Race and Partnership Rates at Large Law Firms

Heather Mac Donald writes about this at the City Journal. The most striking data is on the average grade breakdown of incoming associates by race (which stems from what appear to be quite aggressive racial preferences in hiring), which comes from my colleague Rick Sander’s The Racial Paradox of the Corporate Law Firm (2006); note that it is from the “After the JD” study of lawyers who joined the bar in 2000, though my sense is that not much has changed (at least as to blacks and whites) in law schools and law firms since then:

To the extent that grades measure legal ability—and I think they do to a considerable extent, though of course the two aren’t perfectly correlated—it’s not surprising that the disparity coming in would yield disparity in attrition and in partnership rates, though of course this doesn’t preclude other possible causes for the latter disparity. For a response to Sander’s article, see this piece by James E. Coleman, Jr. & Mitu Gulati.

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Judy Shelton, Trump’s Next Fed Choice, Favors A Gold Standard And Free Trade

Authored by Mike Shedlock via MishTalk,

Economist Judy Shelton, a Trump economic advisor and a gold standard advocate is rumored to be Trump’s next Fed pick.

Bloomberg reports White House Considers Economist Judy Shelton for Fed Board

The White House is considering conservative economist Judy Shelton to fill one of the two vacancies on the Federal Reserve Board of Governors that President Donald Trump has struggled to fill.

She’s currently U.S. executive director for the European Bank for Reconstruction and Development, and previously worked for the Sound Money Project, which was founded to promote awareness about monetary stability and financial privacy.

Case for Monetary Regime Change

On April 21, Judy Shelton had an ope-ed in the Wall Street Journal: The Case for Monetary Regime Change.

Since President Trump announced his intention to nominate Herman Cain and Stephen Moore to serve on the Federal Reserve’s board of governors, mainstream commentators have made a point of dismissing anyone sympathetic to a gold standard as crankish or unqualified.

But it is wholly legitimate, and entirely prudent, to question the infallibility of the Federal Reserve in calibrating the money supply to the needs of the economy. No other government institution had more influence over the creation of money and credit in the lead-up to the devastating 2008 global meltdown. And the Fed’s response to the meltdown may have exacerbated the damage by lowering the incentive for banks to fund private-sector growth.

What began as an emergency decision in the wake of the financial crisis to pay interest to commercial banks on excess reserves has become the Fed’s main mechanism for conducting monetary policy. To raise interest rates, the Fed increases the rate it pays banks to keep their $1.5 trillion in excess reserves—eight times what is required—parked in accounts at Federal Reserve district banks. Rewarding banks for holding excess reserves in sterile depository accounts at the Fed rather than making loans to the public does not help create business or spur job creation.

Meanwhile, for all the talk of a “rules-based” system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles. Today’s arrangements permit governments to manipulate their currencies to gain an export advantage.

Money is meant to serve as a reliable unit of account and store of value across borders and through time. It’s entirely reasonable to ask whether this might be better assured by linking the supply of money and credit to gold or some other reference point as opposed to relying on the judgment of a dozen or so monetary officials meeting eight times a year to set interest rates. A linked system could allow currency convertibility by individuals (as under a gold standard) or foreign central banks (as under Bretton Woods). Either way, it could redress inflationary pressures.

Money Meltdown

Judy Shelton is author of the 1998 book Money Meltdown.

I just ordered the book to have a better idea where she is coming from.

Regardless, I am certain she would have been a better choice for Fed chair than Powell, Bernanke, Yellen, or Greenspan.

Bubbles of Increasing Amplitude

Shelton concluded Central bankers, and their defenders, have proven less than omniscient.”

Indeed.

The judgement of the Fed has produced three consecutive bubbles, each bigger than the one before it. The only reason the latest bubble is not acknowledged yet is that it hasn’t yet burst.

It’s not clear precisely what Shelton has in mind but at least she is headed in the right direction. What’s clear is Trump is fighting the wrong battle when it comes to trade.

Tariffs will not fix the alleged problems of currency manipulation. A gold standard would.

For discussion, please see:

  1. Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?
  2. Mission Impossible: Tariffs Didn’t Reduce the Trade Deficit (Deals Won’t Either)

via ZeroHedge News http://bit.ly/2Q32Y6p Tyler Durden

Goldman: If The VIX Surges On A Small Selloff, What Would It Do In A Crash?

One of the more remarkable dislocations in the market in recent weeks, was the abnormally sharp spike in the VIX (implied vol) even as realized vol, and the drop in underlying stocks, remained rather muted.

Indeed, as BofA noted in “dude, where’s my melt up“, despite a relatively low VIX for much of 2019, implied volatility in equities and credit markets remains significantly higher than realized volatility (17% vs 10% in US equities), and as shown below, is on par with the biggest market dislocations of the past 4 years.

On Monday, Goldman joined the chorus, pointing out that “China trade war escalation drove a small SPX sell-off but big spike in the VIX.” As the bank’s derivatives strategist, Rocky Fishman writes, “while last week’s sell-off was only 4% from intraday peak to trough, equity option markets reacted to the sell-off strongly (particularly on Tuesday, before under-reacting on Friday).” Among the various “overreactions” highlighted, term structure inverted sharply, skew spiked, and the VIX’s increase significantly exceeded what realized vol or the spot sell-off would imply.

Furthermore, and confirming what BofA’s Fund Manager Survey has noted for many months, namely that “Trade War” remains the top tail risk in the market…

… with term structure hitting one of its most inverted moments of the last few years, markets were implicitly pricing the trade negotiations as if they were one of the most important catalysts we’ve had for years, though as Goldman once again points out, even with the tariff deadline taking effect the SPX is within 3% of its high (by comparison, the Shanghai Composite is now down over 10% from its April highs).

Which brings us to the key question: is implied vol too high, or is realized vol too low? Or, as Fishman frames it, if the VIX rises 10 points on a 4% sell-off, what would it do on a larger downturn?

As Goldman responds, judging by the reaction of vol and skew to the limited actual SPX volatility we saw last week, the next large sell-off will not initially see vol under-react like it did in the early stages of Q4. And while Goldman does not see danger from positioning in VIX markets, another growing concern is liquidity, because as “volatility subsided in April, SPX futures’ top-of-book depth did not quite get back to the level they reached in September (just before the Q4 sell-off).” As a result, “hedging continues to be timely – especially with 6-12 month puts continuing to have lower-than-usual.” 

Here are some more details from Fishman:

An unusual characteristic of last week’s volatility was that the implied vol curve inverted (short-dated vol rose above longer-dated), at times sharply, despite the absolute level of implied volatility not reaching an extreme. Specifically, 6-month implied vol reached the lowest it has been in over a decade during a moment when it was below 3-month implied vol.

The takeaway from this according to Fishman, is that markets were implicitly viewing Friday’s tariff deadline as a key near-term catalyst that was unlikely to lead to a sustained high volatility period – despite the potential for transport time to make the deadline a “soft” deadline.

As for the ongoing decline in liquidity, Goldman notes that the $10mm median top-of-book depth for SPX E-mini futures last week was a sharp drop from the previous week’s $23mm median, but a drop that is to be expected with heightened volatility.

Still, with SPX E-mini futures trading $360bln/day of notional last week – a volume that would be consistent with realized vol well over 20% (though close-to-close realized vol last week was only 13%) – in the context of strong index volumes, top-of-book depth metrics could have been stronger.

In short, don’t expect VIX (or implied vol) to drop from here. Instead keep an eye on realized vol, which as shown below tends to follow implied vol…

… to determine how much stocks will drop from here as traders realize what BofA said last night, namely that for a trade deal to happen, stocks will have to experience much more pain first...

via ZeroHedge News http://bit.ly/2E6nkae Tyler Durden

Pompeo Skips Moscow Trip To Pressure EU Officials In Brussels On Iran

It seems for the State Department lately it’s all Iran and Venezuela all the time, or perhaps there’s just an aversion to real diplomatic work. 

After snubbing Germany’s Merkel last week to make an unplanned stop in Iraq to pressure leaders there into resisting cooperation with Iran, Secretary of State Mike Pompeo on Monday scrapped a scheduled trip to Moscow, diverting his plane for a surprise visit to Brussels to presumably crash an EU meeting exploring ways of salvaging the Iran nuclear deal

Last week Pompeo made a detour to Baghdad, snubbing Germany’s Merkel, in order to talk Iran. Image source: New York Times

It appears the “maximum pressure” campaign involves America’s top diplomat throwing his weight around in person anywhere around the globe their might be dissent among US allies.

Key European signatories of the 2015 landmark deal the British, French and German governments — are seeking European coordinated efforts to prevent the JCPOA from collapsing. 

Pompeo scrapped plans for a brief trip to Moscow and will land in the Belgian capital as his 28 EU counterparts gather. President Donald Trump’s top envoy plans to meet with key European allies, though the details are not yet known. — Bloomberg

Iran’s leaders last week threatened to pull out of key terms of the deal, asserting Europe has done little toward sanctions relief, and issued a 60-day ultimatum for Europe to honor its obligations. The EU responded that would reject any ultimatums. 

According to Bloomberg, Pompeo will still travel to Russia on Tuesday where he plans to meeting with Foreign Minister Sergei Lavrov in the Black Sea resort city of Sochi.

German Foreign Minister Heiko Maas told reporters just ahead of the EU meeting in Brussels: “This agreement is necessary for our security; nobody wants Iran to possess an atomic bomb,” while EU foreign-policy chief Federica Mogherini described plans for Pompeo’s visit and meetings “still up in the air”.

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

Trader: “This Reminds Me Of How Stocks Traded In Late 2007”

Via Bloomberg’s Richard Breslow,

How To Claim Victory In A Lose-Lose Situation

Buy the rumor sell the fact. It’s the second time in a week, I’ve used that annoyingly misunderstood phrase. The previous time, it was in the context of wondering which side of the equation referred to what part of the news. This time, it refers to the belief being expressed all over the place this morning that nothing is as bad as it sounds because we’ll always have climb downs and central banks. It’s a horribly dangerous way of assuming how the world works in the long-run.

The trade talks faltered. Equity markets have indeed sold off. The S&P 500 future has fallen to levels not seen since midday this past Friday. The Shanghai Composite acted just the same. Lots of ink has been spilled on the notion that it isn’t going to be so bad. After all, it is already Monday and not a single company went bankrupt over the weekend as a result. The parking lot of The Mall at Short Hills was reported to have been bustling.

It’s a mistake to view the entire world through the lens of a few stock market indexes and declare a measured truce has been achieved, pending the inevitable peace agreement. It reminds me of how shares traded in late 2007. Although back then it was based on the misguided and naive notion that if you just went back to plain vanilla assets and avoided that mortgage stuff everything would be fine. Never was the concept of ring-fencing more misunderstood.

Today is worse. We should know better, but there has been a full capitulation to the belief that governments will be able to indefinitely clean up their messes with a quickie liquidity injection. It isn’t even controversial anymore. Apply this lotion as needed.

And we continue to not wonder why there is so much talk about even more extreme ways to implement monetary policy… as needed!

Meanwhile, with great relief we celebrate equity resiliency taking comfort in the supposed Fed put while thinking nothing about a bunch of Fed speakers suddenly getting religion over the dangers associated with income and wealth inequality. A problem that will be at the center of the national debate through the 2020 election campaign. The trickle-down wealth concept was the very foundation upon which quantitative easing was justified. They mentioned it, wrote a paper purporting to have discovered the concept, and therefore are no longer responsible for having propagated it. That is how victors write history.

It was like watching a production of “My Fair Lady” when I read, “Why can’t equities act like the ‘poised’ currency markets and take this all in stride?” In fact, foreign exchange markets aren’t ignoring what is going on. They are trying to do their best imitation of pointing thumbs-down to all of the above. And that only looks like indifference against some of the dollar’s more obvious counterparts. But there are leaks. The Korean won got hammered yet again. The MSCI emerging currency index has now fallen convincingly through support. Traders are awakening to the fact that the SNB might like a weak franc but that this particular currency exists for a reason. And USD/CNH made a new year-to-date high a few hours ago.

Global bond yields are falling. Suddenly, some of the targets for how low Chinese rates can go don’t look nearly so aggressive.

German 10-year yields below zero are making a lot more sense as not being an aberration. But the most interesting market to watch this week is Treasuries. Tens haven’t had a yield this low since April 1. Whether there is an appetite for them sub-2.40% will tell a lot about the global appetite for the U.S. as a safe haven. It’s difficult to know what to wish for.

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

Paging Tim Cook – Save AAPL, Save The Market

Apple shares are down a stunning 5% as the market opens after US-China trade tensions escalate, breaking back below key technical support levels…

But, but, but earnings…

Back below its 50- and 100DMA…

Only one man can save this market now… Tim Cook and his share-buyback department!

via ZeroHedge News http://bit.ly/30gJxvF Tyler Durden

Kamala Harris Lies About Truancy Laws, Defends Criminalizing Parents Whose Kids Miss School: Reason Roundup

Maybe journalists are just confused. Maybe some are partisan hacks trying to rehabilitate Kamala Harris’ image for her. Either way, there’s been a rash of recent pieces suggesting that the Democratic senator from California and 2020 presidential candidate has revised her tough-on-crime tactics and stances. And almost every time they talk specifics, it turns out to be wrong.

First, the headlines told us that Harris wants to decriminalize prostitution. Pressed on CNN in April, Harris made clear that this wasn’t so.

We were also told last month that Harris “regrets” the truancy laws she helped passfirst in San Francisco and then statewide in Californiato criminalize parents if their kids miss school. Headline after headline made it sound like she’d had a genuine change of heart. But all Harris actually said was that she stands by her efforts but regrets that some parents were arrested under the law, saying this “was not the intention.”

But prosecution of parents was the express purpose of these laws. These arrests were no more an unintended consequence than arrests for breaking the laws against burglary or sexual assault. Sure, it would be nice if no one committed these crimes and no arrests had to be made under the laws prohibiting them. But arrests are by no stretch of linguistics an unintended consequence in any case.

In any event, Harris explicitly defended her truancy crime lawsand lied about themin an interview with Jake Tapper on CNN that aired Sunday. Harris told Tapper, falsely, that “not one parent was sent to jail” because of her initiative:

TAPPER: Well, you pushed for a statewide law, right, a statewide truancy law.

HARRIS: And the state…

TAPPER: And people were thrown into jail under that law.

HARRIS: Not by me.

TAPPER: Not by you, but you supported the law.

Of course they weren’t literally put in jail by Harris, who was attorney general of California when the truancy law was enacted and not an arresting officer. Yet no common understanding of “no one was sent to jail” means People were sent to jail, but they weren’t personally put there by the attorney general. Again, we see Harris trying to rewrite her record and history.

Regardless, avoiding actual jail time doesn’t make prosecution painless. Parents charged under the truancy law were still arrested and put through long and embarrassing ordeals, even when students had very legitimate reasons for missing school. You can read about one of these parents in this HuffPost piece, “The Human Costs of Kamala Harris’ War on Truancy.”

Harris admits in the CNN interview that she had a homeless mother of three who was working two jobs arrested when her kids missed schoolbut she insisted that this was for the woman’s own good. (The idea that having to take time off work to meet with prosecutors and judges, pay court fees, and take mandatory parenting classes actually helped this overworked and indigent mother and her family is the kind of logic that only a cop or politician can love.) Arrest allowed them to get the homeless woman the services “that she needed and didn’t know was available,” argued Harris.

That’s a refrain we often hear for why it’s important to arrest homeless people, drug users, minors in the sex trade, adult sex workers, and members of many other groups whose “crimes” are not against others but against themselves or “society.” And it’s always bullshit. Incarceration, a criminal record, fines and fees, etc. don’t help anyone, and they’re regressive in that they hurt the hardest the poorer and more marginalized someone is.

There are always better ways to get people services they need. And when caging someone or threatening to is the only way to get them to accept your “help,” it’s probably a good time to rethink how helpful you’re actually being.


FREE MINDS

San Francisco reporter Bryan Carmody woke up to police officers bashing in his door on Friday morning. A few weeks prior, Carmody had refused to give police the name of his source for a story on the death of San Francisco public defender Jeff Adachi. Now police were back with a warrant to search his home.

Carmody “wasn’t about to give up his source on Friday either, despite the escalation—not to the police or two FBI agents in suits who questioned him about the case,” The Washington Post reports:

“I’m smart enough not to talk to federal agents, ever,” Carmody said. “I just kept saying ‘lawyer, lawyer, lawyer.'”

So he stayed handcuffed for the next six hours, he says—a certificate of release from the police department that he distributed says he was in custody from 8:22 a.m. until 1:55 p.m.—as investigators searched his home, then his office, where they found the report in a safe. A search warrant filed in the case notes that it was issued as police investigated “stolen or embezzled property.”

“There’s only two people on this planet who know who leaked this report—me and the guy who leaked it,” Carmody said.

The raid on Carmody’s home and office drew wide First Amendment-related attention in the Bay Area over the weekend. And it added a new twist to the intrigue that surrounded the death of Adachi, who had built up a high profile as a public defender in the 16 years he had held the office.

The only elected public defender in California, Adachi was known as an watchdog on police misconduct. His death, on Feb. 22, at the age of 59, was attributed in early reports to a heart attack.

Then more information came to light.


FREE MARKETS

China is targeting free market economists. Researchers with the Unirule Institute of Economics have been harassed for months, reports Bloomberg:

Unirule is the brainchild of Mao Yushi, a respected 90-year-old economist who was among the first scholars to spread free-market ideas such as deregulation and privatization within China. Until recently, the think tank was one of the country’s more influential nongovernmental organizations, benefiting from the relative liberty granted to economics since the rule of Deng Xiaoping, who once declared that he didn’t care “if the cat is black or white, so long as it catches mice.” So long as they stayed mostly clear of politics, scholars were free to discuss Western thinkers and how their ideas applied to China. The result was a vibrant intellectual community that interacted with government decision-makers, providing data-driven reality checks for officials with little experience outside the Communist Party.

That space has shrunk drastically under President Xi Jinping, who has forcefully reasserted the party’s power and the state’s economic role, and has attacked the civil society that emerged under his predecessors.


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Kamala Harris Lies About Truancy Laws, Defends Criminalizing Parents Whose Kids Miss School: Reason Roundup

Maybe journalists are just confused. Maybe some are partisan hacks trying to rehabilitate Kamala Harris’ image for her. Either way, there’s been a rash of recent pieces suggesting that the Democratic senator from California and 2020 presidential candidate has revised her tough-on-crime tactics and stances. And almost every time they talk specifics, it turns out to be wrong.

First, the headlines told us that Harris wants to decriminalize prostitution. Pressed on CNN in April, Harris made clear that this wasn’t so.

We were also told last month that Harris “regrets” the truancy laws she helped passfirst in San Francisco and then statewide in Californiato criminalize parents if their kids miss school. Headline after headline made it sound like she’d had a genuine change of heart. But all Harris actually said was that she stands by her efforts but regrets that some parents were arrested under the law, saying this “was not the intention.”

But prosecution of parents was the express purpose of these laws. These arrests were no more an unintended consequence than arrests for breaking the laws against burglary or sexual assault. Sure, it would be nice if no one committed these crimes and no arrests had to be made under the laws prohibiting them. But arrests are by no stretch of linguistics an unintended consequence in any case.

In any event, Harris explicitly defended her truancy crime lawsand lied about themin an interview with Jake Tapper on CNN that aired Sunday. Harris told Tapper, falsely, that “not one parent was sent to jail” because of her initiative:

TAPPER: Well, you pushed for a statewide law, right, a statewide truancy law.

HARRIS: And the state…

TAPPER: And people were thrown into jail under that law.

HARRIS: Not by me.

TAPPER: Not by you, but you supported the law.

Of course they weren’t literally put in jail by Harris, who was attorney general of California when the truancy law was enacted and not an arresting officer. Yet no common understanding of “no one was sent to jail” means People were sent to jail, but they weren’t personally put there by the attorney general. Again, we see Harris trying to rewrite her record and history.

Regardless, avoiding actual jail time doesn’t make prosecution painless. Parents charged under the truancy law were still arrested and put through long and embarrassing ordeals, even when students had very legitimate reasons for missing school. You can read about one of these parents in this HuffPost piece, “The Human Costs of Kamala Harris’ War on Truancy.”

Harris admits in the CNN interview that she had a homeless mother of three who was working two jobs arrested when her kids missed schoolbut she insisted that this was for the woman’s own good. (The idea that having to take time off work to meet with prosecutors and judges, pay court fees, and take mandatory parenting classes actually helped this overworked and indigent mother and her family is the kind of logic that only a cop or politician can love.) Arrest allowed them to get the homeless woman the services “that she needed and didn’t know was available,” argued Harris.

That’s a refrain we often hear for why it’s important to arrest homeless people, drug users, minors in the sex trade, adult sex workers, and members of many other groups whose “crimes” are not against others but against themselves or “society.” And it’s always bullshit. Incarceration, a criminal record, fines and fees, etc. don’t help anyone, and they’re regressive in that they hurt the hardest the poorer and more marginalized someone is.

There are always better ways to get people services they need. And when caging someone or threatening to is the only way to get them to accept your “help,” it’s probably a good time to rethink how helpful you’re actually being.


FREE MINDS

San Francisco reporter Bryan Carmody woke up to police officers bashing in his door on Friday morning. A few weeks prior, Carmody had refused to give police the name of his source for a story on the death of San Francisco public defender Jeff Adachi. Now police were back with a warrant to search his home.

Carmody “wasn’t about to give up his source on Friday either, despite the escalation—not to the police or two FBI agents in suits who questioned him about the case,” The Washington Post reports:

“I’m smart enough not to talk to federal agents, ever,” Carmody said. “I just kept saying ‘lawyer, lawyer, lawyer.'”

So he stayed handcuffed for the next six hours, he says—a certificate of release from the police department that he distributed says he was in custody from 8:22 a.m. until 1:55 p.m.—as investigators searched his home, then his office, where they found the report in a safe. A search warrant filed in the case notes that it was issued as police investigated “stolen or embezzled property.”

“There’s only two people on this planet who know who leaked this report—me and the guy who leaked it,” Carmody said.

The raid on Carmody’s home and office drew wide First Amendment-related attention in the Bay Area over the weekend. And it added a new twist to the intrigue that surrounded the death of Adachi, who had built up a high profile as a public defender in the 16 years he had held the office.

The only elected public defender in California, Adachi was known as an watchdog on police misconduct. His death, on Feb. 22, at the age of 59, was attributed in early reports to a heart attack.

Then more information came to light.


FREE MARKETS

China is targeting free market economists. Researchers with the Unirule Institute of Economics have been harassed for months, reports Bloomberg:

Unirule is the brainchild of Mao Yushi, a respected 90-year-old economist who was among the first scholars to spread free-market ideas such as deregulation and privatization within China. Until recently, the think tank was one of the country’s more influential nongovernmental organizations, benefiting from the relative liberty granted to economics since the rule of Deng Xiaoping, who once declared that he didn’t care “if the cat is black or white, so long as it catches mice.” So long as they stayed mostly clear of politics, scholars were free to discuss Western thinkers and how their ideas applied to China. The result was a vibrant intellectual community that interacted with government decision-makers, providing data-driven reality checks for officials with little experience outside the Communist Party.

That space has shrunk drastically under President Xi Jinping, who has forcefully reasserted the party’s power and the state’s economic role, and has attacked the civil society that emerged under his predecessors.


QUICK HITS

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Gold Surges Back Above $1300 On Huge Volume As Trade Tensions Escalate

With China’s retaliatory threats coming just minutes after Trump warned them not to, and including a closet threat to dump USTs, precious metals are aggressively bid this morning with Gold surging above its 50DMA and breaking $1300 once again.

Gold spiked on extremely heavy volume…

Breaking above $1300 and its 50DMA once again…

Additionally, gold is surging in value against the yuan…

 

 

 

 

 

 

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