A Heretic’s Guide To Deplatforming

Authored by Mark Jeftovic, easyDNS co-founder & CEO,

Update #2: A few hours later it was unflagged and is currently on the first page of HN.

Update #1: Ironically, after ascending rapidly and fostering vigorous commentary over on Hackernews, this article has been “flagged” there .

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The phenomenon of deplatforming in the internet age, which includes the component of publicly expressed outrage that impels companies to act to remove objectionable content, provides ample fodder for getting all kinds of things wrong against the backdrop of people wanting to put things right.

To that end I see three distinct themes around it:

  1. We run the risk that the act of deplatforming can become as extreme as the hate speech it seeks to banish.

  2. While it’s within the purview of every private (and by that I mean non-governmental) company to do it, those who do typically undermine their own long term interests. And,

  3. On our present course, we’re headed for a balkanized social media landscape

The idea of mobilizing public support, usually just raw emotion, and channeling it toward denying service or infrastructure to something deemed undesirable has taken on an almost macabre element in this day and age. The problem with deplatforming is nobody can give you an objective, rule-of-thumb based guideline that can answer the question

“Where does it stop?”

In the latest issue of #AxisOfEasy I mentioned the recent deplatforming of Gab and offhandedly asked readers to reply back to me if they had any thoughts around it. The responses I’ve gotten were all, in depth, long, thoughtful, considered and rational. I’d like to quote one at length:

the lines are getting blurrier and blurrier. When we hold someone socially accountable for something they say, or some idea they espouse – and we do so by way of silencing them or terminating services of any kind to them, a few things happen. First, we may be seen as exercising our own right to freely speak (and sure, why not?). Second, we haven’t turned that mind around and instead driving the thing underground (where it can and does continue to fester). Third, we willfully and purposefully exercise an act of control over someone else – an act that in actuality we may or may not have a right to. This third point is the blurriest, and it may simply have no good single answer.

The more frightful thing that seems to be happening is that now we not only hold the individual responsible, but the platform itself responsible. Why? Should the ISP that serves the user’s connection also be responsible for letting that person even access the Internet? Should the email service provider not share in the blame, by allowing that individual the continued ability to communicate with those he or she forms such thoughts and ideas with? If a group rents equipment to loudly broadcast its ideas, or purchases the paper and supplies necessary for its signs, would we or should we hold the suppliers of these things responsible if the group is deemed toxic? How far down the social-justice rabbit-hole can and should we, the society, go? Where will it end?

The reality is that an effective deplatforming initiative is built primarily on the momentum of rage and angst and as it gathers momentum, less and less participants have the presence of mind to approach the subject at hand rationally and objectively. It is, as Elias Canetti termed it, a type of hunting pack known as “the baiting crowd”.

“The baiting crowd forms with reference to a quickly attainable goal. That goal is widely known and clearly marked, and it is also near. This crowd is out for killing and it knows whom it wants to kill. It heads for this goal with unique determination and cannot be cheated of it. The proclaiming of the goal, the spreading about of who it is that is to perish, is enough to make the crowd form. The concentration on killing is of a special kind of unsurpassed intensity. Everyone wants to participate; everyone strikes a blow and, in order to do this, punches as near as he can to the victim. If he cannot hit himself, he wants to see others hit him. Every arm is thrust out as if they all belong to the same creature….
— Elias Canetti, Crowds and Power “

What’s most pernicious about all this is that after it’s over, there are no winners, despite the cheer of those declaring victory.

Most successful deplatformings are Pyrrhic victories

Here’s why: let’s step through the various participants in this and show how they undermined their own long term interests by doing this.

First, though, a quick word on Gab:

via http://twitter.com/caitoz/status/1056783477767471105

This mirrors my take on it when I created an account and took a look around. Gab illustrates a “catch-22” around setting out to be specifically a “free speech platform”. You initially appeal to the most fringe elements of public discourse. Your first wave of users are going to be people for whom this has been a problem, and if you’re an absolutist and let them on then suddenly that’s your base. And once that’s your base, it’s a hard sell to entice the normies into the ecosystem. It’s entirely understandable then, why Gab acquired a reputation for being an oasis of the alt-right. Adapting the “Pepe the Frog” meme as their logo didn’t help, to many that looks like a dog whistle.

It all culminated, in the hours after the tragic shooting in Pittsburgh with their tweet about getting “1 million hits per hour” , possibly the stupidest thing ever tweeted, excepting maybe that time that guy tweeted a few jokes about the Ariana Grande concert bombing mere minutes after it happened

All that said, their deplatforming is still very much troubling because they claim to have proactively aided the police once they became aware of the perpetrator’s account on their system.

This is very much in line with how any other social media platform behaves and is normal and responsible. Contrast Gab’s cooperation in the Pittsburgh shooting investigation with Dailystormer who were widely deplatformed for going the extra mile to be indefensibly abominable pricks in the aftermath of Heather Heyer’s murder in Charlottetown. Big difference, but same outcome.

Here is how the deplatforming participants have undermined their own interests:

Stripe and Paypal:

This one rattled me. We use Stripe, it’s our main payment processor and probably the best we’ve ever worked with. But now they’re making fairly loose judgment calls about their clients and letting the actions of a single downstream user, among thousands? (millions?) of a customer decide their fate? It sets a bad precedent. Same goes for Paypal.

Does this mean that if Zerohedge, or Black Lives Matter, two of our clients from opposite ends of the political spectrum, post something, or even if one of their users posts something, that is beyond the pale, then we have to worry about having our finances cut off?

I know as “the DNS guys” we have a near pathological aversion to single-points-of-failure, but it’s not a stretch to come to the conclusion for any business that it’s not an acceptable risk to have that possibility just looming there and to do nothing about it.

That means we will now be looking for backup payment processors. That means maybe after 20 years in business, maybe it’s time to just pull it all in-house. Will any other businesses do the same? Anybody doing the same calculus will arrive at the same conclusion.

Stripe and Paypal put the question in their clients head every time they make a judgement call about one. Especially businesses built around downstream users.

Godaddy:

Is known to skimp on due process before unplugging any domains that garner any kind of quasi-official request , so it’s no surprise that they cut loose Gab’s domain. They’re the 800lb Gorilla in the space and for them, I imagine that it’s all a numbers game. It’s just easier to kick them off than to think about whether they should kick them off.

Whenever I come across a fellow Libertarian, anarcho-capitalist or even an Austrian-school economist or any kind of contrarian or heterodox voice and I find out they’re using Godaddy, I caution them that they really are playing roulette. All it takes is some coordinated, well aimed outrage and they’ll be gone.

And of course, there are groups out there whose entire raison d’être is to do just that.

Shopify:

Came under brief criticism for hosting Breitbart material, but they stuck it out, but this time they also deplatformed Gab. Again – anybody using Shopify may want to rethink relying on them solely.

Medium:

Medium’s suspensions I find quite troubling, considering that they banned Gab’s official account where they would speak to the criticisms being levelled against themselves, but not rebroadcasting any of the material found on Gab that ostensibly made them problematic.

Caitlin Johnstone was exactly correct when she drew attention specifically to Gab’s statement on the Pittsburgh tragedy and posed the question: what about that statement could possibly justify having their voice cut-off?

As I write this, Twitter hasn’t killed the Gab twitter account, yet. But they did seemingly coordinate with Facebook et al in the latest Facebook purge of FreeThoughtProject (I listened to an excellent interview with the co-founders on the Tom Woods podcast this morning).

Yes,  all of the above are all within their rights to deplatform Gab. But all of the platforms that do so simply reinforce the notion in everybody’s head: these platforms have power over us, and they pose existential risk to our businesses or our ability to express ourselves.

What happens next:

For that reason, counter-measures will emerge.

The traditional argument “if you’re doing nothing wrong don’t worry” doesn’t hold.

Maybe today, that means “if you are a social justice minded progressive you have nothing to worry about”. But people forget that pendulums swing, history has certain cycles of mean reversion and then overshoot.

In the years after 9/11 I remember very vividly how the Neo-conservative narrative utterly dominated the mainstream media and the word “liberal” was practically a slur. Those days are certainly gone. Do you think these days won’t be?

What happens when everybody on the “safe” side of the narrative today is no longer considered acceptable tomorrow?

Personally I think it’s more pernicious than a mechanical back-and-forth struggle over control of the narrative. Left-vs-right is a false dichotomy. The real battle, the important one, is between those who would seek to decide what is acceptable for other people to think vs those who would rather think for themselves. It is centralization and consolidation vs decentralization and diversity.

The next challenger to Twitter will not be another centralized platform like Gab. It will be decentralized – perhaps a federation like Mastodon, where each node runs its own CoC and community standards – similar to IRC days. Or something blockchain based like Peepeth. Over all this recent attention around deplatforming, I’ve suddenly heard the name Mighty Networks more than once over the past few weeks. Turns out you can create your own network over there, and use your own domain to do it.

The tech giants today are by their own actions cultivating the motivation and the will to necessitate the creation of their own challengers and everybody is watching closely what works and what doesn’t.

The next wave of disruption will not look like the last wave, the incumbent giants are not impervious to assault. I always like to remind people that Google, Facebook, Twitter, et al may look unassailable today, but so did Yahoo and Myspace, yesterday.

The truly fringe discourse, the stuff nobody normal condones will all go underground, where it will be harder to find and monitor and where it will revel in it’s inscrutability, metastasizing into God-knows-what from whence the occasional shock of really unhinged egregores will surely emerge.

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Georgia Investigating Democrats For Allegedly Hacking Voting System

Two days before the Nov. 6 midterm elections, Georgia Secretary of State and Republican gubernatorial candidate Brian Kemp revealed on Sunday that his office is opening an investigation into the Georgia Democratic Party on allegations that it attempted to hack the state’s voting system, including allegations of possible cyber crimes. 

Abrams

Kempe, whose office announced the investigation in a Sunday morning news release, didn’t reveal any details of the probe, which comes on the heels of a court victory by Democrats, who successfully challenged the state’s attempt to de-register 50,000 voters under the state’s “exact match” voter ID law, according to the Daily Caller.

“While we cannot comment on the specifics of an ongoing investigation, I can confirm that the Democratic Party of Georgia is under investigation for possible cyber-crimes,” Kempe press secretary Candice Broce said in the release. Both the Department of Homeland Security and the FBI have been alerted.

The state Democratic Party has called the allegations “100% false” and “an abuse of power” by Kempe. According to the Atlanta Journal Constitution, a computer scientist and attorney who are currently suing Kempe said that the lawsuit is “an attempt to distract from a report about vulnerabilities in the state’s voter registration website.”

The “vulnerabilities” could potentially allow anybody to access the voting records of individual voters.

Poll numbers between Kempe and his opponent, Democrat Stacy Abrams, have tightened to within a two percentage point margin as Abrams has benefited from several celebrity endorsements, including the support of Oprah Winfrey, who joined Abrams in knocking on doors last week.

The Daily Caller quoted Abrams as saying the lawsuit was a “desperate attempt” to sway the vote in Kempe’s favor ahead of the election.

“I’ve heard nothing about it, and my reaction would be that this is a desperate attempt on the part of my opponent to distract people from the fact that two different federal judges found him derelict in his duties and have forced him to accept absentee ballots to be counted and those who are being held captive by the exact match system to be allowed to vote,” Abrams said.

For many Georgia voters, news of the investigation will not be taken lightly. According to a poll conducted by the AJC and a local TV station, many voters in the state are concerned about the integrity of its elections, including fears about tampering and ineligible voters casting ballots.

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Saudis Furious With Washington Post Coverage, Call For Amazon Boycott

President Trump’s long-running vendetta against Jeff Bezos, The Washington Post and Amazon got an unexpected supporter over the weekend, when Saudis, furious at The Washington Post’s coverage of the kingdom in the aftermath of Jamal Khashoggi’s murder, have called for a boycott of Amazon.com because of its shared ownership by U.S. billionaire Jeff Bezos.

As Bloomberg reports, “Boycott Amazon” was the top trending hashtag on Twitter in Saudi Arabia for several hours on Sunday, as users circulated images showing the deletion of the Amazon smartphone app.

“I was so excited for Black Friday! But unfortunately since #Washingtonpost is double standards against my country #saudiArabia and support propaganda of Erdogan I decide to stop any plans to buy anything in @amazon,” one tweet read. It was repeated eight times on different accounts with the same spelling errors, suggesting at least some of the anti-Amazon resistance was being led by bots. Bloomberg’s efforts to contact users behind those accounts weren’t successful.

Saudi citizens – feeling that their country is under attack since Saudi agents killed Khashoggi, a WaPo columnist and dissident, at the kingdom’s consulate in Istanbul – also called for a boycott of regional subsidiary Souq.com, acquired by Amazon last year.

Saudi anger boiled over after the WaPo published a scathing op-ed article by Turkish President Recep Tayyip Erdogan on Friday in which Erdogan claimed that “we know that the order to kill Khashoggi came from the highest levels of the Saudi government”, as well as by the newspaper’s ongoing coverage of gruesome information about the murder obtained from anonymous Turkish officials.

“It became clear before our eyes that this is an organized media war,” said Bandar Otyf, a Saudi journalist with more than 100,000 Twitter followers who was among those calling for the boycott.

“As Twitter users and activists and citizens, we don’t have power abroad, but we have simple things like boycotting”, Otyf said.

In what will come as music to Trump’s ears, Otyf said that many Saudis are learning for the first time that Bezos, the founder and chairman of Amazon, separately owns the Washington Post, adding that “if we affect even a portion of their business, we’re satisfied.”

While Amazon is little used in Saudi Arabia, the Amazon-owned Souq.com is popular: last year, Saudi Arabia’s sovereign wealth fund invested in a competing e-commerce firm called Noon, which was founded by the chairman of Emaar Properties.

This is not the first time Saudis have called for a boycott related to the Khashoggi murder: three weeks ago, Uber faced similar calls for a boycott of its app in the Persian Gulf in response to the reaction of CEO Dara Khosrowshahi, who was among several business leaders to announce they were pulling out of an investment conference due to take place in the Saudi capital later this month. In light of Bloomberg’s extensive report on “The Inside Story of How Uber Got Into Business With the Saudi Arabian Government“, Saudi threats against Uber appear especially hollow.

For now, there is little reason to expect that Saudi’s grass root anger at Amazon will turn into anything more than just posturing especially in light of photos such as this one

… showing Bezos sharing a moment of levity with MbS back in March.

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Why Bad Economics Makes Such Good Politics

Authored by Ryan McMaken via The Mises Institute,

As the election nears, politicians will more and more frantically point out what wonderful favors they’ve done for the voters – or what favors they will do for the voters, if elected…

Of course, they never mean all the voters. They mean groups or individuals within the voting population who believe they benefit from laws, taxes, regulations, and spending programs supported by the politician in question.

Two such examples of these sorts of favors are tariffs and minimum wage laws. Both impose costs on both producers and consumers overall, while benefiting a small sliver of the population that is able to take advantage of the government mandate.

The economics of each of these, or taxation and business regulation in general, have already been addressed numerous times in these pages.

It must suffice to point out that these policies, for which politicians think they deserve accolades, potentially benefit only very specific interest groups. Nevertheless, these policies can prove to be politically popular, and may help a politician get elected.

But why should policies that help so few — and impose many costs on even those they purport to help — be politically popular?

Hazlitt and Mises on the Popularity of Bad Economics

Answering this question was one of the main reasons that Henry Hazlitt wrote his perennially popular bookEconomics in One Lesson.

In the very first chapter, Hazlitt notes that economic science is prone to so many errors because people are motivated to believe an incorrect version of economics that supports their own economic interests. Or as Hazlitt put it, economic errors “are multiplied a thousandfold … by the special pleading of selfish interests.”

Sometimes, these attempts to throw good economics in the garbage are spectacularly successful. After all, for decades, no insignificant number of Americans believed the claim that “what’s good for General Motors is good for America.”1

Hazlitt continues:

While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

In other words, it’s amazing what you can get people to believe with the right ad campaign or lobbying campaign.

Ludwig von Mises also defined the problem in his book Theory and History, noting that the common good (which he called the common weal) was most certainly not the same thing as the good of the special interests. Nevertheless, many (bad) economists, Mises tells us, have tended to support policies that benefit whatever group the economists happen to like:

People aim at definite ends when resorting to a tariff or decreeing minimum wage rates. When the economists thought such policies would attain the ends sought by their supporters, they called them good.

The real job of an economist, however — according to Mises — is something else:

In dealing with [economic policies] … economics … merely investigates two points: First, whether or not the policies concerned are fit to attain the ends which those recommending and applying them want to attain. Secondly, whether these policies do not perhaps produce effects which, from the point of view of those recommending and applying them, are undesirable.

When politicians support minimum wages or tariffs, they usually frame these policies as being beneficial to nearly everyone. (This is why headlines like “Raising the minimum wage would benefit everyone” are so common.) Meanwhile, both Mises and Hazlitt would maintain, drawing on sound economics — and not even using the empirical evidence which backs them up — that these policies harm nearly everyone and benefit only a few. Moreover, the benefit enjoyed by that small minority may even extend only to the short term, or may even be negative when the bigger picture is considered.

As Hazlitt notes, it is the job of the economist to consider all of these angles and options, and thus economists do their job when explaining how and why minimum wages and tariffs don’t “attain the ends” which their supporters claim.

The Problem with “I’m Willing to Pay a Few Bucks More…”

Confronted with the simplicity and basic common sense of the economic arguments, advocates for minimum wage hikes and tariffs often fail to get the support they like. To counter this, they employ a different tactic.

When economic arguments fail, supporters of these policies then claim that  “well, I am willing to pay the price of adopting the interventionist economic policy in question because….” suggesting that the cost is low, and that there is a moral imperative to adopt their interventionist point of view.

This is how it works: Economist A points out to Activist B that a tariff raises the price of goods, thus making products and services more expensive for entrepreneurs and producers who use those goods. This leads to fewer goods being available on the market, fewer choices for everyone, and higher prices to boot. Activist B then responds: “well, maybe the tariff will make prices higher, but I’m willing to pay that price because the Chinese are cheating us! Beating the Chinese is worth a few bucks more on widgets!”

But here’s the rub: when Activist B says “I’m willing to pay that price” what he is really saying is that he’s willing to have you pay more for the goods and services affected — whether you like it or not.

And if you’re not happy to pay more in order to “beat the Chinese,” (or whatever) well, then that’s just tough luck. The fact that the tariff might be slashing profit margins at your small, family-owned steel-fence manufacturing firm means nothing to them. The fact that a higher minimum wage might force you to close your family restaurant is equally of no concern. They’re willing to pay the price of adopting the policy they want, so you are expected to do the same since, in their minds, the good of their own interests — whether they be economic or moral — trumps the interests of everyone else.

Ultimately, this is nothing more sophisticated than the belief that the police power of the state ought to be used to force economic policies on everyone to satisfy the whims of a few. It’s nothing more than good old-fashioned mercantilism. Many good economists, thinking they had thoroughly discredited mercantilism 200 years ago, continue to be dismayed that a sizable portion of the voting public continues to be hoodwinked by it all. But, if history is any indicator, mercantilism never really stopped being popular.

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US Threatens SWIFT With Sanctions If Iran Isn’t Cut Off

Treasury Secretary Steven Mnuchin threatened the global financial messaging service SWIFT on Friday that it could be penalized if it doesn’t cut off financial services to entities and individuals doing business with Iran. The warning came just days ahead of the US re-imposition of all US sanctions on Iran that had been lifted under the 2015 nuclear deal, which will take effect at midnight tonight and cover Iran’s shipping, financial and energy sectors.

Speaking to reporters, Mnuchin was quoted by Reuters as saying that “SWIFT is no different than any other entity,” adding “We have advised SWIFT that it must disconnect any Iranian financial institutions that we designate as soon as technologically feasible to avoid sanctions exposure.”

The Trump administration has been pressuring allies to cut Iranian oil imports to “zero” next month although on Friday the US agreed to grant exemptions to 8 countries that import Iran oil; the countries include Japan, India, and South Korea according to Bloomberg. China, the leading importers of Iranian oil remains in discussions with the US on terms but is among the eight, as is Turkey which will likely receive an exemption, the country’s energy minister said on Friday. The full list of countries receiving waivers will be released on Monday.

By cutting Iran off from SWIFT, Iran would lose its ability to be paid for its exports and to pay for imports. Washington has been pressuring SWIFT to cut Iran from the financial system as it did in 2012 before the nuclear deal. Six years ago the EU imposed sanctions on Iranian banks, forcing SWIFT, which is subject to EU laws, to cut financial transactions with at least 30 of Iran’s financial institutions, including the central bank.

Iranian banks were reconnected to the network in 2016 after the Iran nuclear deal came into force, allowing much needed foreign cash to flow into Tehran’s coffers.

While SWIFT (The Society for Worldwide Interbank Financial Telecommunication), which is a financial network that provides cross-border transfers for members across the world, is based in Belgium, its board includes executives from US banks with US federal law allowing the administration to act against banks and regulators across the globe. It supports most interbank messages, connecting over 11,000 financial institutions in more than 200 countries and territories.

Washington’s pressure has pushed Brussels to look at creating a SWIFT alternative. As we reported at the time, in August German Foreign Minister Heiko Maas called on the EU to set up an independent equivalent of the system. Later, EU Foreign Affairs Chief Federica Mogherini confirmed that the bloc’s signatories remain committed to the nuclear deal with Iran and are working to create special payment channels to do business with the Islamic Republic. That proposal stalled in Brussels and major European firms left Iran.

* * *

Whether with or without SWIFT’s involvement, Iranians are bracing for the full force of US sanctions due to hit on Monday. The new sanctions, which also aim to cut off Iran’s banking sector from the global market, are timed to coincide with the anniversary of the 1979 storming by Iranian revolutionaries of the US embassy in Tehran, when angry students took 52 American diplomats hostage for 444 days.

Iran has remained defiant, saying it is confident it can weather the impacts, and that the US will fail to bring down Iranian oil imports to zero.

On Friday, President Trump announced the reimposition of sanctions by tweeting on Friday a photograph of himself in the style of an advertisement for the Game of Thrones series, with the tagline: “Sanctions Are Coming, November 5” (much to the chagrin of HBO).

The office of Iran’s Quds force commander, Qassem Soleimani, retaliated by posting a photo of himself in a similar style alongside the tagline: “I will stand against you.”

But ordinary people, wary of the fluctuations of the currency and the rising prices of goods, are anxious. On Sunday, a state-organised rally took place in front of the former US embassy compound in central Tehran to mark the anniversary. The crowd held placards reading “Down with USA”, and “Down with Israel”, while others set US and Israeli flags on fire.

“Never threaten the Iranian people,” Mohammad Ali Jafari, the commander of Iran’s elite revolutionary guards told people gathering in front of the former embassy, officially referred to as a “den of spies”. “Do not make military threats against us, and do not frighten us with military threats,” he added.

Iran is also relying on European support: as noted above, the EU has set up a mechanism – known as a special purpose vehicle (SPV) – to sidestep US sanctions and persuade an increasingly reluctant Iran to stay inside the deal in the hope of rescuing its economy. It is unclear if Europe will be willing to actually activate this “SWIFT-alternative”, however, in light of Mnuchin’s threats.

Iran’s supreme leader, Ayatollah Ali Khamenei, reacting to Trump’s threats on Saturday, said America’s power was in decline. “The US’s goal in imposing sanctions is to paralyze and prevent the growth of national economy; but it resulted in a movement towards self-sufficiency in Iran,” he said.

Inside Iran, however, people are on tenterhooks. Economic grievances were a trigger for a wave of nationwide protests in recent months over the scarcity of the US dollar, unpaid wages and rising prices. “Nov 5th isn’t the most pivotal moment in this saga,” said Ali Vaez, Iran project director at the International Crisis Group told the Guardian. “Paradoxically, if sanctions prove as effective as the White House is hoping for, they are bound to push Iran to either revive its nuclear program or become more aggressive in the region. Both will significantly increase the risks of a military confrontation.”

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Early Voting & The Forgotten Lessons From 2016 Polls

Voters across the country have been crowding into polling places and mailing in ballots in numbers rarely seen in an off-year election.

In some states, as The Courier Tribune notes, more people are on track to cast ballots in early voting than in the entire election in 2014.

Democrats hope that surge indicates they may be succeeding in mobilizing a crucial demographic (because Democrats rely heavily on the votes of younger people and minorities, who are less consistent in their voting than are older whites, their candidates usually benefit from a higher turnout).

But Republicans are also energized, turning out in larger numbers than Democrats so far in Florida, for example, where a cliffhanger race for governor features a Donald Trump acolyte competing against a progressive who would be the state’s first African-American governor.

Nationwide, as early voting was coming to a close in many states Friday, more than 30 million ballots had already been cast. Turnout is hitting a pace closer to what’s typically seen in presidential elections. It has the potential to be the highest in an off-year election since 1966.

“When you look at some of these states, the numbers are eye-popping,” said Michael McDonald, a political science professor at the University of Florida and one of the country’s leading experts on voting patterns.

Overall, the most either side can tell is what has consistently been true of Florida since 2000: The statewide contests are likely to be very close.

Of course, none of this early-voting trend actually means anything statistically relevant – despite the best efforts of MSNBC et al. to spin it to the left’s advantage.

As Salil Mehta points out in his Statistical Ideas blog, everyone recognizes that the 2016 election polls were chaotic.

You can’t put a positive spin on fake 90% “probability”, with a straight face.  But to save face, the forecasters behind those polls have certainly tried!  Meanwhile in the months leading up to the 2016 election, we had correctly reasoned that Hillary Clinton had closer to only a 50% probability.  The gulf between what the mainstream news pushed out, and our reality, was indeed that wide.

Interestingly, all pollsters from back then are still in force.  Same work this go around.  Not much different.  Polls currently indicate that the Democrats have an 80%-85% “probability” of overtaking Congress.  To some, this seems nearly as (too) high as the fake “probability” they were being told in 2016.  Is it still a sure thing, this time?  We will briefly discuss below that we instead see the Democrats with a 55%-60% probability.  Indeed a gulf still exists, but obviously it is not as exuberant as was the case in 2016.

Now for ground rules, let’s reiterate that our website has never been politically biased.  We care about people with differing views, and our sole intention if to focus on the probability theory concepts.  With that, let’s discuss three major math themes that are worth reinforcing this go around, for the 2018 midterm forecasts.

The first theme is that the major pollsters are using a highly limited small sample size of longitudinal polls in order to formulate estimates of their errors.  They also assume a nice clean, normal distribution even though their limited data is noisy.  The result of these issues is that pollsters (such as competing statistician Nate Silver) continuously give absurdly high “probabilities” for outcomes that then fail to materialize. Here is a reminder of some of his high-profile failed forecasts, each with very high “probabilities” stated for occurring:

  • 2015, 75% probability on United Kingdom election

  • 2016, Donald Trump at 98% to lose GOP primaries

  • 2016, Donald Trump at >90% in Alaska primary

  • 2016, Hillary Clinton at >90% in Michigan primary

  • 2016, Hillary Clinton at >90% in Indiana primary

  • 2016, Hillary Clinton at 90% in Wisconsin primary

  • 2016, Hillary Clinton at >70% in general election

  • 2017, 75% probability on Alabama senate election

Don’t worry; for every high “probability” call that you can pick up that he has gotten right. We can provide at least one high “probability” call that he instead got wrong.  So much for high probabilities!  And this brings us to our second theme, which is that pollsters are still stating too low a self-assessed “margin of error”.  See this chart below…

Nassim Taleb in 2016 pointed this out as well:

Even Nate Silver aches from these polling “probability” auto-variances as well.  For example, in a tiny time span, we have had to shake our heads as his “probability” (in one of his three various polling flavors that’s allegedly smoother) confusingly oscillate roundtrips from 77%, down to 70%, up to 84%, and back down below 70%, and back up to over 84%! 

That’s how insanity works; not probability.  And we noted ex-ante to this 2018 polling season, that this would be among the fingerprints remaining on his flawed polling logic.

So our first two themes we described above combine to show the >80% “probability” (that’s popularly said for Democrats to take over Congress in 2018) is way too high.  Directionally it’s correct, but our estimate of <60% is far more realistic.

Our third theme was the problematic “transmission” of the polling data to the overall election outcomes, which is inherently more difficult in this mid-term, versus 2016 and 2014  elections.  Why wouldn’t current pollsters recognize that?  Mid-term polls are smaller, noisier, must work their way through a small number of competitive seats, etc.  Those relationships are not as tight as in general elections, which themselves proved onerously difficult in the current Trump-era for these modern pollsters to get ahead of.

We leave you with this thought-enriching poll below!  Last,please be kind to each other.  All of our dreams are interconnected.  Looking forward to catching up, after Election Day!

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US Troops Lay Down Razor Wire At Southern Border

US troops at the US-Mexico border are laying down approximately 1,000 feet of razor wire fending along the Texas side of the Rio Grande river underneath the McAllen-Hidalgo International Bridge, as three separate caravans of Central Americans make their way north in the hopes of claiming asylum.

Soldiers participating in “Operation Faithful Patriot” are working with US Customs and Border Patrol officers to install the fending, according to the Department of Defense. 

During a Saturday campaign rally in Montana, President Trump said “Mexico is trying, they are trying but we’re different, we have our military on the border,” adding “And I noticed all that beautiful barbed wire going up today. Barbed wire, used properly, can be a beautiful sight.”

A spokesman for the US Border Patrol told the New York Post that the fencing was part of “necessary preparations” for the caravans.

Troop arrivals

Around 900 troops have arrived at the US-Mexico border since the Trump administration announced the deployment on October 26.  

The president vowed the forces would block the caravans, which contain thousands of migrants, from entering US turf.

Military units are heading to outposts along the border from Texas to California.

After saying about 5,000 active-duty troops would be deployed as part of Operation Faithful Patriot, Trump on Wednesday boosted the number from 10,000 to 15,000.

A separate contingent of about 2,100 National Guard troops had already been deployed to work with Border Patrol in anticipation of the caravans, which have about 7,000 people total, according to the Defense Department. –NY Post

The original caravan continued on foot Saturday after Mexico rescinded an offer to bus them to Mexico City, citing a lack of water. They are currently making their way through the Gulf Coast state of Veracruz, and are around 750 miles from the US border. The caravan’s numbers have dropped from 7,000 to around 4,000 over the last few weeks, while around 3,000 have applied for asylum in Mexico and others haver returned home. 

On Friday night, Veracruz governor Miguel Ángel Yunes offered bus rides to the country’s capital, however he quickly rescinded the offer, blaming maintenance work on Mexico City’s water supply which he said left 7 million people without water over the weekend. 

Mexican officials, meanwhile, have ceased to provide bus, truck and van rides to the group. 

A second caravan of around 1,000 to 1,500 people from Guatemala, Honduras and El Salvador entered Mexico last week and is around 1,000 miles from the southern US border, while a much smaller caravan also entered Mexico from Guatemala on Friday – wading across the Suchiate River after Mexican authorities blocked access over a bridge. 

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Market Stalls At Resistance (Selling The Rally)

Authored by Lance Roberts via RealInvestmentAdvice.com,

Market Stalls At Resistance

This past Tuesday, I wrote “A Sellable Rally” in which I laid out the 4-reasons for a rally based on the psychological, fundamental, technical, and seasonal underpinnings. That rally came to fruition over the last few days.

For us, it has been the technical backdrop which remains the most compelling. To wit:

Unlike the February lows, the recent sell-off fell 4-standard deviations below the 50-dma which is a rare event historically speaking. Such deviations do not last long as such an extreme move away from the average price tend to be corrected in fairly short order.

As shown, the combination of both the extreme oversold and deviated conditions contributed to a bounce which hit our “target neighborhood” of 2740-2750 on Friday morning.

In accordance with our portfolio management strategy, when the markets reached our target zone yesterday morning we executed sells of positions that have been under-performing both the market and other holdings within our portfolios. As we have stated many times previously, one of the primary tenants of portfolio management is to “sell losers.”

“Only losers, add to losers.” – Paul Tudor Jones

With portfolios reduced to 50% equity, we have a bit of breathing room to watch the elections next week. There is more than a decent chance the currently Republican-controlled House of Representatives switches to Democratic control which would likely lead to further market volatility. However, Kevin Giddis from Raymond James laid out three likely scenarios last week.

What could a potential change do for bonds and stocks? There are many possible scenarios, so the devil is in the details. I will lay out a couple of them for you:

1) The Republicans could lose the House, or the House and Senate. Either of these possibilities could derail the President’s agenda, leading us back to a period of gridlock that has plagued this country in the past. This would likely be good for bond prices and bad for equity prices.

2) The Republican majority remains intact, and the President pushes forward his plans of another tax cut, among other items as well. This would likely be good for stocks and bad for bond prices.

3) A complete rout that not only gives the majority of both the House and the Senate, it gives them the power and the votes to take on the President. If this happens, bonds could rally in price, the economy could lose its momentum, and the Fed would likely alter its monetary policy.

In the end, however, this turns out, the markets are likely poised for some big changes come next Wednesday.”

He is right. More importantly, there are simply too many possible outcomes to head into the election without some extra cash on hand. That cash will either act as a hedge against a decline or will provide liquidity to add some discounted equity exposure where needed.

On a more bullish note, once we get past the election next week, we do start to deal with the “seasonal” bias that comes with the end of the year. As Stocktraders Almanac noted last week:

“This past midterm-year October that ended yesterday finished well below expectations and historical averages. DJIA declined 5.1%, S&P 500 dropped 6.9% and NASDAQ was off 9.2%. October’s losses were the seventh worst decline for DJIA since 1950, fourth worst for S&P 500 and fifth worst for NASDAQ since 1971. Historically, November and December market performance did hold up following a negative October.”

 “The S&P 500 in November had a modestly weaker average performance following a down October, but December was notably stronger.”

Importantly, it should be noted that while the markets do tend to improve in November and December, following the 7% decline in October, an average gain of 3-3.5% does not get you back to even.

It is this seasonally positive bias that keeps us from a more restrictive equity allocation currently. However, it is our intention to use seasonal strength to reposition portfolios for a much weaker market environment going into 2019 as the bull market officially comes to its end. 

Daily View

After violations of several important levels of support last month, the market did manage a rally back to the 50% retracement level from the April lows. The failure at the level confirms the ongoing bearish trend for now and keeps asset allocations on “high alert.”

I have updated the chart from last week with the previously suggested rally lines shaded light red. The black lines are the new projections based on Friday’s close. Currently, there is roughly 2.8% of upside, which is consistent with the seasonal trends as noted above, versus 5.3% of downside risk into December.

Action: After reducing exposure in portfolios last week, we will look for opportunities to reduce risk further as needed. Sell weak positions into any market strength on Monday.

Weekly View

As noted last week, with the trend line from the 2016 lows now violated, the tenor of the market has changed from bullish to bearish.

The failure of the market to break out of the current trading range this past week sets investors up for disappointment next week. It is critically important the market does not violate the trading range lows on a weekly closing basis.

Action: Sell weak positions into any strength on Monday and reduce exposure ahead of the election.

Of much greater concern in the violation of the long-term trend line combined with declining relative strength and a weekly “sell signal” triggered at a high level. As noted the prior two times all three of these indications have coincided it marked the end of the bull market cycle. 

Monthly View

On a monthly basis, the backdrop has also worsened. RSI has dropped into correction territory along with a confirmed monthly sell signal. As I noted back in both December and September, extensions of the market that move 3-standard deviations above the long-term mean are unsustainable. Currently, a reversion back to the longer-term monthly average would entail a drop currently to 2400 or 11% lower than where we closed on Friday.

Action: Reduce risk on rallies, as detailed above, and look to add hedges on any breaks of long-term support

Actions To Take Next Week

As I stated last week:

“With the market exceeding 3-standard deviations below the 50-dma currently, the extreme oversold condition still sets the market up for a fairly strong bounce. That bounce SHOULD be sold into.”

Portfolio management processes have now been switched from “buying dips” to “selling rallies” until the technical backdrop changes.

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Watch: Yacht-Apocalypse – Storm Slams Italy, Destroys Superyachts

Last week, an unprecedented amount of rain and life-threatening wind battered parts of the Mediterranean over the course of several days, causing massive amounts of damage to superyachts and infrastructure in yachting hotspots across France, Italy, and Spain.

According to Superyacht News, one of the hardest hit regions by the storm was the port town of Rapallo, located on the Italian Riviera coastline. The storm caused a marina’s breakwater to collapse, which then allowed 10 meter high waves to enter the unprotected port.

Italian news agency ANSA said 180 yachts were destroyed in the storm, including many superyachts, and one boat belonging to former Prime Minister Silvio Berlusconi.

Local media outlets said the port of Rapallo in the northern region of Liguria looks like an “apocalyptic” sight, with luxury yachts half-sunk, damaged or leaning to the side.

The insurance implications of the storm damage to yachts across the Mediterranean could be massive. Paul Miller, director of underwriting at Hiscox, told Superyacht News that there would be salvage and recovery operations starting in November to remove the damaged vessels.

Yacht-apocalypse comes as eleven people were reportedly killed as the storm left many coastal areas in Italy badly damaged.

Footage emerged of tourist walking in Venice with flood waters up to their waist, it was the highest level of water since 2008.

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Did “Octobear” Pull The Rug Out From Under Bull?

Via LyonsSharePro.com,

Big down months off of highs have led to bear markets in the past.

Everything was going just fine for investors at the end of September (well, maybe not under the surface). The major averages closed right near all-time highs, just in time for quarterly 401(k) statements. Then October happened and, well, you know…a nearly double digit drawdown intra-month in the Dow Jones Industrial Average (DJIA) and an eventual loss of more than 5% for the month. But, that’s just one bad month, right? Not the start of a new trend or anything? Certainly, only the future knows the answer to that. However, the past may suggest that it may be more than a 1-month hiccup.

Why do we say that? Take a look at the 14 other months in the past 100 years when:

  1. The DJIA set a multi-year high one month, then

  2. Suffered at least an 8% intra-month drawdown and closed down at least 4% the next month.

Now, we’ll show the months and aggregate performance in the table below. However, the best message is probably drawn by a glance at the chart above and the inordinate number of significant tops marked by such month “rug pulls” — including cyclical tops in 1929, 1937, 1946, 1965, 2000 and 2007. (The 1-month return signifies the drawdown month).

So will history repeat again in 2018? It remains to be seen. We certainly aren’t going to hang our hat on this single data point. However, it does fit with much of our other analysis and, because of that, we would not put it past the bears to form another significant top here.

*  *  *

If you’re interested in the “all-access” version of our charts and research, we invite you to check out our site, The Lyons Share. FYI, given the current treachorous market landscape, TLS has extended our CRASH SALE through this weekend. So considering the discounted cost and the current treacherous market climate, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

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