Month: September 2024

Elon Musk’s internet service, Starlink, has announced that it will comply with a Brazil Supreme Court order to shut down X while vowing to pursue “all legal avenues” to allow the recently banned Musk-owned social media platform to operate in Brazil.

The move, announced by Starlink in a statement on Sept. 3, marks an apparent reversal after the country’s telecommunications regulator previously said that the satellite-based internet provider stated that it wouldn’t agree to block the social media platform.

Starlink said it would abide by an order from Brazilian Supreme Court Justice Alexandre de Moraes requiring internet service providers and app stores to block X from their platforms.

“Regardless of the illegal treatment of Starlink in freezing our assets, we are complying with the order to block access to X in Brazil,” Starlink’s statement said.

“We continue to pursue all legal avenues, as are others who agree that @alexandre’s recent orders violate the Brazilian constitution.”

As Tom Ozimek reports at The Epoch Times, De Moraes froze Starlink’s accounts last week in order to pressure the company to cover fines imposed on X in Brazil, reasoning that both are part of the same Musk-controlled group.

In response to the asset freeze, Starlink said on Aug. 29 that it believes de Moraes’s decision violated due process and was unconstitutional.

“It was issued in secret and without affording Starlink any of the due process of law guaranteed by the Constitution of Brazil,” Starlink said in the statement. “We intend to address the matter legally.”

Starlink’s announcement that it will comply with the order to shut down X comes a day after a spokesperson from Brazil’s telecommunications regulator told The Epoch Times that the company had “informally” expressed to a top agency executive its intention to buck the X ban.

The spokesperson said that unless Starlink complies, it will face sanctions, including possibly having its operating license in Brazil revoked.

Arthur Coimbra, an Anatel board member, told The Associated Press that if Starlink refuses to abide by the order to block X, authorities could also eventually seize equipment from Starlink’s 23 ground stations in Brazil, where Starlink serves over a quarter million customers.

Starlink’s announcement that it intends to comply with the X ban marks the latest chapter in a long-running dispute between Brazilian officials and Musk, who has refused to comply with court orders to block accounts accused by investigators of spreading hate and misinformation. Both Musk and X’s global government affairs team have denounced these orders as unlawful attempts at censorship.

De Moraes’s order, which requires internet service providers and app stores to block access to X, also announced a daily penalty of $8,900 for users in Brazil who use a virtual private network to evade the ban. In his decision, de Moraes said X will remain blocked until it complies with his orders.

“Elon Musk showed his total disrespect for Brazilian sovereignty and, in particular, for the judiciary, setting himself up as a true supranational entity and immune to the laws of each country,” de Moraes wrote.

Musk, for his part, has been highly critical of de Moraes and his decision to block X in Brazil and related actions.

In his latest commentary on the matter, Musk shared a post in which billionaire hedge fund manager Bill Ackman compares de Moraes’s actions to strong-arm tactics in communist-ruled China and warns that this puts Brazil on track to becoming an “uninvestable” market.

“Absolutely,” Musk wrote in his post, agreeing with Ackman’s assessment of the X ban, which the hedge fund manager said was “illegal.”

Authored by Turner Wright via CoinTelegraph.com,

The United States Federal Bureau of Investigation (FBI) has issued a warning to employees at digital asset firms regarding the latest attempt by the Democratic People’s Republic of Korea to steal crypto.

In a Sept. 3 notice, the FBI said North Korean malicious cyber actors were targeting workers at decentralized finance and cryptocurrency companies to steal funds through “complex and elaborate” social engineering campaigns. Specifically, the federal agency warned that the scammers had researched firms associated with cryptocurrency-tied exchange-traded funds, or ETFs.

How the scam works

The actors employed schemes, including fake offers of employment or investment opportunities and impersonating well-known individuals associated “with certain technologies” to trick users. The scammers may then provide a link to a “pre-employment test” or another download to install malware.

“The actors usually attempt to initiate prolonged conversations with prospective victims to build rapport and deliver malware in situations that may appear natural and non-alerting,” said the FBI, adding:

“The actors usually communicate with victims in fluent or nearly fluent English and are well versed in the technical aspects of the cryptocurrency field.”

Source: FBI

Since 2017, North Korean hackers have stolen roughly $3 billion in crypto using such schemes. The Lazarus Group, a group of hackers tied to the reclusive nation, has allegedly been responsible for many high-profile attacks targeting crypto users.

The FBI has issued several warnings related to crypto scammers, including those impersonating employees of crypto exchanges and targeting users to compromise their accounts. In June, the federal agency said malicious actors had posed as employees of law firms offering fake crypto recovery services.

US stock-index futures fell, pointing toward a continued selloff on Wall Street after a slump Tuesday, when dire manufacturing PMI and ISM data led to renewed concern that a recession may be looming. Futures on the S&P 500 dropped 0.4% while contracts on the Nasdaq 100 Index declined 0.8% at 8.00 am ET, as NVDA extended its record losses which saw a historic $280 billion in market cap wiped out in Tuesday’s session, after a Bloomberg report hit just after the close that Kamala’s DOJ sent subpoenas to the chipmaker. NVDA sparked Nasdaq’s 3.2% Tuesday rout: the stock has been falling since the company’s earnings last week failed to live up to the highest expectations. Losses in Europe and Asia were deeper, with traders still rattled by the speed and severity of the US retreat while the VIX climbed above 22. Treasury yields dropped 2bps to 3.82% while the dollar weakened for the first time in six as the yen extended gains and the USDJPY traded at 145. On the macro front, we have mortgage applications (1.6% vs 0.5% last week), trade balance, JOLTS job openings, as well as the final July factory orders and durable goods reports.

In premarket trarding, Nvidia slid 1.9% after Bloomberg reported that the US DOJ sent subpoenas to the chipmaker, as well as other companies, as it sought evidence that the dominant provider of AI processors violated antitrust laws. Zscaler plunged 16% after the security-software company gave a full-year forecast that is weaker than expected on both adjusted earnings and revenue. Here are some other notable premarket movers:

• Asana tumbles 12% after posting 2Q results and providing a 3Q forecast. The company also said CFO Tim Wan is exiting the post and will be succeeded by Sonalee Parekh.
• Clover Health rises 10% after its Counterpart unit won a contract with Iowa Clinic, a healthcare group.
• Dollar Tree falls 12% after management lowered the company’s full-year guidance as the chain’s higher income consumers remain cautious in their spending.
• GitLab climbs 12% after the company reported second-quarter results that beat expectations and raised its full-year forecast.
• Hormel Foods falls 5.4% after the company lowered its fiscal-year sales outlook.
• PagerDuty slides 14% after the company cut its full-year revenue forecast.

The S&P 500 on Tuesday fell the most since Aug. 5, when recession fears triggered a brief meltdown, while the Nasdaq 100 had its biggest decline since July 24 as Nvidia crashed. The declines came after the ISM’s manufacturing gauge showed that activity shrank for a fifth straight month, while commentary in the S&P PMI manufacturing report was downright apocalyptic.

The sudden souring of risk sentiment comes just as US equities were edging back toward the all-time high set in mid-July. Other key data to watch this week include July job openings on Wednesday, services PMI and jobless claims on Thursday and non-farm payrolls on Friday. These readouts may shed further light on how much and how quickly the Federal Reserve will lower interest rates, after Chair Jerome Powell last month telegraphed a September cut.

“Investors are in a wait-and-see mode and trying to decipher the probabilities a US recession and how the Fed would adjust,” said Vincent Juvyns, global market strategist at J.P. Morgan Asset Management. “But even if we had disappointing data on US employment this week, for us, it’s too early to call a recession, notably with consumption being resilient.”

The US job openings report due on Wednesday is expected to show further cooling in the labor market, following yesterday’s data showing a fifth consecutive month of contraction in manufacturing activity. As the market’s focus shifts from inflation to concerns over economic growth, negative macro data is increasingly translating into pain for stocks and other risk assets.

For now, traders are anticipating the Federal Reserve will start easing policy in September and reduce rates by more than two full percentage points over the next 12 months — the steepest drop outside of a downturn since the 1980s. Payrolls data due on Friday is considered crucial in shaping the magnitude of the initial rate cut. “A disappointing number will spook markets a little bit,” said Neil Birrell, chief investment officer at Premier Miton Investors. “There’s just a lack of certainty around. I’m not brave enough to say buy the dip on Wednesday when the numbers are out on Friday.”

European stocks followed their Asian counterparts lower after Wall Street’s worst day since the August meltdown. The Stoxx 600 falls 1%, led lower by technology shares. European luxury stocks fell, with LVMH and Richemont notable underperformers as Morgan Stanley cut its price targets on the two stocks amid worries over weakening demand from Chinese customers. Adding to the gloom, Swiss luxury watchmakers are turning to the government for financial aid to help them weather a downturn in demand
Among individual movers, LVMH -2.4%, Richemont -4.3%, Hermes -1.3%, Swatch -2%, Ferragamo -2.3%, Moncler -2.2%, Kering -2%, Brunello Cucinelli -1.5%, Hugo Boss -1.3%, Burberry -1.1%. In separate notes, Morgan Stanley analyst Edouard Aubin cuts equal-weight-rated LVMH’s PT to €715 from €760, as well as lowering estimates

Earlier in the session, Asian equities suffered broad-based losses following Tuesday’s tech-led US selloff. Taiwan’s Taiex index plunged as much as 5.3% with TSMC tumbling amid Nvidia’s record wipeout. Japan’s Nikkei slumps more than 3.5% as the yen soared, while Korea’s Kospi sheds almost 3%. Chinese indexes are relative outperformers, with the CSI 300 down less than 0.5%. Hang Seng drops about 1.1%.

In FX, the yen is the strongest of the G-10 currencies, rising 0.2%. The Bloomberg Dollar Spot Index falls 0.1%.

In rates, treasuries are richer across the curve with gains led by front-end and belly, steepening 2s10s and 5s30s spreads to unwind most of Tuesday’s flattening moves. Front-end US yields are richer by about 3bp, long-end yields by less than 2bp, leaving 2s10s, 5s30s spreads slightly steeper. 10-year around 3.81% is ~2bp richer on the day, trailing bunds in the sector by ~3bp, gilts by 1.5bp. Wider gains across core European rates follow a sharp selloff in Asia equities as risk-aversion takes hold globally. The US session includes several pieces of economic data led by JOLTS job openings, with Fed policymakers attuned to signs of weakness in labor market to guide policy.

In commodities, oil rose slightly after crashing to a nine-month low as Reuters reversed its Friday story, and now “reports” that OPEC+ may not boost output after all (just as we said). Brent futures, the international benchmark, advanced above $74 a barrel following a near 5% meltdown on Tuesday. West Texas Intermediate rose 0.8%, after dropping under $70 for the first time since early January. Spot gold drops $14 to around $2,479/oz. Iron ore and copper are also in the red.

Looking at today’s calendar, we get the July trade balance (8:30am), July JOLTS job openings and factory orders (10am) and Fed Beige Book (2pm). No Fed speakers are scheduled; Williams and Waller are slated to speak Friday

Market Snapshot

• S&P 500 futures down 0.4% to 5,521
• STOXX Europe 600 down 0.9% to 515.19
• MXAP down 2.5% to 181.21
• MXAPJ down 1.9% to 561.58
• Nikkei down 4.2% to 37,047.61
• Topix down 3.7% to 2,633.49
• Hang Seng Index down 1.1% to 17,457.34
• Shanghai Composite down 0.7% to 2,784.28
• Sensex down 0.3% to 82,284.17
• Australia S&P/ASX 200 down 1.9% to 7,950.48
• Kospi down 3.1% to 2,580.80
• German 10Y yield down 3.4 bps at 2.24%
• Euro up 0.1% to $1.1056
• Brent Futures down 0.4% to $73.49/bbl
• Gold spot down 0.6% to $2,479.05
• US Dollar Index down 0.18% to 101.65

Top Overnight News

• Nvidia looks set to extend yesterday’s $279 billion loss of value — the biggest ever for a US stock. The DOJ sent subpoenas to Nvidia and other tech firms as part of an escalating antitrust probe. BBG
• OPEC+ is discussing a possible delay to an oil output increase planned for October, delegates said, after prices crashed to the lowest since last year. WTI crude rose after earlier sliding below $70. Reuters
• China is considering cutting interest rates on as much as $5.3 trillion of mortgages in two steps to lower borrowing costs for millions of families while mitigating the profit squeeze on its banking system. Financial regulators have proposed reducing rates on outstanding mortgages nationwide by a total of about 80 basis points, part of a package that includes an accelerated timeline for when mortgages become eligible for refinancing. BBG
• Investment banks are cutting their growth forecasts for China, believing Beijing risks undershooting its official target of about 5 per cent as confidence wanes in the world’s second-largest economy. FT
• Chile’s central bank cut rates by 25bp on Tues, as expected, and Canada’s central bank is expected to do the same at 9:45amET today (followed by cuts from the ECB on 9/12 and the FOMC on 9/18). BBG
• Volkswagen defended plans to consider closing German factories, saying flagging sales left it with about two plants too many. BBG
• US prepares for final “take it or leave it” ceasefire push in Gaza, with Netanyahu’s insistence of retaining IDF troops along the Gaza-Egypt border the main obstacle to a deal. WaPo
• Kamala Harris is set to propose expanding a tax break for start-ups, one of a series of policy ideas her campaign is rolling out this week aimed at helping entrepreneurs and small businesses. The plan, which Ms. Harris will announce during a speech in New Hampshire, would allow new companies to deduct up to $50,000 in start-up expenses, a campaign official said. The move would increase by tenfold a $5,000 deduction that companies can now claim for expenses, like advertising and salaries, that they incurred before they started operating. NYT
• US Steel would close plants and probably move its headquarters out of Pittsburgh if its planned sale to Nippon Steel collapses. WSJ
• US homebuilders are facing their biggest credit crunch in more than a decade, with banks cutting lending for residential construction by more than 10%. US banks had $92bn of loans outstanding to fund the construction of dwellings for one to four families in the quarter to the end of June, down from $102bn a year ago. This is the largest year-on-year drop in more than a decade, according to an analysis by BankRegData of the most recent data from the Federal Deposit Insurance Corp. It was also the fifth consecutive quarter in which lending for home construction fell. FT

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded with losses across the board following the dire session on Wall Street, which saw a tech rout led by downside in chips, with a similar picture seen in APAC with the likes of SK Hynix opening lower by over 9%. ASX 200 saw losses led by miners and tech following a similar sectoral picture stateside, whilst the downside was somewhat cushioned by heavyweight healthcare and telecoms. The index extended on losses after the QQ GDP miss. Nikkei 225 felt a double-whammy from the tech-led downside coupled with the stronger JPY, with the index slipping under 38k and eventually 37k from a 38,728.50 close on Tuesday. Hang Seng and Shanghai Comp also fell victim to the regional losses, with the former seeing its large-cap oil names with the deepest losses, whilst the mainland saw shallower losses. Caixin Services PMI deteriorated, but accompanying commentary was rosier.

Top Asian News

• Bank of America cut its 2024 China GDP forecast to 4.8% (prev. 5.0%).
• Japan’s Chief Cabinet Secretary Hayashi said closely watching domestic and overseas market moves with a sense of urgency; will conduct fiscal and economic policy management while working closely with BoJ; Important to make assessment of market moves calmly.
• PBoC injected CNY 700mln via 7-day Reverse Repo at a maintained rate of 1.70%
• China August prelim retail car sales -1% Y/Y, via PCA; +11% M/M.
• China mulls cutting mortgage rates in two steps to shield banks, via Bloomberg citing sources; regulators have proposed reducing rates on outstanding mortgages by a total of 80bpsPart of a package incl. an accelerated timeline for when mortgages become eligible for refinancing.

European bourses, Stoxx 600 (-1%) began the session significantly lower, taking impetus from a weak APAC session overnight as it continued the AI-led pressure seen on Wall St. on Tuesday. Thereafter, sentiment gradually improved, but remains firmly in the red. European sectors are entirely in the red; Food Beverage and Tobacco takes the top spot, whilst Tech is the clear laggard. The likes of ASML opened lower by around 6%, playing catch-up to the NVIDIA weakness seen on Tuesday. US Equity Futures (ES -0.3%, NQ -0.5%, RTY -0.2%) are on the backfoot, continuing the NVIDIA-led weakness seen in the prior session, as risk sentiment continues to remain subdued.

Top European News

• ECB’s Kazaks said the ECB can take steps to lower rates at the next meeting; pace of wage growth is slowing; says we can lower rates but must remain cautious.
• ECB’s Cipollone said investment remains weak, which suggest that firms do not believe a strong recovery, via Le Monde; broadly on track to for inflation; data so far confirms our direction of travel and hopes that this will allow the ECB to continue to be less restrictive. Adds, there is a real risk that the stance could become too restrictive.
• ECB’s Stournaras says even with more rate cuts policy will remain restrictive.
• German economy is seen contracting 0.1% in 2024 (prev. forecast +0.2%), via IFW/Kiel; 2025 0.5% (prev. forecast 1.1%)
• Volkswagen (VOW3 GY) CFO sees industry-wide demand in Europe 2mln cars below peak; Europe’s car market will not return to former size; its Europe overcapacity is 500k cars or two plants. Needs to increase productivity and reduce costs/reduce complexity.
• UK banking representatives are expected to meet Chancellor Reeves in the coming days to discuss concerns over a possible increase in bank taxes, via Reuters citing sources; sources expect the Treasury will seek to increase an existing surcharge on profits

FX

• Dollar is flat and trading within a fairly busy 101.57-73 range; currently within the confines of the prior day’s range. Today see’s US JOLTS job openings data.
• EUR is incrementally firmer and trading towards the upper end of today’s 1.1039-62 range, and generally unmoved by a number of ECB speakers. EZ Composite Final PMIs were revised marginally lower, but ultimately had little impact on the Single-Currency.
• GBP is flat and holds within a tight 1.3102-27 range. Cable holds well within the confines of the prior day’s fairly wide 1.3088-3148 range; the docket ahead remains thin from a UK-specific standpoint.
• JPY is firmer today, largely attributed to its safe haven status, given the continued slump in risk sentiment; price action which is largely a continuation of the hefty pressure seen in USD/JPY in the prior session. USD/JPY towards the mid-point of a 144.76-145.56 range.
• The Antipodeans are the slight laggards vs G10 peers, weighed on by the continued risk-off sentiment seen across markets. Alongside this, Chinese Caixin Services PMIs was weaker than the prior, adding to the already weak Chinese demand narrative.
• PBoC set USD/CNY mid-point at 7.1148 vs exp. 7.1167 (prev. 7.1112)

Fixed Income

• USTs are slightly firmer ahead of US JOLTS Job Openings, which marks the first jobs release ahead of ADP and NFP throughout the week. Currently, toward the mid-point of 114-00+ to 114-09 bounds, eclipsing yesterday’s best.
• Bunds are bid given the general risk tone. A busy morning of data and ECB speak but nothing that has sparked any real price action. Bunds have run into a bit of resistance around the 134.37 peak, with the 28th Aug. high just above at 134.39.
• Gilts are firmer, in-fitting with the above. UK Final PMIs were subject to modest upward revisions, but in-fitting with EZ metrics sparked no reaction. Gilts holding at Tuesday’s 99.25 WTD peak.
• Germany sells EUR 0.438bln vs exp. EUR 0.5bln 1.00% 2038 Bund & EUR 0.818bln vs exp. 1bln 2.60% 2041 Bund.

Commodities

• Crude in the red once again. In short, the price action is a continuation of the moves on Tuesday which were driven by Libya/returning of various refineries/risk tone with further pressure coming from soft Chinese PMIs. Benchmarks are currently off lows amid reports that China is planning to cut mortgage rates. Brent’Nov holds around USD 73.85/bbl, after going as low as USD 72.63/bbl.
• Spot gold is in the red, slipping further from the USD 2500/oz mark despite the downbeat risk tone with the JPY once again outmuscling XAU; currently down to a USD 2480/oz low, just below the 21-DMA at USD 2483/oz.
• Base metals are trading on the backfoot, in-fitting with the general tone. 3M LME Copper continues to fall below the USD 9k mark.
• Russia’s Deputy Energy Minister Sorokin, says global LNG demand may rise to 580-600mln tons per year in the next few years; Western sanction against Russia will not halt development of LNG sector.
• Teamsters at Marathon Petroleum’s Detroit refinery (140k bpd) go on strike on Sept 4th.

Geopolitics: Middle East

• “Estimates that Washington will present its new plan for the exchange deal by Friday”, according to Sky News Arabia citing Walla News.
• Israeli Broadcasting Authority said Israeli officials informed mediators of Tel Aviv’s approval to withdraw from the Philadelphi corridor in the second phase of the deal, via Sky News Arabia.
• “US military announces destruction of Houthi missile system in area under their control in Yemen”, according to Sky News Arabia.

Geopolitics: Ukraine/Russia

• Ukraine’s air defence engaged in repelling the second wave of Russian air attacks on Kyiv overnight, according to the country’s military; engaged in repelling a drone attack on the western city of Lviv, near the Polish border.
• Poland activated aircraft to ensure airspace security for the third time in eight days after Russia launched strikes on Ukraine, according to Polish armed forces.
• Russia’s Kremlin said Russia takes into account that Ukraine “will” use US long-range weapons in its attacks deep into Russian territory.
• Russia’s Kremlin said work on changing Russia’s nuclear doctrine is caused by actions of the West, according to Ria.
• Russia and China are working on President Xi’s participation in the BRICS summit in Russia’s Kazan, according to Ria.

US Event Calendar

• 07:00: Aug. MBA Mortgage Applications, prior 0.5%
• 08:30: July Trade Balance, est. -$79b, prior -$73.1b
• 10:00: July JOLTs Job Openings, est. 8.1m, prior 8.18m
• 10:00: July Factory Orders, est. 4.8%, prior -3.3%
  • July Factory Orders Ex Trans, prior 0.1%
• 10:00: July Durable Goods Orders, est. 9.9%, prior 9.9%
  • July Durables-Less Transportation, est. -0.2%, prior -0.2%
  • July Cap Goods Ship Nondef Ex Air, prior -0.4%
  • July Cap Goods Orders Nondef Ex Air, prior -0.1%
• 14:00: Federal Reserve Releases Beige Book

DB’s Jim Reid concludes the overnight wrap

As September got going after the Labor Day holiday on Monday, the month yesterday started living up to its billing as the worst month of the year for risk with a notable sell-off. The S&P 500 (-2.12%) posted its worst daily performance since the global turmoil on August 5th and included the largest market cap drop in history for a single stock. Nvidia (-9.53%) lost $279bn on the day.

The main catalyst for the sell-off was initially the latest ISM manufacturing print, which renewed investors’ concerns that the US economy is running out of a bit of momentum. The release came in beneath expectations yet again, at 47.2 in August (vs. 47.5 expected), which was only a modest pickup from the disappointing July reading. On top of that, the new orders subcomponent fell to its lowest since May 2023, at 44.6. So there really wasn’t much good news to focus on at all, and it’s added to the downbeat backdrop ahead of Friday’s all-important US jobs report. On that the employment subcomponent did pick up from a 4-year low of 43.4 last month to 46.0 but this is still low, and the 17th month below 50 in the last 20 months. However, this has been a period when overall payrolls have been strong so the manufacturing read-through to the rest of the economy is certainly not automatic.

All things considered it was viewed as a soft report and in response risk assets saw a sharp selloff that only extended as the session progressed. The losses were driven by the more cyclical sectors, with the NASDAQ (-3.26%) and the Mag-7 (-3.36%) posting even larger declines than the S&P 500. The Philadelphia Semiconductor Index (-7.75%) saw its worst daily slump since March 2020 amidst a sharp fall from Nvidia (-9.53%), which saw its worst decline since April. Even more remarkably, this marked the largest global daily decline in a company’s market capitalisation, with $279bn wiped off Nvidia’s valuation. Nvidia came under further pressure after-hours after Bloomberg reported that it had received a subpoena from the US Justice Department which is investigating its position as the dominant AI computing provider. S&P 500 and NASDAQ futures have extended their losses overnight, down -0.49% and -0.67% respectively.

While tech stocks led yesterday’s losses, the reversal was pretty broad-based, and the small-cap Russell 2000 also fell -3.09%. The equal-weighted S&P 500 was down -1.33%, with defensive sectors limiting its decline. The renewed volatility also saw the VIX volatility index jump +5.17pts to 20.72, which is its second largest jump in two years, behind August 5th this year, and its highest close this year apart from the 7 days in early August. Other risk assets also came under pressure, with US IG (+4bps) and HY (+16bps) spreads seeing the largest widening since the August 5th vol shock.

With that ISM release in hand, investors also ratcheted up the chance that the Fed would start with a 50bp rate cut in a couple of weeks’ time. Indeed, futures raised the probability from 31% on Monday to 34% by the close yesterday. That more dovish pricing was evident at a longer horizon as well, and futures are now pricing in 102bps of cuts by the December meeting, up from 97bps the previous day. And 205bps of rate cuts are now priced in over the next 12 months, an amount of easing that since the 1980s has materialised only amid recessions.

As investors priced in more rate cuts, that led to a fresh rally among US Treasuries that took the 2yr yield (-5.3bps) to just 3.86%. That’s the lowest closing level for the 2yr yield since the regional banking turmoil in early 2023, and the 10yr yield (-7.2bps) also saw a sharp decline to 3.83% with a small additional -0.38bps dip overnight. This is bucking the seasonal trend as September has seen the Global Bond Ag decline for the last seven years with 10yr UST yields up in 7 of the last 8 Septembers. Still nearly 4 weeks of the month left though.

Clearly, a lot of September will be dictated by how the jobs report turns out on Friday (DB expect +150k for payrolls). But today, the US labour market will remain in focus with the JOLTS job openings release for July. That’s one that Fed Chair Powell has often cited, and recent months have provided evidence that the labour market is cooling off. Among others, the quits rate of those voluntarily leaving their job came in at 2.1% in June, the joint-lowest since 2020. And the ratio of unemployed individuals per vacancy was down to a three-year low of 1.20. So if today’s report adds to the signs that the labour market is weakening, that could further raise expectations that the Fed will open with a 50bp cut (not our base case though).

One factor that pushed yields lower was a fresh decline in oil prices yesterday, which helped to ease fears about any lingering inflationary pressures. For instance, WTI crude oil prices were down -4.36% on the day to $70.34/bbl, which is their lowest closing level of 2024 so far, and also marks their worst daily performance since last November. In part, that’s been driven by demand factors, including fears about a weakening US economy. But supply factors were also at play, and there was a noticeable decline in prices yesterday after Bloomberg reported that a deal could emerge to restore Libyan production again, based on comments from Sadiq Al-Kabir, the central bank governor who’d fled Libya. With the risk-off mood continuing in Asian hours, oil prices are down another several tenths overnight with WTI falling below $70/bbl.

Over in Europe, markets followed a similar if milder pattern as the US, trading in line with the broader risk-off tone at the time of the close. That meant the STOXX 600 (-0.97%) lost ground for a second day running, with the index also posting its worst daily performance since August 5. Interestingly though, we did get comments from Lithuania’s central bank governor Simkus, who referred to an October rate cut after September as “quite unlikely”. So that offered some pushback against those expecting rate cuts might happen more than once per quarter. Market pricing was reflective of that, with the chance of an October rate cut down to 34% yesterday. Even so, sovereign bonds still rallied in line with the global trend, and yields on 10yr bunds (-5.9bps), OATs (-3.6bps) and BTPs (-3.3bps) all fell back.

The risk sell-off is continuing in the Asian session with Japan’s Nikkei (-3.31%) leading losses in the region after slightly recovering from an initial -4.04% drop while the KOSPI (-2.67%) is also trading noticeably lower. Elsewhere, the Hang Seng (-1.06%) is also edging lower after sliding to its lowest in three weeks with the CSI (-0.31%) and the Shanghai Composite (-0.48%) also trading in the red, but marching to their own beat as they have done for most of this year.

Early morning data showed that China’s Caixin services PMI for August expanded at a slower rate compared to July, with the index falling to 51.6 (v/s 51.8 expected) from 52.1. Australia’s second quarter GDP growth slowed to +1.0% y/y (v/s +0.9% expected), the weakest annual pace since the 1990’s recession, outside of the Covid-19 pandemic period. It followed an upwardly revised gain of +1.3% in the previous quarter.

To the day ahead now, and US data releases include the JOLTS job openings, factory orders and the trade balance for July. Meanwhile in Europe, we’ll get the final services and composite PMIs for August, and the Euro Area PPI reading for July. From central banks, the Bank of Canada will announce their latest policy decision, the Fed will release their Beige Book, and we’ll hear from the ECB’s Villeroy.

Ukraine appears to have in its possession a new drone which spits fire. A viral battlefield video posted to the internet early this week shows the moment a Ukrainian ‘flamethrowing drone’ unleashed hot thermite on Russian defensive positions down below. Many commenters have compared it to a dragon upon viewing the clip.

A huge and terrifying flame rains down on a forested position, instantly catching bushes, shrubs, and trees on fire – presumably to flush out Russian soldiers reportedly using the location to conceal their location. The video was initially posted by the 108th Separate Territorial Defense Brigade to social media, and was captioned “Drakaris”—in reference to the dragons in the popular series “Game of Thrones”.

Thermite, which is presumably what the UAV is shooting toward Russian positions, is a mix of iron oxide and magnesium, and is able to reach 2,400 Celsius. It can instantly set alight and melt almost anything in its path. Currently, there’s speculation that this is likely some kind of improvised home-made drone apparatus which clearly has very limited time to unleash its fiery payload. One analyst, Chay Bowes, has written that “War accelerates innovation, and the Ukrainian conflict has transformed the use of drones as weapons in particular.” Watch the ‘fire-breathing’ drone in action below:

Eastern Ukraine, a Ukrainian drone drops molten thermite on a Russian-held treeline, setting it ablaze. pic.twitter.com/LWKDj3NGpz

— OSINTtechnical (@Osinttechnical) September 2, 2024

Authored by Lance Roberts via RealInvestmentAdvice.com,

Since the end of the “Yen Carry Trade” correction in August, bullish positioning has returned with a vengeance, yet two key risks face investors as September begins. While bullish positioning and optimism are ingredients for a rising market, there is more to this story.

It is true that “a rising tide lifts all boats,” meaning that as the market rises, investors begin to chase higher stock prices, leading to a virtual buying spiral. Such leads to an improvement in market breadth and participation, which supports further price increases. Following the August decline, the chart below shows the improvement in the NYSE advance-decline line and the number of stocks trading above their respective 50-day moving averages (DMA).

Given that “for every buyer, there must be a seller,” this data confirms that buyers are increasingly willing to pay higher prices to bring sellers to market. That cycle continues until buyers willing to pay higher prices decline. While prices are rising, we are seeing a dwindling of buyers at current prices, as shown in the chart of trading volume at various price levels. As shown, buyers currently “live lower” between 5440-5480 and the recent correctional lows.

However, despite the diminishing pool of buyers at current levels, investors are becoming increasingly bullish as prices rise. As shown in our composite fear/greed gauge, based on “how investors are positioned” in the market, we are back to more “greed” based levels. While not at extreme levels, investors are becoming increasingly optimistic about higher future prices. Of course, such readings only confirm what market prices are already telling us.

However, two primary risks to the bullish advance are developing as we enter September.

Share Buyback Window Begins To Close

Over the next two months, a primary risk to bullish investors is removing a critical buyer in the market – corporations. For more on the importance of corporate share purchases on the financial markets, read the following:

• 40% Of The Bull Market Is Due To Buybacks

• Stock Buybacks Aren’t Bad, Just Abused

• Why Mega Caps Will Continue Their Dominance

Those articles support that corporations have comprised roughly 100% of net equity purchases since 2000. In other words, the market would be trading closer to 3000 rather than 5600 without corporate share buybacks.

However, these share buybacks also pose risks to the market in the short-term as well. As Michael Lebowitz noted this morning:

“Like the meteorological seasons, share buybacks also follow predictable patterns. Accordingly, as shown below, we are past the peak share buyback season. Following the peak, share buybacks will decline rapidly until early November. Declining share buybacks is not a bearish indicator per se. However, as the number of buybacks declines, the market, specifically the stocks conducting buybacks, will have less demand for their stock. Think of share buybacks as a tailwind.

The pattern is predictable because it directly relates to corporate earnings reports. For three reasons, most companies ban share buybacks about a month before their quarterly earnings report.

• Insider Trading Concerns—Employees have access to non-public information regarding their earnings. Therefore, the ban helps eliminate the perception that the company might be trading its stock on such information.

• Investor Perception– Similarly, investors might be suspicious if the company was actively buying its stock right before the earnings announcements. If the investors were mimicking the company’s purchases, this could create heightened volatility in the stock.

• Regulatory Concerns—While the SEC does not regulate share buybacks before earnings, most companies want to avoid an investigation if the SEC suspects those buying back the shares have inside information.

As shown on Thursday, September 5th, the window for buybacks will begin to close. Corporate buying support will be non-existent by the beginning of October and through the end of the month. In other words, the primary buyer of equities will not be available to bid prices.

If you don’t believe that share buybacks are as crucial as we state, the following chart should answer any questions.

Unfortunately, removing that primary buyer will coincide with a secondary market risk.

Presidential Election Concerns

As we enter September and October, a secondary risk increases. Historically, these months have seen stock market declines, especially in years with a Presidential election. There are three primary reasons for this trend.

1. Uncertainty Surrounding Election Outcomes

Markets dislike uncertainty, and the outcome of a Presidential election is a significant unknown. Investors become cautious during election years, especially when the race is tight. They worry about potential policy changes impacting taxes, regulations, and government spending. That heightened uncertainty increases market volatility and often results in stock market declines as investors move to safer assets.

2. Policy Change Concerns

Depending on the election outcome, significant policy changes can occur. For instance, Harris and Trump have very different approaches to fiscal policy, regulation, and international trade this year. With the polls very tight, Wall Street may look to lock in gains before the election, fearing that new policies might negatively affect corporate profits via higher tax rates and, potentially, changes to capital gains rates.

3. Economic Data Releases

September and October are critical months for economic data releases, particularly since the Federal Reserve expects to cut rates in September. Key indicators from employment, inflation, and housing will potentially move markets over the next two months. Given the approaching election, the markets will scrutinize those releases closely as candidates try to leverage the data. Any negative surprises could result in a sharp pickup in volatility.

Conclusion

As we head into September, which already has a weak performance record, understanding these two risks can help investors navigate a potential pickup in volatility, particularly during election years.

However, the timing of such a consolidation or correction is always tricky. 

We suggest maintaining risk controls, taking profits as needed, rebalancing portfolios, and holding slightly higher cash levels.

While these actions won’t entirely shield portfolios from a near-term decline, they will buffer increased volatility, allowing for more rational and controlled portfolio management decisions.

Poland’s foreign minister has sparked fresh controversy and intense discussion within the NATO military alliance by saying that member states have a ‘duty’ to shoot down incoming Russian missiles when they are in Ukraine’s skies threatening the population below.

“Membership in Nato does not trump each country’s responsibility for the protection of its own airspace – it’s our own constitutional duty,” Foreign Minister Radosław Sikorski told the Financial Times. The comments appeared to shirk off the possibility that such action risks major escalation with Russia.

“I’m personally of the view that, when hostile missiles are on course of entering our airspace, it would be legitimate self-defense [to strike them] because once they do cross into our airspace, the risk of debris injuring someone is significant,” the Polish top diplomat said.

This isn’t the first time the issue has arisen, but Russia’s recent ballistic missile and drone attacks across all oblasts of Ukraine, including in the West near Lviv, have significantly stepped up, leading to more border incidents and close-calls directly impacting neighboring Poland. A large barrage just hit Monday as well. FT details:

Poland signed a bilateral security agreement with Ukraine earlier this summer in which the two countries undertook to examine “the feasibility of possible intercepting in Ukraine’s airspace missiles and UAVs fired in the direction of territory of Poland, following necessary procedures agreed by the states and organizations involved”.

…Sikorski insisted on his country’s right to intercept after a suspected Russian drone crossed into Poland on August 26. Polish authorities have since been searching for the UAV, which may have landed back on Ukrainian territory after probably straying off course during a Russian mass missile attack on Ukraine.

He further explained that when a Russian missile threatens to fall in Poland, it is safer to the Polish population to shoot it down while it is at a higher altitude in Ukraine’s skies. Sikorski has said of this plan, “Ukrainians have told us: you’re welcome.”

Some Western officials have warned that this would move the red lines too rapidly, and get NATO too directly involved, likely triggering direct war with Russia. But a defense analyst in Kiev, Mykola Nazarov, pushed back against this, telling FT, “We’ve seen that some red lines can be moved.”

The ongoing Kursk operation is currently being used of Ukrainian officials to signal to the West that it doesn’t have to worry about Putin following through on his stated red lines. President Zelensky is also ramping up the pressure campaign to take all restrictions off regarding use of long-range missiles on Russian territory.

NATO Secretary General Jens Stoltenberg, who is soon expected to retire from the top post, has rejected the Polish proposal and asserted that it presents too much risk of NATO “becoming part of the conflict.” Of course, at this point this seems to be exactly what Zelensky wants (to drag the West deeper into the war on Ukraine’s behalf).

And NATO’s outgoing deputy secretary general Mircea Geoană also explained to the FT, “We have to do whatever we can to help Ukraine and do whatever we can to avoid escalation. And this is where the line of Nato is consistent from the very beginning of the war.”

“Of course we respect every ally’s sovereign right to deliver national security. But within Nato, we always consult before going into something that could have consequences on all of us — and our Polish allies have always been impeccable in consulting inside the alliance,” Geoană concluded.

But this debate will only intensify, especially given that on Tuesday President Zelensky said Russia mounted one of the single deadliest strikes of the entire war. A missile slammed into a military educational facility in Poltava, central Ukraine, killing at least 41 people and injuring over 180 others.

By Alex Kimani of OilPrice.com

Summary

• Currently, there are thousands of metric tons of used solid fuel from nuclear power plants worldwide and millions of liters of radioactive liquid waste from weapons production sitting in temporary storage containers.

• Finland has built the world’s first deep-earth repository where it will bury nuclear waste for 100,000 years starting 2026.

• About a dozen European countries, including Finland and Switzerland, are planning deep geological repositories for their nuclear waste.

For decades, nuclear energy has been treated as the black sheep of the energy universe thanks to major drawbacks including high costs, high-profile nuclear accidents and hazardous by-products of nuclear energy production. Currently, there are thousands of metric tons of used solid fuel from nuclear power plants worldwide and millions of liters of radioactive liquid waste from weapons production sitting in temporary storage containers, some of which have begun leaking their toxic contents. Nuclear waste is notorious for the fact that it can remain dangerously radioactive for many thousands of years. Thankfully, the world has just come closer to finding a permanent solution to its nuclear menace: Finland has built the world’s first deep-earth repository where it will bury nuclear waste for 100,000 years starting 2026.

Dubbed ‘‘Onkalo’’, the repository is entombed in a bedrock more than 400 meters below the forests of southwest Finland. The facility sits atop a warren of tunnels sited next to three nuclear reactors on the island of Olkiluoto, approximately 240 kilometers from the capital of Helsinki. The Onkalo project is based on the so-called “KBS-3” method developed by the Swedish Nuclear Fuel and Waste Management Company. KBS-3 is based on a multi-barrier principle whereby if one of the engineered barriers were to fail, the isolation of the radioactive waste is not compromised.

“Basically, the Onkalo project is that we are building an encapsulation plant and disposal facility for spent fuel. And it’s not temporary, it’s for good,” Pasi Tuohimaa, head of communications for Posiva, told CNBC via videoconference. Posiva is tasked with the responsibility of handling the final disposal of spent nuclear fuel rods at Onkalo.

The first-of-its-kind geological disposal facility has been hailed as a game-changer that’s likely to increase the appeal of nuclear energy, “Having a solution for the final disposal of spent fuel was like the missing part of the sustainable lifecycle for nuclear energy,” Tuohimaa said. According to  Finnish Climate Minister Kai Mykkänen, Onkala provides the world with a model for sustainable nuclear waste management.

Deep Geological Repositories 

But Finland is not alone. About a dozen European countries, including Finland and Switzerland, are planning deep geological repositories for their nuclear waste. Here in the U.S., government officials have proposed storing the country’s nuclear waste in a repository beneath Yucca Mountain in Nevada about 300 m below ground level and 300 m above the water table. However, this idea has gone in and out of favor with changes in the presidency. For now, nuclear waste simply accumulates mainly where it’s generated–at the power plants and processing facilities, with some having been sitting in interim storage since the 1940s. In Hanford alone, more than 200 million liters of radioactive liquid waste–a mix of liquid, sediment, and sludge–has been sitting in tanks waiting to be processed. Obviously,  storing this kind of high-level liquid waste indefinitely is not sustainable.

Finland’s Onkalo is likely to bring nuclear energy a step closer to mainstream acceptance. According to the World Nuclear Association, nuclear energy currently provides about 9% of the world’s electricity. However, last year at the COP28 summit, 22 countries including the U.S., Canada, the UK, and France pledged to triple nuclear power capacity by 2050 (from 2020 levels). 

Onkalo is also likely to increase the appeal of small modular nuclear reactors (SMRs). SMRs are advanced nuclear reactors with power capacities that range from 50-300 MW(e) per unit, compared to 700+ MW(e) per unit for traditional nuclear power reactors. SMRs can be sited in locations not suitable for larger nuclear power plants, such as retired coal plants; offer significant savings in cost and construction time, and can also be deployed incrementally to match increasing power demand.

However, studies like these can potentially throw a spanner in the works and increase public resistance to SMRs.

“Our results show that most small modular reactor designs will actually increase the volume of nuclear waste in need of management and disposal, by factors of 2 to 30 for the reactors in our case study. These findings stand in sharp contrast to the cost and waste reduction benefits that advocates have claimed for advanced nuclear technologies,” said study lead author Lindsay Krall, a former MacArthur Postdoctoral Fellow at Stanford University’s Center for International Security and Cooperation (CISAC). The study found that one of their key attractions–small size–is also their major Achilles heel because SMRs experience more neutron leakage than conventional reactors, which in turn affects the amount and composition of their waste streams. The study also discovered that spent nuclear fuel from SMRs will be discharged in greater volumes per unit of energy produced and can be far more complex compared to waste from conventional reactors.

Thankfully, the advent of deep geological repositories could improve the bull case for SMRs. 

Authored by Walker Larson via The Epoch Times (emphasis ours),

The president’s desk bears a remarkable pedigree. Its story ties together several disparate historical threads, including a ghost ship, polar exploration, and relations between the United States and the UK. The tale begins with a certain British Admiral, Sir Edward Belch.

A mapmaker in the British Royal Navy described Sir Edward Belcher as “a tyrannical martinet who made every ship he commanded a floating hell.” In 1854, that hell was a cold one, since Belcher and his small flotilla were sailing the frigid seas of the Arctic.

Tyrannical or not, one thing is sure: Belcher was a talented seaman, explorer, and hydrographer (someone who maps bodies of water). In 1852, he’d been assigned an important task. Belcher and his men ventured into the austere, alien waters of the Arctic on a rescue mission, searching for any trace of the lost Franklin Expedition.

The Franklin Expedition, headed by Sir John Franklin, was an 1845 British exploration operation that aimed to find the Northwest Passage through Canada to the Pacific. Franklin’s crew was ordered to record magnetic data as a potential aid to navigation practices. But the treacherous northern sea closed its icy fingers around the men of the expedition and never let them go. The mission proved to be one of the worst disasters in the history of polar exploration.

The two ships of the Franklin expedition—the HMS Erebus and HMS Terror—sailed from Britain in May of 1845, took on supplies in Greenland in July, were spotted in Baffin Bay, Canada, and crossed the Lancaster Sound. They were never heard from again, vanishing into the vast white void.

In the years of searching conducted by the British government after their disappearance, no trace of the ships was found. Only a few artifacts and human remains were recovered. Most of the 129 crew members and officers had simply disappeared. Forensic investigations were conducted on the recovered bodies, revealing that the men suffered from starvation, scurvy, lead poisoning, and, possibly, cannibalism, a narrative supported by the oral accounts of the expedition provided by the Inuit people. It was only in the 2010s that the Erebus and the Terror were at last discovered, wrecked off King William Island.

It was this polar tragedy that brought Sir Edward Belcher and his small fleet of ships, including the HMS Resolute, to the Arctic in 1854. Belcher’s voyage was almost as ill-fated as Franklin’s. Though the Resolute was heavily constructed to withstand the harsh Arctic environment, it became locked in the ice in 1854, along with four more of Belcher’s ships. Belcher made the difficult decision to abandon the ships and begin an overland trek to rendezvous with other vessels that could bring them back to England.

The men left behind their floating piece of home, their security and warmth, and entered the unending whiteness. They marched over the vast expanses of ice, eventually meeting up with their comrades’ ships and returning safely to England. There, Belcher was court-martialed (not for the first time) for abandoning his vessels but acquitted because his orders gave him full discretion. He never received another command.

So there, in the emptiness of the frozen North Sea, where the slowly clenching jaws of ice groaned and echoed through frigid air, the pale winds pined, and the strange lights flickered and played about the sky like ghosts, the abandoned Resolute waited. Belcher and his men had left it in good order, though they knew it would likely be broken up by the ice, in the end. But that was not to be its fate.

Months passed. Summer came, kissing even the hard northern waters with warmth. The ice thawed. Somehow, Resolute broke free. It drifted some 1,200 miles until James Buddington, captain of an American whaling ship, the George Henry, sighted it in 1855, near Baffin Island. An 1856 New York Journal article describes the moment the Americans boarded the ghost ship.

“Finally, stealing over the side, they found everything stowed away in proper order. … Everything wore the silence of the tomb. Finally reaching the cabin door they broke in and found their way in the darkness to the table … [a candle] was lit and before the astonished gaze of these men exposed a scene that appeared to be rather one of enchantment than reality. Upon a massive table was a metal teapot, glistening as if new, also a large volume of Scott’s family Bible, together with glasses and decanters filled with choice liquors. Nearby was Captain Kellett’s chair, a piece of massive furniture, over which had been thrown, as if to protect this seat from vulgar occupation, the royal flag of Great Britain.”

Buddington assigned a portion of his crew to the ghost ship, and they sailed it back to the United States. According to maritime law, the ship belonged to those who had found her (Buddington and his crew), and the British government accepted this fact when they were notified of the find. But the U.S. government had a different idea.

At this time, U.S. relations with Great Britain were strained. The War of 1812 was still alive to memory, including the moment when the British burned the U.S. capitol. The two countries continued to dispute the Canadian border. In the discovery of the Resolute, the U.S. government saw an opportunity to make a gesture of goodwill toward their adversaries across the pond. Congress authorized $40,000 to purchase the ship from Buddington and repair it.

The Americans took great care in refurbishing the sturdy old juggernaut, as described in an 1856 New York Times article:

“With such completeness and attention to detail has this work been performed, that not only has everything found on board been preserved, even to the books in the captain’s library, the pictures in his cabin, and a musical-box and organ belonging to other officers, but new British flags have been manufactured in the Navy Yard to take the place of those which had rotted during the long time she was without a living soul on board.”

With great fanfare, the Resolute was sailed back to England and presented as a gift to Queen Victoria, who visited the ship in person. The Brits took the gift to heart, and the queen remembered this gesture from the Americans for many years.

Returning the Favor

When the Resolute was removed from service and broken down in 1879, Queen Victoria ordered some of its timbers to be preserved. The heavy oak lumber, which had weathered so many storms and seen both tragedy and reconciliation, was constructed into a massive, ornate desk, weighing 1,300 pounds. Victoria sent it as a surprise gift to President Rutherford B. Hayes in 1880, returning the favor and expressing gratitude for returning Her Majesty’s Ship, the Resolute, all those years before. Most importantly, the desk became an emblem of the mutual goodwill and alliance between the United States and Great Britain, which has never wavered since.

Most U.S. Presidents used the desk since it was gifted at the end of the 19th century. Between 1951 and 1962, it was used to hold a projector in the broadcast room at the White House until it was rediscovered by First Lady Jacqueline Kennedy. She had it moved back to the Oval Office, where it has formed part of the backdrop for many landmark moments in American presidential history. There are photos of President Kennedy sitting at the desk with John Kennedy Jr. peeking out from beneath it.

The Resolute desk, as it has come to be known, bears within it the marks of struggle, abandonment, miraculous discovery, restoration, and reconciliation. It’s a fitting symbol for the resolute American spirit.

Authored by John Maxwell Hamilton via RealClearPolitics,

“Quis custodiet ipsos custodes?” – Who guards the guardians? – is an old question that began as amusing repartee and has bedeviled democratic government from the beginning of its formation.

The phrase originated with the Roman satirical poet Juvenal, who was presented with the idea that wives should be chained to keep them faithful. Fine, the poet replied, but who will guard husbands?

The question for democracy lies at the heart of a new book by Supreme Court Justice Neil Gorsuch, “Over Ruled: The Human Toll of Too Much Law.” Too many laws and regulations administered by unaccountable government officials, he writes, have “swallowed up ordinary people.”

Gorsuch, with help from his former law clerk Janie Nitze, makes his case in a series of parables. They feature individual Americans who have been victimized by government laws that they did not know existed and that should not have been written in the first place. The courts in many stories are too aggressive in adjudicating cases that should have been considered minor infractions, at best.

In one such story, an agent from the U.S. Department of Agriculture informed a young magician, Marty Hahne, that he needed a license for using his rabbit in the act he had just performed at a local library. Hahne subsequently learned he also needed an evacuation plan for the animal in case of a hurricane or some other disaster. This requirement originated in a federal statute, the Animal Welfare Act, which regulates the treatment of dogs, cats, rabbits, and other animals for research, teaching, testing, and exhibition. Congressional lawmakers called on the USDA to apply the law to such venues as “carnivals, circuses, and zoos.” USDA regulators interpreted those exhibitions to include magic shows.

In other stories of misplaced rules and courts run amuck, people’s lives are more than inconvenienced. They are ruined. Gorsuch believes these stories show that a surfeit of laws is sucking the life out of democracy.

“Over Ruled” will be catnip for readers who fear the so-called deep state is out to subvert democracy. It also is convenient for Donald Trump, who, if elected, promises to “drain the swamp” by firing career civil servants and installing his own unelected supporters in their place.

But Gorsuch’s book should be taken seriously, both for its strengths and weaknesses. He certainly makes a valid point that the number of laws and regulations has exploded in recent years. The first federal criminal statute, written when the Republic was established, contained fewer than fifty crimes. Now the total number is, by some counts, 5,000. In the process, Congress has delegated powers to executive department agencies to write administrative laws and rules as well as apprehend suspects and judge them.

Having made the case for the problem, however, Gorsuch does not dig into the complexity of implementing workable solutions. He acknowledges that our society is much more complicated than it was at the nation’s founding, and therefore we need more measures to protect citizens. He does not tell us how we sort the good from the bad or how we regulate the regulators.

Perhaps most damaging to his argument, “Over Ruled” does not provide readers with the context needed to understand the longstanding tension between government by the people and the need for expert mediation on social, economic, and political problems.

Gorsuch, who believes judging involves close adherence to the original intent of the Constitution, takes us back to an earlier era that he characterizes as local people solving local problems. He considers this a good time for “ordinary Americans.” What he fails to say, however, is the Founding Fathers were elitists who doubted that ordinary white, male citizens, not to mention minorities and women, were up to the task of making good government decisions.

Gorsuch liberally quotes James Madison about the evils of too much law. But equally important, Madison and others hoped that elections would put the “best” in office. Only members of the House of Representatives were directly elected. Under the original Constitution, senators were elected by state legislatures. The Electoral College can “elect” a presidential candidate who did not win the popular vote – something that has happened already twice this century.

Thomas Jefferson, among many others, promoted national education schemes to create “a natural aristocracy” – what we would today call civil servants – to manage government. What Jefferson vaguely foresaw has come to pass, whether it is experts monitoring environmental degradation and food purity or ferreting out unfair trade practices.

This reliance on experts – people who have the training to determine facts – has not gone uncontested. It fueled populism in the United States in the late 19th century as well as today. Disaffected citizens feel government is not taking them into account and that the bureaucracy is an untethered fourth branch of government, a phrase Gorsuch used frequently. This mentality has given resonance to Donald Trump’s message that his intuitive common-sense ideas about interest rates are more sound than Federal Reserve System economists who have studied monetary policy all their lives.

Readers who want a fuller exploration of the longstanding social and political tension that arises from depending on experts can turn to “Democracy and Truth” by historian Sophia Rosenfeld. Or readers may choose a new volume by Stephen Breyer. The recently retired justice is an expert on administrative law and helped Sen. Ted Kennedy deregulate the airline industry. His “Reading the Constitution: Why I Chose Pragmatism, Not Textualism” thoughtfully weighs the difficulty of balancing fealty to the Constitution with the needs of modern society.

The willingness to rely on common sense over expertise is not infinitely elastic. Most people prefer to go to trained doctors when they are ill rather than consult someone they pass on the street. Most people like some aspects of government expertise and intervention. They may, for instance, place a high value on fighting animal abuse, which is the motivation behind the well-intentioned (if misused) Animal Welfare Act. Various professions require training and education in order to acquire a license to practice; in addition to adding to their credibility, this restriction reduces competition. One of Gorsuch’s examples of overreaching administrative law concerns an African American woman who was “apprehended” for braiding hair in her salon without having attended cosmetology school.

In regard to preferences, it is worth noting that Justice Gorsuch has some of his own, namely enlarging the power of presidents beyond anything the Founders conceived. Insofar as administrative power is concerned, he and other conservatives believe that the president should have more control over quasi-independent agencies.

A recent Supreme Court decision raises concerns about maintaining the protections that administrative law provides. The court found that it was unconstitutional for the Securities Exchange Commission to levy fines against a financier whom they deemed to have violated antifraud and pro-transparency rules. The court said the SEC had to pursue its case in federal court. This dramatic switch in thinking by the Supreme Court could make it difficult – and in some cases impossible – for agencies to police offenders. As law professor David Cole has noted, “some agencies’ statutes do not authorize them to sue in federal court.” It is worth asking, do we want our already flooded courts to deal with all these issues, when more efficient ways exist to get the job done?

Gorsuch has not written a legal analysis so much as a stump speech. His examples are akin to those used by political leaders to give a human dimension to policies they are promoting. Many of the stories are trivial to the point of being frivolous.

Is it really worthwhile to dwell on a law, long ago passed by Virginia legislators, to outlaw hunting bears with dogs on Sundays? A few reform-minded states have wiped laws like these from the books. At the federal level, Gorsuch notes, President Obama directed agencies to “eliminate rules that don’t make sense.”

These steps are relatively easy. The difficult part Gorsuch leaves untouched. His cases are largely cartoons. They do not demonstrate how to balance the injustice growing out of a law with the legitimate concerns it is trying to address.

The solutions he offers sound like Fourth of July speeches. His call for more civic education, as valuable as that would be (see my RCP column on the subject), emphasizes school-age children spending more time reading the Constitution.

Gorsuch argues that the expansion of laws and regulations undermines the credibility of our legal institutions. “Everyone feels like a criminal,” he told the C-SPAN audience.

The growth in law-making is a problem, but it is questionable that most Americans feel like criminals. How can they feel like criminals if they don’t know about all the laws that exist, as Gorsuch insists is the case?

If the justice is worried that we are moving “from a world in which law is revered into one in which it generates disaffection and feeds distrust,” he could profitably focus on the Supreme Court’s unwillingness to police itself. Feeble ethical standards govern justices’ behavior, which is well known and heavily criticized.

The Supreme Court has enormous power. Justices are appointed, not elected, and may serve until they die. They are given their jobs because of their expertise in nuanced application of the law. For Gorsuch, who belongs to this powerful elite, one might expect a deeper exploration of the trade-offs between too much law and too few protections.

“Who guards the guardians” is a much more profound subject than Justice Gorsuch lets on.

John Maxwell Hamilton is an RCP columnist, a professor at the Manship School of Mass Communication, Louisiana State University, and an award-winning author of eight books, including “Manipulating the Masses: The Origins of Government Propaganda,” which won the Goldsmith Prize.

There are a great many tall tales circulating these days in association with illegal immigration.  Possibly one of the most prevalent claims from the political left is that western economies “need illegals” in order to support the dragging economy and fill a hungry labor market. An extension of this idea is that many of these migrants are “skilled workers” that the west desperately needs for vital roles. 

But how much do the US and Europe really need illegal immigrants in order to keep western economies going?  And how many of them actually bring important skills to western labor markets?  Would they be sunk without these people?  Or, would they be much better off?

First and foremost it should be noted that in the US there is ample evidence to show that the Biden Administration has been engaging in statistical manipulation for the last four years, and this includes labor statistics.  While there was indeed a clear shortage of workers in the service sector during covid lockdowns (and the helicopter money supplied by covid stimulus and PPP loans), recent revisions to BLS numbers have cut at least 819,000 jobs from the books that Biden originally took credit for.  In other words, those jobs never existed.

It was these same jobs numbers that were used by the Democrats to argue in favor of open borders; asserting that without illegals this explosion in labor demand would turn into a worker shortage crisis.  While specific job sector stats (job categories) don’t usually distinguish between legal and illegal migrants, there is little evidence to indicate they fill an important role in our society.

In America, migrants flood into the low-skill service sector and health services sector.  In many cases this involves entry level nursing home care and similar employment.  The other category in which they usually work is construction.  They offer cheap labor for home building, but this has certainly not translated to lower housing costs. 

In the meantime, tens-of-millions illegal migrants drive up housing demand, in turn driving up prices on new homes and rentals.  Migrants are given access to government subsidies as long as they are under review for asylum or refugee status, in many cases they are offered more access to government aid than natural born citizens.  Both California and Oregon are currently instituting housing loan programs available to immigrants only.  

Census SIPP data from 2022 indicates that around 59% of non-citizen households in the US use one or more welfare programs, compared to 39% of US-born households.  The establishment media and Democrats will often try to dilute welfare stats by citing legal migrant numbers instead of illegal migrant numbers.

Around 47% of illegal migrants to the US never completed high school (as opposed to 8% of US-born citizens).

It is estimated that illegals cost US taxpayers at least $150 billion in public services (officially) each year while paying only $25 billion in taxes.  While some economists cite a potential $324 billion in GDP gain from migrant workers, this almost all comes from wages which illegals send to their families outside the US.  

In the UK, migrant data is rarely tracked by the government, ostensibly because they want to keep the indigenous public in the dark as much as possible.  However it is clear that, just like in the US, migrants (specifically from third-world nations) do not bring skilled labor to the table.  UK migrants overwhelmingly work in the service and health sectors, once again in low-level nursing jobs, elderly facilities, some work in tech and the rest do not work at all.  

The UK estimates that at least 1.7 million migrants are unemployed while on the dole, and they are costing taxpayers upwards of £8.5 Billion ($11 billion) annually.

In Germany, welfare costs skyrocketed in 2024 and reports show 47% of recipients for government handouts are migrants.  The total cost of $49 billion is 14.8 percent higher than in 2023, 18.4 percent higher compared to 2020, and 23 percent higher compared to 2015.   In the EU migrants from Africa and Asia are once again greatly overrepresented in health services. 

The point is, the notion of “skilled migrant workers” saving western economies with their vital labors is a complete fabrication.  Illegal migrants in particular are a net negative and a dangerous strain on the welfare system.  They also drive up housing costs by creating mass demand with not enough supply, and this same demand drives up inflation in almost every other area of the economy.  The roles they do fill can be easily adapted without them by offering minor subsidies or tax benefits for American citizens.   

Like most countries in the world today, the US and European nations should be vetting migrants and only accepting those that bring value to the table along with a willingness to assimilate.  Otherwise, they serve no useful purpose.