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So, you think socialism will solve the world’s problems…
Think again.
Tragic: starving #Venezuelans fight over meager food rations. This is the #socialist dream; there is no income inequality because everyone has an equal share of nothing. pic.twitter.com/oJGRLULC5r
— Prof. Steve Hanke (@steve_hanke) December 28, 2018
Stop being a progressive sheep and start thinking for yourself (and studying history).
via RSS http://bit.ly/2RrwsxY Tyler Durden
Authored by Sven Henrich via NorthmanTrader.com,
Before I issue my 2019 Market Outlook in the days ahead I wanted to highlight some key practical lessons from 2018 as they will help set the stage for next year. Firstly, I think it’s fair to say that markets ended the year quite differently from how most people expected them to at the beginning of 2018. Before you think this is going to be an exercise in “I told you so” it’s not. As I outlined in Lessons on Being Wrong:
“Everybody will be wrong at some point or another. Markets are boss and will ultimately humble you”.
Pivotal years such as 2018 can humble, or should humble, a lot of people. Unless one can claim to have gotten every move right (which I seriously doubt and I know I haven’t) everyone will have been surprised by some aspect of markets in 2018.
Recognizing of some of the drivers of the market action is hence key to understanding of what happened and to ultimately help formulate a thesis for what investors and traders will likely face going into 2019.
Blame the algos and computerized trading if you wish, but 2018 became a year of seeming reason defying moves to the upside and downside.
2018 consisted of 3 distinct phases: Firstly a massive momentum driven move to the upside soaked in optimism and artificial liquidity courtesy tax cuts. It didn’t matter how stretched and one sided the action was, stocks just kept flying higher and fading this move was atrociously difficult. Money kept pouring in, investors threw their cash into passive ETFs and programs kept allocating on autopilot benefitting the largest big cap stocks disproportionally.
How extreme was this move in January? How about the most overbought RSI reading on the $DJIA ever?
Ever is a long time and if history teaches anything it’s that if things get too extreme to the upside something bad will eventually happen.
Hence the initial correction in February was not a surprise, things just got way too hot. That initial 10% correction then initiated phase 2 of 2018 and it was the long road to new highs driven by record buybacks and on ever shrinking volume bringing us to the next lesson.
Following the March lows key indices engaged in a tight channel ping pong game of higher lows and higher highs. Recognizing what action algos and markets pivot off of is then key to finding tradable entries and exits:
These type of patterns matter big time and while they are active they are highly relevant, but watch out when these patterns break.
In October the pattern broke and unleashed phase 3 of 2018: Investor hell. Two key questions to address: What caused the break? What caused the massive downside that followed?
While they are a myriad of factors to consider for the purpose of this article I want to hone in on 3 key factors.
What triggered the break? From my perch: Yields. Specifically the 10 year reached its multi decade trend line, the end of the line since the early 1980s:
For decades we’ve had the same trend: Unemployment reaches a cycle low while yields rise to lower highs during a period of recovery following a recession. And during each of these cycles markets engage in multi year trends to the upside until yields peak near or at their trend line and then stocks break their trends to the downside. 2007 was such a year and 2018 may have shaped up to repeat the same script and I’ll discuss this further in my upcoming 2019 Makes Outlook.
In each cycle there are warning signs ahead of time, but they tend to get ignored as divergences take a long time to build and evolve. Divergences show up in the form of relative strength, underlying participation and concentration in gains in ever fewer stocks. We saw all of this in the summer of 2018. This is the phase where ever higher target prices are issued and some sectors seem bulletproof while others fall to the wayside.
One of the key warning signs in 2018 was the $BKX (banking sector) making lower highs while $SPX went on to make new highs which was evident in September:
Banks were supposed to benefit from rising yields. The fact they they didn’t while the 10 year ran above 3.2% and tagged its multi decade trend line was a major warning sign. Divergences don’t matter until they do but once they do they matter big time.
In every bubble we see prices extend to the upside well above historic norms. These extensions are incredible difficult to time as momentum begets momentum and people throw all caution to the wind.
One of my favorite technical indicators is the 5 exponential moving average. Be it on the daily, weekly, monthly or even yearly time frames. Stocks and markets ALWAYS reconnect with them at some point. They can extend and they can stay disconnected to the upside or downside for sometime, but the reconnect is coming. Always.
And it is the extent of the technical disconnects in 2018 that then explain the ferocity of the declines once the 10 year yield tagged its trend line.
Markets seek balance and imbalances don’t last. I trust you all remember the $1 trillion market cap headlines and calls for $2 trillion market caps to come for some of the $FAANG stocks. These calls came while these stocks were massively extended above their yearly 5 EMA, $AMZN being a prominent example:
Yes trends can extend and stocks can stay disconnected for a long time, but telling people to buy stocks that are this far extended above technical norms is bound to cause major pain. And it did just that with massive yearly reversal action evident in many individual stocks:
The price action in Q4 was then an attempt by markets to rebalance and seek technical reconnects and hence it must be stated clearly: In a long term context it was the upside of 2018 that was the extreme, but not the downside. The downside may have been extreme in the short term, but it is not in the long term as in many cases we have yet to reconnect with the long term moving averages.
In conclusion: The first part of 2018 was a year of excess to the upside driven by optimism and abundant artificial liquidity producing massive technical extensions and negative divergences amid waning participation. The latter part of 2018 was a wake up call when all the factors that didn’t matter previously suddenly did matter.
2019 then will not be a new beginning, but rather part of an ongoing cyclical journey in context of what we just witnessed. I’ll leave you with perhaps the most important lesson: As Wall Street so aptly demonstrated again this year: Nobody has all the answers. Rather we all are navigating through the treacherous waters of a late cycle environment that will offer surprises to everyone and in every direction in the year ahead.
* * *
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via RSS http://bit.ly/2StYFBz Tyler Durden
Comedian Louis C.K., who fell from grace after admitting in November 2017 that he had serially masturbated in front of various women, is back in the news after audio footage of his new material leaked online. The set, performed at a Long Island comedy club called Governor’s on December 16, at various points mocks the Parkland kids, takes young people to task for being preoccupied with gender pronouns, and discusses the dick sizes of various ethnic groups.
In other words, the new stuff is pretty much exactly in line with Louis C.K.’s previous material, which was equally dedicated to the slaughter of sacred cows. His 2008 special, Chewed Up, for instance, opened with him using the word “faggot”—he moved onto the c-word and the n-word shortly thereafter—and ended with him joking about masturbating on 9/11.
You might not think this kind of humor is funny, and that’s fine. Moreover, you might think Louis C.K., who initiated sexual situations with unwilling women, is a creepy person who has lost the right to joke about uncomfortable subjects. That’s also fine. But it would be silly to pretend that Louis C.K. has undergone some sort of change or deliberate pivot. He’s just doing his same old shtick.
But many in the media have seized upon the idea that Louis C.K. has suddenly became a right-winger—that his new material is some dramatic departure from his pre-scandal days as a woke comedy icon. “Audio of a New Louis C.K. Set Has Leaked, and It’s Sickening,” warns Slate, striking the tone of a nun listening to Eminem for the first time. The Daily Beast accuses Louis C.K. of “pandering to the alt-right,” which is quite the broad categorization; the tons of people—New Yorkers, presumably—who can be heard laughing in the background of the leaked footage would probably be surprised to learn that they take their cues from Richard Spencer.
I can’t recall very many people on the left complaining that Louis C.K. was pandering to pedophiles when he joked about normalizing child rape so that rapists would be more likely to let their child victims live. On the contrary, GQ placed that joke on its list of the 10 best Louis C.K. skits, hailing him as the most transgressive and celebrated comedian “of his generation.”
Those who suddenly find themselves balking at Louis C.K.’s edgy material should admit that the comedian didn’t really change. They did.
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Erdogan’s slow drip-drip of information designed to embarrass and humiliate the Saudis continues, as a Turkish television station has now broadcast new CCTV footage purporting to show journalist Jamal Kashoggi’s killers carrying bags and cases containing his dismembered body out of the Istanbul consulate on Oct. 2.
Though snippets and quotes of the audio content have been made available over the past weeks as part of Turkish investigators’ leaks campaign, this constitutes the most shocking and damning footage of the aftermath of the murder thus far.
CBS reports of the new CCTV footage:
The images shown on A-Haber television late Sunday feature three men carrying five suitcases and two large black bags into the home of the Saudi consul general in Istanbul.
…Citing unnamed Turkish sources, A-Haber said Khashoggi’s dismembered body was inside the cases and bags.
Multiple men can be seen carry large, heavy-looking black bags into the building.
Turkish media channel Ahaber released new recordings of a surveillance camera showing the transfer of what might be the body remains of Jamal #Khashoggi into the Saudi Counsel General’s residence @DirkSchwenk @naderalihashemi @kshaheen @glcarlstrom @borzoupic.twitter.com/dEyh4kQtmG
— Burak Akan (@burakinturkey) December 31, 2018
Apparently the first step in disposing the body, which has yet to be found, was to immediately get it out of the consular officers prior to the “missing person” Turkish investigation which ensued days after.
#BREAKING: The Saudi execution team carried the body of #Khashoggi with the suitcase to the residence of the Saudi Consul General
The body was moved to the residence of Consul General at 3:09pm with a black van.
— EHA News (@eha_news) December 30, 2018
In most consular and embassy compounds across the globe, the chargé d’affaires residence is in a separate building or location, often very close to the main building.
CBS continues, citing the Turkish broadcast program:
A-Haber said the bags and suitcases were put into a minibus which travelled the short distance from the consulate to a garage at the residence. The men are then seen taking them inside.
If confirmed, this could put to rest a number of theories surrounding what the 15-man Saudi assassination team did with the body, with a many reports claiming it was dissolved in acid.
It could given credence to another report widely circulated but which was never proven, and thus thought debunked: that Khashoggi’s cut-up and disfigured remains were found in the garden of the Saudi consul general’s home.
Considering the Turkish authorities were already in possession of a video showing the early process of the body disposal unfolding, it could very well be that the body or parts of the remains have already been found, and that Erdogan is waiting for the right time to thrust the story back into world headlines. Presumably DNA tests and identity confirmation would also take time as well.
via RSS http://bit.ly/2EXgUvi Tyler Durden
Everywhere you turned in 2018, Facebook, Twitter, and other social media platforms were in the news for policing speech in ways that either delighted or infuriated users. YouTube refused to host certain sorts of videos altogether and “demonetized” others (meaning the channels couldn’t run ads and earn revenue). Patreon, a service that allows people to pay creators directly, recently deplatformed Sargon of Akkad, a controversial anti-feminist, which sparked a public exodus by a number of “Intellectual Dark Web” folks, such as Jordan Peterson, Sam Harris, and Dave Rubin.
As a legal and practical matter, there seems to be no question that such services are free to disallow pretty much whatever content they choose. Earlier in the year, YouTube (owned by Google, which is in turn part of Alphabet) won a lawsuit brought by Prager U that charged the site was minimizing the reach of conservative points of view, if not outright censoring them. The crux of that case turned on whether YouTube should be treated as the equivalent of a government-licensed broadcast radio or television network and thus have to provide equal distribution to all participants. The ruling was unequivocal that YouTube (and, by extension, other social media services) are private businesses. From The Hollywood Reporter‘s writeup of the ruling:
Since the First Amendment free speech guarantee guards against abridgment by a government, the big question for U.S. District Court Judge Lucy Koh is whether YouTube has become the functional equivalent of a “public forum” run by a “state actor” requiring legal intervention over a constitutional violation.
Koh agrees with Google that it hasn’t been sufficiently alleged that YouTube is a state actor as opposed to a private party.
“Plaintiff does not point to any persuasive authority to support the notion that Defendants, by creating a ‘video-sharing website’ and subsequently restricting access to certain videos that are uploaded on that website, have somehow engaged in one of the ‘very few’ functions that were traditionally ‘exclusively reserved to the State,'” she writes. “Instead, Plaintiff emphasizes that Defendants hold YouTube out ‘as a public forum dedicated to freedom of expression to all’ and argues that ‘a private property owner who operates its property as a public forum for speech is subject to judicial scrutiny under the First Amendment.'”
That settles the large legal issue: The platforms can decide what stays and goes. But most peeks into how they actually make those decisions are troubling. In August, The New York Times sat in with Twitter’s “safety team” as it wrestled with banning Alex Jones and Infowars. (They eventually got bounced, albeit later than from Facebook, YouTube, and Spotify.) All agreed that “dehumanizing language” should not be tolerated, but the devil is in the details; accounts often get suspended or banned in ways that seem arbitrary or simply wrong. A few days ago, the Times reported on “Facebook’s secret rule book for global political speech.” The platform has about 7,500 moderators that make decisions, often about situations about which they are mostly ignorant and often using autotranslate services because they don’t speak the languages being used.
The Times was provided with more than 1,400 pages from the rulebooks by an employee who said he feared that the company was exercising too much power, with too little oversight—and making too many mistakes.
An examination of the files revealed numerous gaps, biases and outright errors. As Facebook employees grope for the right answers, they have allowed extremist language to flourish in some countries while censoring mainstream speech in others….
The Facebook employees who meet to set the guidelines, mostly young engineers and lawyers, try to distill highly complex issues into simple yes-or-no rules. Then the company outsources much of the actual post-by-post moderation to companies that enlist largely unskilled workers, many hired out of call centers.
Those moderators, at times relying on Google Translate, have mere seconds to recall countless rules and apply them to the hundreds of posts that dash across their screens each day. When is a reference to “jihad,” for example, forbidden? When is a “crying laughter” emoji a warning sign?
It’s easy to sympathize with the in-house censors since the work they are tasked with is both unending and overwhelming. And there seem to be more and more calls to police speech, both from social justice warriors on the left and conservative trolls on the right (who are quick to say they’ll report speech they find offensive even as they deride progressives as snowflakes who need to toughen up).
This is a disturbing development, and I think it should bother all libertarians. Yes, these services have the right to ban people or treat them unequally, and yes, in many cases, Facebook, Twitter, et al are responding to consumer demand by shutting down this or that person, page, or account. But I think basically any speech short of true threats should be tolerated. Even discerning what counts as a legitimate call for violence will create more than enough work for all the censors in the world. But the public sphere of debate, discussion, and disagreement works better in a setting that is more open rather than more closed. That holds true for the internet as a whole, but also on specific social-media platforms.
There’s a doctrinaire market-friendly case to be made that if the platforms become too constrained and stultified, disgruntled users will create compelling alternatives. (The late, not-great, right-wing site Gab is one attempt limping along after being refused service by web-hosting company GoDaddy and online payment service PayPal.) I buy that argument to a large degree, but we’re losing a larger culture of free speech, pluralism, and tolerance with every purge of accounts on every platform. This month it’s Sargon of Akkad or Alex Jones, but in 2019, who knows who it will be? The initial beauty of most of these services was precisely that they allow users to tailor their experience so you don’t need to bump up against the Alex Joneses of the world unless you want to. Individuals can mute, block, and ignore people that bother them. We now seem to be at a place culturally where people think that just isn’t enough anymore. A decade-plus ago, one of the big fears about user-controlled newsfeeds was precisely that individuals would create what MIT’s Nicholas Negroponte called “The Daily Me,” a completely personalized newspaper full of content that you actually wanted. Critics such as Cass Sunstein fretted that such a turn of events would undermine the “neglected requirements of a system of free expression: unanticipated, unchosen encounters and a range of shared experiences.”
It was only a few years ago that such services were rightly celebrated for the roles they played in facilitating and enabling the Arab Spring: “We use Facebook to schedule the protests” an activist was quoted by Mic, “and [we use] Twitter to coordinate, and YouTube to tell the world.” That seems like a different planet, doesn’t it? As we slide into 2019, Sunstein’s fears are more likely to be true at the platform level rather than the individual one.
Related: Prior to celebrating Reason‘s 50th anniversary in November, we hosted a debate that asked, “Should Facebook and Twitter Censor Themselves?” The participants were Renegade University founder Thaddeus Russell and lawyer and blogger Ken White of Popehat. Take a look or a listen:
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A Louisiana police department issued a Facebook post Saturday declaring that some of the region’s methamphetamine had been infected with the Zika virus. If you’re wondering how that’s even possible, you’re not crazy: It isn’t. The cops made it up.
“WARNING,” blared the post from the Harahan Police Department. “If you have recently purchased meth in any area of Louisiana it may be contaminated with the Zika Virus.” It then encouraged meth users to bring their drugs to the police for free testing or to ask for a home visit from the cops:
It is not in fact possible for meth to be contaminated with Zika. Of course, a meth user with the virus could hypothetically transmit it by sharing a needle. But that’s not because the drug itself is contaminated; it’s because the sick person’s blood carries the virus.
In short, the post was untrue. Chief Tim Walker has admitted as much to The New Orleans Advocate, explaining that Officer Keith Moody, who wrote it, wanted it to be “attention-getting.”
“There is an opioid and meth problem. It’s all over the country,” Walker adds.
It seems they succeeded, with the post garnering more than 5,600 shares as of Monday afternoon. Why police thought spreading fake news on social media was the best way to bring attention to an issue remains unclear.
The needless fearmongering bothers Harahan’s outgoing mayor, Tina Miceli. “I am concerned about the information that is disseminated to the community and our surrounding communities, and how they are getting their information,” she tells the Advocate. “I don’t want residents afraid without having information.”
But Tim Baudier, who will take over as mayor tomorrow, says “he got the joke,” according to the Advocate
The post paid dividends for the cops in another way. “Although the post was originally a lighthearted attempt at humor, a lot of great (and incredibly raw) intelligence can be cultivated from the comments,” Moody tells ABC News. “There is a lot of great information obtained by reading threads,” he adds, declaring that “criminals have a tendency to say/do some pretty incriminating behavior when given the opportunity to ‘blow off.'”
It’s not clear if the apparent attempt to troll the comments section for lawbreakers worked. But no one appears to have taken the department up on its offer of free meth testing.
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When all the tribes of Israel still lived in their holy land, they practiced something called the Jubilee.
According to the Book of Leviticus, the Jubilee existed because the Israeli land actually belonged to their god Yahweh…. and the current owners were just borrowing it (sounds like land ownership today – try not paying your property taxes and see who really owns your land).
So every 49 years, the Israelites would celebrate by freeing slaves, redistributing property and forgiving debts.
Of course, a 49-year cycle where debt is forgiven and land is returned to previous owners is ridiculous… markets can’t function under this system. Imagine buying a piece of land and not knowing if you have to give it back down the road… or lending someone money with the possibility that those debts just disappear and you get nothing back for the risk you took.
The Jubilee originated sometime around 1406 BC, so you would think it’s ancient history.
Fast forward 3500 years…
The US government is a record $21 trillion in debt and running $1 trillion annual deficits.
US corporations have a record $9 trillion in debt – with nearly half of that debt maturing in the next five years (meaning the businesses either have to roll that debt into a new loan or pay it back).
Consumer debt – which includes credit card debt, auto loans and student debt – is already at a record high and should pass $4 trillion in 2019.
But the largest portion of consumer debt is student debt. Yes, Americans have borrowed $1.5 TRILLION to earn degrees of questionable use.
As I wrote in a previous Notes:
According to the latest stats, the average student loan debt in the US is nearly $40,000.
But that’s just average…
There are more than two million former students in the Land of the Free with more than $100,000 of debt… around 415,000 people have more than $200,000 of student debt.
And the US Department of Education guarantees 90% of that debt. Which means you, the taxpayer, guarantee that debt. If the borrower defaults, YOU’RE on the hook.
What are the chances millennials will make good on the debt? Not great…
According to a recent Fed study, millennials are much poorer and indebted than previous generations.
Even if they are financially able to repay student loans, you then have to question their will to do so when you can do so many other cool things with the money…
Like this YouTube bro who made a video bragging about using his financial aid money to take his girlfriend on a trip to Thailand.
Already we’re seeing student loan defaults creep up…
Loans issued in 2012 are defaulting at a faster rate than ever before. Interest rates are only rising.
Over 44 million Americans owe student loans, and according to the Federal Reserve, 11.2% of them are delinquent (at least 90 days late) or in default.
It’s hard enough to pay back your loans if you study medicine to become a doctor, or something else that could lead to a relatively high paying career.
But now 22-year olds are graduating with $200,000 of debt, and all they have to show for it is an undergraduate degree in underwater basket weaving.
No direction. No plan. Just a useless degree.
Then there’s the adults who are still swimming in student debt…
There are even almost 2 million Americans over the age of 62 who still owe a combined $62 billion in student loans. That’s over 32 grand per borrower over 62.
I don’t think Social Security is going to cover that… even if by some miracle it stays solvent.
Given these headwinds, we’ve been wondering how on earth this crushing student debt load will ever be paid back.
And I think we just got our answer.
This month, Secretary of Education Betsy Davos agreed to forgive $150 million worth of student debt.
It’s a mini Jubilee.
Here’s the thing… Betsy Davos did NOT want to forgive this debt. She fought to change the rules, but an Obama era forgiveness policy was enforced by the courts.
So if one of the meanest women in government can’t stop this debt from being forgiven… just imagine if we had someone like Bernie Sanders or Kamala Harris steering the ship.
And who do you think is going to come after Trump?
Trump was America’s response to Obama. And the next pendulum swing will be even greater to the left.
So we just saw the first $150 million… and there’s another $1.465 trillion to go in the debt jubilee.
If you ever wondered why I think it’s a moral obligation to pay as little taxes as possible, this is it.
If you want to give the government your dollars to fund YouTube bro to go to Thailand, go ahead.
I’ll be in Puerto Rico, paying a 4% corporate tax rate and 0% capital gains.
Maybe I’ll see you down here.
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Today we want to expand on a theme we touched on last week: 20-year trailing returns on US stocks. Don’t yawn…. There’s interesting material here. Trust us and read on…
First a quick summary of the data, using the latest market prices:
The bottom line: US stocks have just delivered some of their lowest 2 decades of compounded returns since the Great Depression, and that simple fact explains several macro business trends relevant to the financial services industry.
For example:
Point #1: Low returns explain the rise of passive investing and the growth of exchange traded funds. When stocks are compounding at 11% (their long run average), asset owners are more likely to feel they can afford active management for the possibility of outperformance. When the S&P 500 is cranking along at 5% (like now), it becomes harder to justify active management fees; every basis point counts. Exchange traded funds, which can have lower reported tax impacts than mutual funds, also have an edge in the current environment.
Point #2: Low returns push equity market structure to become more cost efficient. It is no coincidence that the heyday of Wall Street trading desks was in the late 1990s, at the last peak of trailing 20-year returns. Institutional commissions of $0.05/share were an easy ask back then. Now, brokers are happy with a penny or two and that is all clients can afford in a low return environment. All this forces trading desks to become more efficient on both the buy and sell side, investing in automation to further reduce expenses.
Point #3: Low equity returns force institutional asset owners to take more risk to make required rates of return (typically 7-10%). Common wisdom holds that low interest rates, especially since the Financial Crisis, are the root cause of pension/sovereign wealth funds raising their allocations to private equity/venture capital. That’s how you end up with a $100 billion Softbank Vision Fund and their brethren spawning scores of startup “unicorns”.
The truth is that these institutions need much better than 5% compounded equity returns to fulfill their own mandates. Low returns in fixed income play a role in their allocation decisions, but it is far from the only challenge they face. US stocks haven’t delivered their historical rates of return, so they must go further afield.
Point #4: Low returns also imply a low equity cost of capital, which puts the current share buyback rage in a questionable light. Ask the typical S&P 500 CFO what his/her cost of equity capital is, and you’ll likely hear “10%”. And that’s generally the hurdle rate they use when assessing new capital investments. Any excess cash after those investments goes to buybacks. In truth, the “real” cost of equity capital is 5% and companies should be reinvesting more and spending less on buybacks.
To be fair to CFOs, they likely see lower than average long run returns through the lens of the volatility that creates them. Rather than invest in marginal projects, they try to buttress their stock’s valuation with buybacks. That’s a sensible approach in a micro sense, but markets see a macro environment where companies forsake long-term growth for short-term stock returns.
Point #5: In order to start seeing better long run returns, US stocks need a lot of new blood in the system. Recall the reason why the S&P 500 has managed reasonable gains over the last 10 years: Amazon, Google, Facebook, Apple, and Microsoft top the list. And even then, their performance only got us to a subpar 20-year track record… Imagine if they had not been in the mix.
Better than 5% CAGR returns on the S&P 500 through 2038 will not likely come from these companies, however. As attractive as they are, it is hard to see any of them doubling their market cap in the next 10 years (a 7% CAGR), let alone doing so again in the next decade after. Or dragging overall equity valuations higher in their wake…
All this explains why it will be so important to see a fresh crop of disruptive Tech companies come public in the next few years. The good news is that VCs have been plowing capital into these businesses to make them ready to go public. The bad news is that IPO windows are notoriously fickle, so we may have to wait a while if current market volatility persists.
Summing up: we don’t see trailing returns mentioned very often, but they are the lifeblood of equity markets. The only good news about sitting at the low end of a historical range (as we are now at 5.5%) is that mean reversion should start to kick in. It can’t come soon enough for our liking.
via RSS http://bit.ly/2EW4oMu Tyler Durden
Outgoing White House Chief of Staff John Kelly blames former Attorney General Jeff Sessions for the “zero tolerance” immigration policy that was widely condemned last spring and summer for separating hundreds of children from parents who illegally crossed the border with them. “What happened was Jeff Sessions, he was the one that instituted the zero-tolerance process on the border that resulted in both people being detained and the family separation,” Kelly told the Los Angeles Times in an interview published yesterday. “He surprised us.” Yet Kelly himself publicly floated the idea of family separation as a deterrent to illegal immigration more than a year before Sessions announced the policy.
In March 2017, when Kelly had been serving as secretary of homeland security for less than two months, CNN’s Wolf Blitzer asked him about rumors of “a new initiative that would separate children from their parents if they try to enter the United States illegally.” Kelly said he “would do almost anything to deter the people from Central America [from] getting on this very, very dangerous network that brings them up through Mexico into the United States.” Blitzer pressed him to clarify: “Are Department of Homeland Security personnel going to separate the children from their moms and dads?” Kelly’s response: “In order to deter more movement along this terribly dangerous network, I am considering exactly that. They will be well cared for as we deal with their parents.”
Notably, Kelly presented family separation itself as a way of discouraging illegal migration from Central America: Knowing that their children could be snatched away from them, parents would think twice before embarking on the dangerous journey to the United States. The suffering that was thereby prevented, Kelly suggested, would outweigh the suffering experienced by children of parents who made the trip anyway.
Sessions, by contrast, described family separation as an unavoidable side effect of criminally prosecuting all illegal border crossers, although he did not seem too broken up about it. In May 2018, a month after announcing that zero-tolerance policy, Sessions said migrants had no one to blame but themselves if their children were kidnapped by the U.S. government. “If you cross this border unlawfully, then we will prosecute you,” he said during a speech in Scottsdale, Arizona. “It’s that simple….If you are smuggling a child, then we will prosecute you, and that child will be separated from you as required by law. If you don’t like that, then don’t smuggle children over our border.”
Kelly, by then Donald Trump’s chief of staff, struck a more compassionate note in an NPR interview four days later, saying “the vast majority of the people that move illegally into United States are not bad people.” Rather, “They’re coming here for a reason, and I sympathize with the reason.” But he added that “they’re also not people that would easily assimilate into the United States,” since they are “overwhlemingly rural” and poorly educated. In any case, he said, “the laws are the laws,” and “a big name of the game is deterrence.” He described family separation as “a tough deterrent.”
Kirstjen Nielsen, Kelly’s protégé and successor at the Department of Homeland Security, nevertheless indignantly denied that family separation was meant as a deterrent. “I find that offensive,” Nielsen said at a June 2018 press conference, “because why would I ever create a policy that purposely does that?” Kelly had explained why, of course, and he had even put a humane spin on what struck most observers, Republicans as well as Democrats, as an inhumane policy. As recently as two months ago, Trump was echoing the rationale that Kelly had enunciated in March 2017. “If they feel there will be separation,” the president told reporters, “they don’t come.”
Now Kelly, on his way out the door, is trying to whitewash his own role in this policy, which provoked outrage across the country and across the political spectrum. Blaming Sessions will not help Kelly’s reputation as an “adult in the room” who supposedly resisted the president’s more extreme impulses, and it can only hurt his reputation as a blunt-spoken former Marine general who can’t help but tell it like it is. Instead he looks like the sort of weaselly political operator he supposedly views with disdain.
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In a fitting tribute to his tenure as Secretary of Defense, James Mattis found himself at the butt-end of an oblique twitter attack launched by his soon-to-be-former boss on Monday. In a series of early morning tweets, Trump castigating the “failed generals” who opposed his decision to pull US troops from Syria and Afghanistan.
But as Mattis prepares to hand over control of the Department of Defense to Patrick Shanahan, a former Boeing executive with no government or political experience, Mattis served up some criticism of his own in a farewell letter to DoD employees where he quoted Abraham Lincoln and urged the department to “hold fast”, saying that the Department of Defense is “at its best when the times are most difficult.”
According to the Associated Press, the one-sentence quote used by Mattis came from a telegram sent by President Abraham Lincoln to Gen. Ulysses S. Grant, the commander of Union forces, on Feb. 1, 1865, during the final weeks of the Civil War. It read: “Let nothing which is transpiring, change, hinder, or delay your military movements, or plans.”
Mattis was initially supposed to depart in February to give Trump time to find a replacement, but after angering the president with his criticism of his decision to pull troops out of Syria, Trump decided to push him out before the end of the year.
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