another site
I wrote about this case, which also involves what strikes me as an unconstitutional order forbidding defendants from naming the officer in the future, here (when the case seemed to be entirely sealed), here (as to the prior restraint), and here (as to pseudonymity and the remaining sealed document). The Enquirer (Cameron Knight) has more.
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A pack of Democratic lawmakers in California are proposing a wealth tax for the state’s richest citizens, forcing them to pay more essentially just for owning a lot of stuff. They also, amazingly, want the tax to follow Californians who flee the state in response, attempting to make them continue paying taxes on wealth that’s not even in the state.
Assemblymember Rob Bonta (D–Oakland) is blunt about his reasons for introducing the California Wealth Tax (A.B. 2088). Rich people have money. He wants more of it to pay for and expand state services. And that’s it.
“The California Wealth Tax would add critically needed revenue for California by creating a more equitable tax structure,” Bonta said in a press release promoting the bill. “Families are hurting right now. COVID-19 has only made matters worse. In times of crisis, all Californians must step up and contribute their fair share. Asking these well-resourced Californians to give a little more to keep our people working and support our most vulnerable is the right thing to do.”
The proposed wealth tax would add a .4 percent tax on a taxpayer’s net worth for net worths that exceed $30 million, which Bonta estimates will affect fewer than 31,000 Californians. From this proposed wealth tax, he estimates the state will raise $7.5 billion per year. The state currently faces a $54 billion budget deficit due in part to economic downturns from the coronavirus pandemic.
And to be clear, this tax goes beyond wealth and assets held in the state of California. “All worldwide property” of these wealthy Californians would be subject to this tax. If you park your money in real estate, farm assets, artwork, offshore funds, or a whole host of categories, they want a piece of it. (It even lists pension funds as taxable to those who meet the threshold!)
For rich Californians thinking of leaving rather than paying the state for the privilege of owning things, lawmakers are also attempting to tax the wealthy who vote with their feet. The bill contains a special formula to apply to anybody who has lived in the state within the last 10 years, though the tax burden will slowly drop over time for each year they don’t live in California. It’s pretty much a certainty that former Californians subjected to this wealth tax would challenge the legality of this plan.
Despite Bonta’s attempt to present the state’s wealthiest as needing to contribute their “fair share,” the reality is that California is exceedingly—perhaps even overly—dependent on its wealthiest for tax revenue. According to the state’s Legislative Analyst’s Office, people earning more than $1 million a year were responsible for almost 40 percent of the state’s personal income tax revenue in 2015, though those same people account for only 19 percent of adjusted gross income in the state (see page 10 here for a graph).
Over at the Los Angeles Times, Deputy Editorial Page Editor Jon Healey notes that this proposed wealth tax could have effects on capital gains taxes, especially if it encourages people to sell their assets at a loss to lower their tax burdens—and California extracts a significant amount of capital gains taxes from its wealthiest citizens. The result here could be a drop in capital gains revenue in the state, meaning (ironically) less tax revenue overall.
You don’t even need to ask whose bright idea this was because Bonta is actually quite happy to reveal that the bill’s co-sponsors are the California Federation of Teachers, the California Teachers Association, and the Service Employees International Union. These are, without exaggeration, the people who would financially benefit from the tax’s passage. The money would be given to the state’s general fund, which pays public employee salaries.
Has there ever been a more vivid example to pin the “taxation is theft” saying to? This wealth tax is literally a fine for having assets the state’s public employees covet for themselves.
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I think this is generally quite right, and indeed an important victory for academic freedom; professors, including those at public colleges, have to be able to speak freely about religious belief systems (whether Islam, Christianity, Judaism, Hinduism, Buddhism, or anything else), no less than other belief systems.
From Sabra v. Maricopa County Comm. College Dist., decided this morning by Judge Susan M. Brnovich (D. Ariz.):
Arising out of an Islamic Terrorism module in an online World Politics course taught by Dr. Nicholas Damask, this case tests the limits of the First Amendment’s Religion Clauses. Mohamed Sabra enrolled in this spring semester course at Scottsdale Community College (“SCC”) in 2020. Its syllabus describes it as one that will provide an “[i]ntroduction to the principles and issues relating to the study of international relations. Evaluation of the political, economic, national, and transnational rationale for international interactions.”
The course is organized into six modules, each containing multiple components to explore various topics concerning world politics. The Islamic Terrorism module challenged by Mr. Sabra and the Council on American-Islamic Relations of Arizona … had three components: a PowerPoint presentation, excerpts from Future Jihad, and a quiz. The PowerPoint presentation explored world politics through three sub-topics: (1) “Defining Terrorism”; (2) “Islamic Terrorism: Definition”; and (3) “Islamic Terrorism: Analysis.” The second component required students to read excerpts from Future Jihad, a book published by Walid Phares, and the quiz evaluated students on their comprehension of course material with twenty-five multiple choice questions.
Plaintiffs take issue with Dr. Damask’s instruction throughout these various Islamic Terrorism module components, alleging that his teachings violate the Establishment Clause and Free Exercise Clause …. Plaintiffs allege his instruction unconstitutionally “conclude[es] that Islam ‘mandates’ terrorism and the killing of Non-Muslims, and that this is the only interpretation of religious texts, but without any disclaimer to inform students that this is one-perspective and that Islam itself does not condone terrorism.” They further allege that Dr. Damask “is not teaching that only some extremists espouse these beliefs, but rather that literally, Islam itself teaches the mandates of terrorism.”
And “[t]he only objectively reasonable construction of [Dr.] Damask’s actions,” Plaintiffs allege, “is that his primary message is the disapproval of Islam.” As it specifically concerns the quiz, Plaintiffs allege “[it] forced [Mr.] Sabra to agree to [Dr. Damask’s] radical interpretation of Islam.” And when Mr. Sabra refused to answer questions in accordance with what he learned in the course, his answers were marked wrong, and his course grade was negatively impacted….
The court rejected Sabra’s Establishment Clause challenge (applying the “endorsement” test set forth by Ninth Circuit precedent, though the Supreme Court seems to have retreated from that test in American Legion v. American Humanist Ass’n):
“The Religion Clauses of the First Amendment provide that ‘Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.'” This includes not only government approval of religion, but its disapproval of or hostility toward religion [citing Ninth Circuit cases].
Courts are directed to apply the “Lemon test” in cases challenging government conduct under the Establishment Clause. Government action regarding religion only satisfies the Establishment Clause if it (1) has a secular purpose; (2) does not have the principle or primary effect of advancing or inhibiting religion; and (3) does not foster excessive entanglement with religion. Lemon v. Kurtzman (1971).
Plaintiffs argue that the challenged module fails under the second prong of the Lemon test. “Under the second prong of the Lemon test, [the Court] must consider whether the government action has the principal or primary effect of advancing or inhibiting religion.” When making this determination, courts decide whether it would be “objectively reasonable for the government action to be construed as sending primarily a message of either endorsement or disapproval of religion.” The analysis is whether the government action “‘primarily’ disapproves” of religious beliefs notwithstanding the fact that one may infer possible government disapproval of religious beliefs.
Under this objective standard, even where the government practice reflects “some disapproval” of religion, this alone is not enough to run afoul of the Establishment Clause. “Courts have long emphasized the importance of academic freedom in deciding the appropriate curriculum for the classroom.”
Examining the course as a whole, a reasonable, objective observer would conclude that the teaching’s primary purpose was not the inhibition of religion. The offending component was only a part of one-sixth of the course and taught in the context of explaining terrorism. One aspect of terrorism is Islamic terrorism. Only in picking select quotes from the course can one describe the module as anti-Islam. Dr. Damask also quotes Peter Bergen for the view that the terrorist threat comes from radical terror groups that represent a “twisted” variant of Islam as a whole.
{Further, as Plaintiff’s counsel misstated in oral argument, Question 19 of Dr. Damask’s quiz on terrorism states: “Walid Phares notes that although ‘gullible’ Westerners are taught that jihad can have two meanings, people in the Arabic world understand that its overwhelmingly obvious meaning is ___.” This question merely asks students to identify the opinion of Walid Phares regarding Islam, not to adopt his position on Islam.} Thus, the Court finds that the primary effect of Dr. Damask’s course is not the inhibition of the practice of Islam….
And the Court rejected Sabra’s Free Exercise Clause challenge:
“The Free Exercise Clause, which applies to the States under the Fourteenth Amendment, ‘protects religious observers against unequal treatment’ and against ‘laws that impose special disabilities on the basis of religious status.'” … Curriculum that merely conflicts with a student’s religious beliefs does not violate the Free Exercise Clause. Parker v. Hurley (1st Cir. 2008) (requirement that public school students to read a book featuring gay couples did not violate constitutional rights of Christian parents or children); California Parents for Equalization of Educ. Materials v. Torlakson (N.D. Cal. 2017) (ruling that requiring students to learn class material that the plaintiffs viewed as “derogatory towards Hinduism” did not violate the Free Exercise Clause)….
Here, Mr. Sabra alleges that he was forced to choose between denouncing his religion by selecting the “correct” answer or receiving a lower grade. That is simply not correct. As Defendants point out, Mr. Sabra was not required to adopt the views expressed by Dr. Damask or the authors Dr. Damask cited to in his course, but only to demonstrate an understanding of the material taught. Dr. Damask’s course did not inhibit Mr. Sabra’s personal worship in any way. Instead, Mr. Sabra was simply exposed to “attitudes and outlooks at odds” with his own religious perspective. Therefore, as a matter of law, the Court finds that the Plaintiff’s allegations do not amount to a violation of the Free Exercise Clause ….
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A pack of Democratic lawmakers in California are proposing a wealth tax for the state’s richest citizens, forcing them to pay more essentially just for owning a lot of stuff. They also, amazingly, want the tax to follow Californians who flee the state in response, attempting to make them continue paying taxes on wealth that’s not even in the state.
Assemblymember Rob Bonta (D–Oakland) is blunt about his reasons for introducing the California Wealth Tax (A.B. 2088). Rich people have money. He wants more of it to pay for and expand state services. And that’s it.
“The California Wealth Tax would add critically needed revenue for California by creating a more equitable tax structure,” Bonta said in a press release promoting the bill. “Families are hurting right now. COVID-19 has only made matters worse. In times of crisis, all Californians must step up and contribute their fair share. Asking these well-resourced Californians to give a little more to keep our people working and support our most vulnerable is the right thing to do.”
The proposed wealth tax would add a .4 percent tax on a taxpayer’s net worth for net worths that exceed $30 million, which Bonta estimates will affect fewer than 31,000 Californians. From this proposed wealth tax, he estimates the state will raise $7.5 billion per year. The state currently faces a $54 billion budget deficit due in part to economic downturns from the coronavirus pandemic.
And to be clear, this tax goes beyond wealth and assets held in the state of California. “All worldwide property” of these wealthy Californians would be subject to this tax. If you park your money in real estate, farm assets, artwork, offshore funds, or a whole host of categories, they want a piece of it. (It even lists pension funds as taxable to those who meet the threshold!)
For rich Californians thinking of leaving rather than paying the state for the privilege of owning things, lawmakers are also attempting to tax the wealthy who vote with their feet. The bill contains a special formula to apply to anybody who has lived in the state within the last 10 years, though the tax burden will slowly drop over time for each year they don’t live in California. It’s pretty much a certainty that former Californians subjected to this wealth tax would challenge the legality of this plan.
Despite Bonta’s attempt to present the state’s wealthiest as needing to contribute their “fair share,” the reality is that California is exceedingly—perhaps even overly—dependent on its wealthiest for tax revenue. According to the state’s Legislative Analyst’s Office, people earning more than $1 million a year were responsible for almost 40 percent of the state’s personal income tax revenue in 2015, though those same people account for only 19 percent of adjusted gross income in the state (see page 10 here for a graph).
Over at the Los Angeles Times, Deputy Editorial Page Editor Jon Healey notes that this proposed wealth tax could have effects on capital gains taxes, especially if it encourages people to sell their assets at a loss to lower their tax burdens—and California extracts a significant amount of capital gains taxes from its wealthiest citizens. The result here could be a drop in capital gains revenue in the state, meaning (ironically) less tax revenue overall.
You don’t even need to ask whose bright idea this was because Bonta is actually quite happy to reveal that the bill’s co-sponsors are the California Federation of Teachers, the California Teachers Association, and the Service Employees International Union. These are, without exaggeration, the people who would financially benefit from the tax’s passage. The money would be given to the state’s general fund, which pays public employee salaries.
Has there ever been a more vivid example to pin the “taxation is theft” saying to? This wealth tax is literally a fine for having assets the state’s public employees covet for themselves.
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I think this is generally quite right, and indeed an important victory for academic freedom; professors, including those at public colleges, have to be able to speak freely about religious belief systems (whether Islam, Christianity, Judaism, Hinduism, Buddhism, or anything else), no less than other belief systems.
From Sabra v. Maricopa County Comm. College Dist., decided this morning by Judge Susan M. Brnovich (D. Ariz.):
Arising out of an Islamic Terrorism module in an online World Politics course taught by Dr. Nicholas Damask, this case tests the limits of the First Amendment’s Religion Clauses. Mohamed Sabra enrolled in this spring semester course at Scottsdale Community College (“SCC”) in 2020. Its syllabus describes it as one that will provide an “[i]ntroduction to the principles and issues relating to the study of international relations. Evaluation of the political, economic, national, and transnational rationale for international interactions.”
The course is organized into six modules, each containing multiple components to explore various topics concerning world politics. The Islamic Terrorism module challenged by Mr. Sabra and the Council on American-Islamic Relations of Arizona … had three components: a PowerPoint presentation, excerpts from Future Jihad, and a quiz. The PowerPoint presentation explored world politics through three sub-topics: (1) “Defining Terrorism”; (2) “Islamic Terrorism: Definition”; and (3) “Islamic Terrorism: Analysis.” The second component required students to read excerpts from Future Jihad, a book published by Walid Phares, and the quiz evaluated students on their comprehension of course material with twenty-five multiple choice questions.
Plaintiffs take issue with Dr. Damask’s instruction throughout these various Islamic Terrorism module components, alleging that his teachings violate the Establishment Clause and Free Exercise Clause …. Plaintiffs allege his instruction unconstitutionally “conclude[es] that Islam ‘mandates’ terrorism and the killing of Non-Muslims, and that this is the only interpretation of religious texts, but without any disclaimer to inform students that this is one-perspective and that Islam itself does not condone terrorism.” They further allege that Dr. Damask “is not teaching that only some extremists espouse these beliefs, but rather that literally, Islam itself teaches the mandates of terrorism.”
And “[t]he only objectively reasonable construction of [Dr.] Damask’s actions,” Plaintiffs allege, “is that his primary message is the disapproval of Islam.” As it specifically concerns the quiz, Plaintiffs allege “[it] forced [Mr.] Sabra to agree to [Dr. Damask’s] radical interpretation of Islam.” And when Mr. Sabra refused to answer questions in accordance with what he learned in the course, his answers were marked wrong, and his course grade was negatively impacted….
The court rejected Sabra’s Establishment Clause challenge (applying the “endorsement” test set forth by Ninth Circuit precedent, though the Supreme Court seems to have retreated from that test in American Legion v. American Humanist Ass’n):
“The Religion Clauses of the First Amendment provide that ‘Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.'” This includes not only government approval of religion, but its disapproval of or hostility toward religion [citing Ninth Circuit cases].
Courts are directed to apply the “Lemon test” in cases challenging government conduct under the Establishment Clause. Government action regarding religion only satisfies the Establishment Clause if it (1) has a secular purpose; (2) does not have the principle or primary effect of advancing or inhibiting religion; and (3) does not foster excessive entanglement with religion. Lemon v. Kurtzman (1971).
Plaintiffs argue that the challenged module fails under the second prong of the Lemon test. “Under the second prong of the Lemon test, [the Court] must consider whether the government action has the principal or primary effect of advancing or inhibiting religion.” When making this determination, courts decide whether it would be “objectively reasonable for the government action to be construed as sending primarily a message of either endorsement or disapproval of religion.” The analysis is whether the government action “‘primarily’ disapproves” of religious beliefs notwithstanding the fact that one may infer possible government disapproval of religious beliefs.
Under this objective standard, even where the government practice reflects “some disapproval” of religion, this alone is not enough to run afoul of the Establishment Clause. “Courts have long emphasized the importance of academic freedom in deciding the appropriate curriculum for the classroom.”
Examining the course as a whole, a reasonable, objective observer would conclude that the teaching’s primary purpose was not the inhibition of religion. The offending component was only a part of one-sixth of the course and taught in the context of explaining terrorism. One aspect of terrorism is Islamic terrorism. Only in picking select quotes from the course can one describe the module as anti-Islam. Dr. Damask also quotes Peter Bergen for the view that the terrorist threat comes from radical terror groups that represent a “twisted” variant of Islam as a whole. {Further, as Plaintiff’s counsel misstated in oral argument, Question 19 of Dr. Damask’s quiz on terrorism states: “Walid Phares notes that although ‘gullible’ Westerners are taught that jihad can have two meanings, people in the Arabic world understand that its overwhelmingly obvious meaning is ___.” This question merely asks students to identify the opinion of Walid Phares regarding Islam, not to adopt his position on Islam.} Thus, the Court finds that the primary effect of Dr. Damask’s course is not the inhibition of the practice of Islam….
And the Court rejected Sabra’s Free Exercise Clause challenge:
“The Free Exercise Clause, which applies to the States under the Fourteenth Amendment, ‘protects religious observers against unequal treatment’ and against ‘laws that impose special disabilities on the basis of religious status.'” … Curriculum that merely conflicts with a student’s religious beliefs does not violate the Free Exercise Clause. Parker v. Hurley (1st Cir. 2008) (requirement that public school students to read a book featuring gay couples did not violate constitutional rights of Christian parents or children); California Parents for Equalization of Educ. Materials v. Torlakson (N.D. Cal. 2017) (ruling that requiring students to learn class material that the plaintiffs viewed as “derogatory towards Hinduism” did not violate the Free Exercise Clause)….
Here, Mr. Sabra alleges that he was forced to choose between denouncing his religion by selecting the “correct” answer or receiving a lower grade. That is simply not correct. As Defendants point out, Mr. Sabra was not required to adopt the views expressed by Dr. Damask or the authors Dr. Damask cited to in his course, but only to demonstrate an understanding of the material taught. Dr. Damask’s course did not inhibit Mr. Sabra’s personal worship in any way. Instead, Mr. Sabra was simply exposed to “attitudes and outlooks at odds” with his own religious perspective. Therefore, as a matter of law, the Court finds that the Plaintiff’s allegations do not amount to a violation of the Free Exercise Clause ….
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“Black People Don’t Have To Vote Democrat” – Baltimore Republican Unveils Viral Campaign Ad
Tyler Durden
Tue, 08/18/2020 – 13:20
Some excitement has been generated around Kimberly Klacik, a nonprofit founder and Baltimore County Republican Central committee member, who is a congressional candidate attempting to fill the vacant seat of late Rep. Elijah Cummings.
Klacik shared a three-minute campaign video Monday on Twitter of her walking the streets of Baltimore City, exposing how decades of Democratic policies have imploded neighborhoods. The tweet reads:
“Democrats don’t want you to see this. They’re scared that I’m exposing what life is like in Democrat-run cities. That’s why I’m running for Congress Because All Black Lives Matter Baltimore Matters And black people don’t have to vote Democrat.”
Maryland’s 7th District, which covers the northern and eastern boundaries of Baltimore County, the majority of Howard, and a decent chunk of eastern and western parts of Baltimore City, has been dominated by Democrates for five decades.
“Do you care about Black lives? The people that run Baltimore don’t…I can prove it. Walk with me,” Klacik said at the beginning of the video.
“This is the reality for black people every single day,” said Klacik while surrounded by rows of abandoned homes.
Klacik said inner-city communities are suffering from “crumbling infrastructure, abandoned homes, poverty, and crime.”
She said it’s not just Baltimore, suggesting that any Democratically controlled metro area in the country is a bad environment for black people.
Readers may recall we’ve pointed this out for years:
Klacik also said, “Baltimore’s been run by the Democratic Party for 53 years. What is the result of their decades of leadership?”
She then accused the Democrats of betraying black people and said: “Black people don’t have to vote Democrat.”
Klacik will square off against former Rep. Kweisi Mfume in the general election. This seat has never been held by a Republican.
The change Baltimore needs could start with Klacik if she manages to win. The time it would take to turn around a failed city such as Baltimore should be measured in decades.
via ZeroHedge News https://ift.tt/3kWqKjB Tyler Durden
Our False Bizarre Economy Renders GDP Useless (Part 1)
Tyler Durden
Tue, 08/18/2020 – 13:00
Authored by Bruce Wilds via Advancing Time blog,
We may be getting to the place where more people are beginning to realize the illusion created from printing and pouring trillions of dollar haphazardly into the economy can’t last.
Today, consumer confidence hinges on what Washington decides to do with the next stimulus package. At this point it is likely they will pour enough money into the economy to keep things artificially inflated. Still, anyone looking at the coming gross domestic product (GDP) figures as an indication of how the economy is faring is barking up the wrong tree.
The usefulness and validity of the GDP numbers in determining how rapidly the economy is growing has been disputed over the years. Let us face the fact the illusion the economy continues to work its way forward is completely based on “government deficit spending” coupled with the Fed’s very easy monetary policy. At the same time, we should concede much of the perceived growth is because all the money being printed has to go somewhere. Sadly, economic growth does not guarantee a healthy economy.
The original formula for measuring economic growth was full of flaws but over the years we have allowed numbers that mean “nothing” to seep into how the GDP is calculated all in an effort to create the illusion of growth. In years past America far outproduced the rest of the world and manufactured goods that it exported across the seas. Today much of our economy is dominated by the service sector, this means if you wash my windows, then I will mow your yard. Another huge problem is that the GDP counts government spending, and politicians spend (other people’s) money on stuff simply to get reelected. If this isn’t the clearest cut case that the calculation of GDP is meant to obscure, rather than to inform, I can’t imagine what would be.
Years ago, the Bureau of Economic Analysis (BEA) has made a significant change in the way they calculate the GDP. It slid by unnoticed by many people but they changed how they classified and recorded expenditures for R&D and entertainment, literary, and artistic originals. An announcement of this change was made by the BEA during February of 2013, this resulted in an increase in the GDP. This kind of “bump” means that a gain of 2% today is, in reality, less than a gain of 2% years ago. This means we are comparing apples to oranges when comparing today’s growth to that of prior years.
Gross Domestic Product is defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment, and government spending, plus the value of exports, minus the value of imports. Within that definition, it appears those in power have discovered some wiggle room, and even before that, a debate existed as to what it really tells us. When we delve into all of this it is easy to see this is not simple at all and that the GDP can be a master illusion when we look at how it filters down to both society and the Main Street economy. The first comprehensive set of measures of national income was developed by economist Simon Kuznets who in 1934 told the US Congress the formula was problematic.
In 1962 Kuznets again emphasized that we must keep in mind the difference between quantity and the quality of growth. He made clear a distinction exist between cost and returns, and between the long and the short run. Kuznets went further to specify we needed goals concerning both growth “of what, and for what.” Other economists have agreed that GDP is an empty abstraction with a very weak link to the real economy. The framework fails to reflect the difference between real wealth expansion or capital consumption. Kuznets used the example of the government building a pyramid that added nothing to the well-being of individuals, it would be viewed as economic growth, but in reality, divert funding away from real wealth-generating activities harms the generation of real wealth.
What is not stated can often be far more important than what is. The number we are spoon-fed and await with such glee has little to do with real growth but most likely mirrors or is merely a reflection of monetary pumping. The GDP number fails to highlight a slew of important factors that feed directly into our standard of living and the health of our economy, such as;
How wealth is distributed and inequality
Taxation and how it affects both the economy and society
Non-market transactions like volunteer and work conducted “off the books”
Underground economy, illegal trade, and many cash transactions.
Asset value, meaning GDP ignores changes in what things are worth
The non-monetary part of the economy, bartering of goods and services
Distinguishing between production that is subsidized and that which is not
Quality improvements and new products
What is being produced, bombs or butter and a better-educated populace
The sustainability of growth or misallocation of either capital or resources
Cross-border parity and changes in currency value
External factors such as negative environmental effects or the health of the people
Some countries have even gone as far as to include things like prostitution and other illegal activities in a way to boost GDP and in effect lower their ratio of GDP to government debt. In 2013 in advice to their government the UK’s Natural Capital Committee highlighted some of the failures of GDP when they pointed out its focus on flows can allow an economy to run down its assets while recording high levels of GDP growth until a point is reached where this begins to impact future growth. They went on to make it clear the recorded GDP growth rate is prone to overstate the sustainable growth rate. This number as with most numbers once put out there is subject to full-blown manipulation and spin.
Bottom-line in the words of the man creating this indicator of economic growth, “The GDP framework is more or less an empty abstraction devoid of any link to the real world.”
via ZeroHedge News https://ift.tt/3iQFmPz Tyler Durden
Kodak Shares Halted Numerous Times, Spike Over 50% As Short-Squeeze Takes Hold
Tyler Durden
Tue, 08/18/2020 – 12:43
It’s deja vu all over again with Kodak shares this morning as the controversial stock has been halted four times (so far)…
As it soars over 50% with no news catalyst at all…
As it appears the massive short-squeeze has begun…
But, some context for today’s move is perhaps useful…
As the company is still dealing with the $765 million government loan being put on pause as the SEC investigates the company’s disclosure of the deal, which was officially announced on July 28.
This move comes a day after White House trade advisor Peter Navarro blasted executives at Eastman Kodak for their handling of the loan to produce pharmaceutical ingredients in the United States.
“Based on what I’m seeing, what happened at Kodak was probably the dumbest decisions made by executives in corporate history,” Navarro said.
“You can’t fix ‘stupid’.” he added.
via ZeroHedge News https://ift.tt/3h9Dql0 Tyler Durden
New Trump Ad Questions Biden’s Mental Faculties With Sad ‘Before & After’ Clips
Tyler Durden
Tue, 08/18/2020 – 12:40
“Did something happen to Joe Biden?” – a new Trump campaign ad questions, before going on the attack and highlighting Biden clips ‘past and present’ to make the case his mental faculties are in decline.
The ad was timed to coincide with the virtual Democratic National Convention, The Hill reports, while Axios’ Jonathan Swan calls it the re-election campaign’s “most brutal ad of the 2020 election”.
“We think it’s very important that voters fully assess Joe Biden’s qualifications and fitness to be president,” a senior campaign official said of the ad to Axios. “Our data show that people are concerned about his ability to do the job.”
The footage compares Biden speeches in 2015 and 2016, where he appears to present his points articulately and with charisma, while thinking quickly on the spot, to later a much slower, confused looking former VP awkwardly grasping for words during the 2020 campaign and in recent television interviews.
As we described earlier on multiple occasions, DNC insiders are terrified at the prospect of Biden melting down into incoherent commentary during a live face-off with Trump and will likely come up with any excuse possible to avoid a live, in-person debate on a stage with cameras rolling.
The ongoing pandemic could provide the ‘perfect excuse’ to keep him in the basement carrying on with tightly scripted remote interviews. Even those are getting increasingly worse, however.
ICYMI: Joe Biden asked “Why the hell do I need to take a test” when a reporter asked if he had taken a cognitive test.
We put together a few moments that show doing so might be a good idea… pic.twitter.com/T5k10AJvT3
— MRCTV (@mrctv) August 10, 2020
When asked point blank in a CBS interview two weeks ago whether the 77-year old presumptive Democratic nominee if he’s willing to submit to a “cognitive test” in order to put widespread concerns of his perceived mental decline to rest, he began bizarrely ranting about cocaine before again stumbling over simple words by the end of the segment.
“C’mon man,” Biden responded to CBS Errol Barnett while other panelists looked on. “That’s like saying, ‘You — before you got on this program you took a test where you’re taking cocaine or not, what do you think? Huh? Are you a junkie?’”
Getting closer to November, the question is not going away, and we expect the meltdowns and confused pauses to only get worse.
* * *
A recent viral Trump tweet mocked Biden’s interview and speech difficulties even more harshly:
— Donald J. Trump (@realDonaldTrump) August 13, 2020
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“Paying More… For Less” – Earnings Don’t Support Bullish Thesis
Tyler Durden
Tue, 08/18/2020 – 12:20
Authored by Lance Roberts via RealInvestmentAdvice.com,
With the second quarter of the 2020 reporting season mostly behind us, and with markets testing “all-time” highs, do earnings support the bullish thesis? Such is the fundamental question surrounding the debate over the record deviation between “momentum” and “growth.”
As we stated before the earnings season began, the annual “beat the estimate” game would, as always, have a high “beat rate.”
“SO EXCITED! – It’s almost Millennial Soccer season on Wall Street where companies begin to beat estimates on drastically lowered expectations.”
Why do I call it “Millennial Soccer” season? As I explained in “The Truth About Wall Street Analysis.”
Earnings season is now a ‘game’ where no one keeps score. The media cheers, and everyone gets a ‘participation trophy’ just for showing up.”
Not surprisingly, after cutting earnings estimates drastically following the first quarter, companies reported a record “beat” rate.
With 90% of companies reporting, we can safely say – “everyone got a trophy.”
Such a high “beat rate” certainly “seems” to suggest companies are firing on all cylinders, and that currently elevated prices are justified.
However, as they say, the “Devil is in the details.”
Let’s start with the “estimate revisions,” which have been touted by the bulls as clear evidence of support for lofty valuations. The chart below is the “revision breadth” by analysts for the S&P 500.
While these revisions from extremely negative levels are significant, and investors rush to chase extremely overvalued “momentum stocks,” the overall “earnings season” was quite dismal. As noted by FactSet:
“Earnings Growth: For Q2 2020, the blended earnings decline for the S&P 500 is -33.8%. If -33.8% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q1 2009 (-35.4%).
Earnings Guidance: For Q3 2020, 11 S&P 500 companies have issued negative EPS guidance and 34 S&P 500 companies have issued positive EPS guidance. (Only 10% issued guidance, which leaves analysts guessing at future results)
Valuation: The forward 12-month P/E ratio for the S&P 500 is 22.3. This P/E ratio is above the 5-year average (17.0) and above the 10-year average (15.3).
Pay very close attention to the chart below.
Below is the evolution of estimates from Standard & Poors from the beginning of this year.
Let me point out some critical points:
In January and February, investors were bidding up stocks to all-time highs based on REPORTED earnings of $171/share by the end of 2021.
Today investors are paying the same price for 2021 earnings that are $20/share lower.
While earnings revisions did tick HIGHER at the beginning of August, estimates through the end of 2020 hit a new low just 2-weeks later.
The message here is simple.
In January of 2020, investors were told to buy stocks because valuations were cheap based on 2021 estimates.
In August of 2020, investors are being told the same, but they are paying more for less.
But what about those upward revisions?
Look at the chart above again. You will notice there have indeed been upward revisions to estimates through the end of the year. However, they have been tiny relative to the increase in asset prices. FactSet also made a note:
“During the first six months of CY 2020, analysts lowered earnings estimates for companies in the S&P 500 for the year. The CY 2020 bottom-up EPS estimate (which is an aggregation of the median 2020 EPS estimates for all the companies in the index) declined by 28.7% (to $126.86 from $177.81) during this period.
This marked the largest decrease in the annual EPS estimate for the index over the first six months of the year since FactSet began tracking the annual bottom-up EPS estimate in 1996.
Not surprisingly, given the record-level cuts to EPS estimates during the first half of the year, it resulted in the elevated “beat rate” as noted above.Given the high beat rate, analysts are confident in increasing their estimates for the next quarter.
Since June 30, the CY 2020 bottom-up EPS estimate has increased by 3.5% (to $131.30 from $126.86).”
Not so impressive when viewed at this level. However, the charts below show the evolution a little more clearly. The data below is the latest from Standard & Poors for the S&P 500 index.
Let’s start with the monthly changes since January. You will notice that 2020 estimates are lower, while 2021 estimates are slightly increased. Not so impressive.
However, that chart is deceptive, along with the FactSet data. The reality is that while markets are sitting at all-time highs (as they were in February), both 2020 and 2021 estimates are lower.
“Price is what you pay, value is what you get.” – Warren Buffett
But this is where you should take notice.
During the last TWO years, reported earnings for the S&P 500 have plunged. While analysts are currently hoping for a “V-shaped” economic recovery to provide for the “hockey stick” recovery, risks are high such will not occur.
As noted, investors are currently “paying up” for 2021 earnings, which are $27 lower than 2020 earnings in April 2019.
The reality is that earnings, and more importantly, revenue (which is where earnings come from) have collapsed.
The chart below shows the total cumulative growth of the S&P 500 index versus operating (most optimistic as its earnings before all the bad stuff) and sales per share.
Do you see the problem here?
Here is a better way to visualize the disparity. The chart below shows the S&P 500 index versus both Operating (fantasy) and Reported (reality) earnings.
Even with the recent upward revisions to earnings, operating earnings are still 33% lower, with reported earnings down 46%.
Despite the rise in the S&P 500 index, earnings have fallen despite substantially lower tax rates and massive corporate share repurchases. (Share repurchases reduce the denominator of the EPS calculation.)
Such is no small thing. The issue of share repurchases previously has been two-fold. Primarily, it was the distortion of bottom-line earnings per share.
We have discussed the issue of “share buybacks” numerous times and the distortion caused by the use of corporate cash to lower shares outstanding to increase earnings per share.
‘The reason companies spend billions on buybacks is to increase bottom-line earnings per share, which provides the ‘illusion’ of increasing profitability to support higher share prices. Since revenue growth has remained extremely weak since the financial crisis, companies have become dependent on inflating earnings on a ‘per share’ basis by reducing the denominator. “
At the end of 2019, reported EPS was boosted by $3.21/share by share buybacks. That support has now collapsed to just $1.51 per share.
Importantly, note that while shares outstanding have reached a new low, earnings have collapsed as well. However, had it not been for the share repurchases, the EPS decline would have been worse. Nearly 75% of earnings reported are from “accounting gimmickry” versus actual “revenue” growth.
Think about that for a moment.
Secondly, a rising headwind for markets in the future will be to share buybacks to remain a significant market support.
As noted previously,
However, for investors, the real issue is that almost 100% of the net purchases of equities has come from corporations.
Today, buybacks have fallen sharply as corporations move to conserve cash amidst a recessionary economy.
As noted, since the “Financial Crisis” lows, much of the rise in “profitability” has come from cost-cutting measures and accounting gimmicks rather than actual increases in top-line revenue. While tax cuts certainly provided the capital for a surge in buybacks, revenue growth, which is connected to a consumption-based economy, remained muted. Now, the “economic shutdown” has crushed revenue growth entirely.
Since 2009, the operating earnings per share of corporations has risen by just 158%. However, the increase in earnings did not come from an increase in revenue. During the period, sales (which is boosted due share reductions) grew by a marginal 41%.
However, investors have bid up the market more than 365% from the financial crisis lows of 666.
Investors are once again extremely optimistic they haven’t overpaid for assets.
While Wall Street continues to come up with a myriad of ways to “rationalize” overpaying for assets in the markets currently, just remember, it’s not their money. It’s yours.
Earnings do not support the current bullish thesis.
As we just wrote in “Close, But No Cigar:”
“What eventually sparks a reversion is always the one thing no one is anticipating. Throughout history, the unexpected, exogenous event is what sends investors fleeing for the exits. After the damage occurs, the media’s excuse is always: ‘Well, no one could have seen that coming.’
As noted above, overbought, extended, overly bullish markets are by themselves ‘bullish.’ These conditions represent the current ‘momentum,’ which keeps pushing assets higher and dragging investors into the market.
It’s very much like a crowded theater. Everything is fine until that point where someone yells ‘fire.’ At that point, everyone tries to rush towards a very narrow exit.”
The market is currently trading at absurd valuation levels. There is little to support the idea of a “V-shaped” recovery at this point.
Investor “psychology” will collide with “reality,” and the rush to exit will not be a slow and methodical process. Instead, much like we saw in March, it will be a stampede with little regard to price, valuation, or fundamental measures.
The exit will become very narrow.
via ZeroHedge News https://ift.tt/329DLxU Tyler Durden