Buttigieg Quits Democratic Presidential Race

Buttigieg Quits Democratic Presidential Race

One day after billionaire Tom Steyer dropped out of the presidential race after spending hundreds of millions on a very expensive ego trip, mayor Pete is also officially out after his dismal performance in South Carolina.

For a brief few moments after his narrow victory in the Iowa caucus, things looked good for the first openly gay major presidential candidate, but since then things have slumped and following a crushing loss in the South Carolina primary where his poor performance with black Democrats signaled an inability to build a broad coalition of voters, he has reportedly decided to pull the plug.

Buttigieg is on his way to South Bend where he will reportedly make the announcement later tonight (likely on his way to CNN, following Yang to become a ‘talking head’ commentator on the debacle ahead).

Mayor Pete had collapsed in the odds already but not as fats as Mike Bloomberg has since the first debate (and the second debate did nothing for him).

Biden’s rebound is of note, but Bernie remains the bookies’ favorite, but the real question is will Mike Bloomberg quit too after a surprisingly strong performance by Biden amid accusations mini Mike will steal from Biden’s centrist base if he does not quit before Super Tuesday.

What is perhaps just as worrying is the fact that with Buttigieg out, Hillary is now #4 in the odds…

As NYTimes notes, in the last presidential debate, on Tuesday in South Carolina, Mr. Buttigieg forcefully warned that nominating Senator Bernie Sanders of Vermont, the front-runner, would lead to crushing defeat in the fall, not just “four more years of Donald Trump,’’ but the loss of the Democratic House majority secured by moderate candidates who won in suburban swing districts in 2018.

It would appear that thesis is about to be tested… but of course, after Tuesday everything will change.


Tyler Durden

Sun, 03/01/2020 – 18:16

via ZeroHedge News https://ift.tt/2Tddz1V Tyler Durden

Equity & Oil Futures Crash As Market Opens Without Fed Bailout

Equity & Oil Futures Crash As Market Opens Without Fed Bailout

After Friday afternoon’s combination of Jay Powell’s statement and a major rebalancing flow sent stocks soaring into the close, a lack of the much-demanded ‘coordinated global easing’ this weekend has spoiled the party and futures are opening down hard.

Friday’s almost 1000 point surge in less than an hour – on absolutely nothing but hope that somebody will do something –

Oil is also collapsing with WTI at a $43 handle…

And gold is bid…

And bond prices have hit a new high, erasing the late-Friday spike in yields…

Additionally, we detailed earlier, the following chart from Deutsche Bank shows, overall liquidity for S&P500 futures has fallen to all time lows even though the S&P was trading near all time highs as recently as a week ago. As such, the recent melt up levitation was nothing more than a mirage, propelled mostly by stock buybacks among the Top 5 tech stocks and fickle retail investors, and once these were removed, the market entered the proverbial “trapdoor opening” formation.

The problem is that virtually no liquidity, extreme moves to the downside are now very likely which in turn creates a reflexive relationship with risk sentiment, as the lower the liquidity and greater the selloff, the higher volatility surges leading to even lower liquidity, even more selling and so on.

In short: absent central bank intervention, it will be virtually impossible for any major player to arrest the market’s collapse.

Of course, that is a big ask the market is already pricing in almost 4 rate-cuts in 2020…

And almost completely priced-in 2 rate-cuts in March…

That’s a lot to expect from a Fed that doesn’t want to signal panic and burn through its ammunition so fast without evidence of economic disruption.


Tyler Durden

Sun, 03/01/2020 – 18:06

via ZeroHedge News https://ift.tt/2I8ttnV Tyler Durden

Coronageddon: Can A “Minsky Moment” Be Avoided?

Coronageddon: Can A “Minsky Moment” Be Avoided?

Authored by Mike Whitney via The Unz Review,

There’s a chance that the coronavirus will be contained in the United States and that fewer people will be infected than in China or Iran. But there’s also a possibility that the highly-contagious virus will spread and that there will be sporadic outbreaks across the country.

If this latter scenario takes place, then the ructions in the stock market will intensify making it impossible to form a bottom or spark a relief rally.

If stocks can’t find a bottom, then pressure will build on the weak players, who purchased securities with borrowed cash, to sell their good assets along with the bad in order to repay their debts. These massive selloffs can quickly turn into firesales where it’s nearly impossible to find a buyer regardless of price. This is what the financial media calls “panic selling”, a vicious, self-reinforcing downward spiral in which stock prices collapse in a frantic, disorderly selloff. The phenomenon has also been described by Pimco’s Paul McCulley as a “Minsky Moment”. Here’s a definition from Investopedia:

“Minsky Moment crises generally occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize on market moves. Minsky Moment defines the tipping point when speculative activity reaches an extreme that is unsustainable, leading to rapid price deflation and unpreventable market collapse. What follows, as hypothesized by Hyman Minsky, is a prolonged period of instability.” (Investopedia)

So, how close are we to a Minsky Moment?

In the last week alone, US stocks have shed $3.6 trillion in market value while benchmark 10-year Treasury yields have dropped to all-time lows and the ominously-named “fear gauge” or VIX (Volatility Index) has spiked to levels not seen in more than two years. The losses have been savage and severe, but the credit markets have held up fairly well so far. Next week could be a different matter altogether though, after all, there’s only so much fat on the bone. Another week like last week, would lead to widening credit spreads, major dislocations in the corporate bond market and, very likely, a few sizable defaults. Over-extended corporations that have borrowed over a trillion dollars from Mom and Pop investors to buy back their own shares, would certainly face a day of reckoning as their cash flow vanishes overnight and their prospects for rolling over their prodigious pile of debt drops to zero. This is typically how credit cycles end, in a fetid cloud of blood and smoke.

Despite persistent warnings from the IMF and other establishment institutions, Central Banks have done nothing to curtail the 11-year orgy of debt-fueled spending or the rampant reckless speculation that has sent stock prices through the roof even while workers wages have remained flat and standards of living have continued to slip. For more than a decade the Fed has kept interest rates locked on their emergency setting while pumping trillions in liquidity into the financial system at the first sign of trouble. So now stocks are the biggest bubble in history and the Fed finds itself without the tools it needs to counter the effects of the coronavirus. This has all the makings of a major catastrophe.

So how does this end?

Well, next week the Fed will announce that it is slashing rates by 50 basis points and that it’s coordinating its action with its fellow central banks, the BoE, the BoJ, and the ECB. The Fed might also announce an additional liquidity program aimed at banks and financial institutions that suddenly find they themselves unable to borrow at the Fed’s discount rate. The announcement could ignite a relief rally, but the surge is not likely to last long since it will not have any material effect on either the virus or the disruptions to supply-lines. The Fed’s easy money will not create the Chinese-made components that laptop manufacturers need to sell their products. They won’t put skittish workers back in the factories or passengers back on airplanes or consumers back in the retail stores. The Fed’s low rates are designed to stimulate demand, but they do nothing to mitigate a “supply shock”. Regrettably, the problem is on the supply side not the demand side.

For a better understanding of how the coronavirus is roiling markets, I’ve transcribed a short interview with market analyst Mohamed El-Erian who explains recent developments and provides a window into the future. El-Erian sees the current drama unfolding in four phases.

Mohamed El-Erian — “Phase one, is the economic and corporate shock. Global growth slows, companies generate less earnings, their costs go up, and their supply chains get disrupted.” (This is already happening.)

“Phase two is financial disruptions. Now we will see pockets of illiquidity, pockets of distress selling, market dislocations, and a complete closure of markets for any kind of funding other than bank funding. These two phases feed onto each other.” (This is also happening now.)

“Phase three, the formation of a bottom which happens in finance first, then in the economy. But for that to happen, it’s not about central banks like a financial sudden stop. It’s about addressing the underlying issue, which is the virus.” (No bottom in sight.)

“Phase four, when we have to look at the longer-term (scare? inaudible) Central banks realize whatever they do, will be shown to be ineffective and the faith that investors have always had that central banks can bolster valuations, is going out the window…..The Fed will cut rates because markets will begin to dysfunction, but (rate cuts) will not deliver a better economic outcome.”

“The problem is…you need the fundamentals to stop deteriorating in order to form a bottom. But the “technicals” can not stabilize long enough to form a bottom in the face of the continuously negative news. …What we need is hope, realistic hope that we have a way to solve this issue, and a vaccine is the best way to do that but that’s not coming anytime soon.” (No vaccine, no remedy.)

Bloomberg –“Is this selloff still orderly?”

“It was until yesterday (Friday afternoon) but now we’re starting to see the things you typically see when too many people are trying to reposition themselves and their isn’t enough risk-taking capacity in the middle. So we are seeing massive price gaps, very little liquidity in certain sectors of the corporate bond markets and emerging markets, and finally people are realizing what you and I have talked about for a long time. They took on too much liquidity risk.” (Watch the whole interview on: “Mohamed El-Erian Breaks Down Coronavirus Impact Into Four Stages”, Bloomberg News)

This interview will help readers understand how hard it’s going to be to calm the markets and stop the downward slide. There are four points that need to be emphasized:

1– In order to turn markets around, a bottom must be formed. Unfortunately, forming a bottom is impossible when stocks are whipsawed every few hours by more bleak information. In short, the news cycle is driving stocks lower.

2– On Friday signs of distress began to appear as a result of the the 5-day Wall Street bloodbath. (“Financial disruptions, pockets of illiquidity, pockets of distress selling, market dislocations, and a complete closure of markets for any kind of funding other than bank funding.) These are the red flags signalling a Minsky Moment is approaching, that is, when speculative activity reaches a tipping point leading to “rapid price deflation and unpreventable market collapse”..followed by “a prolonged period of instability.” In short, a stock market crash.

3– “Markets will begin to dysfunction, but (rate cuts) will not deliver a better economic outcome.”
In other words, Wall Street is demanding lower rates, but lower rates won’t help, in fact, they will further undermine the Fed’s credibility.

4– Finally , what’s needed to stop the selloff is a vaccine. Regrettably, there probably won’t be a vaccine for another 12 to 18 months. By that time, Wall Street could be a pile of smoldering rubble.


Tyler Durden

Sun, 03/01/2020 – 18:05

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5 more travel tips for flying

Earlier this month, I blogged about my top travel tips. I received a number of favorable comments from Volokh readers–fellow road warriors. Here are five more tips for flying. My general goal: make my time in the air as familiar and predictable as possible.

1. Always select the same seat on every plane.

Travel is difficult precisely because it is unfamiliar. You are not sleeping in your own bed, you are in a strange hotel. You are not driving your own car, you are in a rental car, a taxi, or a train. You aren’t working in your own private office, but are working in a cramped airplane seat next to strangers. And the list goes on. To reduce such unfamiliarity, I try to make travel as as familiar as possible.

The most effective way to make your trip predictable is to establish a routine. For example, on planes, I will always select the same seat. Here, I will refer to three of the most popular planes on United’s fleet. These planes will appear in most major fleets. (Southwest, for example, only flies the Boeing 737.) These principle should extend to all fleets.

On a Boeing 737 I will always sit in Seat 11C. Why 11C? I have several reasons.

As a general matter, I prefer aisle seats. I do not want to have to ask permission of my seat mate if I need to use the bathroom. Also, after the plane arrives at the gate, the person in the aisle seat can quickly get up and retrieve his or her bag before he queue forms down the aisle.

Aisle seats have another perk: you can lift up the arm rest. Under most seats is a little button–push it, and you can pull up the arm rest. Removing the arm rest gives you a few more inches to spread out. This extra space is especially helpful if the person in the middle seat is crowding you. (It happens.)

In particular, I prefer the aisle on the left side of the plane, over the right side of the plane. That is seat C rather than seat D. Why? I am a righty. When I use the trackpad on my laptop, my right elbow naturally sticks out to the right. It is possible to use a trackpad with a straight arm, but the motion is unnatural. (Try it.) When I sit in seat C, my elbow juts out into the aisle. It doesn’t bother anyone. (When the drink cart comes down the aisle, I have some temporary restraints). When I sit in seat D, my elbow juts out into the person sitting in seat E. As a result, I much prefer Seat C. Indeed, if there are no seat Cs available, I will sometimes prefer a Seat F (window on the right side). That way, my elbow juts into the window, rather than the person next to me.

Of all the C seats, why 11C? First, the 8C and 20/21C are out. (I explain below why the bulkhead and exit row seats are overrated). 15C, the row immediately before the exit row, is also out. That seat cannot recline. (I am on the pro-side of the recline debate; it’s my seat, I can use it as I choose.) That leaves us with 9C, 10C, 11C, and 12C. If I am in a pinch, I will select any of these four seats, but I prefer 11C the most. I consider three factors.

  • Proximity to the front of the plane: Flights board by status (Zone 1 before Zone 5) but deplane by row (Row 1 before Row 11). The closer you are to the front of the plane, the closer you get off the plane. A person in Zone 5, who sits in 10A will usually get off the plane before a Zone 1 passenger in 11C. Based on my rough timing, it takes a row (6 passengers abreast) about 30 seconds to a minute to get out of their seats, retrieve their overhead bags, and move forward. Passengers in every row, further back, will have to wait more time to get off the plane.
  • Availability of overheard space: Generally when I board early, I don’t have to worry about overhead space above my seat. But if I am running late, or if the gate agent boards early (I really wish they wouldn’t), I sometimes have a tougher time locating overhead space. I find that among rows 9-12, the overhead space fills up the quickest towards the front. Sometimes the airline will store some type of emergency equipment by the bulkhead–fixed space you cannot move. Also, pilots and other crew will put their bags up there. I rarely have problems with bag space in row 11 or 12.
  • Likelihood that the middle seat remains empty: On a less-than-sold out flight, middle seats are often open. I will usually prefer an aisle seat with an empty middle seat to a business class seat. (On shorter flights, I’ve declined last-minute upgrades to avoid the hassle of moving from a spacey position.) Sometimes the airline will “upgrade” someone from a regular economy seat to a middle seat in economy plus. (I am not sure that is an upgrade; I would rather have a cramped aisle seat than a roomy middle seat.) In my experiences, the middle seat in Rows 11 and 12 fill up after the middle seats in Rows 9 and 10. No science here. My anecdotal observations.

Given these three considerations. I have made 11C my default choice. It is my mobile office. Wherever available, I take it. Indeed, I am comfortable with it. When I have to use 10C, I feel too close to the front. 12C feels too far from the front. If you ever see me on a plane, and I am not in 11C (or in business class), you can assume that I didn’t buy the ticket early enough.

All of the C seats I mentioned are in the Economy Plus section of the plane. United (and most carriers) designate the first few rows of the plane as “premium.” You have more space between seats. Specifically, there are more inches from the end of one seat to the beginning of another. This unit is known in the industry as “pitch.” (I will explain later why “pitch” is not a useful measurement.) With premium seats, you can also board earlier (with Zone 1 or 2). All passengers can choose to pay extra for these seats (between $50 and $75). Passengers can also buy an annual subscription and receive unlimited economy plus seats (about $600 a year). And members with gold status or higher receive complimentary economy plus seating. (Traditionally gold status was awarded to passengers with 50,000 miles flown a year, but now status is primarily based on spending money.)

The seating configuration is different on the Embraer Regional Jet (ERJ) 175. Instead of two rows of three, the smaller plane has two rows of two. In other words, no middle seat. The seats themselves are also much thinner, and less comfortable. For a short flight, the seats are fine. But United treats some three-hour flights (Houston to DC) as “regional.”

The first four rows of the ERJ 175 are Economy Plus. I usually prefer 9B. (The aisle side on the left side). I avoid the bulkhead (7B). I also avoid 10B. This row is immediately in front of the regular Economy Section. It is harder to recline onto someone who has space. I prefer to recline onto people who have the added space of an economy plus seat. 8B also works in a pinch. As a general matter, I will take a D window seat in Economy Plus over a C aisle seat, to avoid having my elbow jut into the seat mate.

Finally, we have the ERJ 145, the tiny regional jet with a 2-1 configuration. This plane is (thankfully) being phased out. It is very cramped and uncomfortable. Some smaller airports can only be reached by these tiny planes. Here, the A seats are preferred. You sit by yourself, in your own row. But there is very little leg room. My knees always touch the seat in front of me. If the person in front of me reclines, I have to lift the tray table up, and put my laptop on my lap. Here I actually prefer the exit row (Row 18A). There is more leg room, and I can comfortably work. Also, the tray table is not in the arm rest, so there is more lateral space.

I have given seating a lot of thought.

2. Bulkhead seats and Exit Row seats are overrated

Bulkhead seats refer to the first row on a plane. On the Boeing 737, for example. There are two bulkheads. First, Row 1 in business class. Second, Row 7 in economy class. Generally, there is a wall in front of the first row to separate the seats.

Also, every plane has at least one or more exit rows. These are the rows that align with the plane’s wings. In the event of the emergency, people may need to evacuate through the exit rows, onto the wing. Some travelers prefer the bulkhead and exit rows. I think these seats are overrated.

One law professor described me as “tall and muscular.” I agree with the first half of that statement. I am about 6’2″, with long legs. I’m also wide. The bulkhead seats, located in the first row of the plane, don’t work for me for three reasons. First, there is actually less room for my legs. In seat 11C, I can stretch my legs all the way out under the seat in front of me (10C). But for the bulkhead, there is a partition in front of the seats. The bulkhead offers more knee room–that is, no one will recline a seat into my knees. (This measurement is referred to as “pitch.”) But there is less leg room–I have less space to stretch out. Indeed, with most economy plus seats, I seldom have problems with knee room. Even if the person in front of me reclines, I still have plenty of room. (Though I have to reposition my laptop on the tray table slightly).

Second, in the bulkhead, I cannot keep my laptop under my seat during taxi, takeoff, and landing. The path in front of the bulkhead must be clear. This FAA rule never made much sense to me. There is no quick escape by the bulkhead seat. I’m not sure why this path must remain free, but other rows can be cluttered. This rule is enforced unevenly. Some flight attendants will let me keep the laptop under my seat. Others will let me put it in the seat pocket (which hangs off the partition). But some flight attendants make me put my computer in the overhead bin. That change deprives me of about 20-30 minutes of working time per flight. Why? You can’t get the computer from the overhead until you reach cruising altitude (double chimes). And you have to stow your computer during the descent. Depending on weather, that could be as much as a 20-minute. No thanks.

Third, in the bulkhead the tray tables are stored in the arm rest. As a result, there are fixed boundaries on both the right and left side of the seat. I feel cramped inside that unit. Unlike with my beloved 11C, the exit rows do not allow me to lift up the arm rest, and extend into the aisle. Also, the tray tables that fold of the arm rests are far more flimsy. They are likely to sit on top of my knees, creating undue pressure throughout the entire flight.

The exit row seats will also place the tray table in the arm rest. You have more knee, and leg room, but there is less lateral space. But the exit row has plenty of knee room and even more leg room. I can’t even reach the seat in front of me. On some planes, the exit row is colder because of the proximity to the window. The temperature doesn’t bother me, but it could be a factor for other passengers.

I think the exit row and the bulkhead seats are overrated. They provide some benefits, but also add costs for taller, and wider passengers.

3. Tips for trading seats

This tip will be unpopular among unfrequent flyers, but will resonate with frequent flyers. I will generally switch seats switch to allow a parent to sit next to his or her child–the younger the child, the more likely I will make the switch. As a general matter, there are inconveniences to sitting next to a young child: they can make a lot of noise, can jump and kick around, and there are frequent bathroom breaks. Sometimes moving away from a child on a plane is win-win. Also in rarer cases, a person will want to sit next to an elderly parent with some health conditions. That switch will also usually work for me.

But I won’t entertain a switch for a husband, wife, boyfriend, girlfriend, etc. Seat 11C is very important to me. (See #1 above.) If I have to sit in a window seat, or an aisle seat, I will not be able to get work done that I had planned to finish. And I will likely have to sit in a cramped position, leading to discomfort for the rest of the day. Indeed, I won’t switch from seat 11C to 11D. Recently, someone asked to switch an “aisle for an aisle.” I declined. I’ve tried to explain in the past the difference between 11C and 11D while someone is asking me to switch, but it is too complicated. Now I just say no, without an explanation. (That incident, in part, spurred this lengthy post.)

Refusing to switch in such cases generates a lot of glares and dirty looks. And I have to sit next to the person who wanted to switch for 2+ hours. There are costs. But I am efficient at looking ahead and focusing on my work. I usually forget about the issue by the time we reach cruising altitude.

Indeed, my general tactic when my seat mate is unpleasant is to simply look forward and ignore them. Responding or engaging in any way simply escalates the issue. There are no rational conversations when a passenger is irate. On rare occasion, if the situation escalates, I press the call button and let the flight attendant deal with it. In some cases, reaching up to press the button could escalate the situation further–especially if the seat mate perceives the sudden motion as an act of aggression. In such cases, I get up “to go to the bathroom” and mention something to the flight attendant.

For example, on a recent flight, the passenger next to me was really, really drunk. (By my count, he had four vodka drinks, and probably started drinking before the flight.) He kept asking me bizarre questions and saying obnoxious things. I looked forward and ignored him. Alas the behavior did not stop. I got up and told the flight attendant to cut him off. And the flight attendant did so, and brought him coffee.

Back to switching for parents and children. The mechanics of the switch are complicated. And parents are seldom thinking about what they are asking. Their sole concern is to sit next to their kid. I can truly relate. Here I offer some general tips to make the process smooth.

As a threshold matter, parents who buy tickets well in advance would not knowingly seat their child apart. Parents and children are generally are assigned separate seats because they missed a connection, and were automatically rebooked. It happens. On most flights, stand-by passengers are assigned to the middle-seats (the most unpopular seats). As a result, a child may be assigned to 11B (an economy plus middle seat on the left side of the plane) while the parent may be assigned to 22E (an economy middle seat on the right side of the plane).

Usually, the parent will ask me (in 11C) to move back to 22E. That certainly seems like the easiest swap. I am in the aisle, and easy to talk to. The person in the window is further away. This is probably the worst trade. The parent is asking someone seated in a premium, aisle seat to go back to a non-premium middle seat. I addressed above how that seat would affect my trip.

Rather than swapping 11C for 22E, the parent should consider two other options.

First, send the child back to row 22. The parent should ask the person in 22D or 22F to move up to 11B This person did not purchase a premium seat, but would be getting that benefit. True enough, they would be giving up a window or aisle for a middle seat. But the added legroom may make it worth it. Also, I’ve found that people in row 22+ aren’t as persnickety about their seats. If they were, they wouldn’t be sitting in row 22+.

Second, ask the person in 11A to go back to 22E. This swap also represents a downgrade (window seat to a middle seat). But if 11C (me) declines, 11A should be the next bet.

I’ve been on some flights where parents try to organize three-way trades, so that mom, dad, and kid can sit in the same row. I won’t participate. These switches are too complicated and seldom pan out. The boarding process is fairly short, and everyone must be seated by the time the door closes. Waiting around for these trades to materialize is a waste of time.  Sometimes people try to organize a trade while in the air. At that point, people are seated, and are less likely to move.

On rare, rare occasion, a parent and child will be seated in my seat before I board. (Parents with children 2 and under board before members with “1K” status). Their hope is that if they are seated in my seat, I would be happy to move. I’ve acquiesced to this plan a few times. It is gutsy, but works. I would not recommend it. It could backfire, and create a scene at boarding.

 

4. Always use a neck pillow on planes, Ubers, and everywhere else

I have a neck pillow clipped to my bag. I bring it everywhere I go. I wear it all the time on planes, in Ubers, and everywhere else. Indeed, I usually put it on during the boarding process. It looks ridiculous. I’ll admit. But it prevent neck strain and cramping. Moreover, the neck pillow allows me to easily sleep for two hours at a time. (Something usually wakes me up during longer naps).

Not all neck pillows are created equal. I’ve tried them all. The best model I’ve seen is the Cabeau Evolution Memory Foam Travel Neck Pillow. It is perfect. The grooves on the slide let me rest my neck. And the memory foam material is quite comfortable. And the strap easily clips onto any bag handle. I have 2 or 3 extra ones at home, in the event I ever lose it.

 

5. To create extra leg room, remove the literature from the seat pocket

Most airplanes load lots of literature in the seat pocket: a magazine no one reads, safety cards no one reads, applications to sign up for credits cards, wifi instructions, etc. Those pages take up precious inches. Remove them. Put them on the floor. You will buy yourself a few inches of free room. Flight attendants will sometimes rebuke you for moving the safety card. (I once got yelled at while flying a 747 from Hong Kong to San Francisco–it was a tight ship.)

Some of the newer models place the literature pouch higher up, so there are no problems with knee room.

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“It’s A Betrayal” – ICE Runs Millions Of Facial-Recognition Searches On Maryland Drivers

“It’s A Betrayal” – ICE Runs Millions Of Facial-Recognition Searches On Maryland Drivers

The real-world use of facial-recognition technology in the justice system is fraught with problems, according to a new report from The Baltimore Sun

New evidence suggests the US Immigration and Customs Enforcement (ICE) has accessed the Maryland state database of licensed drivers numerous times in the last several years, using facial-recognition software to scan millions of licenses without state or court approval.

The move by ICE has alarmed immigration activists in the state, alleging that the agency has used the database to scan for undocumented immigrants that have received a special driver’s license in the last seven years.

ICE can take a photograph of an unknown person and run it through the database, in search of a match. 

“It’s a betrayal of immigrants’ trust for the [state] to turn around and let ICE run warrantless searches on their faces,” said Harrison Rudolph, a senior associate at Georgetown University Law School’s Center on Privacy and Technology. It’s a bait-and-switch. … ICE is using biometric information in the shadows, without government notice or public approval, to hunt down the most vulnerable people.”

A new bill backed by state Democrats would force ICE agents to obtain a warrant before running images through the motor vehicle records and driver’s license database. The bill would also allow the state to track federal queries into the system. 

ICE has used the database to scan for undocumented immigrants, mainly in the Baltimore–Washington metropolitan area. 

“We have seen certain cases where they didn’t have any sort of criminal record but were targeted,” said Lydia Walther-Rodriguez, operations head of Baltimore CASA. 

Rodriguez said ICE has used the database to search for immigrants “for years now.” 

The Washington Post said ICE has also deployed the software in other state databases, such as ones in Utah, Vermont, and Washington. 

“They have a wide-open door to be able to search through anything in this database,” said Maryland Sen. Clarence K. Lam (D-Howard), who has openly told state officials that there needs to be more oversight on ICE’s use of the database. “They’ve not been forthcoming in their willingness to [stop it] or coming up with solutions.”

Rudolph said ICE searches affect everyone, not just immigrants, due in part because of the facial-recognition software can produce errors and misidentify people, leading agents to pursue the wrong person. 

“If you’re a US citizen and thinking ICE facial-recognition searches don’t affect you, you’re wrong,” he added. “With face recognition, the question is not whether you are an immigrant, but whether an error-prone technology thinks you look like an immigrant.”

Facial-recognition software deployed by ICE to track immigrants is something that tyrannies like China are using to control their population. 

Law enforcement agencies across the country have also embraced facial recognition and AI surveillance. 

Last month, the Chicago Police Department was caught using a controversial facial recognition tool that scans social media platforms to pinpoint the identity of unknown suspects. 

There are additional downside risks of AI surveillance and data harvesting; that is, a hacker can steal the treasure trove of data. This is what happened with a Manhattan-based facial recognition company that uses AI to collect data from unsuspecting social media users reported this week that their entire client list was stolen.

Although AI promises to make ICE and other law enforcement agencies more effective in crimefighting, the troubling trend is that the US could be sleepwalking into a technological tyranny, just like China.


Tyler Durden

Sun, 03/01/2020 – 17:45

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Two More Problems For The Bulls: Market Liquidity And Short Interest Are At All Time Lows

Two More Problems For The Bulls: Market Liquidity And Short Interest Are At All Time Lows

While on any other occasion last week’s selloff, which as we detailed extensively on Saturday included the puking by virtually every investor class which until recently was “all-in” risk assets, and has pushed the market to record oversold with the Put/Call ratio surging to a level that traditionally suggests a near-term bottom has arrived…

… this time it may be a more difficult for the oversold bounce to emerge, for two main reasons.

First, as the following chart from Deutsche Bank shows, overall liquidity for S&P500 futures has fallen to all time lows even though the S&P was trading near all time highs as recently as a week ago. As such, the recent melt up levitation was nothing more than a mirage, propelled mostly by stock buybacks among the Top 5 tech stocks and fickle retail investors, and once these were removed, the market entered the proverbial “trapdoor opening” formation. The problem is that virtually no liquidity, extreme moves to the downside are now very likely which in turn creates a reflexive relationship with risk sentiment, as the lower the liquidity and greater the selloff, the higher volatility surges leading to even lower liquidity, even more selling and so on. In short: absent central bank intervention, it will be virtually impossible for any major player to arrest the market’s collapse.

The second reason why the market will find it difficult to rebound from its extremely oversold state is that short interest is also near all time lows. While normally shorts provide a convenient speed break when stocks are plunging, as they tend to take profits and cover existing shorts, in the process bidding up risk, this time the Fed and corporate buyback orders had pushed the market so high that virtually no shorts are left. Of course, it is ironic: the forced extinction of shorts will now make sure many more longs also go extinct…

… unless of course, the Fed steps in as it always does when the market has had a 10% correction, and somehow makes everything better. On the other hand, if Powell disappoints longs who are literally praying for – if not divine – then monetary intervention at this moment, what few shorts are left are about to have the party of their lives.


Tyler Durden

Sun, 03/01/2020 – 17:37

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Morgan Stanley: “We Believe That We Are Still Heading Towards Scenario 2”

Morgan Stanley: “We Believe That We Are Still Heading Towards Scenario 2”

Authored by Chetan Ahya, chief economist at Morgan Stanley

Disruption, Dislocations and Delayed Recovery

With economic activity disrupted and capital markets dislocated, investors are debating if Covid-19 will derail the global cycle. In times of sharp drops in asset markets, pessimistic prognoses are easy to make, but it is at times like this when some perspective is warranted.

Coming into the year, we had a growing body of evidence that, after a tough 18 months, the global economy was on the mend. PMIs new orders were improving from October and headline PMIs troughed then too. Global trade was growing again in December after contracting for six months. While there was still skepticism then, we thought these data points were lending support to our thesis of a global recovery taking hold from 1Q20.

The outbreak of Covid-19 has certainly changed the near-term narrative. It is an untimely shock, considering that the starting point of global growth was weak, and the recovery was very nascent. The disruptions to economic activity will create a pronounced impact on global growth in 1Q20.

The question is whether this is an exogenous, transitory shock or one that fundamentally challenges the cycle. We are in the former camp. Indeed, throughout this expansion cycle, we have had a series of shocks to the global economy, which have led to a number of mini-cycles in global growth, but have actually helped to extend the cycle as we did not have the runway to go into a traditional overheating situation.

Given the uncertainty over the virus outbreak, we see three possible scenarios for the road ahead:

  • Scenario #1 – containment by March: The virus outbreak is contained by end-March and production disruption is limited to 1Q20. Policy-makers in China and Asia will provide meaningful policy support, with China expanding its fiscal deficit by 120bp, keeping it high for the second year running. Global growth dips to 2.5%Y in 1Q20 (from 2.9%Y in 4Q19), but recovers meaningfully from 2Q20.
  • Scenario #2 – escalation in new geographies, disruption extends into 2Q20: New cases continue to rise in other parts of the world, before peaking by end-May. The disruption extends into 2Q20, affecting corporate profitability in select sectors, risking the emergence of corporate credit risks. If the dislocations in asset markets also persist into 2Q20, the sharp tightening in financial conditions may well become the overwhelming factor and exacerbate the impact on growth via weaker corporate confidence and capex and cutbacks in hiring activity.

In response, policy-makers around the world will step up easing measures – with fiscal policy in Asia and Europe and monetary policy in the US doing the heavy lifting. Indeed, our chief US economist Ellen Zentner expects the Fed to cut rates by 25bp in March and to maintain an explicit promise to continue if growth damage extends. Global growth averages just 2.4%Y in 1H20, but picks up from 3Q20.

  • Scenario #3 persisting into 3Q, escalating recession risks: The virus continues to spread into 3Q, encompassing all the large economies. China faces a renewed rise in new cases as it restarts production. Disruption continues into 3Q. The extended disruption to economic activity damages corporate profitability and brings about a rise in corporate credit risks and significant tightening in financial conditions, which exacerbate the slowdown in global growth.
  • Central banks will embark on a renewed easing cycle, with the potential for a coordinated response. We expect the global weighted average monetary policy rate to dip to its lowest level since 2012. The Fed extends the cuts from March-June and becomes more aggressive in 50bp increments to take rates to close to the lower bound by 3Q20. The fiscal response across key DM and EM economies also becomes more aggressive, with China taking up 200bp of fiscal expansion. The cyclically adjusted primary fiscal deficit for G4 and China widens to 5.1% of GDP in 2020, from 4.1% in 2019. Global growth stays weak (i.e., below 2.5%Y) between 1Q20-3Q20.

At the current juncture, we believe that we are heading towards scenario 2. Our strategists believe that more liquid markets, such as equities and UST yields, may well see a bounce from oversold levels soon, but credit has not cheapened enough given the greater return asymmetry. Developments related to the outbreak of the virus remain key to watch, and we are monitoring the following signposts:

  1. The ability to bring the outbreaks under control in affected areas and the scope of the spread across Europe and into the US;
  2. Whether China faces a rise in new cases as it continues to restart production; and
  3. Updated data from the therapeutics in development.


Tyler Durden

Sun, 03/01/2020 – 17:25

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Gold Jewelry Selling Sees “Frantic Surge” After Price Spike And Volatility

Gold Jewelry Selling Sees “Frantic Surge” After Price Spike And Volatility

Gold jewelry owners have almost been as frantic as the price of gold itself over the last few weeks.

Front month gold futures spiked to almost $1700/oz leading up to last week’s decimation, amid coronavirus fears and a widely growing acceptance that central bankers will once again be stimulating the global economy and supporting asset prices. 

As quickly as gold rose, it fell. During last week’s equities selloff, margin calls forced the price of gold futures to tank as low as $1564 on the Friday session, before finishing the session down $55, or about 3.3% lower. 

All the while, people are frantically scrambling to try and sell their gold jewelry, anticipating that the price hike of about 8.4% in the precious metal since the beginning of the year may not hold. 

Tobina Kahn, the president of House of Kahn Estate Jewelers told Bloomberg: “Old gold sales always jump when prices rise, but we’ve never seen a surge like this.”

Bookings for jewelry assessments were up 12% at her shop. She continued: “No one is saying, ‘I want to wait because I think gold will go up even more’. They realize this is time sensitive. It’s a flight-to-safety rally that’s based on fear.”

Little do the sellers know, they should be buying gold instead of selling it, for a true flight to safety. 

And the sell off on Friday could actually trigger more selling. “Everyone is hedging their bets,” said Ash Kundra, co-owner of J Blundell & Sons Ltd. in London’s Hatton Garden jewelry district.

Scrap gold usually makes up about 30% of total global supply. Even though mining outputs were flat in 2019, scrap gold in play may have rose by as much as 2.5%. Most retail buyers pay a fraction of spot prices before melting down the gold and purifying it, before making it into gold bars. Other items with collectors value, like gold Rolex watches, are resold. 

Empire Gold Buyers in New York pays up to 96% of spot. Chief Executive Officer Gene Furman said:

“A typical 18-carat gold wedding band weighing about 10 grams would gain a seller about $383 at a spot price of $1,600. A gold watch weighing about 3 ounces and purchased for around $1,000 in the 1980s would probably gain a buyer around $1,900.”

Rohit Savant, an analyst at the research firm CPM Group said: “People have started to clean out their safes. They find a packet that’s been sitting there for 5 years, 10 years and they scrap it to take advantage of the higher prices.”

In China, the selling landscape is the opposite, as sales of gold jewelry are set to plummet for the year amid the economic damage of the coronavirus outbreak. 

In the U.S., the story is just the opposite. “People who have been sitting at home thinking ‘time for me to sell, time for me to sell’ are coming out of the trenches right now,” Furman concluded.


Tyler Durden

Sun, 03/01/2020 – 17:05

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Governments Will Use The Coronavirus Card To Downgrade Estimates And Increase Interventionism

Governments Will Use The Coronavirus Card To Downgrade Estimates And Increase Interventionism

Authored by Daniel Lacalle,

The John Hopkins University Coronavirus Global Cases Monitor shows that the mortality rate of the epidemic is very low. At the close of this article, 87,470 cases, 2,990 deaths and 42,670 recovered.

It is normal for the media to focus on the first two figures, but I think it is important to remember the last one. The recovered figure is more than ten times the deceased one. This should not make the reader ignore the epidemic, but it is also worth reading the scientific study that shows that the death rate in citizens under 60 is less than 1.3%, 0.2% in young population, and on average it is a maximum of 4% (“The Epidemiological Characteristics of an Outbreak of 2019 Novel Coronavirus Diseases”, February 2020).

I have attended several debates in international media where scientists repeat these important factors to prevent panic reactions from the population. History shows us that these epidemics have diminishing mortality rates and are contained relatively quickly.

We must remember the victims and their families and pray for a quick response from the scientific community, a solution that will surely arrive… Although not in the time that market participants and media would desire.

The economic impact is completely different.

There is more logic in the negative reaction of markets because the coronavirus impact adds to an already weak and bloated global economy that was showing poor growth, high debt and an evidently disappointing earnings season before any epidemic was included in estimates.

The ramifications are not small. China has closed 21 provinces that account for about 90% of exports and 80% of GDP. At the close of this article, 13 provinces, which account for around 51% of China’s GDP, have begun to recover economic activity, but at a very slow pace. China PMIs came at the lowest level in decades, even below 2008 figures. Manufacturing PMI fell to 35.7 in February, compared to the previous 50 and estimates of 46. More importantly, non-manufacturing PMI collapsed to an all-time low of 29.6 compared to the previous 54.1.

Few analysts expected to see China posting recession figures, even in their most negative estimates. China may print a zero GDP in the first quarter, which shows the extent of the economic shutdown.

The previously mentioned PMIs are important for two reasons: Manufacturing, which was already poor and in contraction in most leading economies, is likely to slump in the first quarter. However, the second conclusion is even more worrying. The non-manufacturing and services sectors have kept the global economy afloat in an earnings and manufacturing contraction and, this time, services will be hit harder and for longer.

Why? Because the only action that authorities can take to prevent a collapse in the health systems of their countries is to shut down borders, limit travel, cancel large gatherings and events as well as reduce international trading activity to reduce the virus spreading speed. Not because the mortality rate is high, but to avoid a massive flow of citizens into hospitals and hoarding of medicines.

The reaction of the authorities in many countries and the fear of the unknown generate a domino of cancelations of investment decisions as well as a slump in international trade. As such, we cannot fall into the unjustified panic of a global health disaster or the complacency of thinking, as we read in some economic research papers in February, that all this will be solved in a month and in two months world growth will be relaunched.

We must be cautious because the coronavirus card will be used, as the Brexit and Trade War cards before, to slash already optimistic global growth estimates.

Before the epidemic news broke, economies such as Spain, France, Italy, Germany, Japan or China already showed weakness in the fourth quarter of 2019. energy and industrial commodities, which have now entered into a correction phase, had already started the year with weak price action. We cannot forget important signals such as the Baltic Dry Index, which reflects the enormous global overcapacity and the collapse in the pricing of maritime freights, or the poor volumes posted by exporters in copper, oil, coal and iron ore.

In its analysis of economic risks, PricewaterhouseCoopers showed an estimate of the global economic impact that the coronavirus may generate. It stated that it could shave up to about 0.7% of global GDP, using the methodology of John Hopkins and McKibbins & Lee. However, that impact may well be seen as conservative once we have taken into account the global loss of market value in stocks and the China PMIs. Bloomberg raised the impact to a trillion US dollars considering that the effect on commodities, industries, and services will likely be greater than feared in the short term and the recovery may not to be the V-shaped one most analysts would want, but slower.

It is essential to remember the previous weakness of many economies, especially the eurozone, due to excess debt, low growth and high interventionism. We cannot forget the impact on emerging markets either, as they face a massive wall of maturities of more than 1.4 trillion US dollars of dollar-denominated debt just as the price of commodities collapses and exported volumes slump to new lows.

Deutsche Bank analyzed the most exposed economies to the epidemic and concluded that South Korea, Japan, and Mexico will likely be the most affected, while the United States, which exports very little (11% of GDP more or less) is less impacted.

The biggest mistake, and one that is almost guaranteed to be made, is to try to disguise the economic impact of the epidemic by cutting interest rates (consensus already discounts a 68% probability of Fed rate cuts) and injecting more liquidity. No company will invest more with lower-than-zero rates if they are facing a sales decline from an epidemic, and there is an excess of complacency in governments that see their bond yields reach even lower levels. Falling sovereign bond yields make governments believe they are doing the right thing and there is no risk, two big mistakes, and a very negative combination. Low bond yields are a signal of high-risk aversion, not of excellent government policies.

China and Hong Kong have promised massive spending programs to “offset the economic impact”. Huge white elephants, unnecessary public spending projects to disguise the economic impact of an event, can generate a much worse effect and accelerate the path to stagflation. Core prices rise due to the supply chain impact and economic growth stalls.

Let us not forget the lessons from Japan. the country spent more than 6 trillion US dollars in massive infrastructure plans after the burst of its real estate bubble and the economy became less dynamic and more debt-ridden.

I am convinced that we will have a medical solution to this epidemic, but the real economy and science do not move as fast as market participants would desire.

The excess of pessimism reflected these days can only be explained by the previous and imprudent excess of optimism that all of us, financial market agents, had at the end of 2019 and the beginning of 2020 when stock markets reached new all-time high levels despite the coronavirus headlines in China, poor earnings and weak macro news.

In the coming weeks, we have to start thinking about important side-effects such as increased default rates, risks in emerging countries exposed to large monetary and commercial imbalances and analyze them calmly.

Central banks and governments are not going to disguise the real economic impact of the epidemic, rather the opposite. Aggressive shutdown measures will worsen an already weak economic trend.

Many call it “uncertainty”, but we have a lot of certainties:

  • This epidemic’s impact will be longer than most would like

  • Central banks and governments will try to disguise the risks with more financial and monetary repression and drown the issue in a sea of ​​spending.

As in all episodes of panic, one of the greatest risks is governments that feel the need to do something quick and massive, probably contributing to that same panic that they call to mitigate. Taking unnecessary interventionist measures, closing the economy and disguising the risk with bricks and mortar may be even worse as a solution than the problem itself.

I trust the scientific community and global collaboration networks but don’t forget this: The coronavirus card will be used as an excuse to cut growth and employment estimates, blame an outside enemy, and present the government as the solution by throwing billions into more debt-fueled spending.


Tyler Durden

Sun, 03/01/2020 – 16:45

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US Carrier Strike Group Enters Mediterranean As Syria & Turkey Move To State Of War

US Carrier Strike Group Enters Mediterranean As Syria & Turkey Move To State Of War

Erdogan is urging US and NATO help to halt the Syrian-Russian offensive in Idlib, and elsewhere Libya is also turning into a full-blown major conflict involving external powers, notably also Turkey which is providing military support to Tripoli against Gen. Haftar’s offensive. Turkey and Syria are currently downing each other’s aircraft over Idlib province in a major escalation.

And now the Marine Traffic maritime information portal has identified along with other international reports that the USS Dwight D. Eisenhower (or “Ike”) crossed through the Strait of Gibraltar and entered the Mediterranean Sea late Friday into Saturday, accompanied by multiple support ships.

So far the White House has remained cool toward pledging military support to Turkey, however, if the carrier strike group eventually moves closer to the Syrian coast this week, it could be a worrisome sign of Washington’s intent to once again get involved militarily against Russia and the Syrian Army.

Social media image purportedly showing the USS Dwight D. Eisenhower entering the Mediterranean via the Strait of Gibraltar this weekend.

This also as Russia’s Interfax news agency reported additional Russian warships currently en route to the eastern Mediterranean, including the frigate “Admiral Makarov” and “Admiral Grigorovich” which have consistently participated in operations off the Syrian coast.

The US carrier group’s movements are ostensibly in support of a large US-European military exercise, being described as the first of its kind since the Cold War.

The strike group’s main role thus far was to clear a path through the “contested” Atlantic for a group of cargo ships en route to Europe.

Business Insider described the joint naval build-up as follows:

The Defender-Europe 2020 exercise will be the largest deployment of US-based forces to Europe in 25 years, with some 20,000 soldiers deploying from the US to join another 17,000 troops from 17 other countries.

The exercise will take place in April and May, and to get some of those soldiers and their gear to Europe, the US Military Sealift Command cargo ship USNS Benavidez, US-flagged merchant vehicle carriers MV Resolve and MV Patriot, are already sailing across the Atlantic, escorted by guided-missile cruiser USS Vella Gulf.

However, analysts are interpreting its quick entrance into Mediterranean waters after its Atlantic mission as likely in response to escalating events over Idlib.

Crucially there’s also an emerging refugee crisis as Erdogan has announced Turkey has “opened the gates” on Syrian refugees fleeing Idlib and wishing to make it to Europe. 

Last week the US Navy issued a press statement about Ike’s movements and operations, noting the strike group was “conducting operations in the US 6th Fleet to support maritime security operations in international waters, alongside our allies and partners.”

On Sunday US European Command reiterated its ongoing European operations in a new statement. Vice Admiral Lisa Franchetti, commander of the Sixth Fleet, earlier underscored that “The deployment will also serve to demonstrate commitment to our allies and partners in Europe and Africa.”

But it remains unclear the extent to which Washington is willing to go to bat for its “partner” and NATO ally Turkey amid Erdogan’s adventurism in northwest Syria.


Tyler Durden

Sun, 03/01/2020 – 16:25

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