Facebook Civil Rights Audit Signals Bad News for Free Speech

faphotos389545

Facebook auditors find the company falling short on “civil rights.” A report commissioned by the company and made public Wednesday morning says Facebook has been “too reactive and piecemeal” in its “approach to civil rights.”

The report, two years in the making, might come as good news to those worried about Facebook’s handling of hateful, dishonest, or otherwise objectionable content. But it’s unlikely to mean good things for folks who value open expression, want to see fewer arbitrary crackdowns on political content, and worry about how more aggressive social media moderation might be weaponized.

“The report faulted Facebook for … inadequately policing political speech,” notes the Wall Street Journal.

As always, advocates for greater policing of political speech invoke white nationalists and other widely reviled groups to call for Facebook to take more action. But it’s not just hate groups that will suffer from speech crackdowns. Small communities fighting the good fightsor anyone with views deemed outside the majority, reallyalways get hit hard by these sorts of demands, too.

The report also runs into dangerous territory in urging Facebook to get more directly involved in partisan politics and to devote itself to vague, highly discretionary, feel-good goals like decreasing polarization.

It “calls out the company’s choice not to take action against posts by President [Donald] Trump that allegedly threatened violence or were meant to suppress voting,” the Journal reports:

[Facebook CEO] Mr. [Mark] Zuckerberg had said he didn’t think private companies should regulate political speech unless it was likely to undermine democratic participation or produce real-world violence.

“The Auditors vigorously made known our disagreement, as we believed that these posts clearly violated Facebook’s policies,” the report said. More broadly, the auditors said Facebook “has failed to grasp the urgency” of the threat that voter suppression efforts on its platform pose as the 2020 election approaches.

The report also said that Facebook had been too quick to dismiss reporting by The Wall Street Journal in a May article that found the company had watered down or killed internal efforts to study and address ways in which its products encouraged divisiveness and polarization.

“The Auditors do not believe that Facebook is sufficiently attuned to the depth of concern on the issue of polarization and the way that the algorithms used by Facebook inadvertently fuel extreme and polarizing content,” the report said.

Professional activists are already using the report to pressure Facebook to make their preferred changes. For instance, Farhana Khera, the executive director of Muslim Advocates, said in a statement that the “audit is illuminating but it is ultimately meaningless if Facebook does not agree to take dramatic and substantial steps.”


FREE MINDS

Controversy around free speech letter proves its point. If anything, a letter in Harper’s magazine promoting “open debate and toleration of differences” might deserve some gentle mocking over certain signatories who rarely stand for such values. Or perhaps it should just inspire sad awe over such basic liberal values being controversial in the first place. Instead, it’s proven just how complicated and unreasonable the dynamics of the current discourse are.

The letterwhich was signed by a host of powerful writers and advocates for free speech, including Deirdre McCloskey, Nadine Strossen, and a number of other people who have written for Reason—has sparked scandal and indignation not because of its core message but because a few of the letter signers (particularly Harry Potter author J.K. Rowling) are on the wrong side of progressives’ current cultural doctrine. Apparently, a lot of folks have decided that putting one’s name on a letter now aligns signatories not only with the letter’s message but with the opinions and past statements of every other signer of the letter. Sigh.


FREE MARKETS

New reports from the Organization for Economic Cooperation and Development (OECD) and the European Commission provide an even more grim economic forecast for Europe and the world. “The O.E.C.D. looked at jobs; the commission measured economic contraction … But both reached similarly brutal conclusions,” write Liz Alderman and Matina Stevis-Gridneff at The New York Times. More:

The number of job losses has been 10 times greater than the hit inflicted during the first months of the 2008 global financial crisis, O.E.C.D. economists said, making it very unlikely that employment in Europe, the United States and other developed economies will return to pre-pandemic levels before 2022 at the earliest. […]

Joblessness in the 37 countries that are O.E.C.D. members is expected to reach 9.7 percent at the end of the year from 5.3 percent in 2019, and could march to more than 12 percent should a second wave of virus force countries to shut down parts of their economies again.

Meanwhile:

The European Commission, the bloc’s administrative branch, said the E.U. economy would shrink 8.3 percent this year, a downgrade from predictions released in May that saw a 7.4 percent contraction. The subgroup of 19 nations that share the euro currency will have it even worse, shrinking 8.7 percent this year. […]

The data is especially grim for nations in the bloc’s southern rim, some of which were particularly pummeled by the virus. Italy, the E.U.’s third-largest economy, is set to shrink 11.2 percent. Spain, the fourth largest, is facing a 10.9 percent recession. France, second after Germany, will shrink 10.6 percent.


QUICK HITS

  • Bloomberg questions the wisdom of Attorney General William Barr’s antitrust crusade against Google. The pursuit is “likely to amount to a political attack with a belabored legal rationale attached,” says the editorial board.
  • Some Republican senatorsincluding Mitt Romney and Chuck Grassleyare already pulling out of the Republican National Convention in Florida, planned for August.
  • Huh.

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Facebook Civil Rights Audit Signals Bad News for Free Speech

faphotos389545

Facebook auditors find the company falling short on “civil rights.” A report commissioned by the company and made public Wednesday morning says Facebook has been “too reactive and piecemeal” in its “approach to civil rights.”

The report, two years in the making, might come as good news to those worried about Facebook’s handling of hateful, dishonest, or otherwise objectionable content. But it’s unlikely to mean good things for folks who value open expression, want to see fewer arbitrary crackdowns on political content, and worry about how more aggressive social media moderation might be weaponized.

“The report faulted Facebook for … inadequately policing political speech,” notes the Wall Street Journal.

As always, advocates for greater policing of political speech invoke white nationalists and other widely reviled groups to call for Facebook to take more action. But it’s not just hate groups that will suffer from speech crackdowns. Small communities fighting the good fightsor anyone with views deemed outside the majority, reallyalways get hit hard by these sorts of demands, too.

The report also runs into dangerous territory in urging Facebook to get more directly involved in partisan politics and to devote itself to vague, highly discretionary, feel-good goals like decreasing polarization.

It “calls out the company’s choice not to take action against posts by President [Donald] Trump that allegedly threatened violence or were meant to suppress voting,” the Journal reports:

[Facebook CEO] Mr. [Mark] Zuckerberg had said he didn’t think private companies should regulate political speech unless it was likely to undermine democratic participation or produce real-world violence.

“The Auditors vigorously made known our disagreement, as we believed that these posts clearly violated Facebook’s policies,” the report said. More broadly, the auditors said Facebook “has failed to grasp the urgency” of the threat that voter suppression efforts on its platform pose as the 2020 election approaches.

The report also said that Facebook had been too quick to dismiss reporting by The Wall Street Journal in a May article that found the company had watered down or killed internal efforts to study and address ways in which its products encouraged divisiveness and polarization.

“The Auditors do not believe that Facebook is sufficiently attuned to the depth of concern on the issue of polarization and the way that the algorithms used by Facebook inadvertently fuel extreme and polarizing content,” the report said.

Professional activists are already using the report to pressure Facebook to make their preferred changes. For instance, Farhana Khera, the executive director of Muslim Advocates, said in a statement that the “audit is illuminating but it is ultimately meaningless if Facebook does not agree to take dramatic and substantial steps.”


FREE MINDS

Controversy around free speech letter proves its point. If anything, a letter in Harper’s magazine promoting “open debate and toleration of differences” might deserve some gentle mocking over certain signatories who rarely stand for such values. Or perhaps it should just inspire sad awe over such basic liberal values being controversial in the first place. Instead, it’s proven just how complicated and unreasonable the dynamics of the current discourse are.

The letterwhich was signed by a host of powerful writers and advocates for free speech, including Deirdre McCloskey, Nadine Strossen, and a number of other people who have written for Reason—has sparked scandal and indignation not because of its core message but because a few of the letter signers (particularly Harry Potter author J.K. Rowling) are on the wrong side of progressives’ current cultural doctrine. Apparently, a lot of folks have decided that putting one’s name on a letter now aligns signatories not only with the letter’s message but with the opinions and past statements of every other signer of the letter. Sigh.


FREE MARKETS

New reports from the Organization for Economic Cooperation and Development (OECD) and the European Commission provide an even more grim economic forecast for Europe and the world. “The O.E.C.D. looked at jobs; the commission measured economic contraction … But both reached similarly brutal conclusions,” write Liz Alderman and Matina Stevis-Gridneff at The New York Times. More:

The number of job losses has been 10 times greater than the hit inflicted during the first months of the 2008 global financial crisis, O.E.C.D. economists said, making it very unlikely that employment in Europe, the United States and other developed economies will return to pre-pandemic levels before 2022 at the earliest. […]

Joblessness in the 37 countries that are O.E.C.D. members is expected to reach 9.7 percent at the end of the year from 5.3 percent in 2019, and could march to more than 12 percent should a second wave of virus force countries to shut down parts of their economies again.

Meanwhile:

The European Commission, the bloc’s administrative branch, said the E.U. economy would shrink 8.3 percent this year, a downgrade from predictions released in May that saw a 7.4 percent contraction. The subgroup of 19 nations that share the euro currency will have it even worse, shrinking 8.7 percent this year. […]

The data is especially grim for nations in the bloc’s southern rim, some of which were particularly pummeled by the virus. Italy, the E.U.’s third-largest economy, is set to shrink 11.2 percent. Spain, the fourth largest, is facing a 10.9 percent recession. France, second after Germany, will shrink 10.6 percent.


QUICK HITS

  • Bloomberg questions the wisdom of Attorney General William Barr’s antitrust crusade against Google. The pursuit is “likely to amount to a political attack with a belabored legal rationale attached,” says the editorial board.
  • Some Republican senatorsincluding Mitt Romney and Chuck Grassleyare already pulling out of the Republican National Convention in Florida, planned for August.
  • Huh.

from Latest – Reason.com https://ift.tt/320xJRx
via IFTTT

Sino-US Tit-For-Tat Visa Restriction Spat Erupts Over Tibet

Sino-US Tit-For-Tat Visa Restriction Spat Erupts Over Tibet

Tyler Durden

Wed, 07/08/2020 – 09:17

The Trump administration said on Tuesday it would impose travel bans on Chinese Communist Party (CCP) officials that are restricting foreigners’ access to Tibet. Then, in a classic tit-for-tat, China responded Wednesday with visa restrictions on Americans, reported Reuters

On Tuesday, US Secretary of State Mike Pompeo slapped an unspecified number of CCP officials with visa restrictions, limiting their mobility within the US. 

Pompeo condemned the CCP for blocking foreign diplomats, tourists, and journalists to Tibet.

“The United States seeks fair, transparent, and reciprocal treatment from the People’s Republic of China for our citizens,” Pompeo said. “We have taken several steps to further this goal. Unfortunately, Beijing has continued systematically to obstruct travel to the Tibetan Autonomous Region (TAR) and other Tibetan areas by U.S. diplomats and other officials, journalists, and tourists, while PRC officials and other citizens enjoy far greater access to the United States.”

On Wednesday, in apparent retaliation, China imposed visa restrictions on Americans who have had ‘extreme’ behavior over Tibet. 

Chinese Foreign Ministry spokesman Zhao Lijian told reporters in Beijing: The US “should stop going further down the wrong path to avoid further harming China-U.S. relations and communication and cooperation between the two countries.” 

Zhao said China supports travel and tourism to the Himalayan region, it has adopted “certain management and protection measures for foreigners visiting Tibet in accordance with law and regulations” due to its “special geographical and climatic conditions.” 

Washington has tried for years to ease restrictions on foreigners’ travel to Tibet. Human rights activists claim Beijing has suppressed local culture for decades. 

US-China relations have plunged to their lowest point in decades since the trade war began (1Q18), coronavirus pandemic, Hong Kong debacle, Taiwan, and hostilities in the South China Sea.   

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

Tesla’s Moonshot, How High Can It Go?

Tesla’s Moonshot, How High Can It Go?

Tyler Durden

Wed, 07/08/2020 – 08:56

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

Since the beginning of 2020, the aggregate market cap of the twelve largest automakers is up 9.30% to $803 billion. Quite an increase considering the COVID pandemic is causing a global recession and weak auto sales. 

The obvious question is, why is the auto sector doing so well amid such uncertainty?

It’s not!

The optics are “driven” by one stock, Tesla (TSLA). TSLA’s stock price continues its moonshot while other automakers languish. The gross divergence of fortunes in the industry is worth exploring. 

As has always been the mandate of our articles, we look at data on auto sales, industry trends, and demographics to help you come to your conclusion about Tesla and the auto industry. This, in turn, allows you to assess Tesla better independently.  

Auto Industry

According to the International Organization of Motor Vehicle Manufacturers, global vehicle sales have grown annually at 0.37% over the last five years. Sales over the previous 15 years are quite a bit stronger at 2.20%.

The graph below highlights total global auto sales broken down by passenger and commercial vehicles.

The following table shows growth rates and the percentage of global sales for the four largest auto markets.

Bottom line: auto sales over the last five years are tepid at best.

To put sales into a different context, it’s worth comparing them to economic activity. Over the last 15 years and five years, global GDP has grown annually 4.17% and 3.14%, respectively. Auto sales are not keeping up with global growth.

China has increased car ownership significantly and is the bright light for the industry. However, as shown below, sales of vehicles in China are leveling off. With China’s economic growth slowing considerably, and auto ownership more saturated, China’s appetite for autos will remain weak.

Without an obvious geographic region to replace China, the industry must rely on changes in consumer behaviors and preferences.

Demographics

Baby Boomers are retiring in droves and need fewer automobiles. Can the newest drivers, Millennials and Generation Z pick up the slack?

The Atlantic wrote an article in March 2012 entitled Why Don’t Young Americans Buy Cars? While the article is dated is still rings true. Here are some key quotes about the Millennial generation’s desire to buy cars: 

Kids these days. They don’t get married. They don’t buy homes. And, much to the dismay of the world’s auto makers, they apparently don’t feel a deep and abiding urge to own a car. 

The Times notes that less than half of potential drivers age 19 or younger had a license in 2008, down from nearly two-thirds in 1998. The fraction of 20-to-24-year-olds with a license has also dropped. And according to CNW research, adults between the ages of 21 and 34 buy just 27 percent of all new vehicles sold in America, a far cry from the peak of 38 percent in 1985. 

At a major conference last year, Toyota USA President Jim Lentz offered up a fairly doleful summary of the industry’s challenge. 

“We have to face the growing reality that today young people don’t seem to be as interested in cars as previous generations,” Lentz said. “Many young people care more about buying the latest smart phone or gaming console than getting their driver’s license.”

The next generation, Gen Z, currently aged 5-25 are starting to buy cars. As such, it is early to define Generation Z’s car buying preferences. However, they are being shown to be frugal with big-ticket items. Data shows that their buying habits are similar to the millennial generation. This seems to make sense given their existing student debt obligations and relatively low wages.

For an in-depth discussion of generational tendencies we highly recommend Generations and The Fourth Turning by Howe and Strauss (LINK).

Ridesharing

As if generational shifts are not enough trouble for the industry, ridesharing companies may be worse. Uber and Lyft make it easy to avoid car ownership.

What taxis did for car ownership in New York City, ride-sharing services are doing in many urban and suburban regions. (In Manhattan, less than a quarter of households own a car. That compares to an average of 1.88 vehicles per U.S. household.)

The cost/benefit analysis of owning a car has changed, and it’s not to the benefit of the auto manufacturers. Autonomous ridesharing services in the future will only make this problem more acute.

Why Are Valuations Rising?

The recent pace of car sales is weak and below economic trends. Global economics argues there is no clear replacement for China’s growth of years past. Demographics do not favor the industry. So, why is the aggregate value of auto companies rising during a recession?

As shown below, Tesla’s market cap has risen 244% this year. The market cap of the industry, excluding Tesla, is down 17%.

The table leads to a straightforward question. Is Tesla becoming an automotive behemoth and leaving its competition in the dust?

The graph below comparing sales and market cap puts context around that question.

As shown, Tesla’s sales are a fraction of every other major manufacturer. By default, investors must think their future sales trajectory is enormous. Meanwhile, deliveries have been flat since the third quarter of 2018.

Courtesy @teslacharts

If Tesla shareholders are correct, Tesla must garner at least 25-30% of the market share.

Can TSLA justify the combined market cap of GM, Fiat/Chrysler, Honda, BMW, Nissan, Hyundai, Mercedes, and Ford? Before you answer, understand they currently make only about 2% of the cars as those other manufacturers.

Tesla’s Advantage… For Now

Tesla certainly has a valuable first starter advantage in the electric vehicle (EV) category. Notably, however, they do not have patents. 

Its advantage exists because other manufacturers have been slow to release EV cars. The technology is easy to replicate.  Whether they are waiting for costs to decline, longer battery life, persistently higher gas prices, or more robust demand, we don’t know. Nonetheless, the wait will not be much longer.  

Most auto manufacturers have lines of EVs due out this year and next. Many will come at prices cheaper than those Tesla offers. Unlike Tesla, they offer their clients service shops and trade ins. Tesla’s first mover advantage is slipping away quickly.

For Tesla’s market cap to be correct, the following must be true:

  • They must continue to dominate the EV space

  • EVs must gain significantly in popularity

  • Other manufacturers must be incapable of producing competitive EVs

That a tall order!

Summary – Momentum Rules

TSLA’s stock may run higher. We believe its stock price is in the grips of speculative fervor and passive investing momentum. These conditions may last longer.

We do not know when Tesla’s moonshot will end. However, as we learned in 2001, the end is unusually swift and vicious. Afterward, it can take years and even decades before an investor breaks even. Just consider it took Microsoft 15 years to regain the record highs of 2000. At that time, Microsoft had strong fundamentals and a dominant market position.  

Tesla?

Not so much.

via ZeroHedge News https://ift.tt/3gAsImM Tyler Durden

Broke Brothers – Oldest US Men’s Retailer Files Chapter 11 Bankruptcy

Broke Brothers – Oldest US Men’s Retailer Files Chapter 11 Bankruptcy

Tyler Durden

Wed, 07/08/2020 – 08:36

The forced work-from-home lockdowns have created an environment where the average working man (or woman or other) in America is now only visible from the shoulder up on his Zoom calls.

This new COVID normal of (in)formal meetings seems to have been the last nail in the coffin of America’s most iconic menswear retailers as Brooks Brothers has just filed for bankruptcy (just weeks after Men’s Wearhouse owner Tailored Brands considered the same).

A month ago we noted that  the 202 year-old clothing retailer Brooks Brothers was in talks with banks about raising financing for a potential Chapter 11 bankruptcy filing amid the coronavirus pandemic, according to a report by CNBC.

Brooks Brothers Chief Executive Claudio Del Vecchio, told The New York Times at the time that while he was not “eager” to consider a Chapter 11 bankruptcy filing, he would not rule it out

It appears, despite The Fed’s massive credit easing, that no one would rescue the oldest men’s retailer and the closely-held company, which is owned by Italian businessman Claudio Del Vecchio, filed for bankruptcy protection in Wilmington, Del.

Brooks Brothers was acquired by the British retail chain Marks and Spencer Group PLC in 1988. It was sold in 2001 to Retail Brand Alliance Inc., which was controlled by Mr. Del Vecchio, whose father founded Luxottica Group SpA, the Italian eyeglass maker. It changed its name to Brooks Brothers Group Inc. in 2011.

Brooks Brothers has more than 250 stores in North America and 500 worldwide.

As Fox News notes, Brooks Brothers was facing challenges before the health crisis forced nonessential retailers to temporarily close their stores. U.S. corporations had turned increasingly casual, and fewer men were buying suits. Once people started sheltering at home, they turned to even more casual attire such as sweatpants.

The filing follows other retailers who sell men’s workwear (JCPenneyNeiman Marcus, and J.Crew) who have all filed for bankruptcy during the pandemic.

Brooks Brothers is expected to attract buyers, other people familiar with the situation said. Authentic Brands Group LLC, a licensing company that owns the Barneys New York and Sports Illustrated names, is a potential suitor, they said.

*  *  *

Full Petition below:

via ZeroHedge News https://ift.tt/38AO4xw Tyler Durden

Blain: “Pragmatism Is Out The Window, The Days Of Madness Are Upon Us”

Blain: “Pragmatism Is Out The Window, The Days Of Madness Are Upon Us”

Tyler Durden

Wed, 07/08/2020 – 08:15

Authored by Bill Blain via MorningPorridge.com,

“The hurrier I go, the behinder I get..”

I used to think the “believe 6 impossible things before breakfast” line from Alice Through the Looking Glass was one of the funniest things ever written. Until this year.. I’ve come to understand it’s a statement of simple fact for this corona-addled age. I really can’t believe just how confused, conflicted, unfocused and distracted the various threads of society are becoming.

While the virus is still lashing its way around the globe – hitting the Southern Hemisphere in winter – it does feels like its passing. Look for what happens in terms of new cases and outbreaks in Oz over the coming weeks for potential clues about a second wave to hit the North come autumn.

The Pandemic has become the defining event of the decade. As it eases, there are a whole series of unexpected releases occurring. Not just in terms of surprisingly strong snapback economic numbers due to 3 months of repressed consumer spending, but also in terms of bizarre behaviours as tension eases. As the global economy tries to rebalance after the shock, it feels we’re being deluged in a sea of delusional noise and madness.. 

Let me try to explain… without using the word “unprecedented”. 

Stop for one moment to take a dispassionate look at what has been achieved through the last 4 months: The medical services coped – rather well. The scientists are innovating treatments, therapies and, who knows, maybe we will get an effective vaccine. Millions of key workers – the delivery men, the rubbish collectors, the shop workers and all the rest – combined magnificently to keep society functioning. The worst effects of the Virus shut-down on economies have been effectively mitigated by swift government bailouts, furloughs and support – avoiding immediate mass unemployment. 

Of course, everyone will find something to complain about. There have been mistakes and failures. Here in the UK we delight in complaining about how badly the government has done and blaming everything on Boris. But, it’s been quite impressive how well the shocks have been absorbed. There will be consequences. The global economy has been bruised and battered. The cost has been enormous – and we’re not entirely sure how it’s going to be paid for. 

Yet, as we come out of the crisis… take a look at the headlines. As the tension is released, pragmatism is out the window and the days of madness are upon us. It feels a little crazy – but I suspect we’re now in for a period of calculated noise. 

Take, for instance, the Scottish Government declaring it’s going to set its own food and environmental standards in direct defiance of London. Its Nicola Sturgeon at her best/worst. She’s adept at playing any card to demonstrate to the Scots how it’s all England’s fault. Nicola is a feisty wee thing – and I have a reluctant admiration for her. 

She’s had a great virus; looking calm, measured, sensible, ordered and pragmatic – everything the ill and shambolic Boris has not. As the Shaggy One stumbles.. she pounces by throwing out another pointless challenge. It sounds imminently sensible and reasonable – protecting the Scots from the evils of chlorinated chicken. 

One of my kids asked why can’t we have her as Prime Minister? It’s an intriguing question – would she not have made a great leader of the UK? I sadly suspect her fate is to become leader of a very poor and divided independent Scotland at the cost of fracturing the UK.  

Nicola’s success in Scotland should be a serious concern for markets. There is already a massive discount on UK Inc over Brexit/deal concerns. The threat of another destabilising Indy referendum vote – which she could well win – could be another nail in our economic coffin. Or would it? Sorry to be blunt… but England without Scotland? Such a bad thing? 

Scotland without England is definitely going to prove a loser North of the Border though! If the SNP really want to leave the UK, the way to win it… is give the English the vote! 

And then we have the Madness in Frankfurt. 

Christine Lagarde in on the front of the FT telling us she’s going to focus the ECB towards buying Green Bonds because she’s been staring into the eyes of her children and doesn’t want them to blame her.. for whatever. 

I absolutely believe we need to address climate change – but I was rather hoping we could get out this immediate crisis first? Let’s get the economy up and running, make sure everyone has jobs and a livelihood, then get on with the business of saving the planet. And I was rather hoping my elected politicians would be leading the charge – rather that a central banker…. But perhaps they do things differently in Europe these days… 

Of course, what Madame Lagarde is doing is trying to divert attention from the EU’s farcical Euro 750 bln bailout fund which is still so far from agreement it probably won’t be executable for months. Which is too late for Italy. By throwing a green bond programme into the equation to distract us, she’s not talking about the real issues – which threaten a new Euro crisis.

And of course, there is still the issue of what is a green bond? The investment banks are having a wonderful time announcing their new Green Bond departments and appointing bankers to highly paid positions as Green Bond champions, but as far as I can make out about the only distinguishing feature of most Green bonds is that the prospectus says they are a green bond on the front page.. 

Green bonds work because banks have persuaded investment management funds they will look good from an ESG (Environment, Social and Governance) perspective if they buy Green Bonds. Everyone gets to virtue signal how green they are.. 

And naturally everyone jumps on the bandwagon… Great comment yesterday from 24 Asset Management wondering how a bank can issue a Green AT1 deal – as Santander has just done. Like them I am struggling to understand how any bank can segregate the capital it allocates to projects it decides are green, as against those which are black. And… it also looks like the bank will be using the proceeds of this new AT1 deal to payback a previous not-so-green AT1 deal. 

Meanwhile, there is also genuine madness out there.. Folk are struggling. Mental health, anger and despair are going to come to the forefront in coming months. 

Like the woman who jumps into a bramble patch to maintain social distancing – screaming as we pass by about keeping at least a kilometre from her as she’s shielding. Or the corona-nazis tearing the masks off pensioners while yelling about how the virus is fake news spread by agents of a Zionist World-Government conspiracy. 

And there is the really sad stuff, like the child who is scared to go into the back garden because she’s picked up on the threat from watching CeeBeebies. 

I suspect the next few months are going to be… noisy.

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

Futures Drift As Gold Soars

Futures Drift As Gold Soars

Tyler Durden

Wed, 07/08/2020 – 08:00

S&P futures traded in a narrow range even as European stocks slid amid new tensions between Washington and Beijing, as well as worries that an alarming rise in coronavirus caseloads across the country pose a risk to the recovery in business activity and will hit consumer spending. The dollar was flat as gold continued its surge, rising  above $1,800 and rapidly approaching its Sept 2011 all time high.

Global markets have been struggling for traction ever since the Fed’s balance sheet started shrinking modestly in mid-June…

… after a sharp rally last week amid concern it’ll take a long time for the broader economy to recover from the pandemic. Many Americans are planning to spend less on things like movies, event tickets or at bars, even as states allow businesses to start re-opening, according to Bloomberg.

On Tuesday the Nasdaq notched yet another intraday record high but all the three main stock indexes finished lower as investors booked profits following a strong run after a batch of upbeat data strengthened the case for a bounce back in economy.

European shares gave up gains early in the trading session after Hungarian Prime Minister Viktor Orban said regional leaders will probably fail to agree on a massive spending plan aimed at reviving their economies. Negotiations at a summit next week will be “very tough” and will likely need to continue throughout the summer, he said.

“It’s not unusual for stocks to take a breather at this point,” Susan Schmidt, a portfolio manager at Aviva Investors, said on Bloomberg TV. “We could see ourselves in a bit of a trading range in the next couple of weeks,” before U.S. earnings season ramps up.

Asian stocks were little changed, with communications rising and industrials falling, after falling in the last session. Most markets in the region were up, with Jakarta Composite gaining 1.8% and the Shanghai Composite rising 1.7%, its seventh daily rise in a row to the highest level since the 2018 start of the U.S.-China trade war, with Nanjing Iron & Steel and Jilin Yatai posting the biggest advances.

Trading volume for MSCI Asia Pacific Index members was 69% above the monthly average for this time of the day. The Topix declined 0.9%, with Teac and Airtech Japan falling the most. Australia’s S&P/ASX 200 dropped 1.5%. Emerging-market equities resumed gains, heading for the highest level since February.

China stocks rose even as HSBC Holdings slumped after a report that some of Donald Trump’s advisers proposed a move to destabilize Hong Kong’s currency peg to the dollar as a way of punishing China.

Meanwhile, China on Wednesday said it will restrict visas for U.S. officials for what it called “egregious” behavior over Tibet,  reciprocating a move announced by Secretary of State Michael Pompeo a day earlier.

Eastern European currencies weakened, while gains for the Mexican peso and South African rand limited losses on the MSCI Inc.’s gauge for emerging-market exchange rates. Stock market gains in China have even pushed the country’s financial publications to caution investors about overheating. But as The Trump administration is said to be considering options to punish China for recent moves to chip away at Hong Kong’s political freedoms, markets “appear to be learning to look past the noise,” according to Credit Agricole’s Eddie Cheung. “While valuations would suggest that there is ground for China’s markets to continue to rally, it remains to be seen whether that alone can continue to be a driving force regionally, especially with Western markets trading more tentatively,” the Hong Kong-based strategist said in note.

In rates, Treasuries were slightly weaker across the curve on low volumes, with long-end yields higher by 1bp and front end little changed. Price action creates small concession in 7- to 10-year sector for $29b 10-year note auction at 1pm ET that may draw a record low yield. Treasury 10-year yields hover around 0.65% ahead of auction, steepening 2s10s by 0.8bp; bunds outperform by 3.5bp vs. Treasuries, gilts by 2.5bp. Futures volumes as of 7am ET were 70% to 90% of 20-day average levels across the curve, Bloomberg reported. German Bunds bull-flattened, outperforming Treasuries.

In FX, the dollar erased a decline as investors measured signs of renewed political tension between the U.S. and China. Hong Kong’s Dollar remained at the strong end of its established trading range after a report that advisers to President Trump suggested undermining the currency’s peg to the greenback after Beijing’s moves to curb the island’s political freedoms. Australia’s dollar weakened against all of its Group-of-10 peers after rising infection rates in the nation’s second-most populous state and S&P Global Ratings warned that the return to lockdown in Victoria would put pressure on its economic recovery. “From an economic point of view, this is potentially disastrous,” said Michael McCarthy, chief market strategist with CMC Markets Asia Pacific. “Forex traders are certainly expressing their growth outlook worries by selling the Aussie, and we’re likely to see support for the havens like the dollar, yen and Swiss franc.”

In commodities, the biggest mover was once again gold, which continues its tremendous ascent, topping $1,800 an ounce, with silver needing to catch up.

Upside in WTI and Brent front month contracts were hampered by a surprise build in private inventories (crude stocks +2mln vs. Exp. -3.1mln), and the relevant headlines overnight were also on the bearish side with ADNOC set to boost oil exports next month and Total’s Port Arthur refinery said to be running at 60% capacity due to subdued demand.

Looking at the day ahead now, we have central bank speakers including ECB Vice President de Guindos and the Fed’s Bostic, while data releases from the US include consumer credit for May and the weekly MBA mortgage applications.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,143.25
  • STOXX Europe 600 down 0.3% to 367.88
  • MXAP up 0.07% to 164.44
  • MXAPJ up 0.5% to 544.63
  • Nikkei down 0.8% to 22,438.65
  • Topix down 0.9% to 1,557.23
  • Hang Seng Index up 0.6% to 26,129.18
  • Shanghai Composite up 1.7% to 3,403.44
  • Sensex up 0.04% to 36,687.46
  • Australia S&P/ASX 200 down 1.5% to 5,920.30
  • Kospi down 0.2% to 2,158.88
  • German 10Y yield fell 1.6 bps to -0.445%
  • Euro up 0.1% to $1.1286
  • Italian 10Y yield fell 3.6 bps to 1.077%
  • Spanish 10Y yield fell 1.0 bps to 0.415%
  • Brent futures down 0.2% to $43/bbl
  • Gold spot up 0.2% to $1,797.93
  • U.S. Dollar Index up 0.1% to 97

Top Overnight News

  • Some top advisers to President Donald Trump want the U.S. to undermine the Hong Kong dollar’s peg to the U.S. dollar as the administration considers options to punish China for the recent imposition of a security law in the former British colony.
  • The threat of U.S. action to undermine Hong Kong’s longstanding U.S. dollar peg is highly unlikely to become reality given the practical difficulties of pursing such a path and the damage it would do to U.S. interests, economists say.
  • HSBC Holdings Plc, which draws more than two-thirds of its pretax income from Hong Kong, slumped as advisers to U.S. President Donald Trump were also said to be discussing measures against banks there.
  • Boris Johnson warned Germany’s Angela Merkel that the U.K. is ready to do without a trade deal if the European Union wasn’t prepared to compromise.
  • Japan’s investors are flocking to Australia’s sovereign bond market, lured by cheaper currency-hedging costs and some of the highest yields among developed nations.

Asian equity markets were mixed as attempts to shrug off the weak handover from global peers were somewhat hindered by the record infection rates stateside and a slew of punchy US-China related headlines. ASX 200 (-1.5%) was subdued as Australia’s 2nd largest city heads into a 6-week lockdown and with the declines in the index led by notable losses in consumer stocks and financials, while Nikkei 225 (-0.8%) was pressured by the ongoing virus flare up in Tokyo where more than 100 new cases were reported for a 6th consecutive day, but with downside stemmed after data showed the largest increase in bank lending on record. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were supported as the latest coronavirus updates from Beijing showed zero new cases for a 2nd consecutive day although caution was also observed on the inauguration day of China’s national security office in Hong Kong and as reports continued to suggest increasing tensions between the world’s largest economies. This includes confirmation by US President Trump that he is looking at banning TikTok in the US and his administration also warned the Railroad Retirement Fund against Chinese investments due to risks of additional sanctions, while the White House is considering executive actions which involve targeting Chinese businesses operating in the US and aides were also said to propose undermining the USD/HKD peg although this was not put forward to President Trump and certain officials have opposed the idea. Finally, 10yr JGBs were initially copy as they conformed to the unsettled overnight tone across asset classes, but eventually edged only marginal gains amid a subdued risk tone in Tokyo and the BoJ’s presence in the market for JPY 870bln of government bonds with up to 5yr maturities.

Top Asian News

  • AirAsia Is Said to Weigh Raising $234 Million Via Rights Issue
  • Itochu Makes $5.4 Billion Bid for Rest of Japan’s FamilyMart
  • Hong Kong’s Resilient Markets Just Knocked Down Another Big Test
  • Singapore in Survival Mode Looks to Reinvent Itself. Again

European stock markets initially attempted to nurse losses seen at the open before losing steam as the mid-week session goes underway [Euro Stoxx 50 -0.9%], following on from a mixed APAC lead overnight. Fresh fundamental newsflow has been light for the session, with the calendar also sparse, albeit key risk events, aside from COVID-19 US-China headlines, could include UK Chancellor Sunak’s fiscal unveiling alongside the European Commission’s potential compromise recovery fund proposal. Sectors are all in negative territory with a clear defensive bias, with the detailed breakdown also painting a similar picture. Financial names underperform, likely on the back of HSBC (-4.0%) amid reports President Trump’s aides were said to propose undermining the USD/HKD peg, although the idea had not been put forward to President Trump and certain officials opposed the idea. In terms of other individual movers, Nokia (-7.5%) shares extend on losses amid a negative broker move coupled with speculation that Verizon may be dropping the Co. as a 5G partner, Nokia stated that it continues working with Verizon amidst these reports. On the flip side, Deutsche Post (+0.8%) remains buoyed after reporting an improvement in Q2 prelim figures whilst noting FY22 EBIT in the least favourable case of EUR 4.7bln and the most favourable case in excess of EUR 5.3bln.

Top European News

  • Serbia’s Vucic Sees Rising Risk of Regional Conflict in Europe
  • Volkswagen Management Tumult Spills Over to Truck Subsidiary
  • Medtronic Is Said to Make Offer for Medical Device Maker Intersect
  • Analysts Applaud Deutsche Post Earnings, Dividend Proposal

In FX, the Dollar and its G10 currency counterparts are stuck in a rut after 2 volatile sessions, but ultimately no clear direction amidst fluctuating and flaky risk sentiment on coronavirus updates interspersed with economic data and surveys supporting the recovery from first wave pandemic lows. Major pairings are muted and the subdued state of affairs exemplified by the DXY showing little sign or inclination to stray too far either side of the 97.000 level that has been magnetic of late. Moreover, Wednesday’s agenda does not bode well in terms of market-moving potential, barring any surprises from UK Chancellor Sunak and/or an unscheduled event given a blank US agenda beyond weekly mortgage applications and then consumer credit.

  • CHF/EUR/CAD – All marginally firmer against the Greenback, but within relatively tight confines as noted above, as the Franc hovers just below 0.9400, Euro shy of 1.1300 where a hefty 1.9 bn option expiry resides and Loonie pivots 1.3600 ahead of Canadian housing starts and an update from Finance minister Morneau on the economy in context of measures taken to combat COVID-19.
  • JPY/XAU/NZD/GBP/AUD – The Yen remains tethered between 107.70-40 parameters with a light underlying bid that is also apparent in Gold as bullion continues its assault on Usd 1800/oz, while the Kiwi is still straddling 0.6550 and fractionally outpacing the Aussie around 1.0600 in cross terms due to the return to lockdown in Melbourne. As such, Aud/Usd is capped circa 0.6950 in similar vein to Cable on the 1.2550 axis in advance of the aforementioned Economic Update. Note, contacts are touting stops at 1.2530 that are currently being tested and could be filled in conjunction with the absorption of offers in Eur/Gbp close to 0.9000.
  • SCANDI/EM – Not much lasting reaction to weaker than forecast Norwegian GDP data hot on the heels of a drop in manufacturing output yesterday, with Eur/Nok flitting either side of 10.7000 and Eur/Sek likewise around 10.4300. However, more pronounced activity in the Hkd overnight following reports that the US may target the peg in response to China’s security legislation with the HKMA forced into concerted intervention.                

In commodities, a choppy session thus far for the crude complex, albeit prices remain somewhat flat and within tight ranges amid a lack of notable catalysts. Overnight, upside in WTI and Brent front month contracts were hampered by a surprise build in private inventories (crude stocks +2mln vs. Exp. -3.1mln), while the relevant headlines overnight were also on the bearish side with ADNOC set to boost oil exports next month and Total’s Port Arthur refinery said to be running at 60% capacity due to subdued demand. On the flip side, EIA lifted 2020 world oil demand growth forecast by 190k BPD (to 8.15mln BPD Y/Y fall) but cut 2021 world oil demand growth view by 190k BPD (to 6.99mln BPD Y/Y increase) – with participants awaiting the IEA report on Friday. Looking ahead, aside from COVID-19 headlines and sentiment-driven moves, the complex will likely eye the weekly DoE release for confirmation of the Private Inventory data, whilst State-side production will also be in focus as some believe output has bottomed. Elsewhere, spot gold has extended on gains but has decoupled from its safe-haven status, whilst Dollar dynamics also provided little influence on prices. The yellow metal has eclipsed the 1800/oz mark for the first time since 2012 before immediately running into selling pressure at the key figure. Copper meanwhile briefly topped USD 2.8/lb to levels last seen in January amid supply woes coupled with hopes of a rebounding Chinese economy.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -1.8%
  • 3pm: Consumer Credit, est. $15.0b deficit, prior $68.8b deficit

DB’s Jim Reid concludes the overnight wrap

Yesterday I boasted about nearly 5 year old Maisie winning a race at Sports Day. I’ve since got the video from the school and I must admit if I was another parent I would be questioning whether she false started. Put kindly she anticipated the “B” of the Bang a bit too perfectly. Still a victory is a victory. On that the latest in my 15 month journey to remodel my golf swing left me finishing 3rd last in the first cup competition at my club after lockdown on Sunday. It was my worst round since I was 11. You may say that at least I wasn’t last. However I should add that the two below me were octogenarians who were only too delighted to be out after isolating during lockdown. Meanwhile I’ve been practising hard most evenings where I can. I have a heart to heart planned with my golf coach tomorrow night to see if there is any light at the end of the tunnel. He says I’m on the verge of a major breakthrough. I feel I’m on the edge of a breakdown.

Markets broke down yesterday, albeit nowhere near as much as my golf swing. A drip-feed of negative stories on the economic outlook as well as covid headlines from all around the world dampened investor sentiment. By the end of the session, the S&P 500 had fallen -1.08%, and unable to reach a 6th successive move higher which would have been a first since April 2019. Over 85% of the index was lower on the day, with the worst performing industries being energy (-3.18%) and banks (-3.16%). Tech stocks outperformed slightly, with the NASDAQ down -0.86%. The Dow Jones was the worst performer, down -1.51% (Boeing -4.8% and Goldman Sachs -3.9%). Bourses also fell across Europe with the STOXX 600 (-0.61%) and DAX (-0.92%) lower. Just like with the S&P, European banks were among the worst performers, with the STOXX Banks index down by -1.34%.

Markets in Asia are a bit more mixed this morning. While we’ve seen modest declines for the Nikkei (-0.24%), Kospi (-0.29%) and ASX (-0.61%), the Shanghai Comp (+0.74%) and Hang Seng (+0.34%) are up along with S&P 500 futures (+0.20%). The main talking point overnight has been a Bloomberg story suggesting that some top advisers in the Trump administration are weighing proposals to undermine Hong Kong’s dollar peg to the greenback as a way of penalizing China. However, the report added that the idea has not been pitched to senior levels of the White House which suggests that it hasn’t gained serious traction yet.

Back to yesterday and after Senate Majority Leader McConnell signalled a willingness to pass another stimulus bill with case numbers rising across the country, the White House announced they want the package by the first week of August. Vice President Pence’s top aide said, “we want to make sure that people that are still unemployed or hurting are protected but at the same time, we want to take into consideration the fact the economy is bouncing back and want to try to contain the amount of spending.” This is aligned with Senate Republicans who want to keep the overall price tag south of $1 trillion. President Trump said that there would be another round of stimulus checks for Americans, though it will likely be even more targeted this time around. With some states pausing reopening and even re-entering shutdowns, additional stimulus is likely needed in order for economic data to continue improving.

Meanwhile, the slowdown in reopenings continues to be driven by the US seeing high numbers of new cases. Texas had over 10,000 new cases in one day for the first time yesterday, with cases rising 5% compared to a weekly average of 3.9%. Daily increases in some other recent hot spots were below the weekly average, which while encouraging may still be experiencing after-effects of the holiday weekend. Florida reported a 3.6% rise in new cases, under the 5% 7-day average, however the 7-day rolling total of 61,360 cases was the highest yet. Fatalities rose by 1.7%, with the 7-day average at just under 48 per day. Arizona meanwhile recorded a record 98 new fatalities yesterday, however the data has clearly seen big lags on Sunday and Monday in the past. Overall the 7 day average of covid fatalities in the state is roughly 40 per day, while cases are rising by just under 3700 per day. When New York state was at 3700 and 8700 (similar to Florida now), it was seeing around 85 and 630 deaths per day, and so both Arizona and especially Florida are seeing better case fatality rates at this time. However, this could change and requires a high level of scrutiny as hospital conditions and capacity constraints are going to be different in different regions. Speaking of New York, the state continues to add more regions to its quarantine list, which is now 19 states long, with Delaware, Kansas and Oklahoma travellers all being asked to isolate for 14 days upon arriving. Overnight, the US Department of Health and Human Services has said that it is ramping up coronavirus testing in Louisiana, Texas and Florida as health officials attempt to get a firm grasp on how the fast-moving pandemic is evolving.

For more details on the current US virus outbreak and what it could mean for upcoming policy decisions, you can join a conference call today at 11:00 EDT/16:00 UK time hosted by our chief US economist Matt Luzzetti. He will be joined by two guest speakers to discuss the outlook for health policy and small businesses. You can find the full details here.

Back to markets and it’s fair to say that the huge pre-covid momentum into ESG was temporarily sidetracked by the pandemic. However this is undoubtedly a multi-year trend and there are signs the topic is springing back to life. Here at Deutsche Bank Research we have launched dbSustainability, a new offering with research reports focused on sustainability issues and spanning thematic, macro, quantitative and individual company analysis. Recent reports include; ‘ESG through the pandemic’. Luke Templeman, Thematic Research (link to report and video), ‘Decarbonisation: Can Mining & Steel sustain in a low carbon world?’ from Head of European Mining And Metals, Liam Fitzpatrick (link to report) and from Juliana Lee, Chief Economist, Asia, ‘Asia Thematic Analysis:Households’ ESG action’ (link to report). We will continue to put out research under this banner so best to let Luke.Templeman@db.com on my team know if you want to be added to any future reports. He is on hols but he’ll pick up and add you on Monday.

In terms of those economic stories we alluded to earlier, we firstly had some underwhelming numbers on German industrial production, which saw just a +7.8% increase in May. This was lower than the +11.1% rebound expected and still leaves IP -19.3% below its levels a year earlier. Furthermore, it comes just a day after some worse-than-expected data on factory orders, adding to fears that the German recovery won’t be as rapid as hoped for. Next, we had the European Commission’s summer economic forecasts, which revised down their economic forecasts for Euro Area growth both this year and next. They now see the economy contracting by -8.7% this year compared with -7.7% before back in May. And 2021 growth was revised down two-tenths to +6.1%. And finally, we had a warning from Atlanta Fed President Bostic in the FT yesterday, who said that the high-frequency data had pointed to a “levelling off” in activity. We also heard from the Fed’s Vice Chairman Clarida later who said that the Fed can turn to additional forward guidance and asset purchases if the economy needs more aid and Cleveland Fed President Loretta Mester said that “If we don’t get further fiscal support, things won’t come back as well as they could” while adding, with disruption from the virus lasting longer than expected, “this is a period where we need to be supporting both individuals and businesses who but for the pandemic would have been healthy.”

Given this negative newsflow yesterday, safe havens performed relatively strongly, and gold hit another milestone as it closed above its 2012 peak to reach an 8-year high of $1795/oz. Other metals performed reasonably well too, with copper up +0.78% to advance for a 6th successive session. Over in fixed income, there was clear differentiation in core sovereign bonds, with yields on 10yr Treasuries down -3.6bps and those on bunds up +0.2bps. However that mostly reflected a post European close rally for USTs. There was a further narrowing in peripheral spreads however, with yields on Italian 10yr debt over bunds falling by -3.8bps to 163bps, their tightest level since late March, and Greek spreads down -3.7bps to their tightest since late February.

Here in the UK, sterling was the strongest performing of the G10 currencies yesterday, as it strengthened by +0.46% against the US dollar. It comes ahead of Chancellor Sunak’s much-awaited “Summer Economic Update” before the House of Commons today, in which he’s expected to announce a package of measures to aid the economic recovery. We’ve already had some announcements in recent days, with Prime Minister Johnson announcing last week that £5bn of capital investment projects would be brought forward, as well as a subsequent £1.57bn package for the arts. Our UK economists’ base case is that Sunak will broadly stick to the mandate set out by PM Johnson last week, possibly topping up the package by another 0.2% of GDP, focusing particularly on apprenticeship schemes, and modest wage subsidies to get furloughed employees back into work. There’s certainly been a fair amount of speculation in the media as to what to expect, including reports that a Stamp Duty holiday could be announced on homes under £500k.

Elsewhere in Europe, we heard from ECB Executive Board member Schnabel, who said in an interview that positive confidence indicators “suggests that the recession could turn out somewhat milder than expected”. She also waded in to the debate on the EU recovery fund, saying to the Dutch newspaper NRC Handelsblad that “If most of the fund is made up of loans, this could create a public debt overhang after the crisis. That could then cause problems of its own.” It comes ahead of the summit of EU leaders in just over a week, which is scheduled to begin on 17 July.

There wasn’t a great deal of other data yesterday, though the number of job openings in the US unexpectedly increased in May to 5.397m (vs. 4.5m expected), while the number of hirings rose to a record high of 6.487m. Furthermore, in a sign of the labour market recovery, the quits rate of voluntary separations that generally correlates with economic strength ticked up to 1.6% from 1.4% the previous month, even if it still remained some way down from the 2.3% recorded in February. Our US Economist Matt Luzzetti noted that private quits rate is a good leading indicator for wage growth and it remained low at 1.8%, down from a 2.6% peak late last year. This indicated that there could be a collapse in wage growth in the coming months. The ratio of unemployed people per job opening remained elevated in May, with 3.9 unemployed per job opening. This compares to a sub-1.0 figures late last year, however it is well below GFC levels of over 6.0. Lastly, he noted that change in job openings can proxy for employment data and that doing so would suggest that job loss was much more extreme in March, less extreme in April, and not as robust in May, with 2.4m jobs created vs the NFP tally of 3.2m.

To the day ahead now, and one of the highlights will be the previously mentioned UK economic statement from Chancellor Sunak. Central bank speakers today include ECB Vice President de Guindos and the Fed’s Bostic, while data releases from the US include consumer credit for May and the weekly MBA mortgage applications.

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Part V: Barr v. AAPC, Severability Doctrine, and Chief Justice Marshall

I have published four posts on Barr v. AAPC. The first considered judicial departmentalism. The second focused on content-based restrictions. The third analyzed stare decisis. And the fourth analyzed modern severability doctrine. This fifth installment focuses on the plurality’s historical analysis of severability doctrine.

Justice Kavanaugh wrote the plurality opinion in Barr v. AADC. It was joined by Chief Justice Roberts and Justice Alito. The plurality purported to apply “ordinary severability principles.” Justice Kavanaugh attempted to ground severability jurisprudence in Marbury v. Madison.

The Court’s power and preference to partially invalidate a statute in that fashion has been firmly established since Marbury v. Madison. There, the Court invalidated part of §13 of the Judiciary Act of 1789. The Judiciary Act did not contain a severability clause. But the Court did not proceed to invalidate the entire Judiciary Act.

Justice Kavanaugh added:

Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute. If the rule were otherwise, the entire Judiciary Act of 1789 would be invalid as a consequence of Marbury v. Madison.

This argument is flawed. Let’s briefly recall the facts of Marbury. William Marbury filed suit in the Supreme Court’s original jurisdiction. Marbury sought a writ of mandamus to order James Madison, the Secretary of State, to deliver Marbury’s commission. Marbury did not ask the Court to declare any law unconstitutional. He simply sought a remedy that was ostensibly provided for by Section 13 of the Judiciary Act of 1789. Chief Justice Marshall concluded that Section 13 purported to expand the Supreme Court’s original jurisdiction. This, the Chief held, Congress could not do. Therefore, Section 13 was contrary to the Constitution. And, the Court could not issue a writ of mandamus. That was it!

The Court didn’t “invalidate” anything. To the contrary, Marshall accurately explained how courts should treat a statute that conflicts with the Constitution:

So, if a law be in opposition to the Constitution, if both the law and the Constitution apply to a particular case, so that the Court must either decide that case conformably to the law, disregarding the Constitution, or conformably to the Constitution, disregarding the law, the Court must determine which of these conflicting rules governs the case. This is of the very essence of judicial duty.

Marshall explained, with his remarkable clarity, that the remedy is limited to a “particular case.” The statute is not nullified, writ large. Instead, Marbury simply doesn’t get his writ.

Justice Thomas recognized this analysis in Murphy v. NCAA:

As Chief Justice Marshall famously explained, “[i]t is emphatically the province and duty of the judicial department to say what the law is” because “[t]hose who apply the rule to particular cases, must of necessity expound and interpret that rule.” Marbury v. Madison, 1 Cranch 137, 177 (1803). If a plaintiff relies on a statute but a defendant argues that the statute conflicts with the Constitution, then courts must resolve that dispute and, if they agree with the defendant, follow the higher law of the Constitution. See id., at 177–178; The Federalist No. 78, p. 467 (C. Rossiter ed. 1961) (A. Hamilton). Thus, when early American courts determined that a statute was unconstitutional, they would simply decline to enforce it in the case before them. See Walsh 755–766. “[T]here was no ‘next step’ in which courts inquired into whether the legislature would have preferred no law at all to the constitutional remainder.” Id., at 777.

Justice Kavanaugh has no response to Justice Thomas’s accurate analysis. Nothing is “invalidated.” And Marbury cannot support modern severability doctrine.

Justice Kavanaugh cites a second Marshall decision to support the notion of “partial invalid[ation].”

As Chief Justice Marshall later explained, if any part of an Act is “unconstitutional, the provisions of that part may be disregarded while full effect will be given to such as are not repugnant to the constitution of the United States.” Bank of Hamilton v. Lessee of Dudley (1829).

If you’ve never heard of Dudley, you’re not alone. I could only find one case that has ever quoted this proposition: the District Court of Minnesota in 1888. In Dudley, Marshall was not discussing modern severability jurisprudence in which parts of statutes can be invalidated in part. Rather, he was discussing traditional equitable principles, in which a remedy was limited to a particular case.

In Dudley, the defendant argued that a law governing the Ohio territory violated Article I, Section 10 of the Constitution. But Marshall concluded that this question did not “properly arise in the present actual state of this controversy.” Why? Because the case “must be submitted to a jury,” in accordance with the Seventh Amendment. But the law did not allow the claim to be submitted to a jury. Rather, the law required the “appoint[ment of] commissioners for the decision of questions which a court of common law must submit to a jury.”

At bottom, Dudley is a Seventh Amendment case. Most of the citations I found to this case actually concerned the right to a civil jury. For example, Justice Thomas cited Dudley in in Feltner v. Columbia Pictures Television (1998). He wrote: “Bank of Hamilton v. Lessee of Dudley, 2 Pet. 492, 7 L.Ed. 496 (1829) … held in light of the Seventh Amendment that a jury must determine the amount of compensation for improvements to real estate.”

But in the final paragraph of Dudley, Chief Justice Marshall added further observations. He wrote:

But this inability of the courts of the United States to proceed in the mode prescribed by the statute, does not deprive the occupant of the benefit it intended him. The modes of proceeding which belong to courts of chancery are adapted to the execution of the law; and to the equity side of the court he may apply for relief. Sitting in chancery, it can appoint commissioners to estimate improvements as well as rents and profits, and can enjoin the execution of the judgment at law until its decree shall be complied with. If any part of the act be unconstitutional, the provisions of that part may be disregarded while full effect will be given to such as are not repugnant to the constitution of the United States or of the state or to the ordinance of 1787. The question whether any of its provisions be of this description, will properly arise in the suit brought to carry them into effect.

Marshall’s analysis is premised on the equitable jurisdiction of a “court of chancery.” These equitable courts could only issue judgments in particular cases.  It isn’t clear how this analysis extends to courts of law. Moreover, the remedy Marshall alludes to involves a single case: the unconstitutional portion is simply not enforced for the claimant. The chancellor could not “invalidate” a statute, in any regard. (Sam Bray has articulated this point well). Indeed, this analysis closely tracks Marbury, which referenced a remedy in a “particular case.”

Neither Marbury nor Dudley provides support for modern severability doctrine. As the saying goes, it must be nice to have John Marshall on your side. But Marshall is with Thomas and Gorsuch.

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Part IV: Barr v. AAPC and Modern Severability Doctrine

I have published three posts on Barr v. AAPC. The first considered judicial departmentalism. The second focused on content-based restrictions. The third analyzed stare decisis. This post turns to severability. Justice Kavanaugh’s plurality opinion provides a helpful count of the votes:

Applying traditional severability principles, seven Members of the Court conclude that the entire 1991 robocall restriction should not be invalidated, but rather that the 2015 government-debt exception must be invalidated and severed from the remainder of the statute. See (SOTOMAYOR, J., concurring in judgment); (BREYER, J., concurring in judgment with respect to severability and dissenting in part).

What about the other two members? Justices Thomas and Gorsuch would not have “invalidated” anything. They have accepted the model of judicial departmentalism, and eschew any notion that courts can “invalidate” a statute. Rather, they would have issued an injunction to prevent the enforcement of the unconstitutional law against the plaintiffs.

This post will explain how the Court’s conservatives reached such different results.

“Ordinary Severability Principles”

Justice Kavanaugh wrote the plurality opinion in Barr v. AADC. It was joined by Chief Justice Roberts and Justice Alito. The plurality purported to apply “ordinary severability principles.” Those “ordinary severability principles” left the Court with two options: “(i) to invalidate the entire 1991 robocall restriction, as plaintiffs want, or (ii) to invalidate just the 2015 government-debt exception and sever it from the remainder of the statute, as the Government wants.”

I appreciate that Justice Kavanaugh purported to redefine the phrase “invalidate.” This framing, however, follows the traditional meaning of “invalidate”: render the statute unenforceable in all regards. Justice Kavanaugh concluded that the Court “must invalidate the 2015 government-debt exception and sever that exception from the remainder of the statute.” To do so, he followed “general severability principles.”

But the Court’s current “general severability principles” differ from the Court’s outmoded severability principles. In the bad old days “courts paid less attention to statutory text as the definitive expression of Congress’s will.” Judges would try to focus on Congress’s “actual intent.” Now, things are much better: “courts today zero in on the precise statutory text and, as a result, courts hew closely to the text of severability or nonseverability clauses.” Here, Justice Kavanaugh cited Chief Justice Roberts’s recent decision in Seila Law.

But what if there is no “text” to “hew closely to”? Should courts “search for other indicia of congressional intent”? The plurality doesn’t say no. Instead, the plurality says “this formulation often leads to an analytical dead end.” Why? “[C]ourts are not well equipped to imaginatively reconstruct a prior Congress’s hypothetical intent.”

The plurality explains that the “the Court’s remedial preference after finding a provision of a federal law unconstitutional has been to salvage rather than destroy the rest of the law.” (The plurality tries to ground its analysis in Marbury v. Madison–more on that argument in Part V.) And, in a sentence made to be quoted, Justice Kavanaugh wrote, “The Court’s precedents reflect a decisive preference for surgical severance rather than wholesale destruction, even in the absence of a severability clause.” And another quotable quote: “Applying the presumption, the Court invalidates and severs unconstitutional provisions from the remainder of the law rather than razing whole statutes or Acts of Congress.”

Justice Gorsuch’s concurrence

Justice Gorsuch, joined by Justice Thomas, rejected the plurality’s approach to severability. What would be his preferred remedy? A traditional injunction with respect to the named parties:

With a First Amendment violation proven, the question turns to remedy. Because the challenged robocall ban unconstitutionally infringes on their speech, I would hold that the plaintiffs are entitled to an injunction preventing its enforcement against them. This is the traditional remedy for proven violations of legal rights likely to work irreparable injury in the future. Preventing the law’s enforcement against the plaintiffs would fully address their injury. And going this far, but no further, would avoid “short circuit[ing] the democratic process” by interfering with the work of Congress any more than necessary. Washington State Grange v. Washington State Republican Party (2008).

Gorsuch is exactly right. This is the only remedy necessary in this case. It mirrors the remedy he favored a week earlier in Seila Law. Justice Thomas and Gorsuch concluded:

Given my concerns about our modern severability doctrine and the fact that severability makes no difference to the dispute before us, I would resolve this case by simply denying the CFPB’s petition to enforce the civil investigative demand.

The Court should only halt the illegal action in this particular case. There is no need, or license, to “invalidate” anything.

Justice Gorusch criticizes the plurality’s approach:

JUSTICE KAVANAUGH’s opinion pursues a different course. Invoking “severability doctrine,” it declares the government-debt exception void and severs it from the statute. As revised by today’s decision, the law prohibits nearly all robocalls to cell phones, just as it did back in 1991….

Gorsuch describes the majority’s approach for what it is: judicial legislation:

I am doubtful of our authority to rewrite the law in this way. Many have questioned the propriety of modern severability doctrine, [FN1] and today’s case illustrates some of the reasons why.

FN1: See, e.g., Seila Law LLC v. Consumer Financial Protection Bureau (THOMAS, J., concurring in part and dissenting in part); Harrison, Severability, Remedies, and Constitutional Adjudication, (2014); see also Movsesian, Severability in Statutes and Contracts (1995) (collecting academic criticism of severability doctrine).

Gorsuch explains that “severability doctrine” is not an equitable remedy at all:

To start, it’s hard to see how today’s use of severability doctrine qualifies as a remedy at all: The plaintiffs have not challenged the government-debt exception, they have not sought to have it severed and stricken, and far from placing “unequal treatment” at the “heart of their suit,” they have never complained of unequal treatment as such.

Moreover, severance does not actually address the Plaintiffs’ injury:

Severing and voiding the government-debt exception does nothing to address the injury they claim; after today’s ruling, federal law bars the plaintiffs from using robocalls to promote political causes just as stoutly as it did before. What is the point of fighting this long battle, through many years and all the way to the Supreme Court, if the prize for winning is no relief at all?

Indeed, this bold remedy raises separation of powers questions:

It is highly unusual for judges to render unlawful conduct that Congress has explicitly made lawful—let alone to take such an extraordinary step without warning to those who have ordered their lives and livelihoods in reliance on the law, and without affording those individuals any opportunity to be heard. This assertion of power strikes me as raising serious separation of powers questions, and it marks no small departure from our usual reliance on the adversarial process.

He concludes that it is time to “reconsider” severability doctrine:

In the end, I agree that 47 U. S. C. §227(b)(1)(A)(iii) violates the First Amendment, though not for the reasons JUSTICE KAVANAUGH offers. Nor am I able to support the remedy the Court endorses today. Respectfully, if this is what modern “severability doctrine” has become, it seems to me all the more reason to reconsider our course.

The Plurality Responds to Justice Gorsuch

Justice Kavanaugh’s plurality opinion responded to Justice Gorsuch’s concurrence:

JUSTICE GORSUCH’s well-stated separate opinion makes a number of important points that warrant this respectful response.

Justice Kavanaugh critiques the narrow approach of Justice Gorsuch’s remedy. He dubs it “injunctive relief, plus stare decisis.” But that is all courts can do. Issue a judgment in a particular case, and set a precedent for future cases. Justice Kavanaugh’s focus on “invalidation” merges these steps. But under judicial departmentalism, the steps are distinct.

***

The conservatives on the Roberts Court are fractured on severability. Justice Thomas, and now Justice Gorsuch, reject the notion of modern “severability doctrine.” Rather, they would tailor remedies in individual case to affect specific plaintiffs. Justice Kavanaugh seems to recognize the merit of the Gorsuch/Thomas position, but wants to stand by the Court’s severability precedent. Chief Justice Roberts reaffirmed this traditional doctrine in Seila Law. And we know from NFIB v. Sebelius that Justice Alito was content to kill the entire Affordable Care Act.

So far, this schism has not had any practical consequences. In Seila Law, Justice Kagan and company shrewdly joined the Chief’s severability analysis, so there was a clear majority to sever the for-cause tenure protection. And in AAPC, Justice Breyer and company shrewdly joined Justice Kavanaugh’s severability analysis, so there was a clear majority to leave the underlying statute in place. But soon enough, there will come a case where the Court’s progressives cannot be counted on to provide a strategic join. Indeed, we may see a case where a conservative majority of the Court finds a statute is unconstitutional, but the progressives will join with Thomas and Gorsuch to yield an outcome where the statute largely survives. The game theory here can complicate already-complicated vote counting.

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