San Francisco became in May the first jurisdiction to ban law enforcement use of facial recognition technology. Civil libertarians persuaded the city’s Board of Supervisors to pass the measure on the grounds that the government could abuse the technology and make the country more of an oppressive surveillance state.
The use of facial recognition and other biometric surveillance is the functional equivalent of requiring every person to show a personal photo identification card at all times in violation of recognized constitutional rights. This technology also allows people to be tracked without consent. It would also generate massive databases about law-abiding Californians, and may chill the exercise of free speech in public places.
Facial recognition and other biometric surveillance technology has been repeatedly demonstrated to misidentify women, young people, and people of color and to create an elevated risk of harmful “false positive” identifications.
Facial and other biometric surveillance would corrupt the core purpose of officer-worn body-worn cameras by transforming those devices from transparency and accountability tools into roving surveillance systems.
The California Senate’s Public Safety Committee has scheduled a hearing on the bill for next week.
At the federal level, the House Oversight Committee has held two hearings so far on police use of facial recognition surveillance. Among other things, our representatives learned that the FBI already has a database consisting of more than 640 million photographs, including driver’s license photos from 21 states.
“People believe that it’s inevitable that there’s going to be more and more surveillance, more and more police state power, and technology is going to keep creeping into our lives,” Brian Hofer, chairman of Oakland’s Privacy Advisory Commission, tells the Los Angeles Times. “But we still have the freedom and ability to say no.”
from Latest – Reason.com http://bit.ly/2Zj0RPv
via IFTTT
San Francisco became in May the first jurisdiction to ban law enforcement use of facial recognition technology. Civil libertarians persuaded the city’s Board of Supervisors to pass the measure on the grounds that the government could abuse the technology and make the country more of an oppressive surveillance state.
The use of facial recognition and other biometric surveillance is the functional equivalent of requiring every person to show a personal photo identification card at all times in violation of recognized constitutional rights. This technology also allows people to be tracked without consent. It would also generate massive databases about law-abiding Californians, and may chill the exercise of free speech in public places.
Facial recognition and other biometric surveillance technology has been repeatedly demonstrated to misidentify women, young people, and people of color and to create an elevated risk of harmful “false positive” identifications.
Facial and other biometric surveillance would corrupt the core purpose of officer-worn body-worn cameras by transforming those devices from transparency and accountability tools into roving surveillance systems.
The California Senate’s Public Safety Committee has scheduled a hearing on the bill for next week.
At the federal level, the House Oversight Committee has held two hearings so far on police use of facial recognition surveillance. Among other things, our representatives learned that the FBI already has a database consisting of more than 640 million photographs, including driver’s license photos from 21 states.
“People believe that it’s inevitable that there’s going to be more and more surveillance, more and more police state power, and technology is going to keep creeping into our lives,” Brian Hofer, chairman of Oakland’s Privacy Advisory Commission, tells the Los Angeles Times. “But we still have the freedom and ability to say no.”
from Latest – Reason.com http://bit.ly/2Zj0RPv
via IFTTT
Nancy Pelosi may have gone a step too far trying to appease her Democratic colleagues frothing at the mouth for a Trump impeachment, after the House Speaker told senior Democrats that she’d like to see Trump “in prison.”
Pelosi made the statements while clashing with House Judiciary Chairman Jerrold Nadler (D-NY) over whether to launch impeachment proceedings, according to Politico.
In response, Trump hammered Pelosi – tweeting on Thursday “Nervous Nancy Pelosi is a disgrace to herself and her family for having made such a disgusting statement, especially since I was with foreign leaders overseas,” adding “There is no evidence for such a thing to have been said. Nervous Nancy & Dems are getting Zero work done in Congress and have no intention of doing anything other than going on a fishing expedition to see if they can find anything on me – both illegal & unprecedented in U.S. history.”
…and have no intention of doing anything other than going on a fishing expedition to see if they can find anything on me – both illegal & unprecedented in U.S. history. There was no Collusion – Investigate the Investigators! Go to work on Drug Price Reductions & Infrastructure!
Pelosi’s comment comes two weeksafter she claimed without evidence that Trump was engaged in a ‘cover-up’ in regards to the administration’s efforts to prevent former White House Counsel Don McGahn from testifying before the House Judiciary Committee.
Democrats have been sharply divided over whether to launch impeachment proceedings against Trump over allegations that he obstructed the Mueller probe.
At least 55 House Democrats are on record endorsing an impeachment inquiry, according to The Hill, however Pelosi has been joined by several prominent Democrats in opposing the move because the Senate would never follow suit, which would ‘exonerate’ Trump just in time for the 2020 election.
Last week, House Intelligence Committee Chairman Adam Schiff – who swore up and down that he had evidence of Trump-Russia collusion that was “more than circumstantial” – effectively threw cold water on impeachment, telling The Hill last week “Where it ends I don’t know,” adding “I presume it ends with Donald Trump being voted out of office.”
Meanwhile, former Senate Majority Leader Tom Daschle penned an Op-Ed in the Washington Post titled: “Listen to Pelosi, Democrats. Now’s not the time to impeach Trump.“
via ZeroHedge News http://bit.ly/2I3ydfr Tyler Durden
New York Times columnist Jamelle Bouie faults Democratic presidential contender Pete Buttigieg for his insufficiently ambitious plan to remake the U.S. Supreme Court, arguing that progressives need to challenge the idea that the Court has the final say on what the Constitution means. The problem, Bouie says, is not that the Court is too partisan or political but that it has the power to override the will of the people—or at least the will of politicians who claim to speak for them. Bouie thinks that ditching the principle of judicial review enunciated in Marbury v. Madison will help progressives pursue their policy agenda. He does not pause to consider that it might also have consequences he would not like.
“Progressives have a crucial task ahead of them—not merely to defeat Trump and Trumpism, but to reclaim the Constitution and advance a more expansive vision of democratic freedom, in which Americans have inalienable economic rights as well as inalienable political and civil ones,” Bouie writes. “It’s a problem of power, which means it’s impossible to fight this conflict with Buttigieg-style technocratic reforms. Progressives must look, instead, to presidents and other leaders who resisted the Supreme Court’s claim to ultimate interpretive authority.”
Bouie is right that the central issue is “a problem of power.” The Constitution addresses that problem by imposing limits on what politicians can do, even when backed by a majority of voters. If politicians themselves get to decide what the Constitution means, those limits, including the ones that Bouie thinks are important, mean nothing.
We need not engage in wild hypotheticals to imagine the downside of this approach. Our current president thinks that flag burners should be jailed or stripped of their citizenship; that TV stations should lose their broadcast licenses when they air content that offends him; that he has the authority to wage wars Congress never declared and spend money Congress has repeatedly refused to appropriate; that due process is something people should get only after they’ve been stripped of their constitutional rights; and that birthright citizenship, guaranteed by the 14th Amendment, can be abolished by an act of Congress. That’s just for starters. In the name of “defeat[ing] Trump and Trumpism,” Bouie is recommending a principle that would let Trump and every reckless demagogue who follows him do their worst.
“After decades of railing against ‘activist judges,'” Bouie complains, “Republicans are poised to reverse the hard-won gains of activists and ordinary people through judicial fiat.” He does not specify which “hard-won gains” he has in mind. But let’s take Roe v. Wade as an example, since fears of its impending doom have been much in the news lately. It is possible to believe both that Roe was wrongly decided and that women should be free to obtain abortions. In fact, that’s the position staked out by pro-choice luminaries such as Justice Ruth Bader Ginsburg and Harvard law professor Laurence Tribe. But in Bouie’s view, the result is all that matters; how you get there is so much legalistic mumbo-jumbo aimed at concealing a process that is inescapably political.
“There’s no depoliticizing an institution that deals with political questions and operates in the context of political struggles and conflicts,” Bouie writes. “The Supreme Court has always been political, and no reform short of ending the power of judicial review will disentangle it from ordinary, partisan politics.”
Yet ending the power of judicial review would leave legislators free to do whatever they want, restrained only by their own consciences and their fear of political repercussions. Depending on who happens to be in power, legislators might enact Bouie’s policy agenda, or they might endorse torture, approve warrantless searches, abolish the presumption of innocence, close down newspapers that criticize them, or exclude immigrants based on their race. They might even ban abortion.
The whole point of a constitution is to put some decisions outside the realm of politics. The course Bouie recommends would make literally everything subject to the whims of elected officials, including the current occupant of the White House.
The main benefit of the Trump administration, aside from its entertainment value and some surprisingly good judicial appointments, is that it encourages people who might otherwise be inclined to expand the power and scope of government to think seriously about what that means in practice. But some of those people are so focused on getting rid of Trump that they ignore the civics lesson he embodies.
from Latest – Reason.com http://bit.ly/2IEfgiD
via IFTTT
Exactly three weeks ago, as stocks were sliding, “world-renowned commodity guru” Dennis Gartman provided a glimmer of hope to bulls when he made an “official recommendation to sell stocks short this morning.” Why was this important? Well, Ramp Capital (with whom we need to have a trademark conversation one of these days) put it best:
Fast forward to today when, following today’s massive rate cut-hope driven rally on the back of an absolutely abysmal job report, it is the bulls’ turn to cower. Why? Because Gartman’s “official recommendation” to short is no more. From his latest Gartman report.
… as we wrote here yesterday, we have had a most unusual series of technical trading circumstances take place recently as late last week we had a rare “unanimous” day lower for stock prices globally, followed two trading sessions later by an equally rare unanimous day higher! Truly we cannot remember when we’ve seen this unanimity to the downside followed by unanimity to the upside in such inordinately short order. We have been left to wonder if that unanimous “up” day marked the end of a short bull run or did it add to the unanimous nature of the end to the bear run of much larger proportion? All we know is that we’ve not seen this sort of violence down and then up ever before and one or two wise readers of TGL suggested that the violence of the recent past two weeks warns of continued such violent random noise and argues then for us to take to the sidelines.
* * *
We’ve continued to maintain a net short position in the equity market in the US put into place five weeks ago… although we’ve cut the size down a bit these past two days… Yesterday was a much better day for us than was the day previous but we face today’s trading environment with a sense of trepidation and confusion…
Finally this:
Friday, May 17th, having already sold equities vs. commodities and as the markets had risen into “The Box” marking the 50-62% retracement of the break that began on the 1st of this month, we sold a single unit of the US stock market short of the July S&P futures trading then 2870. We sold a 2nd unit Thursday, May 23rd to add to the position as the July futures traded 2840, which then gave us an average of 2855. We wished to risk no more than break even on a closing basis but we are breaking even as we write and we want out… immediately.
The bounce is finally over.
via ZeroHedge News http://bit.ly/2Wqgu5z Tyler Durden
New York Times columnist Jamelle Bouie faults Democratic presidential contender Pete Buttigieg for his insufficiently ambitious plan to remake the U.S. Supreme Court, arguing that progressives need to challenge the idea that the Court has the final say on what the Constitution means. The problem, Bouie says, is not that the Court is too partisan or political but that it has the power to override the will of the people—or at least the will of politicians who claim to speak for them. Bouie thinks that ditching the principle of judicial review enunciated in Marbury v. Madison will help progressives pursue their policy agenda. He does not pause to consider that it might also have consequences he would not like.
“Progressives have a crucial task ahead of them—not merely to defeat Trump and Trumpism, but to reclaim the Constitution and advance a more expansive vision of democratic freedom, in which Americans have inalienable economic rights as well as inalienable political and civil ones,” Bouie writes. “It’s a problem of power, which means it’s impossible to fight this conflict with Buttigieg-style technocratic reforms. Progressives must look, instead, to presidents and other leaders who resisted the Supreme Court’s claim to ultimate interpretive authority.”
Bouie is right that the central issue is “a problem of power.” The Constitution addresses that problem by imposing limits on what politicians can do, even when backed by a majority of voters. If politicians themselves get to decide what the Constitution means, those limits, including the ones that Bouie thinks are important, mean nothing.
We need not engage in wild hypotheticals to imagine the downside of this approach. Our current president thinks that flag burners should be jailed or stripped of their citizenship; that TV stations should lose their broadcast licenses when they air content that offends him; that he has the authority to wage wars Congress never declared and spend money Congress has repeatedly refused to appropriate; that due process is something people should get only after they’ve been stripped of their constitutional rights; and that birthright citizenship, guaranteed by the 14th Amendment, can be abolished by an act of Congress. That’s just for starters. In the name of “defeat[ing] Trump and Trumpism,” Bouie is recommending a principle that would let Trump and every reckless demagogue who follows him do their worst.
“After decades of railing against ‘activist judges,'” Bouie complains, “Republicans are poised to reverse the hard-won gains of activists and ordinary people through judicial fiat.” He does not specify which “hard-won gains” he has in mind. But let’s take Roe v. Wade as an example, since fears of its impending doom have been much in the news lately. It is possible to believe both that Roe was wrongly decided and that women should be free to obtain abortions. In fact, that’s the position staked out by pro-choice luminaries such as Justice Ruth Bader Ginsburg and Harvard law professor Laurence Tribe. But in Bouie’s view, the result is all that matters; how you get there is so much legalistic mumbo-jumbo aimed at concealing a process that is inescapably political.
“There’s no depoliticizing an institution that deals with political questions and operates in the context of political struggles and conflicts,” Bouie writes. “The Supreme Court has always been political, and no reform short of ending the power of judicial review will disentangle it from ordinary, partisan politics.”
Yet ending the power of judicial review would leave legislators free to do whatever they want, restrained only by their own consciences and their fear of political repercussions. Depending on who happens to be in power, legislators might enact Bouie’s policy agenda, or they might endorse torture, approve warrantless searches, abolish the presumption of innocence, close down newspapers that criticize them, or exclude immigrants based on their race. They might even ban abortion.
The whole point of a constitution is to put some decisions outside the realm of politics. The course Bouie recommends would make literally everything subject to the whims of elected officials, including the current occupant of the White House.
The main benefit of the Trump administration, aside from its entertainment value and some surprisingly good judicial appointments, is that it encourages people who might otherwise be inclined to expand the power and scope of government to think seriously about what that means in practice. But some of those people are so focused on getting rid of Trump that they ignore the civics lesson he embodies.
from Latest – Reason.com http://bit.ly/2IEfgiD
via IFTTT
The run-up to the presidential primaries offers a funhouse reflection of American life. Presidential hopefuls, hacks, and has-beens turn to focus groups to discover what they think the American electorate wants. Then they distill it down to hollow bumper stickers. After that, they pump their fists and reflect it back with mindless repetition.
Change We Can Believe In. Feel the Bern. Make America Great Again. Sí Se Puede. Fighting for Us. Compassionate Conservatism. A Stronger America. Ross for Boss. Morning in America. Not Just Peanuts. Nixon’s the One. Dean Scream. And much, much, more…
The mantras are both idiotic and comical. They provide political lemmings with something to believe in. They also provide incisive observers with a unique prism into the menaces of tomorrow.
For example, presidential candidate Elizabeth Warren’s slogan is: “Warren Has a Plan for That.” An official t-shirt, adorned with this slogan, will set you back just $30 bucks. And you can pick up a slogan emblazoned tote bag for $35. What a bargain!
To any onlooker with their wits about them this mantra is utterly absurd. But to Warren, it’s as serious as a heart attack. She does, indeed, have a plan for everything – even if it means instant death. In fact, her official website includes the following sales copy:
“Child care unaffordable? Big corporations and billionaires not paying their fair share? Want more economic and political power in the hands of the people? Don’t worry, Warren has a plan for that.”
Pulling the Patriotism Card
Warren, if you recall, owes her career to scheming and conniving. She pulled the race card for nearly three decades…claiming to be Native American even though her ancestral connection is slim to none. In doing so, she was rewarded for helping the University of Pennsylvania and Harvard University embellish their diversity metrics.
Now Warren’s at it again. This time her scheme is to bamboozle the American voter by pulling the patriotism card. Remember, in America today, it’s forbidden to be against any and all things patriotism. You’re either for it, or you’re un-American.
This week, while most of us were busy going balls to the wall, Warren burped out her plan to save the economy from itself. It’s called Economic Patriotism. And it involves extreme government intervention into all aspects of economic life…with the intent of, somehow, making the American worker rich.
Warren’s shameless grab for votes – what she calls Economic Patriotism – includes:
Dollar debasement to boost U.S. exports. The creation of a new government agency to cook up four-year jobs plans like McDonald’s Big Macs. A 10X increase to annual investments in apprenticeship programs. And, among other things, $2 trillion over 10 years to eradicate climate change.
Warren, like many en vogue American socialists, wants to extract tribute from producers so she can dole it back out from Washington to her liking. She doesn’t care that her plan hasn’t a snowball’s chance in hell of delivering economic nirvana for the American worker. She’s counting on American voters to buy the sizzle…
Elizabeth Warren’s Plan to Bamboozle American Voters
For anyone who’s bothered to consider it, if but just for a moment, it’s readily apparent that the economy’s a complex living organism. It evolves. It changes. And it often moves in ways that are only obvious in hindsight.
One relationship at one moment can be completely different at another moment. Prices rise. Prices fall. All the while, supply and demand are incessantly adjusting and readjusting to meet the conditions of the market. These continuous interactions provide a natural and efficient response to supply shortages and gluts.
Centrally planned economies, as advocated by Warren, are inclined to frequent, intensive and chronic shortages. Bureaucrats, armed with spiral bound planning reports and pie graphs, are incapable of fixing the proper prices for gumballs and gasoline by diktat. There’s simply too much going on and too many moving parts for them to consider.
What’s more, these enlightened ones, filled with visions of utopia, are blinded to their own conceit. They believe they know what’s best – whether that involves ending climate change or ending poverty. And their efforts to redeploy resources in ways that the decisions and interactions of billions of people don’t demand, invariably cause things to go haywire.
Instead of less poverty, they get more poverty. Instead of real jobs, they get fake jobs. Instead of greater fairness, they get greater corruption. Instead of new innovation and new wealth, they get cronyism and stagnation. Instead of more freedom, they get more coercion.
Over time, centrally planned economies rot from the inside out until they cease to function all together. This was effectively proven by the experiences of the centrally planned economies of the old communist Eastern Bloc countries during the second half of the 20th century. Still, some people never learn.
Do ice cubes stem the flow of volcanic lava? Does adhesive tape control diarrhea? Does a sports car make a middle-aged man younger? Does central planning uplift slackers and shirkers?
Warren may have a plan for that – and everything else. But it’s not a plan anyone should want. It has nothing to do with sound economics. And it has nothing to do with patriotism.
But, alas, if Warren gets her way, it’s just the sort of plan the American voter will fall for come 2020.
via ZeroHedge News http://bit.ly/2WTAimq Tyler Durden
National security “experts” scoffed when President Trump insinuated that ISIS-backed terrorists might find their way across the southern border with Mexico to plan attacks inside the US. But as it turns out, the transnationl terror organization had been planning one such attack, according to a chilling confession from one captured fighter, according to a study published Thursday by Homeland Security Today.
Seized ISIS fighter Abu Henricki, a Canadian citizen with dual citizenship with Trinidad, last month said that he was sought out by the violent insurgency’s leadership to attack the U.S. from a route starting in Central America, according to Fox News.
In a chilling confession from a captured ISIS fighter who held dual citizenship with Canada and Trinidad, the group had been planning to send English speakers and westerners to sneak into the US via these smuggling routes, then target local financial centers.
“ISIS has organized plots in Europe with returnees so it seems entirely plausible that they wanted to send guys out to attack. The issue that makes a North American attack harder is the travel is more difficult from Syria,” said Anne Speckhard, who co-conducted the study as the director of ICSVE and Adjunct Associate Professor of Psychiatry at Georgetown University. “So the idea that they would instead use people who were not known to their own governments as having joined ISIS might make it possible for them to board airplanes.”
Henricki said he traveled to Syria with the intention of serving as an ISIS fighter, but was later told he could not take on soldier duties because of a chronic illness.
In late 2016, Henricki claimed to have been “invited” by the ISIS intelligence wing, known as the emni, to join other Trinidadians and launch financial attacks on the US.
The attacks were described to Henricki as designed to “cripple the U.S. economy,” and he was said to have been informed that he would be issued false identification and passports and would be maneuvered from Puerto Rico to Mexico and then to the United States.
“The plan came from someone from the New Jersey state of America. I was going to take the boat from Puerto Rico into Mexico. He was going to smuggle me in,” the ISIS cadre continued.
He further elaborated that he believed the scheme was aimed at New York financial targets.
“They wanted to use these people (to attack inside the U.S.) because they were from these areas,” Henricki told the scholars, indicating that they were either from North America or were English speakers.
Henricki added that many other Trinidadians, who where ultimately killed in the fighting, were enlisted to do the same thing. However, Henricki then claimed he refused the mission and was subsequently thrown into an ISIS prison in Manbij where he was brutally tortured. His wife, also a Canadian, was imprisoned in a women’s prison where she endured psychological torture.
The plot has likely been scrapped, according to the report’s authors, as those who had been recruited are probably now dead.
“This plot is likely dead as those who were pressured to join it are according to Abu Henricki now all dead and ISIS is in retreat as we know,” Speckhard said. “That doesn’t mean we shouldn’t disregard that it was a plot. We should take thoughtful steps to prevent.”
“We often hear about terrorists trying to enter the southern border in political debate, but I rarely have come across a real case. It surprised me to hear this was a real plot by ISIS to exploit our southern border. That’s concerning of course.”
What’s more amazing is the fact that more of these types of insider-focused attacks haven’t been perpetrated already.
“Even better, however, is to get someone inside the actual company to attack its network from behind the firewall. That is much easier to carry out than a cyber attack from outside of the network, and this type of ‘insider threat’ is a major problem already for US companies,” he explained. “An employee knows everything about his or her company, and what its strengths and weaknesses are. This type of person would be very effective at exploiting a corporate network and causing massive amounts of damage. What is really surprising is that terrorist groups have not already used US employees to attack their own companies.”
For example, ISIS could recruit an American to get a job at a bank and then…bring it down.
Hamerstone pointed out that terrorist groups like ISIS have been able to recruit Americans and people in the U.K. to go to their training camps, “so it wouldn’t be a huge stretch for them to get an American to get a job at a bank and then sabotage it.”
“Think about what an insider in IT aligned with terrorists could do,” he noted. “What’s really scary to think about is that an insider can do almost anything to a company. There are very few limits on the type of damage a rogue employee could cause.”
The bottom line: An ISIS-organized attack using seemingly innocuous English speaking operatives shouldn’t be ruled out…
And the Democrats in Congress will still pretend there’s no crisis. What a disgrace.
The United States is using energy as a political weapon and its ‘golden era’ of energy could turn out to be an ‘era of energy colonialism’ for all other market participants, Igor Sechin, the chief executive of Russia’s largest oil producer Rosneft, said at a forum in Russia on Thursday.
There is no doubt that the U.S. is using energy as a political weapon on a mass scale, Sechin said at the St. Petersburg International Economic Forum today, as posted on Rosneft’s website.
Imposing sanctions or even the threat of sanctions have a destructive effect on the global energy ecosystem, Sechin said, criticizing America’s approach to energy dominance.
“The golden era of American energy is now underway,” U.S. President Donald Trump said last month, while U.S. officials have started to refer to the U.S. exports of liquefied natural gas (LNG) as “freedom gas.”
The United States has long been accusing Russia of using energy, especially pipeline Russian gas to Europe, as a political weapon.
Now the head of Russia’s biggest oil producer and a close ally of President Vladimir Putin is returning the favor by accusing the U.S. of wanting to suppress competitors and pariah states by imposing sanctions.
The Texas oil boom was the result of new sanctions that the U.S. slapped on Iran and Venezuela, sharply reducing their respective oil production, Sechin said, noting that as much as 2.5 million bpd of oil production could be subject to sanctions this year, up from 1.5 million bpd in 2018.
In order to have further growth in Texas, the U.S. may need to find a “new sanctions victim” and remove its oil supply from the market in order to replace it with Texas oil, Rosneft’s boss said, adding that “Any oil producing country could be that victim.”
Earlier this week, Sechin—who has criticized Russia’s involvement in the OPEC+ deal in the past—questioned the Russian rationale of sticking to the cuts, saying that the U.S. would take market share away from of Russia if the OPEC/non-OPEC deal is extended.
via ZeroHedge News http://bit.ly/2K5dv0K Tyler Durden
After today’s dismal payrolls report, which sent bond yield plunging and stocks surging, the market’s verdict is in: a Fed rate cut in July is now the base case, with odds of 76% (and even a June cut is possible, with odds of 25%).
And while a rate cut would be delight to President Trump, who earlier today proclaimed that had rates been lower the Dow would be “10,000 higher”, there a far greater, potentially existential threat, to the Fed should it proceed with a rate cut according to Bank of America.
In his latest Flow Show report, Bank of America CIO Michael Hartnett presents several reasons why – despite today’s payrolls print – the market does not a rate cut, among which:
Positioning: investors are extremely bearish, with the BofAML Bull & Bear Indicator plunging to 2.5, a fraction away from “buy” signal level of 2.0; and equity investors very bearish – as the latest BofA FMS survey revealed, investors are most hedged since Jan 3rd equity lows. The weekly flow data suggests the same: $17.5bn into bonds (2nd biggest week of inflows ever) offset by $10.3bn out of equities; YTD $183bn into bonds, $155bn out of equities as nobody wants to have anything to do with stocks (despite the S&P being just shy of all time highs again).
Profits are about to trough: the Global PMI (highly correlated with global EPS) was 49.8 in May, i.e. on “boom-bust” border; makes stocks a one-decision market…”sell” if PMI heads toward 45, and “buy” if PMI heads toward 55. However, providing a somewhat bullish take on this series, is the ratio of orders/inventories which leads PMI by 2-months and has turned higher. At the same time, US/China financial conditions are easing via liquidity/lower yields/lower oil, and assuming no material escalation of trade war, BofA thinks that PMI troughs next 3 months, resulting in a rebound in EPS as well.
Monetary policy is already max bullish and exhibits clear parallels to the Shanghai Accord ’16, ahead of the Osaka G20 meeting. As a reminder, the Shanghai Accord saw global coordinated policy easing coinciding with extreme pessimism & trough in profit expectations. In its aftermath, the S&P500 & ACWI multiple jumped 1.5-2x in next 3 months. Fast forward to today, when in the run-up to Osaka G20 big global monetary ease underway, investor sentiment is likewise plunging. At the same time, a key catalyst is already in play – there is a big global monetary ease underway for 1st time since Q2’17 as 9 central banks cutting rates and Fed/PBoC/ECB/BoE are all turning dovish while there are rate cuts in Malaysia, New Zealand, India, Philippines, Australia; additionally if Trump changes his mind and there is no U.S. imposition of 25% tariffs on remaining $300bn of Chinese goods policy will be max bullish for risk in H2; however, the narrative can quickly flip to trade war, leading to 2019 playing out like Asia crisis ’98.
In other words, all else equal, the foundations for the S&P rising to 3,000 in the summer – which is BofA’s base case (before the S&P slides back down in the second half) are already there. In light of this, the risk is that the Fed does precisely what the market now expects with certainy, that it cuts rates as soon as July.
This is shown in the chart below, when in the aftermath of the Asian crisis of 1998, the Fed cut rates only to cause the dot com bubble… and its subsequent bursting and the plunge in rates from 6%+ to just 1% as the first 21st century bubble popped.
It is this risk that threatens markets now as well: an overly easy Fed cutting rates, only to create a historic meltup just ahead of the 2020 election, and eventually bursting the biggest asset bubble in history.
* * *
Two more points from Hartnett: he notes that according to client feedback, most are bearish on global macro and thus hedged; have been waiting for SPX 2650 entry point and also looking to short rally (hence the recent furious short squeeze); meanwhile the long-onlies are paralyzed by recession risk from yield curve, but missed Jan-Apr rip so inclined to buy weakness; private clients totally unfazed, conservatively positioned.
The final point: Risks, two of them.
Risk 1 Tariff Man = recession: tariffs not yet leading to rise in unemployment in key battleground states for Trump re-election (Chart 10); we assume Trump would rather campaign as the Jobs President rather than Tariffs President; but trade war escalation via full US tariffs on China & Mexico, China offensive via rare-earth embargo & CNY devaluation, tech wars via market access embargoes.
Risk 2 Powell pushing-on-a-string: if and when the Fed does cut, the tell will be that credit spreads widen, indicating that Fed has joined the BoJ & ECB in monetary policy impotence.
If that is what happens, then sell and don’t look back, as the worst-case scenario recently proposed by none other than Pimco, in which the Fed loses control of the market, will then be in play.
via ZeroHedge News http://bit.ly/2XxV9su Tyler Durden
