the Texas Cottage Foods Law does not guarantee that everyone who decides to pickle and sell cucumbers under the law will do so correctly. But it seems most people are doing it well enough. The Centers for Disease Control (CDC) has recorded fewer than 200 cases of botulism across the entire U.S. each year, going back to at least 2001, and fewer than two dozen cases each year involve food.

The vast majority of botulism cases are diagnosed in infants and are unrelated to canned goods. The cases that involve both adults and food products prepared at home tend to reflect the kind of carelessness that you generally don’t see in the cottage food economy, which no regulator can prevent—for example, the case of “beets roasted in aluminum foil and kept at room temperature for several days then made into a soup,” which caused two Utah residents to develop botulism in July 2015.

You’d think a regulatory body operated by health experts would take all these factors into consideration, especially given the linguistic shakiness of insisting that only cucumbers can be pickles. But no. The McHaneys had to file suit against the Texas Department of State Health Services. Throwing this question to the courts doesn’t seem like the wisest solution, though I suspect hours of oral argument over what constitutes a pickle could be pretty entertaining.

The more troubling phenomenon, and one Linnekin has documented very recently for Reason, is the willingness of health departments to intentionally misinterpret laws that disempower them. You’ll note that I said troubling, not surprising.

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British Left Unveils Plan To “Weaponize” The Bank Of England

Authored by George Pickering via The Mises Institute,

Under cover of the tumult of Westminster politics in recent weeks, the far-left leadership of Britain’s Labour Party recently released anew plan to alter the fundamental role of the Bank of England in the British economy.

The plan — co-authored by Graham Turner, who is regarded as a likely pick for Governor of the Bank of England if Labour wins the next election — would have Britain’s central bank adopt a new set of objectives, similar to the ‘dual mandate’ pursued by the US Federal Reserve. If the plan were to be put into effect, not only would the Bank pursue a 2% inflation goal, as it already does, but it would also adopt the new goal of promoting ‘maximum employment’, as well as new productivity targets.

More worryingly though, the new plan would aim at “integrating” the Bank of England’s monetary and macroprudential policy with the government’s “industrial strategy.” In practice, this would mean the Bank would be required to use its regulatory powers, as well as its control over credit expansion, to arbitrarily steer cash toward whichever industries and businesses happened to be favoured by the government of the day. This policy — which has been given the deceptively inoffensive name of ‘credit guidance’ — would likely involve the Bank of England adjusting the capital requirements for commercial banks in such a way as to manipulate them into extending more loans to the manufacturing sector and other “critical areas of technology,” and fewer loans to the supposedly unproductive residential and commercial real estate sector.

This desire to diminish the role of real estate in the British economy also led to one of the more bizarre proposals put forward by the plan. Contrary to banks’ widespread use of real estate as collateral for loans in the present, Labour’s new plan would force banks to “show they are raising the share of loans backed by intellectual property instead.” Even leaving aside the questionable validity of the very concept of intellectual property, this article would not be the first to point out that banks might be less willing to extend loans at all if they were forced to secure those loans on shaky estimates of the value of the copyright to a self-published volume of the borrower’s poetry, for example, or perhaps the patent on a contraption the borrower invented in their garage, rather than the more certain value of brick and mortar.

All of this is not to deny that Britain’s economy is currently struggling under the weight of a dangerously overblown housing bubble, and any sincere attempt to deflate that bubble would certainly be welcome. However, if Labour wish to use the Bank of England to prick the housing bubble, they must first understand that the Bank itself played a large part in inflating that bubble to begin with. While it’s true that a patchwork of price-controls, planning restrictions, and other assorted regulations have restricted the supply of British housing, the Bank of England’s low interest rate policy and resultant cheap mortgages have stimulated an artificial surge of demand in the housing sector, pushing prices up to prohibitive heights. Regardless of who’s in control of the Bank after the next election, they should aim to remove this root cause of the problem, rather than merely patching it with new policy.

Although the British press is not typically known for its devotion to free markets, the media reaction to Labour’s new plan for the Bank of England has been quite negative, likely due to the perception that it is a threat to the sanctified tenet of ‘central bank independence’.

London’s Evening Standard, for example, described the plan as government “meddling” in the affairs of the Bank, while another mainstream article decried the “weaponisation” of the Bank by a plan which “reeks of central planning … [and] statism.” It is certainly true that Labour’s new plan puts forward many dangerous ideas which deserve to be criticised. However, the media’s criticisms of the new plan would ring significantly less hollow if those same criticisms were not equally applicable to the very institution of central banking itself, which that same media is so quick to defend.

For example, the news media are correct to point out that permitting the government to use ‘credit guidance’ to arbitrarily pick winners and losers in the economy is indeed “straight out of the central planning handbook.” But the same is also true of the central banking status quo, which likewise distributes arbitrary benefits and penalties without arousing any complaint from the mainstream press. When writing in the 1720s, Richard Cantillon — the forgotten founder of modern economics — pointed out the redistributive effects of money creation: the first receivers of the new money get the benefit of being able to spend it at its previous value before the market has a chance to register the increased supply, whereas the rest of us are stuck with the downside of having the value of our savings inflated away. These same ‘Cantillon effects’ abound in our modern economy because of the way central banks, by their very nature, enable and drive credit expansion and money creation, benefitting the first receivers of the new money (mainly financial institutions and government agencies) at the expense of smaller businesses and individual savers.

The mainstream press are likewise right to attack the interventionist “meddling” of Labour’s plan to make the Bank of England pursue explicit, government-set targets for employment and growth. If only those same outlets had not, for so many years, overlooked the Bank of England’s equally interventionist commitment to “support the economic policy of the Government, including its objectives for growth and employment.”

It is undoubtedly true to say that Labour’s new plan for the Bank of England would harm the British economy — compared with both the laissez-faire ideal and the present situation — and we should be pleasantly surprised that the mainstream press has criticised it so readily, perhaps reflecting the slowly-growing place of free market and ‘Austrian’ ideas in the zeitgeist. In reality however, the real emphasis should be on the fact that Labour’s “central planning” proposal is separated from the ‘respectable’ central banking status quo only by a difference of degree, not of kind.

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Federal Judge Rules That Albuquerque’s Asset Forfeiture Created an Unconstitutional Profit Incentive

A federal judge has ruled that Albuquerque’s civil asset forfeiture program violated residents’ due process rights by forcing them to prove their innocence to retrieve their cars. Under civil forfeiture laws, police can seize property suspected of being connected to criminal activity, even if the owner isn’t charged with a crime.

The city of Albuquerque “has an unconstitutional institutional incentive to prosecute forfeiture cases, because, in practice, the forfeiture program sets its own budget and can spend, without meaningful oversight, all of the excess funds it raises from previous years,” U.S. District Judge James O. Browning wrote in an order filed Saturday. “Thus, there is a ‘realistic possibility’ that forfeiture officials’ judgment ‘will be distorted by the prospect of institutional gain’—the more revenues they raise, the more revenues they can spend.”

The Institute for Justice, a libertarian public interest law firm, filed the lawsuit in 2016 on behalf of Arlene Harjo, whose car was seized after her son drove it while drunk.

“It’s a scam and a rip-off,” Harjo told Reason at the time. “They’re taking property from people who just loan a vehicle to someone. It’s happened a lot. Everybody I’ve talked to has had it happen to them or somebody they know, and everybody just pays.”

Harjo was one of thousands of Albuquerque residents whose cars were seized under the city’s aggressive forfeiture program. While lawsuits have forced cities like Philadelphia to reform their programs, federal judges have for the most part been unwilling to directly address the issue of profit incentive.

Law enforcement groups say civil forfeiture is a vital tool to disrupt drug trafficking and other organized crime. But civil libertarians note that there are far too few safeguards for property owners and that the profit incentive leads police and prosecutors to go just as often after everyday citizens rather than cartel bosses.

New Mexico essentially banned civil asset forfeiture in 2015, but Albuquerque argued the state law didn’t apply to its own city codes and continued to seize cars.

City officials offered to give Harjo her car back for $4,000—a typical settlement tactic—but she refused to pay up. The city then returned the car in an attempt to render her lawsuit moot and keep its program intact. But in a opinion issued in March, Judge Browning allowed the case to proceed, warning the city that Harjo had raised plausible claims that the city’s profit incentive and hearing process violated her constitutional rights.

Shortly after the March opinion was released, Albuquerque officials announced they were ending the city’s forfeiture program. But Saturday’s decision is still important: Two other New Mexico local governments continue to flout the reform law and seize vehicles, and almost all of them have failed to conform with new reporting requirements on their forfeiture activities.

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Why No Selloffs: Citi Blames “Herding Behavior ” For Ignoring The “Gathering Storm Clouds”

While Goldman’s clients are growing increasingly concerned about the narrow breadth in the market and the S&P500 leadership where a handful of stocks are responsible for all the gains, Goldman itself is not too worried, and as we reported over the weekend, the bank responded to concerns about about excessive concentration and “bad breadth” that while “in the past, sharp declines in breadth have signaled below-average 1-, 3-, and 6-month returns for the S&P 500 as well as larger-than-average prospective drawdowns” however, “relative to history, the recent narrowing of market breadth has not been sharp enough to trigger alarm.”

Not everyone agrees.

In a note released this morning by Citigroup, the bank warns that investors are once again becoming complacent even as fundamentals do not “support an enduring move” to the upside. In the latest warning to watch out for growing idiosyncretic risks, Citi’s Mark Schofield said that the risks that led to several rounds of selloffs earlier in the year, have not abated and that the growing risk of tighter monetary policy may be what knocks markets off course, according to the FT.

But what, according to Citi, explains the lack of any selling, and in fact quite the opposite: continued market levitation?

In one word: Herding, or the same market phenomenon dismissed by Goldman, which is far more sanguine about the “herding” by most investors in just a handful of stocks, such as FaceBook.

“It may be that easing trade tensions and China’s policy response are comforting investors, but the move has the hallmarks of herd instincts at work” warns Schofield.

What Citi believes the herd is missing, is that while “the global economy looks to be riding the tailwinds of easy policy and
fiscal stimulus” these drivers are fading.

“Meanwhile storm clouds are gathering and risks look biased to the downside.”

Of course, no risk is greater than the potential collapse of trade, following growing trade tension between the US and China, coupled with fears of a possible economic slowdown in China. But while the market casts a concerned eye into the future, last Friday we showed that global trade has already posted a sharp slowdown and is now negative on a 3M annualized basis, which historically has preceded a drop in global EPS.

In addition to trade worries, the rise in bond yields also sparked a drop in equities prices earlier in 2018, however that move – which we now know was at least partially a function of Russia’s record Treasury liquidation – is now over, with the 10Y Treasury trading in a range between the mid 2.80s and 3.00%.

Meanwhile, even as trade tensions continue to escalate, with the US now widely expected to launch another $200BN in Chinese tariffs in the coming months, the S&P 500 has jumped nearly 10 per cent and is close to its January all-time high, while Europe’s Stoxx 600 index has risen nearly 8 per cent over the same period.

But the “news has not really justified the latest moves” and “fundamentals are vulnerable to longer-term headwinds” amid “rising risk of higher rates in three of the larger central banks, that have hitherto been the anchor as the Fed has started to raise rates”, he said cited by the FT.

Recent news-flow has been heavily skewed towards the intertwined risks of escalating trade wars, potential retaliation in currency markets and the possibility of an economic slowdown in China. These have combined to create a narrative of a global economy riding the last tailwinds of accommodative policy and financial conditions, against a backdrop of threatening storm clouds and market risks that are increasingly skewed to the downside

Which brings up back to the risk of herding behavior, and the Citi strategist writes that while he adheres “to the view that the business cycle is increasingly mature and that the risks are becoming far more skewed to the downside” yet the “timing of an inflexion point in the cycle and indeed the central bank policy responses to a shift in the data, remain unclear.” Until then, investors find confidence in numbers, and conflate positioning with fundamentals:

Absent a catalyst, herding behavior can be very  persistent and can feed on itself.

So what could shake the herd’s confidence and serve as a trigger for a risk-reversal? Schofield writes that it is idiosyncratic events that deliver the necessary impetus for investors to reappraise broader risks, and while “it is not always clear where unexpected come from” he believes that this week’s trio of central bank announcements from the BOJ, Fed and BOE could be just such a catalyst, of which that from Japan would be most troubling.

We expect the Bank of Japan to leave monetary policy unchanged at this week’s meeting; however we expect it to make its JGB purchase operations more flexible in order to accommodate modestly higher long-term interest rates. We do not expect any move higher in JGB yields to be large, but we would point out that the JGB market has a considerable track record in triggering broader reactions in global bond markets.

Putting all of this together, Citi warns that it still sees “plenty of reason not to get too complacent over the recent rally in risk assets.” Of course, the bank is also taking on a “herd” which for the past 10 years has been conditions not only to buy every dip, but – more recently – never to sell. Citi may find that changing a decade of behavior ingrained by the Fed will be very difficult to achieve.

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Candidate and Daughter Build Trump’s Border Wall in Cringeworthy Campaign Ad

Florida’s leading candidate for the GOP’s gubernatorial nomination wants voters to know he’s a big fan of Donald Trump. So he’s airing an ad that shows him using toy blocks to teach his young daughter how to build Trump’s border wall.

“Everyone knows my husband Ron DeSantis is endorsed by President Trump,” DeSantis’ wife Casey says at the start of the 30-second spot, which was released online today and will be televised statewide starting tomorrow. “But he’s also an amazing dad. Ron loves playing with the kids.” At that point, the commercial cuts to the candidate and his young daughter constructing a wall out of cardboard blocks. “Build the wall!” Ron says:

Rep. DeSantis also reads to his children—from Trump’s book The Art of the Deal. “Then Mr. Trump said, ‘You’re fired,'” DeSantis tells his infant son. “He’s teaching Madison to talk,” Casey adds, before the camera reveals Ron showing his daughter how to say “make America great again.”

It’s meant to be lighthearted; instead it’s cringeworthy. But from a political standpoint, it may be the right move: DeSantis currently has an 11-point lead in the RealClearPolitics polling average.

And it could be worse. If Trump ever does build his border wall, the project will cost taxpayers tens of billions of dollars to solve a problem that doesn’t exist. So I guess I should give DeSantis some credit. His wall serves an actual purpose—getting elected—and it’s cheap.

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Finding “Inspiration” In Socialist ‘Bernie Sanders’-Wannabees

Authored by Mike Shedlock via MishTalk,

Bernie Sanders is 76 years old. New progressives will have to carry the torch. I have some inspiration to share…

An article in the Detroit Metro Times article mentions 27 candidates in support of “Medicare for All,” a $15-per-hour minimum wage, free college tuition, universal pre-kindergarten, publicly-funded campaigns, and mandated paid sick leave.

Candidate Laurie Pohutsky says she is inspired.

I am inspired too, enough to write this.

Dear Bernie Sanders Wannabees,

Please pay attention.

There is no such things as a “free lunch, free education, or free health-care”. The cost comes from somewhere.

It is precisely because of Fed policies and affordable housing programs that housing isn’t affordable.

It is precisely because of insane public union contracts, student loan programs, and other government interference in the free market that the cost of education is high.

There’s a guaranteed way to make education costs even higher, and that is to make education “free”.

Here’s a Bernie Sanders 2011 flashback.

The latest spreading idiocy, is universal basic income. ​

Dear wannabees, in case you did not yet get the message, there is no such thing as free money either.

There is a right to free speech, which, ironically, most of you wannabees don’t want.

But when it comes to “free” goods and services, the countries that offer the most of them, like Venezuela with gas at a penny a gallon, end up like Venezuela where no gas, no food, and no medical care is available at all.

Venezuela is how “progressive” socialism inevitably ends.

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Bernie Sanders’ Medicare-for-All Plan Will Cost $32 Trillion Over 10 Years

A plan to bring single-payer health care to the United States by expanding Medicare to cover nearly all Americans would cost more than $32 trillion over the first 10 years—and paying for it would require a doubling of current tax revenues, plus some.

That’s the bottom line in a new study released Monday by the Mercatus Center at George Mason University, a free market think tank. The analysis attempts to apply a price tag to the single-payer proposal backed by Sen. Bernie Sanders (I-Vt.), otherwise known as the “Medicare-for-all” plan. Sanders’ plan would see the federal government replace private health insurance that Americans currently receive as a benefit of employment or purchase independently, and would have the federal government become responsible for current state-level health care spending.

Even with conservative cost estimates—conservative because the estimate assumes, as Sanders does, that the single-payer plan would deliver savings in administrative costs and drug prices—the Medicare-for-all plan would require an “unprecedented” increase in government spending, writes Charles Blahous, the study’s author.

“Doubling all federal individual and corporate income taxes going forward would be insufficient to fully finance the plan, even under the assumption that provider payment rates are reduced by over 40 percent,” says Blahous, who was a health policy advisor to President George W. Bush and served as a Medicare trustee during the Obama administration. “Such an increase in the scope of federal government operations would precipitate a correspondingly large increase in federal taxation or debt and would be unprecedented if undertaken as an enduring federal commitment.”

Instead of responding to the details of the Mercatus analysis, Sanders attacked the think tank’s connections to the Koch Brothers. In a statement to the Associated Press, Sanders called the report “grossly misleading and biased.”

But the Mercatus study is roughly in line with other assessments of how much it would cost to implement a single-payer health care program in America. A 2016 study from the Center for Health and Economy, a centrist health policy think tank, said Sanders’ Medicare-for-all plan would add $27 billion to the federal budget deficit over the first decade. An Emory University analysis of Sanders’ plan estimated that it would require $25 trillion in new federal funding.

It also fits with what some states have found as they have explored the idea of state-level single-payer plans.

Vermont experimented with single-payer health care a few years ago, but ultimately abandoned the project in 2014 because it was too costly. In Colorado, voters rejected a proposed single-payer system in 2016 when faced with the prospect of increasing payroll taxes by 10 percent to meet the estimated $25 billion annual price tag.

More recently, lawmakers in both California and New York have passed legislation to create single-payer health care at the state level, but both ran into difficulties when it came to figuring out how to pay for them. New York’s single-payer plan would have required doubling (and possibly quadrupling, depending on which projection you believe) the state’s tax burden, while California’s single-payer legislation would cost an estimated $400 billion—more than twice the size of the entire state budget of $180 billion.

Figuring out how to pay for a single-payer system remains a serious problem for supporters of the idea. With more than $21 trillion already on the national credit card, it would be beyond irresponsible to pass a wildly expensive overhaul of the health care system without adequately funding it. Supporters of single-payer will have to convince Americans that it is worth paying twice (or more) as much in taxes in order to get “free” health care (and abolish premiums, co-pays, and deductibles).

Progressives seem prepared to make that sales pitch. Writing at the People’s Policy Project, a progressive think tank in favor of single-payer, Matt Bruenig makes the case that reducing health spending is a trade-off worth making. “Rather than paying premiums, deductibles, and co-pays for health care, people will instead pay a tax that is, on average, a bit less than they currently pay into the healthcare system and, for those on lower incomes, a lot less,” he argues.

While Bruenig is right that the Mercatus study shows that national health expenditures would fall by about $300 billion as the federal government, Blahous is merely accepting Sanders’ projected savings there. And it’s probably right to be skeptical of those assumptions. Even though single-payer advocates point to potential administrative savings by having the government step-in to replace health insurance companies, but those numbers usually require a degree of deception—for example, not counting current Medicare costs as “administrative costs” of the existing health care system.

Beyond that, Blahous notes that increased demand for health care—eliminating co-pays and deductibles means people will get treatments they otherwise wouldn’t—wipes out the savings achieved by reducing drug prices.

Moving to a single-payer system also comes with costs that aren’t captured by a balance sheet. Much of the outcry over the implementation of the Affordable Care Act revolved around the disruption of health care coverage in the individual market. But Obamacare caused a few million Americans to move from their existing health insurance plans. Moving to single-payer means a disruption for literally everyone.

Single-payer health care may very well be an improvement on some aspects of the current American health insurance system, which is a weird mish-mash of overlapping programs, subsidies, mandates, and highly regulated markets that often makes little coherent sense. At the very least, a debate over a robust overhaul of the system is badly needed.

But part of that debate has to be about paying for it. So far, that’s been a stumbling block for progressives. In polls, support for single-payer health care declines substantially after respondents are told about the associated costs.

Those trade-offs must be fully understood—not just by health care policy wonks, but by average Americans—before single-payer proposals can be seriously considered. Abolishing the disaster that is the American health insurance system sounds great, but government-run health insurance will be one of the costliest undertakings in the nation’s history.

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Path Cleared for Still-Undecided Gary Johnson’s Potentially Historic Senate Bid

It's happening! ||| Matt WelchNew Mexico State Land Commissioner Aubrey Dunn, the first-ever Libertarian to hold statewide office in a position determined by partisan election, has officially announced his anticipated withdrawal from the U.S. Senate race in New Mexico, clearing the path for two-time former governor and presidential third-place finisher Gary Johnson.

“He seems sincerely grateful that I’m offering him this opportunity. I believe he’ll accept it,” Dunn tells Reason. “With Gary taking this race over, I think this is the best thing that could happen to the Libertarian Party of New Mexico. I think that it’s going to cause an unbelievable shift in the way that people look at the Libertarian Party.”

Johnson, who received 9.3 percent and 3.6 percent of the presidential vote in New Mexico in 2016 and 2012, respectively (both results constituting 50-state highs, tripling his nationwide percentages), is still just “strongly considering” a run, even with the general election only three months away.

“He’s not going into the race unless he thinks he can win,” two-time Johnson campaign manager Ron Nielson has been telling reporters. (A year ago, Nielson’s line was that there’s “no doubt that Gary would be a fantastic senator. He would do an amazing job and be great at that task.”)

Until very recently, Johnson was adamant about never running for office again after the miserable last two months of the 2016 presidential campaign, during which he was battered by negative advertising from Democratic billionaire Tom Steyer, hobbled by his own serial verbal gaffes, and blindsided by Hillary Clinton–burnishing statements from his own running mate.

When I asked the L.P. presidential candidate on Election Day 2016 whether we’d ever see a Johnson-for-Senate campaign, his answer was an emphatic and repeated “No!” When Nick Gillespie asked him just five months ago whether he was considering getting back into the political fray, the conversation went like this:

Johnson: No. No.

Gillespie: Absolutely not?

Johnson: No. I’m done. I’m done with elected political office.

So what changed? Polling. In late June, amid the New Mexico L.P. bungling its way through getting candidates qualified for the November election despite the party’s freshly minted ballot access, Dunn, who had switched from Republican to Libertarian in January and announced his Senate bid 10 days later, decided to compare his name with Johnson’s in a three-way poll against Democratic incumbent Martin Heinrich and Republican nominee Mick Rich.

“His poll numbers were three to four times better than what mine were,” Dunn recalled. “He was in the high twenties, and I was in the sevens….It was pretty evident that if Gary were to take on this opportunity…he has a real chance to win.”

Dunn’s pollster was none other than Ron Nielson. One thing led to another—including this awkward video interview Nielson conducted with his old pal two weeks later at FreedomFest—and now the L.P. has arguably its most promising senatorial candidate in its 47-year history.

But that doesn’t mean it will be easy, even if Johnson were as enthusiastic about campaigning as he is about participating in absurdly strenuous cycling competitions. The Senate race in this solidly blue state had been universally forecast until now as “Safe D.” Registered Democrats in New Mexico outnumber Republicans, unaffiliateds and Libertarians by a ratio of 46 to 28 to 24 to 1. Combine that with anti–Donald Trump animus in a midterm year, and the path looks rockier than the Continental Divide.

Unless, that is, the Republican drops out.

Mick Rich, an entrepreneur turned political novice described by Santa Few New Mexican columnist Milan Simonich as a “tomato can” (Simonich argued that the GOP instead “should have sweet-talked former Gov. Gary Johnson into leaving the Siberia of the Libertarian Party to become a Republican again”), was already in pretty miserable shape before the Johnson chatter began. As of mid-May, Rich trailed Heinrich in available campaign funds, $166,000 to $3.993 million, with Dunn limping along at $7,000. A Johnson entry, speculated NM Politico‘s Dax Contreras Sunday, would make it “practically impossible for Mick Rich to pull off an upset.”

The Rich campaign as of Sunday evening had not been quoted on the record about the Libertarian Party intrigue. (I’ve got a phone call in.) The New Mexican has reported without further detail that “Rich’s campaign said the Albuquerque contractor is not dropping out.”

Dunn for one is bullish on Johnson’s chances even in a three-way race. “I think he has an opportunity to win whether the Republican stays in or out,” he said. “He wins either way….One thing with Gary in the race—it’s going to dry up any of the Republicans’ ability to raise any funds.”

There is some softness to the incumbent’s obvious advantages. Heinrich, then a congressman, won his first Senate race by just six percentage points in 2012, a year Barack Obama won the state by 10. He has not exactly been cutting a broad swath since—a full 25 percent of New Mexico voters have no opinion of their junior senator, according to Morning Consult’s latest data, and among the rest he has a modest 43 percent–32 percent favorable-unfavorable advantage.

Mmmmm...numbers. ||| Smart PoliticsA Johnson win, however far-fetched, would reshape the long-term trajectory of the Libertarian Party, and perhaps some short-term fortunes on Capitol Hill as well. Republicans now essentially control the Senate 51-49 (two of the Senators who caucus with Democrats are independents), and though there have been some indications that 2018 will be a “wave” election for Team Blue, the Senate math is brutal: As Wikipedia succinctly states, “Democrats are defending ten seats in states won by Donald Trump in the 2016 presidential election, while Republicans are only defending one seat in a state won by Hillary Clinton in 2016.”

Though state polling data of even contested Senate races can be shockingly sparse, and polls for the World’s Greatest Deliberative Body are more error-prone than presidential surveys, the very preliminary consensus among forecasters is that Democrats have maybe a one in three chance of wresting control back from Republicans. Replace safe-D Heinrich with Libertarian Johnson, and those odds take a serious tumble.

If Democrats were to take a 50-49-1 post-election advantage, they’d still need to woo the Libertarian on party-line votes in order to avoid a tiebreaker from Vice President Mike Pence. Given that Johnson leans closer to Trump than Sen. Chuck Schumer (D–N.Y.) on regulation, domestic taxes, and the more dovish aspects of the administration’s foreign policy, that swing vote would no doubt prove to be an irritant, despite Johnson’s more copacetic views on immigration, criminal justice, and social issues.

For the L.P., having a first elected federal official would be a watershed event, replacing overnight nearly five decades of conjecture with the concrete. Elected Libertarians such as Nebraska State Sen. Laura Ebke (a party-switcher) and Calimesa Mayor and Riverside County Board of Supervisors candidate Jeff Hewitt (technically a nonpartisan, though his affiliation is nobody’s secret) are already demonstrating that Libertarians as legislative swing voters can accomplish real policy victories on the state and local level. A federal Leviathan run by a mercantilist who is bringing back the bad old days of $1 trillion annual deficits is more than ripe for libertarian-flavored reform.

Until now, the best performance among the more than 330 Libertarian Senate candidates since 1976 has been Alaska’s Joe Miller, who finished second in a four-way race with 29 percent of the vote in 2016. Miller, a former Tea Party Republican, endorsed Donald Trump instead of Gary Johnson that year; also, Libertarian vice-presidential nominee Bill Weld endorsed Miller’s victorious opponent, incumbent Lisa Murkowski.

The next-best L.P. Senate performances, according to a very useful Smart Politics article and chart by Eric Ostermeier, were Michael Cloud’s 18.4 percent in Massachusetts (2002), Steve Osborn’s 12.6 percent in Indiana (2006), and Carla Howell’s 11.9 percent in Massachusetts (2000). No other Libertarian has cracked double digits.

But breaking the previous L.P. record for a Senate race while still finishing second would represent a net loss in the party’s number of elected officials. That’s because Aubrey Dunn will no longer be state land commissioner of New Mexico in 2019, and the chances of L.P. nominee Michael Lucero beating Republican Patrick Lyons for the office are remote indeed. “We polled [the race] a year ago,” says Dunn, who has been engaged in a series of political skirmishes with the GOP, “and I didn’t poll well.”

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Watch Live: President Trump Joint Press Conference With Italian PM

Italy’s Prime Minister Giuseppe Conte arrived at the White House this morning and met with President Trump. We are sure immigration and NATO spending were among the many topics of joint interest, but will the press be asking about that or Manafort, Cohen, and Trump Tower instead?

As CNN notes, German Chancellor Angela Merkel and French President Emmanuel Macron — no big fans of the US administration — are bound to hold their breath in fear that Italy might lend Trump a hand in further destabilizing the European Union, already torn by contrasts between member states and facing a deadlock in its integration process. And they do have cause for concern. Conte is turning out to be Trump’s main supporter and ally in Europe.

Watch Live:

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“Entire Equity Universe In Turmoil”: Hedge Funds Crushed As Value/Growth Unwinds

On Friday, in a prescient note observing the factor, style and sector rotations in the market, Nomura’s head of x-asset strategy, Charlie McElligott explained why the most important trade of the past decade – growth over value – is now reversing.

One day later, as moves he pointed out last week accelerate, McElligott has published a follow up piece, in which he warns that the value/growth rotation is accelerating, while hedge funds and other members of the buyside are getting crushed, something Morgan Stanley touched upon earlier today.

McElligott explains:

  • Another day, another powerful rebalancing OUT of “Growth” (FAANG, Tech / Cons Disc) and INTO “Value” (Cyclicals / Resources)—thus disrupting the performance of “Momentum” strategies (-2.9% on day), broad “consensual positioning” across Equities funds (HF L/S model -1.8%) and spurring speculation of “quant fund unwinds” (Momentum Sector-Neutral -2.3%)
  • However, it’s not just a one week phenomenon: “Cash / Assets” factor (-3.4% today) is the factor category poster-child of “Growth over Value”—and which from the low in U.S. rates in the Summer 2016 through March 2018 was +63.5% as a “market-neutral” strategy; however, since March 9th 2018, the factor is -8.5%
  • Crowded “long Growth” (and “Momentum”) positioning is “tipping over” with 1) the negative “micro” earnings catalysts of last week sapping sentiment vs high expectations / “loaded” positioning, in addition to the “Value” macro drivers I’ve spoken about as well:  2) the current tactical steepening of the UST yield curve via BoJ “tweak” potential 3) the more-gradual tightening of US Financial Conditions and 4) Chinese outright easing / stimulus ‘pivot’ powering a potential Commodities / Cyclicals recovery (through infrastructure / fixed-asset investment)
  • This overall “knock-on” is a “mean-reversion” across the factors, sectors and themes, driving broad “gross-down” / “net- down” flows throughout the Equities universe.

Some additional details:

AS INVESTORS SCRAMBLE TO SELL “GROWTH” AND REBALANCE INTO “VALUE,” THE ENTIRE FACTOR UNIVERSE IS MEAN-REVERTING VS YTD / START-OF-YEAR TREND:

“CASH / ASSETS” FACTOR AS PROXY FOR “GROWTH OVER VALUE” SEEING ITS LARGEST 3D DRAWDOWN SINCE THE “QUANT MARKET NEUTRAL UNWIND OF FEB / MAR 2016:

“MOMENTUM” = “LONG GROWTH / SHORT VALUE” (USING ‘CASH / ASSETS’ FACTOR AS PROXY):

SELECT ‘VALUE’ VS ‘GROWTH’ FACTOR CATEGORIES SHOW EXTENT OF THE 5D ROTATION (% RETURN):

GROSS-DOWN:

THEMATIC-REVERSALS MEAN PERFORMANCE-DISRUPTION:

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