Month: February 2019

Democratic Socialism And Regular Socialism Have The Same Goal

Authored by Anthony Mueller via The Mises Institute,

The longing for the socialist dream comes in part from the great success of capitalism as an engine of prosperity. From the nineteenth century onwards, the entrepreneurial economy created prosperity on a scale that had never been seen before in history.The socialists, however, believed economic success would become even greater in a society of egalitarian redistribution. The socialists expect that under their rule, the economy would become more productive and society more just.

This illusion of obtaining prosperity and justice under socialism was already evident in the Communist Manifesto of 1848. In their pamphlet, Karl Marx and his sponsor Friedrich Engels enthusiastically praised capitalist achievements:

“The bourgeoisie,” they declared, “has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.”

During its rule, the bourgeoisie

has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground – what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor?

Yet, according to Marx and Engels, the capitalist system is doomed, and private property stands in the way to a perfect society: “the theory of the communists may be summed up in the single sentence: abolition of private property.” Doing away with private property implies the “abolition of bourgeois individuality, bourgeois independence, and bourgeois freedom…”

For Marx and Engels, the bourgeois family remained a fundamental part of liberal and capitalist. Thus, under communism, the “bourgeois family will vanish along with country, nationality, and religion.”

The Socialist Plan

To achieve these aims, the Communist Manifesto demands the following measures:

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in the hands of the State.

7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production”

Under socialism, individualism must make way for collectivism. Then the state will replace private initiative. Communist rule also requires the centralization of money and credit in the hands of a state and production must follow a central plan. Public education comes with the obligation to work and its combination with industrial production.

On the way to achieve these aims, “the Communists everywhere support every revolutionary movement against the existing social and political order of things… They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions.”

From Dream to Nightmare

The motivation for this revolution is not hard to understand. Who would not want a society that guarantees prosperity for all but does not ask for an equivalent contributory effort? Socialism promises equality and that everyone would receive what he needs — whether one adds little or nothing to produce the goods. The fatal attraction to socialism results from the wishful thinking there could be an economic system, which would be as productive as capitalism and come with equality. The problem with this promise is that it does not work.

While private property lies at the heart of the free order of classical liberalism, socialism requires its abolishment. The means of production must come under the regime’s control.

But not all advocates of socialism want immediate and total revolution as Marx and Engels implied. Different from the communists — who want to install the “dictatorship of the proletariat” — are the “democratic socialists,”  who believe in a gradual method, and who also believe that one could maintain personal freedom under socialism. Yet while the declared aim is different, the modern socialists plan to use the same instruments as the communists.

Socialists want to abolish private property and the market. Yet if prices as an information and incentive system no longer exist, a command system must supplant it. When there is no market, state directives must take its place. Without prices, however, there is no way of knowing how to coordinate economic activity. The rulers must apply coercion, and everyone must follow the central plans. In practice, socialism installs a power center, the ruling party, which collaborates with the central economic planning apparatus.

But it is not the proletariat that employs the dictatorship. It is the secret police and the military who will alsosuppress all dissent and make sure that the true voice of the people is kept silent and that the workers obey the state’s plans.

Socialism in Disguise

When the murderous reality of communism in the Soviet system became well known in the West with the publication of Solzhenitsyn’s The Gulag Archipelago in 1973, the term “communism” fell out of favor and was replaced by the less burdensome concept of “socialism.”

When this term became less appealing, the expression “left” came to the fore. When “left” got a bad name, “liberal” became the brand name, as has happened in the United States. Here, the socialists have usurped the concept of “liberal”, so that “liberalism” denotes the opposite of its original meaning. Now, the term “democratic socialism” is en vogue.

In this expression, “democratic” has replaced the communist concept of the “proletariat.” The idea behind this change is that “the people” are identical with the proletariat because they are the large majority. “Dictatorship of the proletariat” gains a new meaning. For the democratic socialists, majority rule gives the party in power the legitimacy to erode and finally to do away with private property — at first by taxation and regulation and finally through the collectivization of the means of production.

All of this is in service to the socialist dream which maintains that under socialism there would be both material abundance and equality. As Marx and Engels proposed, socialism is to offer all the benefits and abundance of capitalism, but maintain perfect equality as well. The reality, however, illustrates that socialism comes with economic misery, social deprivation, and political suppression. Socialism shows that the more one wants to realize the paradise on earth with the use of force the more one will, in fact, create a hell .

via ZeroHedge News http://bit.ly/2D2Bojw Tyler Durden

Young Adult Fiction Author Cancels Book Publication After Social Justice Crowd Says It Isn’t Woke Enough

F451A first-time author of young adult fiction, Amelie Wen Zhao, has decided not to publish her book Blood Heir after progressive critics in the YA community decided that she was guilty of a litany of crimes: racial insensitivity, plagiarism, and more.

According to two accounts of the kerfuffle—one by Jesse Singal in Tablet and another by Kat Rosenfield in Vulture—these were largely unfair smears, levelled in bad faith by social justice zealots. Rosenfield has written previously that the YA community is sometimes subsumed by “toxic drama,” and Zhao’s fate appears to be a prime example.

The trouble began last week, when a YA influencer claimed that Zhao was “gathering screenshots of people who don’t/didn’t like her book.” Such behavior is far from improper, but some on the progressive left consider any attempt to engage with their tweets to be a form of harassment. (See: Jacobinghazi.)

Others accused Zhao of plagiarism because one of her characters implores another not to “go where I can’t follow,” which is a line from The Lord of the Rings. To my mind, this single line does not constitute plagiarism, and could even be considered an homage.

Some objected to the themes of the book, which is a sort of revisionist fantasy treatment of the legend surrounding Princess Anastasia of Russia. Some thought the book was ham-handedly referencing American chattel slavery, though as Singal writes,

based on the published tweets, no one could explain exactly what it was about Zhao’s treatment of the subject that was offensive. “[I]t is also HIGHLY troubling that no one in the process of publishing or editing Blood Heir saw a story about slavery, trafficking, and race relations and thought to bring in a sensitivity reader, or even several,” noted one member of the community who didn’t level any specific critiques about the book’s handling of these subjects. “[T]o put something that resembles chattel slavery SO CLOSELY is distasteful,” opined another, the implication being this simply isn’t a subject to be written about. Among other critics, there seemed to be a lack of understanding that “slavery” doesn’t mean “American slavery” and that the concept has a broader context and history than that. “[R]acist ass writers, like Amélie Wen Zhao, who literally take Black narratives and force it into Russia when that shit NEVER happened in history—you’re going to be held accountable,” said one contributor to the pile-on. “Period.” (Parenthetical after the period: Russia has its own recent history of what is certainly one strain of slavery)….

I didn’t have access to an advanced copy of the book and wanted to make sure I wasn’t missing anything so I emailed Oh, the YA writer whose tweets to Zhao as a fellow author of Asian descent had castigated her for her lack of awareness and cultural context. Oh has read the book, and to her credit, given that we had been arguing about this on Twitter, she sent me a thoughtful and civil response, but one that didn’t really contain any new or compelling evidence Blood Heir can be fairly called a racist book.

Of course, some on the progressive left balk at any attempt to blend different cultural settings and traditions, or tell new stories that are inspired by rituals or clothing belonging to an ethnic group of which the author is not a member. Some even complain if any of a book’s characters are repugnant—even if the point is to shed light on those characters’ odiousness. (Singal and Rosenfield both point to a previous social media outrage concerning the YA book The Black Witch, derided as racist because some of the evil characters did in fact do racist things.)

It’s Zhao’s book, and she can decide not to publish it if she no longer wants to. This was to be the first volume in a trilogy for which the author received a $500,000 advance, so opting not to publish is going to cost her quite a lot of money. But given how off-base these criticisms were, it seems like a terrible shame to capitulate to them.

Last year my colleague Eric Boehm argued that our society resembles Ray Bradbury’s Fahrenheit 451. Boehm pointed out that the famous science fiction novel is misremembered as a mere warning against government censorship. In fact, it’s a treatise against the sort of society where everything that provokes anyone is deemed problematic. Bradbury wasn’t worried that the government would start burning books out of nowhere; he worried that people would demand the bonfires. Censorship grow out of political correctness, weaponized by each aggrieved person against everyone else.

“There is more than one way to burn a book, and the world is full of people running about with lit matches,” Bradbury wrote. In our age of daily, context-free viral outrages, it’s a prescient warning.

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Is It All Just One Giant Short Squeeze: Investors Rush To Pull Money Out Of US Stocks

After the worst December for stocks since the Great Depression, which saw the S&P500 tip into bear market territory if only for a few seconds, on December 24, the market enjoyed a furious rebound last month, when it climbed 7.9%, the best January return since 1987, a fact that was not lost on president Trump who is back to tweeting about the market after taking a 3 month hiatus during the Q4 swoon.

Of course, as extensively discussed here and elsewhere, this miraculous rebound was entirely due to the Fed’s bizarre, according to some laughable dovish reversal, which has put rate hikes on hold at least until the summer if not indefinitely with the market now officially expecting the Fed to cut rates in early 2020 when the recession hits, paradoxically giving stocks a green light to keep levitating up until the point the US economy contracts if not beyond: after all at some point, the Fed will have to launch QE4, and that as every shoeshine boy knows, is bullish for stocks which long ago ceased to reflect the economy and merely rise and fall based on how much liquidity the Fed is injecting or draining from the market.

And yet, something strange happened: at a time when stocks continued to surge, investors were not buying it the market’s latest miraculous recovery, and according to EPFR, this week saw wildly risk-off flows with $9.4 billion allocated to bonds while $15.0 billion was pulled out of equities.

Which, once again, begs the question: was the recent rally just one giant short squeeze?

As Bank of America’s Michael Hartnett points out in his latest Flow Show, not only were billions pulled out of US equity funds, with outflows on 10 of the past 11 weeks, culminating with $12.1NN in ETF outflows and $2.9BN in mutual funds outflows this week, but US equities have suffered record outflows in the past 3-months, amounting to $82.0BN, equivalent to a whopping 2% of all AUM, i.e. consistent with US equity bearishness at “events” & “big lows” of past decade.

Meanwhile, as investors drained equity funds, they rushed to allocate funds to “yield” with $6.9BN in inflows to corporate bond & EM bond funds, the largest since Jan’18…

… while IG bond funds saw $4.7 billion in inflows this week, the biggest since Feb’18.

Meanwhile, betting on a sharply lower dollar, investors allocated even more funds to EM which saw another week of inflows, with BofA noting that the cumulative bond & equity inflows to EM are now back to just $2 billion from all-time highs.

So what accounts for this odd divergence? According to BofA it’s all the Fed trade, i.e., “long risk, long leverage, short vol”, as the fear of a credit event in Dec’18 caused the now infamous Fed capitulation on tightening… and it worked as credit ETFs, such as EMB/HYG/LQD, are all back at highs.

And yet, not all is well just yet, because as Hartnett notes, the BofAML Global EPS Model still forecasts 0% 2019 vs consensus +5%, adding that the model says end of EPS recession will be signaled by steeper US 2s10s yield curve (>50bps), as well as a rebound in Asian export growth, easy China financial conditions, and rising global PMI – in short “watch Jan ISM & new orders tomorrow…must bounce.” It bounced in the US… it dropped pretty much everywhere else.

Hartnett concludes with what he dubs the “Most contrarian trade in world” which is now a Fed hike in 2019 – consensus now rushing back to “low growth, low rates” playbook of long credit, EM, growth stocks.

As such, the greatest irony of all would be if the Fed ended tightening just as wage inflation is set to accelerate further. As such, the best hedge against inflation & complete collapse in Fed credibility is short US dollar, long small cap value stocks.

 

via ZeroHedge News http://bit.ly/2BfEwZD Tyler Durden

‘Field Of Dreams’ Economy Failing As Wholesale Sales Tumble, Inventories Rise

Wholesale Inventories-to-Sales ratios rose in November (the latest data released today) to 14-month highs as ongoing inventory builds appear not to have encourage ‘them’ to come spend as wholesale sales tumbled.

 

Wholesales Sales growth slumped to its weakest since Nov 2016, dropping back below wholesale inventories growth for the first time since Sept 2016…

Is this the ‘bad’ news that is also ‘good’ news?

 

via ZeroHedge News http://bit.ly/2Gf7g7X Tyler Durden

US Manufacturing Bucks Global Collapse Trend – Rebounds In January

With European, Japanese, and Chinese manufacturing PMIs plunging, all eyes are on today’s ISM and Markit manufacturing data (after ADP reported the greatest surge in manufacturing jobs since 1968) as the latter confirmed its Flash print, rebounding to 54.9 – against the global trend…

Below the surface of the Manufacturing PMI, however, it was not all sunshine and unicorns as new export order growth slumped but overall it seems the government shutdown did not affect survey respondents’ sentiment at all as business confidence rebounded notably.

Chris Williamson, Chief Business Economist at IHS Markit said:

“January saw US manufacturers start the year with renewed vigour. Production rose at a markedly increased rate, commensurate with the factory sector contributing to robust economic growth of approximately 2.5% in the first quarter if such momentum can be sustained in coming months.

“Other encouraging signs included an improved rate of job creation and increased purchasing of inputs, suggesting firms are in the mood for expanding capacity.

“The upturn in business activity in January helped lift confidence in the outlook, though many companies clearly remain concerned about the impact of trade wars and rising protectionism.

“Domestic markets provided the main source of new work for manufacturers, offsetting a near-stalling of export trade, the latter linked to subdued demand for US goods in foreign markets.

“Although higher than December, the overall rise in new orders was the second-lowest since last August, hinting at a slight cooling of demand growth in recent months which served to keep the headline PMI below the average recorded last year.”

It seems, from the first chart above, that perhaps US sentiment is on a lag to the rest of the world – remember there is no decoupling.

And after December’s plunge in ISM Manufacturing data, expectations were for no bounce, but like Markit’s PMI, ISM rebounded from an upwardly revised 54.3 to 56.6 in January…

…as New Orders soared as prices paid and employment slipped…

 

ISM respondents are notably les ebullient than the headline projects:

“Unlike in the last few years, we are experiencing a first quarter slowdown.” (Paper Products)

“Overall, business continues to be good; however, margins are being squeezed.” (Transportation Equipment)

“Concerns about oil prices are fueling questions of how strong the economy will be the first half of 2019.” (Chemical Products)

“We continue to enjoy the benefits of a strong general economy. We are busy and maintain a backlog of sales orders.” (Machinery) . We are busy and maintain a backlog of sales orders.” (Machinery)

“Business conditions are good, and our demand and production are tracking to our forecasted growth levels for the year. (Miscellaneous Manufacturing)

“Going to be a very strong spring. Business levels will be just as good [compared to] the same time frame in 2018.” (Fabricated Metal Products)

“Sales nationally appear to be on target for 2019 and slightly ahead of 2018.” (Nonmetallic Mineral Products)

Mixed enough for everyone to be happy.

via ZeroHedge News http://bit.ly/2RzcLjU Tyler Durden

Atlanta Spent $23 Million Building a Pedestrian Bridge for the Super Bowl That Pedestrians Can’t Use

You’ve heard of the “bridge to nowhere.” Now meet Atlanta’s bridge for no one.

In anticipation of hosting this year’s Super Bowl at the brand new Mercedes-Benz Stadium, the city of Atlanta spent more than $23 million to build a pedestrian bridge linking the stadium to the nearby Vine City public transit station, allowing fans to cross a busy street without needing a crosswalk. The bridge was originally supposed to cost about $13 million—already pretty pricey for a simple pedestrian crossing over a four-lane road—but city officials approved an extra $10 million in funding last year to ensure the project would be finished in time for the big game, which kicks off Sunday evening.

The serpentine bridge—decked out with dazzling, customizable LED lights and wrapped with diamond-shaped aluminum panels—did indeed get finished in time for the Super Bowl.

But it won’t be used by the vast majority of the expected 80,000 people heading to the game on Sunday. Because of it’s location adjacent to the stadium, the bridge has been deemed a security risk and will be closed to everyone except credentialed staff and media, the Atlanta Journal-Constitution reported this week.

Fans heading to the Super Bowl will have to enter through various security check-points well outside of the stadium grounds. That means anyone arriving at the Vine City station on the other side of the $23 million pedestrian bridge will get to admire a very expensive piece of public art as they cross the street the old fashioned way—though the bridge will be “open for attendees to exit at the conclusion of the game,” the Atlanta Falcons told the paper.

Even by Atlanta’s standards, paying $23 million to build a bridge that no one can use is a pretty incredible screw-up. This is, after all, the same city that spent $98 million building a streetcar line that’s literally useless for anyone except tourists—it runs in a 2.7-mile loop downtown around the Coca-Cola Museum, Centennial Olympic Park, and the new football stadium—then closed the streetcar when some 100,000 tourists descended on the city for last year’s college football national championship game.

Just outside the city, the Atlanta Braves’ new stadium—a disaster for taxpayers and fans in several ways, as I’ve detailed before—had its own issues with a pedestrian bridge that was supposed to connect the stadium with a large parking garage on the opposite side of Interstate 285. The bridge wasn’t ready until the Braves’ second season at Sun Life Park, leaving the team with inadequate parking (and forcing fans to play a human version of Frogger) when the new field opened.

Despite those issues, the Braves’ pedestrian bridge across eight lanes of highway cost a mere $11 million—less than half of the final price tag for the now-useless pedestrian bridge at the Falcons’ new stadium, which crosses a four-lane city street.

“That’s how the City wants to impress out-of-town visitors. Not with our civil rights legacy, our cultural icons, our southern soul food, our urban tree canopy, or our welcoming diverse people,” wrote Lauren Welsh, an Atlanta-based activist, in a post for the ThreadATL blog. “Instead, we believe tourists will think Atlanta is awesome because we have a snakeskin light-up bridge to cross a 4-lane road.”

The unseen cost of this pedestrian bridge—like other urban boondoggles—is worth considering, too. What else could the city have done with the $23 million spent on this project? What else could Atlanta taxpayers have done with that money if it wasn’t expropriated from them in the first place? Smart urban planning requires city officials to allocate finite resources to cover a wide variety of expenses while preparing for unexpected surprises. Spending $23 million on a foot bridge is a terrible decision, even without the embarassment of having it closed for the very event for which you spent an extra $12 million.

The extra spending is particularly galling because is was approved less than a year before the Super Bowl was heading to Atlanta. Surely, someone could have checked with the NFL or the FBI (which handles security issues for the Super Bowl) about the extent of the planned security peremeter for the big game. Those things are carefully planned—certainly more carefully planned than this pedestrian bridge appears to have been.

When the bridge was first proposed, the Atlanta Journal-Constitution reported last year, city officials claimed it had nothing to do with the new stadium. It was supposed to be a way to connect the city’s Vine City neighborhood to the downtown and just happened to be located immediately adjacent to the stadium. But when the city council approved the additional funding for the bridge in March of last year, an aide to the mayor’s office explicitly connected the bridge project to the Super Bowl. “It’s time-sensitive,” Katrina Taylor-Parks, deputy chief of staff to Mayor Keisha Lance, told the paper.

And it got done on time. That’s about the only part of this story that makes Atlanta look good.

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Why It’s Not The “Super-Rich” That Will Pay For The Left’s “Radical” Tax Plans

Via DataTrekResearch.com,

US individual income tax rates have become an important topic of debate in American politics, with both members of the new Democrat-controlled House and presidential hopefuls pitching changes to the status quo. There is, for example, talk of a 70% marginal tax rate for income above $10 million. One recent survey even showed the majority of Americans favor that idea, so there seems to be plenty of political air cover for a rethink of Federal income taxes.

Since this is the Data section, let’s look at 2 sets of numbers that should inform US tax policy.

Point #1: The history of Federal tax receipts as a percent of US GDP. This measures how various US individual/corporate tax regimes have altered the ability of the Federal government to increase revenue relative to the size of the US economy. A few points here:

  • Even though the highest marginal individual/corporate tax rates have varied widely since World War II (from 50% – 90% in the 1940s/1950s to 21% – 37% now), total tax receipts as a percent of GDP have been remarkably stable.
  • The average tax receipt/GDP ratio from 1968 to 2017 is 17.1%. Every dollar of GDP creates 17 cents of Federal individual/corporate taxes.
  • This ratio was 17.0% in 2017 (latest data available). The current cycle peak was 17.8% in 2015.
  • History shows that economic growth does far more to increase tax collection than changes in the tax code. The post-World War II high for tax collections/GDP was in 2000, at 19.8%. The low water mark was 14.4% in 2010.

The upshot here: tax rates ebb and flow, but the historical record shows they don’t fundamentally shift the amount of money collected by the Federal government relative to the total “pie” that is the US economy.

Point #2: The number of US households making over $10 million/year in income, the most commonly mentioned threshold in the current political debate over “taxing the super rich”. Data on this cohort from the 2016 tax year (latest available at a sufficiently granular level), according to the US Internal Revenue Service:

  • In 2016, the IRS received 16,087 returns that reported $10 million or more in adjusted gross income. That amounts to 0.01% of all returns filed.
  • This group paid just over $116 billion in Federal taxes, or 7.9% of total individual tax collections for the 2016 tax year.
  • Also worth noting: households making $100,000 – $1,000,000 in adjusted gross income are responsible for 53% of all Federal individual income tax receipts. 

    Those making below $50,000/year comprise only 3.9% of the same aggregate total. That’s not to say those households do not pay taxes, because we’re only talking about Federal income tax – not sales taxes, real estate taxes, etc.

The upshot on this point: those 16,000 households currently in policymakers’ crosshairs are going to be a very difficult target to hit. First, they have access to world-class financial planning that will develop tax-reduction strategies to fit whatever changes to the tax code that may come along. Second, there aren’t very many of them, so losing just 20-30% of them will dramatically impact tax collection. For example: to the degree that some are foreign nationals, they can move to new jurisdictions with more favorable tax regimes.

The real issue:

…once taxing the +$10 million earners at higher rates fails (a rational expectation given the prior points), the burden for any incremental social spending will quickly move down the income ladder to the $100,000 – $1,000,000 brackets. 

That, the data clearly shows, is where income tax collection is most effective. This group is large (+25 million households) but does not have the same access to tax-minimization strategies as the +$10 million cohort.

They, not the “super rich”, will end up with higher actual taxes.

via ZeroHedge News http://bit.ly/2RZ5sHc Tyler Durden

Can Cory Booker Be Our First Vegan Bachelor President?: Reason Roundup

Another day, another Democrat running for president. New Jersey Sen. Cory Booker announced this morning that he’ll be competing for the Democrats’ 2020 presidential nod. So what do we know about Booker? “Is he a vegan? Is he really Spartacus? Did he really save a guy from a fire?”

Those last three questions come courtesy of NJ.com, and the answers are yes, no, and yes. The paper also notes that Booker is a bachelor, and that he would be our first unmarried president since Glover Cleveland in the 1880s.

Booker was mayor of Newark, New Jersey, before being elected to the U.S. Senate in a special election in 2013. He won a full six-year Senate term the following November. Black, relatively young, and a gifted orator, Booker quickly drew comparisons to Barack Obama.

In Congress, he’s prioritized criminal justice reform (good) and grandstanding against Republican colleagues (not so good). He also introduced legislation to decriminalize weed at the federal level (good) and was “the only current or potential 2020 Democratic presidential candidate to sign onto legislation preventing American companies from supporting a boycott of Israel” (not so good).

As mayor of Newark, he was on the board of the Alliance for School Choice.

Another thing we know about Booker is that he likes the spotlight. The senator is a frequent guest on TV, and he spoke on the Senate floor 31 different days during the 2017–18 Congressional session. NJ.com notes that this is less than potential Democratic presidential candidates Elizabeth Warren (88 days) and Benie Sanders (56 days), but more than Kirsten Gillibrand (28 days) or Kamala Harris (11 days).

In other 2020-related matters…

FREE MINDS

A genetic-testing company is opening up its records to the federal government. Law enforcement has already been using publicly available DNA test results in investigations, including one high-profile murder case where a family match led to the killer. But Family Tree DNA is the first company to willingly open up all of its data to the FBI.

“While the FBI does not have the ability to freely browse genetic profiles in the library, the move is sure to raise privacy concerns about law enforcement gaining the ability to look for DNA matches, or more likely, relatives linked by uploaded user data,” writes Buzzfeed‘s Salvador Hernandez.

FREE MARKETS

Soda warnings are out in San Francisco.

FOLLOWUP

Congress defends unauthorized war. The Senate voted to condemn President Donald Trump for moving to withdraw troops from Afghanistan and Syria. I’ll leave the commentary to Rep. Justin Amash (R–Mich.) on this one:

More info here.

QUICK HITS

• The FDA’s almond-milk fussing could be a First Amendment violation.

• France’s Supreme Court just upheld the country’s ban on paying for sex.

• The U.K. is finally ditching its antiquated obscenity law.

• Meet the man behind one third of Wikipedia.

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Where The Record Government Shutdown Can Be Spotted In Today’s Jobs Report

On the surface, today’s blistering jobs report which notched the 100th consecutive monthly gain in payrolls in style, with some 304K (estimated) jobs added to the US economy, was not impacted by the record government shutdown which lasted for nearly the entire duration of January, with the BLS stating that “there were no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings from the establishment survey.”

Bloomberg economist Yelena Shulyatyeva doubled down on this, stating that “the government shutdown had no impact on January payrolls. While the shutdown affected roughly 380,000 government workers who were deemed “non-essential,” they were counted as employed since they received back pay.”

To justify why the BLS “pro formad” the jobs report, it explained that “employment in federal government was essentially unchanged in January (+1,000). Federal employees on furlough during the partial government shutdown were counted as employed in the establishment survey because they worked or received pay (or will receive pay) for the pay period that included the 12th of the month.”

And yet it is not true that the shutdown did not affect the jobs report.

For one thing, as the BLS says in the very first line of the jobs report, “Both the unemployment rate, at 4.0 percent, and the number of unemployed persons, at 6.5 million, edged up in January. The impact of the partial federal government shutdown contributed to the uptick in these measures,”

Next, employment as measured by the Household Survey, actually tumbled by 251K to 156.694MM, with the slide impacting both the U3 and U6 unemployment rates which rose to multi-year highs as the total level of the civilian labor force was roughly unchanged.

Third, there was yet another place where the government shutdown impacted the jobs report: as the BLS notes, the number of persons employed part time for economic reasons (i.e., involuntary part-time workers) increased by about one-half million to 5.1 million in January. This was the biggest increase since 2012; nearly all of this increase occurred in the private sector and according to the report, “reflects the impact of the partial federal government shutdown” (persons employed part time for economic reasons would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs). This is shown in the chart below.

Still, despite these “glitches” the broader report was certainly very strong, as Neil Dutta from Renaissance Macro explains:

“We are told not to pay attention to any one jobs report and that goes double for this one because of the government shutdown. That being said, the main story comes through loud and clear. The U.S. economy is not operating at full employment. Strong growth continues to draw workers back into the labor force, driving the participation rate higher. This justifies a go-slow approach from the Fed. Buy stocks.”

Or maybe the jobs report wasn’t strong at all for another, far simpler reason: much more of its was estimated than normal. As Bloomberg’s Andrew Cinko warns, we should probably brace ourselves for another big revision to the job-market data when February rolls around. That’s because the survey response rate for January was even lower than December’s woefully weak rate: consider that today’s report was based on a 60.7% response rate; December’s initial estimate was based on a 61.0% rate, which rose to 88.3% for today’s revised data. The low December response rate was a reason Wells Fargo economist Mark Vitner was wary of the big December job gain.

Ironically, whether it is correct or entirely fabricated for political reasons or otherwise, it is safe to say that the jobs report, or any other economic indicator for that matter, is now irrelevant at least until the summer when the Fed’s “patient” period is expected to expire, and concerns about the Fed potentially hiking again return.

Until then, Dutta is right: “buy stocks“… on autopilot.

via ZeroHedge News http://bit.ly/2DNBayy Tyler Durden

Bull Trap

Authored by Sven Henrich via NorthmanTrader.com,

The bulls are back. $SPX up nearly 8% in January and nearly 14% off of the December lows. What slowing global growth? What reduced earnings expectations? Trade wars? Who cares. It’ll all sort itself out, all that matters was the Fed caving in spectacular fashion laying the foundation for the big bull case. The central bank 2 step is back: Dovish + dovish = nothing but higher prices. The lows are in, what else can I buy? This pretty much sums up current sentiment.

And so goes the familiar script during emerging bear markets, a general sense of relief that the lows are in and a return of optimism and greed after an aggressive counter rally following an initial scary drop. Long forgotten are the December lows after a torrent consecutive 6 weeks of higher prices.

While indeed a renewed fully dovish Fed may be all that’s needed to keep 2019 bullish (after all this playbook has worked for the past 10 years) there is evidence that this rally may turn out to be a big fat bull trap.

And it’s not a single data point, but rather it’s a confluent set of factors that are acting in concert that give credence to this possibility.

Let me walk you through the factors step by step.

Firstly here’s the big monthly chart of everything as I call it which includes $SPX, some basic technical elements, but also a price chart of the 10 year yield ($TNX) and the unemployment rate:

Note the common and concurrent elements of the previous two big market tops (2000 & 2007) versus now:

  1. New market highs tagging the upper monthly Bollinger band on a monthly negative RSI (relative strength) divergence – check

  2. A steep correction off the highs that breaks a multi-year trend line – check

  3. A turning of the monthly MACD toward south and the histogram to negative – check

  4. A correction that transverses all the way from the upper monthly Bollinger band to the lower monthly Bollinger band before bouncing – check

  5. A counter rally that moves all the way from the lower Bollinger Band to the middle Bollinger band, the 20MA – check

  6. A counter rally that produces a bump in the RSI around the middle zone alleviating oversold conditions – check

  7. All these events occurring following an extended trend of lower unemployment, signaling the coming end of a business cycle – check

  8. All these events coinciding with a reversal in yields – check

  9. All these events coinciding with a Federal Reserve suddenly halting its rate hike cycle – check

I submit that the current counter rally is consistent with all of these factors. Indeed, as with counter rallies in the past, this rally remains below its broken trend line.

What can we learn from the counter rallies during the two previous emerging bear markets?

In 2008, following the 2007 top, $SPX fell deep below its 200MA, but then saw an aggressive counter rally in a rising wedge pattern that stopped at the 200MA before everything reversed:

What did optimistic, the coast is clear, buyers know then? Nothing as $SPX didn’t bottom until 666 in March 2009.

In 2001 $SPX rallied hard from a yearly low in December (similar to now) and the high was made on January 31, the last trading day of the month. Unbeknownst to buyers then that day turned out to be the high for YEARS to come as markets turned south in advance of the coming recession:

Lows didn’t come until 2002/2003.

Look, my eyes are wide open here, I recognize that between the dovish Fed and a potential China deal markets may just drift higher and any pullbacks could turn into buying opportunities.

However, as long as $SPX remains below its 200MA without a confirmed breakout above the confluent set of elements discussed above suggest there is well founded risk that this market can still turn into a full fledged bear market. After all growth is slowing, earnings growth is slowing and the last 3 times the Fed halted its rate hike cycle a recession soon followed.

And what do we have so far? An aggressive counter rally below the 200MA in a very steep ascension pattern approaching key .618 fib resistance:

In early 2018 the 200MA was support, in the fall it became resistance. $SPX remains below it and I think it’s fair to say we’re no longer oversold. Indeed a dovish Fed has now been priced in. Jay Powell made sure of that on January 4th and confirmed it this week. That carrot is gone.

While the bull case remains technically unconfirmed at this stage the bull trap scenario will also remain unconfirmed for some time. The first few down days following the peak in January 2001 and the peak in May 2008 did not have anyone waving a big white flag screaming the top is in. It’s easy to see these things in hindsight, but much harder, if not impossible, if you’re in the thick of things. And this is where we are now, in the thick of things, and will be for weeks to come, but I suspect we’ll know more in the next month or two. Stay sharp.

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via ZeroHedge News http://bit.ly/2Gee0mA Tyler Durden