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Risk Happens Fast. Is The Selling Over?

Authored by Lance Roberts via RealInvestmentAdvice.com,

Risk Happens Fast

Over the last few weeks, we’ve been discussing the potential for a correction due to the extreme extension of the market above the 200-dma. To wit:

“In the very short-term, the market is grossly extended and in need of some correction action to return the market to a more normal state. As shown below, while the market is on a near-term ‘buy signal’ (lower panel) the overbought condition, and near 9% extension above the 200-dma, suggests a pullback is in order.”

Chart Updated Through Friday

The correction was inevitable; it just needed a catalyst, like President Trump ramping up trade wars, to trip up traders. However, the rebound in the markets through the end of the week was also expected. As we told our RIAPRO subscribers on Monday (30-Day Free Trial).

After 5-days of selling, look for a short-term bounce next week, but we suspect the correction is not complete yet.

We followed that analysis on Tuesday morning before the market opened in “Look for a ‘Sellable Bounce:”

“On a very short-term basis, the market has reversed the previously overbought condition to oversold. This could very well provide a short-term ‘sellable bounce’ in the market back to the 50-dma. As shown in the chart below, any rally should be used to reduce portfolio risk in the short-term as the test of the 200-dma is highly probable.

(We are not ruling out the possibility the market could decline directly to the 200-dma. However, the spike in volatility and surge in negative sentiment suggests a bounce is likely first.)

By the end of the week, the market did indeed retrace back to the 50-dma, but failed to climb above it. With the market only halfway back to “overbought,” there is some “fuel” still available for a further rally next week. 

However, even if the market does rally a bit more next week, it is STILL a “sellable rally.”

Therefore, let me restate what actions should be taken in the short-term:

1) Trim Winning Positions back to their original portfolio weightings. (ie. Take profits)

2) Sell Those Positions That Aren’t Working. If they don’t rally with the market during a bounce, they are going to decline more when the market sells off again.

3) Move Trailing Stop Losses Up to new levels.

4) Review Your Portfolio Allocation Relative To Your Risk Tolerance. If you are aggressively weighted in equities at this point of the market cycle, you may want to try and recall how you felt during 2008. Raise cash levels and increase fixed income accordingly to reduce relative market exposure.

This is just the “risk management” process. 

Last week, I quoted my friend Victor Adair at Polar Futures Group:

“Risk happens fast.” 

In the past, I have spilled much digital ink discussing risk and reward, and possibilities versus probabilities. 

Investing is simply about the understanding of risk. However, when risk is compounded by high-speed, automated trading, the effect of “risk” is compressed into a concise time frame. As such, reversions are becoming faster, deeper, and more concentrated than we have seen in the past. 

Take a look at the chart below, which shows the daily trading range of the S&P 500.

That’s what is known as “volatility.” 

However, volatility has not been just this past week, but for the past four months. While investors may not realize it, the markets are currently no higher than they were at the beginning of May.

This kind of volatility makes it incredibly tough for investors to sit on their hands and do nothing. But, sometimes, the best course of action is simply “doing nothing.”

However, that depends on what you think will happen next.

Is The Selling Over?

The market, now driven primarily by “headline watching” algorithms, ran up and down this past week on the back of a “tweet.”

Stocks plunged on a tweet that more tariffs would hit China. Then surged on a tweet of a September “trade deal,.” The market then plunged again on a tweet that restrictions would return on Huawei, just to surge again on news the ban would only apply to Federal agencies.

I’m exhausted just typing that.

As I said above, it is difficult to trade kind of volatility.

The good news is the market did rally this past week, as hopes the Fed will continue to cut rates to support asset prices. (I am writing an article for next week on the “Pavlovian effect.”) 

The bad news, is the current set up, technically speaking, is much like we saw last September/October as markets. The chart below is the S&P 500 as compared to the “Volatility” index which is inverted for clarity.

As we saw last year, the market plunged from very overbought conditions, rallied sharply back, and failed again before crashing to lows. The strong contra-rallies pulled investors into the markets before crushing them into the end of the year. 

Currently, while it may not be the Fed causing problems for the market, it is the White House that is raising red flags. If the White House follows through on its threats to increase tariffs on China, and assuming that China doesn’t retaliate in return, there is not an inconsequential risk to asset prices as markets begin to reprice earnings. (More on this in a moment)

Importantly, the market has triggered a “sell signal” much like was seen in both May of this year, and in February and October of 2018.

Given that we took profits in May and July from portfolios, raised cash, and are carrying hedges, we will “sit on our hands” for the moment and wait for the market to “tell us” what it wants to do next. 

However, our signals suggest the risk, at the moment, is to the downside.

Risk Happens Slowly Too

While “risk happens fast” in the financial markets, it builds up slowly as well. As Doug Kass noted this past week:

“The odds of a U.S. recession according to JP Morgan is 40% – a cycle high. The rate of growth is slowing measurably. The manufacturing recession is now seeping into the consumer sector.”

“Like in 2007, (though the circumstances are far different) many investors, and even Administration officials, are ignoring the tea leaves of substantially slowing global economic growth.

With the world more interconnected at any time in history, non-domestic economic activity is importantly influencing the S&P Index’s constituent companies’ top- and bottom- lines.”

He is absolutely correct. 

Most importantly, while investors are betting on more Fed rate cuts, they are missing what is happening with earnings which continue to erode. The first chart is our earnings estimates (which we projected in June, 2018, unrevised for accountability) versus S&P’s estimates (which are constantly revised.) Note that estimates not only caught up with our original projections (wiping out the entire benefit of tax cuts) but has now exceed those levels. 

Despite the collapse in earnings, stocks are currently trading higher than they were in then. Valuations have expanded by 3x, while earnings have deteriorated. More importantly, and even less optimistic for the bulls, is the continued deterioration of 2020 estimates.  (The orange dashed line is our estimate for earnings based on assumptions of trade war impacts.) 

This is not a problem the Fed cutting rates, or doing QE, will fix. 

The other problem for the bullish view is the global glut. 

Following the financial crisis, it was China’s consumption binge which bailed out the majority of the world. While many believe it was Central Banks that rescued the globe, it really wasn’t. 

However, now, China is at its limits, and the global glut and output gap has now come home to roost.

Doug drives this point home:

“An output gap is the difference between actual global GDP and the level that would be consistent with operating at full capacity. The difference today is a consequential 0.5% – an unusually large figure considering the late stage cycle of economic growth.

In other words, a subpar economic recovery since The Great Recession has yielded excess global supply. This idle capacity has been accompanied with a continuous deflationary influence that has contributed to generational lows in worldwide interest rates and a central bank community that is quickly out of monetary bullets.

This means that since 2007, the $128 trillion of new global debt has been supported by only $27 trillion of new income. (Debt has grown by a factor of 5x against the amount of money that can support it!)

World debt is now about 295% of world GDP – a new record.

To understand the severity of this problem we should look back into the 2001-07 cycle. During that period global debt rose by only $30 trillion (from $86 trillion to $116 trillion). In the interim interval, global GDP rose by $25 trillion to $58 trillion. So, in the bubble cycle of 2001-07, debt growth (+$30 trillion) outstripped economic growth (+$25 trillion) by only 20% compared to the 2007-19 time frame in which debt growth (+$128 trillion) outstripped economic growth (+$37 trillion) by nearly 400%!!!

Ignore the massive buildup of global debt (against the backdrop of slow global nominal GDP) at your own risk.”

While investors are hoping that Fed rate cuts and QE will extend the current cycle, I can’t stress enough that when the recession hits, and it will, it will be a far more destructive process than the current consensus believes. 

It will be the “Perfect Storm” when debt, demographics, and unfunded pension obligations collide. There is simply not enough money to bail it all out at once.

via ZeroHedge News https://ift.tt/2Z1DFIO Tyler Durden

Watch: Tesla On Autopilot In Moscow Slams Into Tow Truck, Explodes Into Flames

Just days after we reported that Tesla could be on the verge of a formal investigation by the NHTSA, a father and his two kids in Moscow both suffered serious injuries after their Tesla Model S on Autopilot slammed into a tow truck before bursting into flames, according to RT. 

Shocking video footage from a vehicle passing the accident in the opposing lane captures the moment that the Tesla explodes, going up in flames and “shocking oncoming drivers”. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

A post shared by Gago (@gagorun) on

This video, around the 2 minute mark, shows a driver passing what can only be described as the smoldering wreckage of the Tesla after the finally was finally under control. 

The accident took place on Moscow’s Ring Road on Saturday evening and initial reports are blaming the car’s Autopilot system for failing to recognize a stopped tow truck that was attending to a vehicle on the road. 

Both the driver and his children were rushed to the hospital before the Tesla caught fire. The driver suffered a concussion and a leg fracture and the children suffered cervical spine and chest injuries. 

Video of the initial incident shows the Tesla, in the left hand lane, failing to move over for a stopped tow truck and driving directly into the stopped vehicle. 

With more Teslas on the road now than ever, it feels as though the “watershed” moment that’ll prompt the NHTSA to take serious and swift action against the company, in order to protect drivers, might not be that far away.  

via ZeroHedge News https://ift.tt/2H28rY5 Tyler Durden

Getting To A Special State Of Ugly

Authored by MN Gordon via EconomicPrism.com,

There are certain phrases – like “trust me” or “I got this” – that should immediately provoke one’s suspicion.  When your slippery contractor tells you, “trust me, your kitchen renovation will be done before Christmas,” you should be wary.  There’s no way it’ll be done until late spring.

Or when your incompetent client says, “I won’t be needing your services at this time, I got this.”  You should expect a panicked phone call at 5pm on Friday.  “This is way more than I can handle,” your client will say, “take care of it.”

On Monday, when the sky was falling, and there was much weeping and gnashing of teeth, the Chinese yuan weakened to above 7 per dollar for the first time in over a decade.  This prompted U.S. Treasury Secretary Steven Mnuchin to waft out a suspicious phrase of his own.  He called China a “currency manipulator.”

Mnuchin’s logic, as far as we can tell, is that China manipulated their currency because their central bank didn’t adequately intervene in foreign exchange markets to prop up the yuan.  Conversely, direct intervention into markets, to maintain a centrally planned price that’s acceptable to Mnuchin, is not currency manipulation.  Go figure!

On Tuesday, to restore confidence in the yuan, and refute accusations of being a malevolent currency manipulator, the People’s Bank of China (PBOC) announced a plan to price fix the yuan.  Specifically, the PBOC will sell 30 billion yuan ($4.2 billion) of offshore bills in Hong Kong on August 14.  This move is designed to drain liquidity offshore, thus strengthening the yuan against the dollar.

Why bother?

Cooperative Currency Debasement

The world, circa 2019, is a fabricated reality.  Debt, piled upon debt, piled upon debt, ad infinitum, has erected a financial order that’s at perilous odds with the underlying economy.  Central bankers attempt to manipulate fake money and fake foreign exchange rates to keep the debt pile from cascading down.

The primary tactic central bankers use to haphazardly keep this sucker from going down, a la George W. Bush, is currency debasement.  Central bankers inflate their currencies to keep asset prices and corporate operations, which are dependent on cheap credit, above water.  Without perpetual currency debasement, the debt structure will break down…and assets and businesses will be liquidated for pennies on the dollar.

Such a liquidation is exactly what’s needed to return asset prices and businesses to a form and function that’s inline with the economy.  However, getting from here to there would be incredibly disruptive.  Many businesses would shutter their doors indefinitely.  Unemployment would go through the roof.

But more important to the central planners, debt deflation and liquidation would overturn the wealth and power structure of today’s elites.  Many of today’s wealthy and powerful would be reduced to paupers.  That’s why they’re so determined to prevent it.

Nonetheless, the dirty deed of currency debasement is a delicate endeavor.  The major central banks of the world must practice it in a loosely coordinated and cooperative manner.  They must hold hands and debase their currencies together, maintaining relative stability.

Getting to a Special State of Ugly

The point is all central banks manipulate their currencies in an attempt to preserve a certain realm of acceptability.  But, above all, they must supply liquidity to credit markets, via currency debasement, to levitate asset prices, and forestall the great liquidation.  Ultimately, these efforts are doomed.

For one, they ignore the fact that foreign exchange markets are made by more than just central bankers.  They’re requisite for international trade.  They’re used by large investment funds to hedge against an abrupt devaluation.  They’re also used by speculators to exploit perceived price differentials, which are often the result of central bank intervention in the first place.

Throw in a currency war and escalating trade war, and the fabricated reality becomes increasingly difficult to maintain.  Sooner or later it’ll be impossible to keep this sucker from going down.  Before then, things will have to get to a special state of ugly.

For example, yesterday [Thursday], via Twitter, President Trump bellowed for greater currency manipulation:

“As your President, one would think that I would be thrilled with our very strong dollar.  I am not!  The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing,…John Deere, our car companies, & others, to compete on a level playing field.

“With substantial Fed Cuts (there is no inflation) and no quantitative tightening, the dollar will make it possible for our companies to win against any competition.  We have the greatest companies…in the world, there is nobody even close, but unfortunately the same cannot be said about our Federal Reserve.  They have called it wrong at every step of the way, and we are still winning.  Can you imagine what would happen if they actually called it right?”

Indeed, we can imagine many things.  We imagine that when the Fed gives Trump what he wants – substantial rate cuts – the results will be remarkably different than he imagines.

Rather than invigorating American businesses, it will sink them under a red sea of debt.  After that, this sucker’s going down.

via ZeroHedge News https://ift.tt/2H08vY9 Tyler Durden

In First Footage Of Kashmir Protests Under Lockdown, Live Fire Rings Out

Despite Indian-administered Kashmir now on a complete communications blackout and security lockdown after its autonomy was revoked last Monday, videos of major protests and clashes with Indian troops in the Muslim stronghold have begun to emerge. 

One video from the Jammu and Kashmir’s (J&K) largest city and capital of Srinagar appears to show live gun fire used by security forces to disperse demonstrators, at the end of a protest which western media described as initially involving tens of thousands. 

Amid troops dispersing tear gas, automatic fire can also be heard in some of the early videos to come out.

Though it’s unclear whether gunfire clearly heard in the video could involve riot control measures like rubber bullets, pellets, or possibly Indian troops discharging their weapons in the air, The New York Times this weekend reported multiple wounded by gunshot following the weekend protests.

Interestingly, consistent with the information and communications blackout, Indian authorities overseeing the tens of thousands of Indian military which surged into J&K over the past week have denied the protests ever happened. 

This as The Guardian reports there’s been a slight ease in curfew and travel restrictions places on Srinagar. Landlines, cell phones, and the internet remain blocked, however. This means little information, including of protests in the restive region, has come out.

A Times report cited eyewitnesses to say Indian troops are in some instances suppressing mass demonstrations through live fire:

Afshana Farooq, a 14-year-old who was nearly trampled in a stampede when Indian forces opened fire on demonstrators, in a hospital in Srinagar, Kashmir, on Friday. “We were just marching peacefully after prayers,” her father said. “Then they started shooting at us.”

An Al Jazeera correspondent currently on the ground in the region also reported that, “Despite the unprecedented security lockdown, thousands of people demonstrated in Srinagar and were met with live fire, tear gas and rubber-coated steel bullets,” according to an account of prior Friday protests in Srinagar.

As we reported previously, local reports are describing a total communications blackout that’s so bad many don’t even know New Delhi revoked the region’s political autonomy early this week. The region has essentially been cut off from the rest of the country and the outside world, with a security blockade and checkpoints also set up by the military, and schools shuttered and all public assemblies banned.

Preceding Monday’s unprecedented revocation of the over 50-year old constitutional Article 370 which gave Indian-administered Kashmir special autonomous status, a massive Indian troop surge had been observed entering the country’s most restive and politically sensitive Muslim-majority region, with estimates putting it close to 40,000 additional soldiers deployed. 

via ZeroHedge News https://ift.tt/2McvZ0q Tyler Durden

How To Avoid Being Called A Russian Agent Online

Authored by Caitlin Johnstone via Medium.com,

The always reliable NBC News has published an important and informative article titled “Russia-linked Twitter accounts promoted ‘doxxing’ over racial tension videos”, which uses fearless investigative insinuations and cutting-edge vagueness to inform readers that viral videos of Americans being racist are essentially a Russian fabrication.

The article’s four authors boldly document the shocking, bombshell findings of a Clemson University study that “almost 30 suspicious Twitter accounts” were involved in retweeting videos of racist behavior from white Americans, and, as alert readers should all be aware by now, “suspicious” is another word for “Russian”. Since we all know that racism has never been a problem in America and only Russian agents could possibly promote such an outlandish idea, we can safely assume that anyone we see sharing viral videos of white Americans being horrible to minorities is a subversive agent of the Kremlin.

Due to the need to protect western democracy from the malign influence of Moscow, it has become increasingly necessary for patriotic citizens to call attention to these nefarious propagandists so that social media users don’t become hypnotized by their soul-corrupting memes. This is why you will very often see alert netizens sounding the alarm online whenever they catch someone doing something Kremliny, such as expressing skepticism of western intelligence agencies or criticizing Kamala Harris. Here are five things you can do to avoid being caught in the crossfire of this vital information war and getting labeled a Russian agent yourself:

1. Always support all actions of the US military and its allies.

There’s only one person who benefits from skepticism toward the activities of western military forces, and that’s Vladimir Putin. Nobody but a GRU agent would question the fact that our brave men and women in uniform are out there fighting for freedom and democracy in the highest interest of everyone involved. Our trusted leaders have never lied to us about what they are using the armed forces for, and they’re not about to start now.

This rule applies to news which demonstrates the need for military action as well. If the television tells you that Bashar al-Assad has dropped poison gas on an area full of children and video cameras, and you find your mind quibbling over details like the absence of any strategic reason for such a thing, just relax and keep watching. This is just your mind trying to turn you Russian. The TV will straighten you out.

2. Believe everything the news reporters tells you.

It is a known fact that Putin’s main goal in his hybrid warfare against truth and freedom is to weaken our trust in our institutions. That’s step one of his plot: weaken our trust in our institutions and media. Step two, well, nobody knows what step two is, but step three is the annexation of America and the EU into the Russian Federation.

The best way to thwart this sinister plot is therefore to place as much trust as possible in authoritative news bodies which, unlike Russian media, have no record of circulating fake news or propaganda at any time ever. There is a fully diverse range of trusted media outlets for you to choose from, varying all the way across the entire political spectrum from politically conservative outlets like The Wall Street Journal and Fox News, to highly progressive news outlets like The Washington Post and MSNBC. There’s something for everybody!

3. Accept Joe Biden as your Lord and Savior.

President Joe is happening. It’s like one of his famous neck kisses: you might not like it, you might not want it, but it’s happening. So you may as well get used to the idea. Don’t struggle against it. Don’t protest it. Don’t be Russian about it.

This rule also applies to the surrogate Joe Bidens waiting in the wings in case Plan A falls through. No objecting to President Kamala, President Liz or President Beto, either. If the DNC decides that that’s what’s best for you then you’ll vote for it and say thank you, you insolent little shits.

4. Kiss up to power, kick down at the oppressed.

Your government loves you. Your government would never do anything to harm you. Your government would never do anything to harm anyone. Anyone who criticizes your government or its friends is your enemy. They are Russian. They must be destroyed.

The unwashed masses want to take from your leaders what is rightfully theirs. The unwashed masses have been hypnotized by Russia. They do not know what is best for them. They are useful idiots. It is your job to correct their thinking, loyal citizen. Correct them as forcefully as necessary.

5. Believe all America’s problems started in January 2017.

It is common knowledge that the White House has been infiltrated by the Kremlin using a complex scheme involving hackers, Facebook memes, Trump Tower, and urinating Russian prostitutes. All of America’s problems began at that time, whether they be racism, gun violence, deportations, Republican Party corruption, or political divisiveness. Any attempt to trace any problems to any time prior to January 2017 or any location other than Moscow is Russian. If we get rid of the Putin Puppet, we solve all of America’s problems forever.

If you meticulously follow these five steps, loyal citizen, you can be sure to avoid ever being labeled a Russian agent. Probably. Maybe. Depends how obedient you are. I wouldn’t worry about it.

*  *  *

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Deprivation of Voting Rights as a Collateral Consequence of a Felony Conviction

The U.S. Commission on Civil Rights issued a report on the collateral consequences of a felony conviction several weeks ago. Its members are against ’em. And to some degree, so should we all be. There are too many collateral consequences to a felony conviction these days. Examples include laws that prevent ex-offenders from engaging in certain professions and rules that make it difficult or impossible for ex-offenders to live in public housing.

On the other hand, the Commission appears curiously naïve about the reasons behind some of these collateral consequences. They seem to think they are just gratuitous efforts to kick people who are already down. But high rates of recidivism are a fact. According to Bureau of Justice statistics, “Five in 6 (83%) of state prisoners released in 2005 across 30 states were arrested at least once during the 9 years following their release.” The average number of re-arrests is five. Some collateral consequences are genuinely useful in protecting the public.

For example, few would argue against laws that forbid those who have been convicted of the sexual abuse of a young child from working in a day care center. And maybe it’s not such a bad idea to invest in more halfway houses for recently released prisoners instead of immediately putting them in unsupervised public housing, where some ex-offenders will likely put innocent residents in greater danger.

Even so, there have to be limits. Some collateral consequences seem to be nothing more than the work of a special interest seeking to squelch competition. In West Virginia, for example, “waxing specialists” and “shampoo assistants” must demonstrate “good moral character” to a government board. Maybe it’s just me, but I like rather like shampoo assistants “with a past.”

My Commissioner Statement (along with Commissioner Peter Kirsanow) urges a bit more effort to assess collateral consequences on a case-by-case basis.

What struck me most about the Commission’s report was its emphasis on laws that deny felons the vote. The report purports to be about how collateral consequences make it too difficult for ex-offenders to re-integrate and hence increase the likelihood of recidivism. And yet it devotes more pages to the deprivation of voting rights than to any other kind of consequence. And it uses by far the report’s most florid language to describe it, arguing that “denying this right to even a ‘subset of the population’ jeopardizes democracy for the entire population,” and that “the right to vote is the ‘essence of a democratic society, and any restrictions on that right strike at the heart of representative government.” [Italics added.]

Curiously, this is the one collateral consequence that is unlikely to prevent re-integration. If one doesn’t have a job or a place to live, it is easy to see how one might be lured back into crime. Not being able to vote isn’t in that category at all.

Alas, it is a little hard to imagine that the Commission’s Progressive majority would have been as focused on voting if they had not been quite so convinced that ex-offenders tend to vote for left-of-center candidates. (Ditto for the lack of enthusiasm shown by Republican state legislators.)

If useful reform is going to happen, it makes sense to focus elsewhere.

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Authoritarian Rulers Mobilize Private Violence To Advance Their Goals

Authoritarian figures rarely rely on state power alone to accomplish their draconian ends. They often also mobilize the very thing that legitimate rulers are supposed to stop: private violence. That is part of how the Jim Crow South maintained its regime of racial apartheid after the abolition of slavery limited the scope of formal state action. And now President Donald Trump is dipping into that ignominious tradition to activate the white nationalists in his base to advance his border control objectives.

Trump did not pull the trigger in the El Paso carnage that killed 22 people and counting, but it’s hard to deny that he has helped foment the atmosphere in which the trigger was pulled. Trump kicked off his presidential run by calling Mexicans rapists and criminals, of course. And in his rallies he teasingly encouraged his supporters to “rough up” dissenters who protested his incendiary rhetoric. Far from cooling such language after getting elected, he ramped it up. He has repeatedly referred to immigrants as an infestation and painted a lurid picture of an out-of-control southern border under attack by “invaders” that border patrol agents are powerless to stop because, as he laments, “we can’t let them [the agents] use weapons.” As New York‘s Eric Levitz points out, the unmistakable message to “trigger happy patriots” in all of this is that “we can’t use weapons” but “perhaps you should.”

That, of course, is precisely what the 21-year-old El Paso shooter, who reportedly wrote a manifesto that billed his attack as a “response to the Hispanic invasion of Texas,” did. Although he took matters much further than Trump intended with his inflammatory rhetoric, the same cannot be said for border militias steeped in white supremacist ideology that have increasingly been doing for Trump what Trump can’t do for himself.

For months now a slew of paramilitary outfits in border states have taken it upon themselves to patrol the southern border more aggressively than the government, constrained by due process and other concerns, can. “Having the most powerful person on Earth echo their hateful views may even give extremists a sense of impunity,” points out Louisiana State University’s Nathan P. Kalmoe.

Indeed, after Trump stoked fears of the Central American migrant caravan before the November midterms, about 100 volunteers from the Texas Minutemen, draped in camouflage suits, night-vision goggles, aerial drones, and semiautomatic weapons, holed up along the Rio Grande and conducted night vigils to supplement the border patrol. Meanwhile, the Arizona Border Recon, founded eight years ago by the notorious army veteran Tim Foley, has ramped up its raids in the Sasabe desert in search of drugs and border crossers over the last two years. And then there is New Mexico–based United Constitutional Patriots (UCP). It started patrolling the New Mexico border in February 2018 and videotaping its encounters with migrants. By its estimates, it has apprehended some 3,000 border crossers.

In one particularly egregious episode in April whose video the group brazenly circulated on social media to gain recruits, its “patriots” held 300 terrified asylum seekers—men, women, and toddlers—on their knees at gunpoint.

This was tantamount to an illegal hostage taking, and the backlash finally prompted the arrest of its leader—though not for holding up the migrants at gunpoint, but for impersonating a federal agent. The U.S. Customs and Border Patrol issued a pro-forma disclaimer declaring that it “does not endorse” enforcement action by private groups. But if that’s the case, asks the ACLU’s Peter Simonson, how does the agency explain photos of two border patrol agents on horseback posing on either side of masked vigilantes? “All indications are that they had a collaborative relationship with UCP and never told the vigilantes to cease and desist, even though the vigilantes were dressed up to impersonate BP officers, badges and all,” he notes.

Even more shockingly, such actions have not made the group too radioactive for Trump and his allies. Indeed, notes Simonson, UCP is now working closely with We Build the Wall, an organization founded by Trump’s former ultra-nationalist advisors, Steve Bannon and Krish Kobach. We Build the Wall’s mission is to raise private funds to build Trump’s wall. A few months ago, without obtaining any permits, it erected a short wall on private land on New Mexico’s southern border and then illegally extended it across a federal road. The ACLU is challenging the extension, notes Simonson.

In the name of enforcing the law, these vigilante groups are breaking the law at every turn. Yet instead of facing the wrath of the administration, they are making friends in the highest circles; Bannon, after all, was the architect of Trump’s America First campaign and served in the White House, while Kobach headed his voter fraud commission and was a serious contender as Trump’s immigration czar.

By contrast, migrants who cross the border without proper authorization, a mere misdemeanor the first time around, are having their babies snatched from them under Trump’s zero tolerance border policies, a practice that has continued even after a court order barred it. At the same time, the administration is cracking down on the sanctuary movement. Immigration activists such as Arizona State University’s Scott Warren are being slapped with anti-harboring charges that carry a 20-year prison sentence merely for offering food and first aid to those crossing the harsh desert. Even advocates who merely speak out on behalf of the migrants aren’t being spared.

All of this is reminiscent not in scale but in kind of the Jim Crow era, when southern states (and some northern ones) relied partly on unofficial private actors rather than official government channels to enforce its ideology of apartheid, allowing the white establishment to perpetrate the worst atrocities with impunity. Indeed, between 1877 and 1950, blacks suffered 4,000 documented incidents of extrajudicial lynchings for everything ranging from unproven accusations of sexual assault to speaking disrespectfully to a white man. In one case, a white mob in Blakely, Georgia, lynched a black World War I army veteran just because he refused to take off his uniform.

Even as whites went scot-free for these unspeakable crimes, blacks faced harsh punishment for minor crimes such as violating anti-vagary laws that criminalized black unemployment in order to keep blacks working for whites. In other words, the state systematically perverted the rule of law so that a combination of state action and private actors could keep blacks under its thumb.

America isn’t the only country where this kind of thing has happened. To this day, Indian authorities rely on actual and tacit private violence to perpetuate the caste system. But America is supposed to be the country most dedicated to equality under the law. It is therefore distressing that Trump is violating that dedication by uncorking private movements and personal demons to further border objectives that he can’t openly promote through legitimate state means.

Of course the El Paso shooter is facing the full brunt of the law and is being treated like a domestic terrorist. But the fact that it took Trump two days to condemn him for his sick ideology signals to his ilk that while man’s law might be against them, higher law is with them, exactly as was happening under Jim Crow. Unless Trump fundamentally changes course, no one should be shocked at more vigilante action and El Paso–style shootings as his most militant supporters take his inflammatory rhetoric literally.

A version of this column originally appeared in The Week.

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Deprivation of Voting Rights as a Collateral Consequence of a Felony Conviction

The U.S. Commission on Civil Rights issued a report on the collateral consequences of a felony conviction several weeks ago. Its members are against ’em. And to some degree, so should we all be. There are too many collateral consequences to a felony conviction these days. Examples include laws that prevent ex-offenders from engaging in certain professions and rules that make it difficult or impossible for ex-offenders to live in public housing.

On the other hand, the Commission appears curiously naïve about the reasons behind some of these collateral consequences. They seem to think they are just gratuitous efforts to kick people who are already down. But high rates of recidivism are a fact. According to Bureau of Justice statistics, “Five in 6 (83%) of state prisoners released in 2005 across 30 states were arrested at least once during the 9 years following their release.” The average number of re-arrests is five. Some collateral consequences are genuinely useful in protecting the public.

For example, few would argue against laws that forbid those who have been convicted of the sexual abuse of a young child from working in a day care center. And maybe it’s not such a bad idea to invest in more halfway houses for recently released prisoners instead of immediately putting them in unsupervised public housing, where some ex-offenders will likely put innocent residents in greater danger.

Even so, there have to be limits. Some collateral consequences seem to be nothing more than the work of a special interest seeking to squelch competition. In West Virginia, for example, “waxing specialists” and “shampoo assistants” must demonstrate “good moral character” to a government board. Maybe it’s just me, but I like rather like shampoo assistants “with a past.”

My Commissioner Statement (along with Commissioner Peter Kirsanow) urges a bit more effort to assess collateral consequences on a case-by-case basis.

What struck me most about the Commission’s report was its emphasis on laws that deny felons the vote. The report purports to be about how collateral consequences make it too difficult for ex-offenders to re-integrate and hence increase the likelihood of recidivism. And yet it devotes more pages to the deprivation of voting rights than to any other kind of consequence. And it uses by far the report’s most florid language to describe it, arguing that “denying this right to even a ‘subset of the population’ jeopardizes democracy for the entire population,” and that “the right to vote is the ‘essence of a democratic society, and any restrictions on that right strike at the heart of representative government.” [Italics added.]

Curiously, this is the one collateral consequence that is unlikely to prevent re-integration. If one doesn’t have a job or a place to live, it is easy to see how one might be lured back into crime. Not being able to vote isn’t in that category at all.

Alas, it is a little hard to imagine that the Commission’s Progressive majority would have been as focused on voting if they had not been quite so convinced that ex-offenders tend to vote for left-of-center candidates. (Ditto for the lack of enthusiasm shown by Republican state legislators.)

If useful reform is going to happen, it makes sense to focus elsewhere.

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Authoritarian Rulers Mobilize Private Violence To Advance Their Goals

Authoritarian figures rarely rely on state power alone to accomplish their draconian ends. They often also mobilize the very thing that legitimate rulers are supposed to stop: private violence. That is part of how the Jim Crow South maintained its regime of racial apartheid after the abolition of slavery limited the scope of formal state action. And now President Donald Trump is dipping into that ignominious tradition to activate the white nationalists in his base to advance his border control objectives.

Trump did not pull the trigger in the El Paso carnage that killed 22 people and counting, but it’s hard to deny that he has helped foment the atmosphere in which the trigger was pulled. Trump kicked off his presidential run by calling Mexicans rapists and criminals, of course. And in his rallies he teasingly encouraged his supporters to “rough up” dissenters who protested his incendiary rhetoric. Far from cooling such language after getting elected, he ramped it up. He has repeatedly referred to immigrants as an infestation and painted a lurid picture of an out-of-control southern border under attack by “invaders” that border patrol agents are powerless to stop because, as he laments, “we can’t let them [the agents] use weapons.” As New York‘s Eric Levitz points out, the unmistakable message to “trigger happy patriots” in all of this is that “we can’t use weapons” but “perhaps you should.”

That, of course, is precisely what the 21-year-old El Paso shooter, who reportedly wrote a manifesto that billed his attack as a “response to the Hispanic invasion of Texas,” did. Although he took matters much further than Trump intended with his inflammatory rhetoric, the same cannot be said for border militias steeped in white supremacist ideology that have increasingly been doing for Trump what Trump can’t do for himself.

For months now a slew of paramilitary outfits in border states have taken it upon themselves to patrol the southern border more aggressively than the government, constrained by due process and other concerns, can. “Having the most powerful person on Earth echo their hateful views may even give extremists a sense of impunity,” points out Louisiana State University’s Nathan P. Kalmoe.

Indeed, after Trump stoked fears of the Central American migrant caravan before the November midterms, about 100 volunteers from the Texas Minutemen, draped in camouflage suits, night-vision goggles, aerial drones, and semiautomatic weapons, holed up along the Rio Grande and conducted night vigils to supplement the border patrol. Meanwhile, the Arizona Border Recon, founded eight years ago by the notorious army veteran Tim Foley, has ramped up its raids in the Sasabe desert in search of drugs and border crossers over the last two years. And then there is New Mexico–based United Constitutional Patriots (UCP). It started patrolling the New Mexico border in February 2018 and videotaping its encounters with migrants. By its estimates, it has apprehended some 3,000 border crossers.

In one particularly egregious episode in April whose video the group brazenly circulated on social media to gain recruits, its “patriots” held 300 terrified asylum seekers—men, women, and toddlers—on their knees at gunpoint.

This was tantamount to an illegal hostage taking, and the backlash finally prompted the arrest of its leader—though not for holding up the migrants at gunpoint, but for impersonating a federal agent. The U.S. Customs and Border Patrol issued a pro-forma disclaimer declaring that it “does not endorse” enforcement action by private groups. But if that’s the case, asks the ACLU’s Peter Simonson, how does the agency explain photos of two border patrol agents on horseback posing on either side of masked vigilantes? “All indications are that they had a collaborative relationship with UCP and never told the vigilantes to cease and desist, even though the vigilantes were dressed up to impersonate BP officers, badges and all,” he notes.

Even more shockingly, such actions have not made the group too radioactive for Trump and his allies. Indeed, notes Simonson, UCP is now working closely with We Build the Wall, an organization founded by Trump’s former ultra-nationalist advisors, Steve Bannon and Krish Kobach. We Build the Wall’s mission is to raise private funds to build Trump’s wall. A few months ago, without obtaining any permits, it erected a short wall on private land on New Mexico’s southern border and then illegally extended it across a federal road. The ACLU is challenging the extension, notes Simonson.

In the name of enforcing the law, these vigilante groups are breaking the law at every turn. Yet instead of facing the wrath of the administration, they are making friends in the highest circles; Bannon, after all, was the architect of Trump’s America First campaign and served in the White House, while Kobach headed his voter fraud commission and was a serious contender as Trump’s immigration czar.

By contrast, migrants who cross the border without proper authorization, a mere misdemeanor the first time around, are having their babies snatched from them under Trump’s zero tolerance border policies, a practice that has continued even after a court order barred it. At the same time, the administration is cracking down on the sanctuary movement. Immigration activists such as Arizona State University’s Scott Warren are being slapped with anti-harboring charges that carry a 20-year prison sentence merely for offering food and first aid to those crossing the harsh desert. Even advocates who merely speak out on behalf of the migrants aren’t being spared.

All of this is reminiscent not in scale but in kind of the Jim Crow era, when southern states (and some northern ones) relied partly on unofficial private actors rather than official government channels to enforce its ideology of apartheid, allowing the white establishment to perpetrate the worst atrocities with impunity. Indeed, between 1877 and 1950, blacks suffered 4,000 documented incidents of extrajudicial lynchings for everything ranging from unproven accusations of sexual assault to speaking disrespectfully to a white man. In one case, a white mob in Blakely, Georgia, lynched a black World War I army veteran just because he refused to take off his uniform.

Even as whites went scot-free for these unspeakable crimes, blacks faced harsh punishment for minor crimes such as violating anti-vagary laws that criminalized black unemployment in order to keep blacks working for whites. In other words, the state systematically perverted the rule of law so that a combination of state action and private actors could keep blacks under its thumb.

America isn’t the only country where this kind of thing has happened. To this day, Indian authorities rely on actual and tacit private violence to perpetuate the caste system. But America is supposed to be the country most dedicated to equality under the law. It is therefore distressing that Trump is violating that dedication by uncorking private movements and personal demons to further border objectives that he can’t openly promote through legitimate state means.

Of course the El Paso shooter is facing the full brunt of the law and is being treated like a domestic terrorist. But the fact that it took Trump two days to condemn him for his sick ideology signals to his ilk that while man’s law might be against them, higher law is with them, exactly as was happening under Jim Crow. Unless Trump fundamentally changes course, no one should be shocked at more vigilante action and El Paso–style shootings as his most militant supporters take his inflammatory rhetoric literally.

A version of this column originally appeared in The Week.

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“Don’t Go Out Alone” – Swedish Cops Warns Women After 4 Rapes In 4 Days

“It doesn’t feel very safe” exclaimed one young Swedish lady following reports of a fourth rape in as many days  in the Swedish city of Uppsala.

“I even bought a self-defense spray yesterday. I’ll have it in my hand when I go home myself. If something should happen, you are always prepared.”

And her fears (and preparation) are well-placed it appears as even the police admit they can’t protect everyone, warning women to walk in groups and to “think how to behave.”

“Women in town should not be worried, but must think how to behave,” the city’s police force said in a statement to newspaper Expressen.

“Feel free to walk on illuminated streets and not alone in alleys or parks,” they continued, adding that because officers “cannot be in all places, both men and women have to think ahead.”

Women’s rights groups criticized the warning, calling for a greater police presence on the streets:

“Reducing girls’ freedom of movement is a serious development,” activist Mariet Ghadimi told SVT Nyheter in March.

 “It is a structural problem that restricts girls’ freedom and rights, and in the long run affects women generally.”

These are not isolated incidents as Sweden’s rape count has been rising since 2005, and jumped ten percent in 2017 alone. Between 2005 and 2017, rapes nearly doubled and sexual molestation incidents more than doubled.

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