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Tech Flows Are Finally Rolling Over

While one wouldn’t see it by looking at the S&P 500 which in fits and starts continues to push toward its January all time highs, the latest weekly flows saw a broad “risk off” shift in investor mood, with $3.6BN out of equities ($0.7bn ETF outflows, $2.9bn mutual fund outflows), $2.3BN out of bonds, and $0.5BN out of gold.

Curiously, despite the so-called decoupling between the US and the rest of the world, investors weren’t convinced, and pulled $2.6BN out of US equity funds, despite the recent BofA survey showing the biggest equity overweight by fund managers in US stocks since Jan ’15.

Meanwhile, it appears that at least according to fund flows, the leadership is finally broken. Remember this chart from a month ago, when BofA annualized tech inflows YTD and came up with a ridiculous number?

Well, the streak is now over and the last week saw the biggest Tech outflow since the Feb sell-off, as investors pulled  $0.5bBN, together with big redemptions from Financials ($1.2bn).

Another streak that is clearly over in light of the recent EM fireworks, is that into Emerging markets, which also saw some $0.2BN in outflows. Meanwhile, Europe remains near rock bottom, with 23 consecutive weeks of outflows after the latest $2.9 billion in latest weekly outflows.

And as investors pulled money out of growth, the rushed into “late cycle” defensives, with big inflows to Healthcare ($0.8bn & $5.5bn inflows past 3 months = 4% AUM).

And speaking of late cycle, the top 5 performing S&P sectors in the past 3 month all defensive: staples, utilities, REITs, health care, telco.

Putting the above in context, here are the most overbought and oversold assets in August:

  • Most overbought assets in Aug: US equities, global healthcare, US high yield
  • Most oversold assets in Aug: European credit, global financials & materials, Italy, China, Turkey

 

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US Doubles The Number Of Marines In Norway: No Big Deal Or Serious Threat To Russia?

The United States has confirmed plans to more double the number of troops based in Norway, a move Russia has already criticised as “clearly unfriendly”.

As The Local reports, the Norwegian Defence Ministry on Wednesday said that the US had recently informed them that they would push forward with a plan to increase the number of US marines stationed in Norway from 300 to “up to 700”.

“US authorities have recently confirmed that they are happy to continue and increase the rotation-based training and practice in Norway for units from the US Navy Corps,” Norwegian Defence Minister Frank Bakke-Jensen said in a press release.

“This means that the scheme will continue beyond 2018 and could include up to 700 soldiers.”

The marines, the first foreign troops stationed in Norway since World War Two, were originally expected to leave Norway at the end of this year, but the posting will now last for up to five years. 

The Russians are not happy, as the embassy to Norway exclaimed that the stationing of US troops “contravenes the Norwegian decision from 1949.”

But, as The Local notes, Norway’s foreign minister Ine Eriksen Søreide dismissed these claims, repeating the Norwegian government position that the marines should not be seen as a permanent US military base.

“The Russians are very well aware of what it is and what it isn’t,” she told Marine Corps Times in May. “Of course, they are using it in their propaganda and we are countering that as best we can because this is something that is not new.”

The arrangement has also met with criticism in Norway from both the Social left and Labour parties, who argue that the priority should be maintaining a strong Norwegian troop presence near the northern border with Russia, but,as Arkady Savitsky writes, for The Strategic Culture Foundation, the transformation of Norway into the tip of the knife for an attack on Russia is taking place amidst the speedy militarization of other Scandinavian countries, the Baltic states, and Poland.

Norway has abandoned its traditional policy of “no foreign forces on our national soil.” On Aug. 15, the Norwegian defense ministry reported that the US will more than double (from 330 to more than 700) the number of Marines stationed in that country, in line with plans first outlined in June. The deployments to Norway are expected to last at least five years, compared with the former posting that ran for six months after the initial contingent arrived in 2017 and was then extended last June. A new military base at Setermoen will accommodate the US personnel this fall. The United States has expressed interest in building infrastructure to host up to four US fighter jets at a base 65 kilometers south of Oslo, as part of the European Reassurance Initiative (ERI).

The reinforcement comes ahead of a large-scale exercise dubbed Trident Juncture 18 — the biggest NATO maneuver in decades, involving 40,000 soldiers, 130 aircraft, and 70 vessels from more than 30 nations. That training event will be held from October to November in central and eastern Norway, the North Atlantic, and the Baltic Sea. Iceland, Sweden, and Finland will also take part.

According to the Norwegian government, the sole purpose of the American military presence is for training, there is no escalation involved in this whatsoever, and Russia has nothing to worry about. Foreign Minister Ine Eriksen Soereide previously told reporters that this decision did not constitute the establishment of a permanent US base in Norway and was not targeted at Russia.

Moscow issued a warning about the consequences such a move will entail. Are Russia’s concerns justified? After all, 700 soldiers are not a big deal for such a large country. They’ll finish their training, pick up some skiing skills, and leave. Is there really anything to worry about? Perhaps a more in-depth examination can provide an answer to this question.

The US Marines Corps is a service designed mainly for offensive operations. They are training to fight Russia under certain weather conditions. Once it has begun, such training becomes a routine part of the operational cycle. Whether you call it rotational or permanent, they’ll be there for years, ready to attack. It’s not just a few hundred servicemen, it’s an expeditionary force. They are in Norway to make sure that everything is in place to ensure a rapid reinforcement in order to launch offensive operations that include air support right upon arrival.

The cooperation between the US and Norway includes the exchange of intelligence, the purchase of weapons — including 52 F-35 aircraft and five Boeing P-8 Poseidon maritime patrol aircraft (MPA) — the use of Norwegian air bases, and the storage of military equipment in line with the Marine Corps Prepositioning Program-Norway (MCPP-N), which has been in effect since 2005. Actually, that project is a revival of a Cold War program that was launched in 1981 to preposition military equipment. Norway pays half of the program costs. Since 2014, it has been adjusted to meet the needs of the US Marine Corps. Their stockpiles have enough gear, vehicles, and ammunition to equip a force of more than 4,600 troops. According to the plans, there should be enough equipment and ammunition stored up to sustain a Marine Expeditionary Brigade (MEB) during combat. A MAB can consist of 8,000 to 16,000 Marines, or even more.

And it’s not just Norway. In May, US Marines from the 4th Tank Battalion withdrew tanks and weapons from storage caves in Norway to bring them to Finland during the Arrow 18 training exercise. That equipment was used in their maneuvers alongside the Finnish army. The US Marines in Norway could also be transported to Sweden. Such a scenario played out during the Swedish Aurora 17 exercise. As one can see, the Marines’ deployment in Norway is essential for providing US forces access from northern Scandinavia to the Baltic theater of operations.

Norway is part of an intelligence and missile-defense effort. The high-powered radar Globus 3 in Vardo is an example. The radar in Svalbard (above the Arctic Circle) is installed in violation of a 1925 treaty, which states that Svalbard has a demilitarized status. It can be used for missile-defense purposes. The US Poseidon MPA from Andøya monitor Russian submarine movements. In June, the US, UK, and Norway agreed to create a trilateral coalition on the basis of those planes that will conduct joint operations in the North Atlantic near Russia’s Northern Fleet naval bases.

The F-35 Lightnings purchased from the US are to be based in Ørland in southern Norway. They are nuclear-capable planes. The training provided by the American military to the Norwegian pilots is a violation of the 1968 Non-Proliferation Treaty (NPT) , which prohibits the transfer of nuclear weapons from nuclear-weapon states to other states. According to the treaty, non-nuclear-weapon states are not to receive nuclear weapons. Russia will never be sure the Norwegian F-35s aren’t carrying nuclear weapons.

The setting is important. The transformation of Norway into the tip of the knife for an attack on Russia is taking place amidst the speedy militarization of other Scandinavian countries, the Baltic states, and Poland.

 According to the Russian Defense Ministry, NATO has tripled its military presence on Russia’s western borders over the past five years, forcing Moscow to take retaliatory steps. The Norwegian government’s decision to extend and expand the Marines’ presence is part of NATO’s vigorous war preparations, making Norway a state on the front lines and the prime target for the Russian military.

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New Lawsuit Says Utah’s Medical Marijuana Initiative Is a Free Speech Violation

Utah’s medical marijuana ballot initiative might be a First Amendment violation, claims a longtime marijuana opponent in a new lawsuit intended to remove the question from the state’s November ballot.

On Thursday, Salt Lake City-area lawyer Walter J. Plumb III filed a lawsuit against Utah’s Proposition 2, alleging that the measure—which would legalize medical marijuana for patients suffering from certain qualifying medical conditions as well as allow for the plant’s cultivation and sale—would violate First Amendment guarantees to freedom of speech and free exercise of religion.

The sticking point for Plumb is a provision in Prop. 2 that would forbid landlords from discriminating against potential tenants solely because of their status as medical marijuana patients. This would force Plumb—a practicing Mormon and owner of a number of residential properties that he leases out—to associate with people and practices that run counter to his deeply held beliefs, something his lawsuit says is a violation of his religious liberties. The suit also claims that being forced to rent to medical marijuana patients amounts to “compelled speech.”

“Members of all religions, including the Church of Jesus Christ of Latter Day Saints have constitutional rights to exercise their religious beliefs. This includes the right not to consort with, be around, or do business with people engaging in activities which their religion finds repugnant,” the suit reads. “Any practicing member of the LDS faith would find this mandate deeply offensive and incredibly repulsive to their religious beliefs and their way of life.”

Thursday’s lawsuit against Prop. 2 is the second one for Plumb, who has a long history of anti-marijuana activism.

In the late 1990’s, Plumb—a one-time law partner of Sen. Orrin Hatch (R–Utah)—mailed out an unsolicited, 60-page pamphlet to some 7,000 Salt Lake residents, warning of the dangers of cannabis consumption.

“I think it’s the best work on marijuana that’s ever been out. I think this is specific and gives parents help and direction,” Plumb told the Deseret News in 1998. He was speaking of his own pamphlet, which included a glossary of marijuana-related terms, as well as notes on which of these terms were used exclusively by blacks and Hispanics.

Whatever the quality of that work, Plumb’s lawsuit is unlikely to go anywhere, says Connor Boyack of Utah’s Libertas Institute, a libertarian think tank and one of the organizations advocating for a ‘yes’ vote on Prop. 2.

In addition to the First Amendment claims in Thursday’s suit, which he describes as “a huge stretch,” Boyack says the lawsuit lacks “ripeness”—a requirement that litigation not be based on hypothetical future harms.

“Even if their claim were to have merit in the eyes of a judge, they can’t do anything until after the initiative passes into law,” Boyack says.

An opponent of anti-discrimination laws on property rights grounds, Boyack nevertheless says that the religious claims in Plumb’s lawsuit also miss the mark. “The contention in the lawsuit that our religion considers medical marijuana users to be repugnant is not only false, it’s abjectly stupid. It has no basis in truth,” says Boyack, himself a practicing Mormon, who notes that the church’s health code is silent on the use of marijuana as a medicine, although it does include prohibitions on “illegal drugs,” as well as perfectly legal substances like coffee and alcohol.

Boyack says Thursday’s lawsuit is the latest in a bag of dirty tricks used by marijuana opponents to keep the popular Prop. 2 measure away from voters.

Back in May, after Prop. 2 supporters had collected enough signatures to put their initiative up for a vote in November, a coalition of opponents—including the Utah Medical Association—paid canvassers $25 an hour trying to convince enough people to remove their names from the petition to get it booted off the ballot. That tactic failed, as did a previous lawsuit which was filed and then quickly retracted over the same ripeness issue.

Currently, Prop. 2 is polling at two-thirds support. Provided Plumb’s lawsuit fails to get the initiative kicked off the ballot, it will likely coast to victory in November, making conservative Utah the 31st state to legalize marijuana for medical purposes.

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Turkey’s Collapse Could Send “Millions” Of Refugees Flooding Into Europe

As Turkey braces for a fresh round of US sanctions amid a plummeting lira and what Turkish President Recep Tayyip Erdoğan says is “economic warfare” with Washington over the detention of US pastor Andrew Brunson, millions of refugees – primarily from Northern Africa and neighboring Syria, would likely flood into Europe as the Turkish economy collapses according to Newsweek.

Over 3.5 million refugees now live in Turkey after having escaped the brutal conflict that has continued for over seven years in neighboring Syria. At the same time, there are at least half a million refugees from other parts of the Middle East and Northern Africa also living in the transcontinental country.

Many of these migrants settled in the country because of a deal Ankara struck with the European Union in 2016. –Newsweek

“There are 4 million refugees in Turkey. Even though they haven’t integrated into Turkish society, they have benefited from a welcoming government. Erdoğan says he’s spent $20 billion of unbudgeted funds on these people. It’s quite clear these are unbudgeted expenditures he’s been willing to spend. But if you add another million on top of that, who knows,” Bulent Alizira, director of the Turkey program at the Washington, D.C.–based Center for Strategic and International Studies, told Newsweek.

Erdoğan was convinced to bring the European migrant influx under control in exchange for $6.6 billion in assistance, however this may be untenable as the Turkish economy goes deeper into a death-spiral, and another million migrants may cross the border after an impending Russian-backed Syrian government offensive in the jihadist stronghold of Idlib province. 

Turkey, meanwhile, has threatened to open the floodgates to Europe in the past – as foreign minister Süleyman Soylu warning that Ankara could send “15,000 refugees to you… each month and blow your mind,” while threatening Brussels into footing the bill for the multi-billion dollar deal. 

Such a scenario “could have major political consequences for politicians like German Chancellor Angela Merkel,” whose internal battles within her coalition government have left it in a precarious state after significant pressure to dial back her EU open-border migration policies which began in 2015. 

Merkel has urged the Erdoğan administration to maintain the independence of Ankara’s central bank – stressing the importance of an “economically stable neighborhood,” while speaking from Bosnia this week. “No one…has an interest in an economic destabilization of Turkey, but of course everything must be done so that, for example, an independent central bank can work and so on,” she added.

That said, experts cited by Newsweek say that the majority of migrants who might flee an economic collapse in Turkey would likely flood into Greece, not Germany. 

“Erdoğan has been talking about sending people back to parts of Syria that Turkey controls. But many of the refugees are from the areas that [Syrian President Bashar] al-Assad controls, they aren’t going to want to go to northern Syria,” says Alizira. “The so-called Balkan route has been closed down. If Turkey turns on the spigot, which is a terrible way to refer to refugees, they’ll go to Greece. If boats start to leave Turkey, it’ll be a problem for Greece. Beyond, I don’t think it’ll hurt the EU.”

“Clearly if Turkey’s economic crisis continues, if the government has to seriously reign in public funding, funding for refugee programs would have to be on the chopping block,” Ross Wilson, an expert on Turkey at the Atlantic Council in Washington D.C., told Newsweek.  “But I doubt that there will be much impact in the short term.”

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Security Bars Couple From Statue of Liberty for Wearing ‘Abolish ICE’ Shirts

A New York couple planned to symbolically protest President Donald Trump’s immigration policies last month by visiting the Statue of Liberty while wearing “Abolish ICE” T-shirts. But they say security guards told them they couldn’t tour the monument unless they changed their shirts.

Tiffany Huang and her fiancé “felt we needed to acknowledge the symbolism of visiting the Statue of Liberty,” Huang tells Gothamist. They planned their visit for July 14, less than two weeks after protester Therese Okoumou was arrested for scaling the monument. Prior to her arrest, Okoumou and other demonstrators unfurled a banner from the statue’s pedestal calling for Immigration and Customs Enforcement to be abolished.

But Huang and her fiancé didn’t intend to take similar action. “We did not have any plans for any other sort of action—just exercising our right to free speech,” she tells Gothamist.

Still, citing “what happened on July 4th,” security guards gave them an ultimatum: Change their shirts, or leave. One guard told them “it was our ‘choice’ to either change or put on clothes over our T-shirts, or leave,” Huang says. “So we said we would rather leave, and another security person walked us back out through security.”

The couple contacted to the New York Civil Liberties Union (NYCLU), who says they were the victim of “viewpoint discrimination.”

“Prohibiting would-be visitors to the Statue of Liberty from accessing the nation’s most prominent public symbol of welcoming immigrants simply because of the message on their shirts violates our most sacred values,” NYCLU staff attorney Jordan Wells tells INSIDER.

The NYCLU got in touch with the National Park Service (NPS), who admitted to the “misstep.” NPS spokesperson Jerry Willis tells Gothamist “this never should’ve happened” and said “it’s pretty clear from our standpoint that we don’t restrict free speech.”

Statue Cruises, the company that operates Statue of Liberty tours, refunded the couple for their unfinished tour, and the NPS invited them to return. Huang and her fiancé have taken the agency up on that invitation. They planned to come back today, again wearing their “Abolish ICE” shirts.

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Lance Roberts: The Markets Are Now Waving A Huge Red Flag

Authored by Adam Taggart via PeakProsperity.com,

Lance Roberts sees trouble ahead.

As chief investment strategist of Clarity Financial and chief editor of Real Investment Advice, Lance issues commentary weekly on the financial markets. He sees a major market correction/crash dead ahead, likely in early 2019 as the US economy officially slides back into recession — though he’s open to it happening sooner than that.

Based on the huge debt/decifit excess that have built up in the economy, paired with the tremendous overvaluations in asset prices seen in today’s markets, Lance expects economic growth to remain anemic (at best) for the coming decade:

It’s a huge red flag. Look, at the end of the day, we can manipulate the bottom line of earnings statements all we want. But if I’m a business, look, I run three businesses, and if I don’t have revenue coming in at the top line, I can manipulate my bottom line through accounting gimmicks. I can do some weight suppression. I can layoff all my employees. I can maintain an illusion of profitability for some period of time. But at some point I’ve got to have the revenue, which is what happens at the top line of the income statement.

Just to put this into some context: since 2009, total growth of revenues for the S&P 500 is running about 30%. Bottom line profitability has grown by almost 300% during that same timeframe. Earnings per share have grown tenfold over revenue growth because of things like corporate stocks buybacks, weight suppression, employment suppression and accounting gimmicks.

We’re at record levels on debt across the board. In fact, I run a chart every now and then that shows what I call total system leverage. And what total system leverage looks at is all the debt: government, margin, corporate, personal debt, all put into one indicator. And we’re talking in excess of $120-$130 trillion of total debt outstanding right now, relative to an economy that’s growing at $20 trillion.

This is, of course, the highest level ever on record. Corporations have, of course, they’ve used ultra-low interest rates to lever up balance sheets to pay out dividends, to do stock buybacks, et cetera, and a lot of these stock buybacks that have been done using corporate leverage because it was a ‘better use of capital’: I get to write off the interest on my balance sheet in terms of what I’m borrowing on the debt plus the buyback shares and improve my bottom-line earnings. That’s been a win-win for corporations.

The problem, though, eventually, is that a lot of this debt that’s been issued is sub-quality credit in terms of investment. When you talk about investment grade investments, BBB or better, a lot of this debt that’s outstanding is BB or less. And that’s going to be an issue when two things occur: one, when interest rates rise enough that the cost of borrowing is no longer acceptable and two, when you have the next major market crash that causes a massive deleveraging cycle in the markets — and that will be triggered by an increase in interest rates from the Federal Reserve.

So America can slash taxes; do the things it wants to do — like trade wars and tariffs — but all it’s going to do is negatively impact the economy because of the fact we’re running $21 trillion in debt. And we’re going to run a trillion-dollar deficit by the end of this year, one that’s going to become $2 trillion over the next five years. With this growth trajectory of debt and deficits, economic growth can only go substantially lower over the next decade.

Click the play button below to listen to Chris’ interview with Lance Roberts (53m:51s).

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Woman Escapes ISIS Sex Slavery Only To Bump Into Former Captor Walking Freely In Germany

A woman who was kidnapped by ISIS as a teenager in her native Iraq in 2014 and held for three months as a sex slave by the terror group eventually managed to escape and later resettled as a refugee in Germany after the harrowing ordeal. 

But two years after her escape, she unexpectedly encountered her ISIS kidnapper while walking the streets of Stuttgart, Germany. The man she identified as Abu Hamam was living in Germany as a free man, and the police did nothing. 

The Daily Mail reports the following of the Kurdish Yezidi woman Ashwaq Ta’lo’s testimony relating the shock encounter:

Speaking in a Facebook video, she said she had seen the man, Abu Humam, in 2016 and then again earlier this year in Schwäbisch Gmünd in south-western Germany. 

She told police and asylum officials about the encounter and although they identified the man from CCTV they said there was nothing they could do because the man was also registered as a refugee, The Times reports. 

Former ISIS captive Ta’lo Ashwaq, Screengrab 

“Someone stopped me, on 21st February this year. I froze when I looked at his face carefully. It was Abu Humam, with the same scary beard and ugly face. I was speechless when he started speaking in German, asking, ‘You’re Ashwaq, aren’t you?’” Ta’lo told Kurdish outlet Bas News in an exclusive interview published Wednesday.

The girl was kidnapped in northern Iraq along some of her sisters, one of which is still missing, when she was only fifteen; and after being auctioned off she was abused by her ISIS captor on a daily basis for ten months, according to her testimony.

She escaped after feigning a skin disease, for which she had been issued pills. She had managed to slip the pills into the food of her captor, putting him to sleep, and escaped the compound where she was being held near Mosul. 

Upon fleeing Iraq and resettling in Germany in 2016, and while seeking the support of humanitarian refugee services, she came upon the man that had tortured her in Mosul all those months. 

Ta’lo related of the incident that she immediately denied her identity out of shock and fear when questioned by Abu Hamam on on a German street. The man told her, “Yes, you are Ashwaq, and you know me very well. I am Abu Humam, and you were with me for a while in Mosul. And I know where you live, with whom you live, and what you are doing,” according to the Bas News report.

ISIS kidnap survivor Ta’lo Ashwaq’s shocking video testimony…

The girl says she fled to a nearby market until she could observe the ISIS terrorist-turned-“refugee” leaving.

In her testimony she recounts that while previously being abused daily she was also made to pray five times a day and recite the Koran by the ISIS fanatic. Encountering the terrorist roaming freely on the streets of Germany left her stunned in disbelief. 

She recounts of the apathetic response on the part of the German police when she notified them that an ISIS terror leader was walking free in their midst: “The police told me that he is also a refugee, just like me, and that they could not do anything about it. They just gave me a phone number that I could contact in case Abu Humam ever stopped me. After this response, I decided to return to Kurdistan and never go back to Germany,” Ashwaq told Bas News.

Since Ashwaq’s story was first published, it’s been picked up by a number of US and UK outlets, including Newsweek, which sought answers from German authorities: “The Stuttgart headquarters of the Baden-Württemberg Police were not immediately available for comment when contacted by Newsweek,” the magazine reports. 

Thousands of other refugees also survived ISIS captivity before the terror group was routed from northern Iraq in 2017, but as Bas News summarizes of her tragic story:

But what makes Ashwaq’s story unique is that after three years living in Stuttgart, she meets Abu Humam, the IS militant who had bought Ashwaq in Iraq’s Mosul for $100, and subjected her to constant inhuman abuses. Abu Humam, at the time of meeting Ashwaq in Germany, appears to have no fear and no regrets. He starts again harassing Ashwaq, which forces the Yezidi victim to escape Germany and return to Kurdistan. 

Which begs the question: how many other ISIS terror leaders and kidnappers are roaming European streets freely, right under the watchful and apparently permissive eye of German and other European authorities? 

We expect that there are many more untold stories like Ta’lo Ashwaq’s out there, and more as yet unreported instances of European governments allowing ISIS terrorists to cross their borders without hindrance. 

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Aretha Franklin in Muscle Shoals

When Aretha Franklin arrived in Muscle Shoals, Alabama, in 1967, she was one of the greatest singers in the world but hardly anybody knew it. She’d been showing up occasionally on the R&B charts, and she had grazed the lower rungs of the pop top 40 once, with—of all things—a version of the old Al Jolson hit “Rock-a-Bye Your Baby with a Dixie Melody.” But she wasn’t a star yet, and she hadn’t yet found the sound that would make her one. She recorded some blues songs, some jazz standards, and a lot of material in what was seen as a “sophisticated” pop mode; she acquitted herself well, but she hadn’t shown what she was capable of doing. That changed at FAME Studios in Muscle Shoals, which spent the ’60s producing some of the earthiest, grittiest soul music around.

The first song Franklin recorded there, “I Never Loved a Man (The Way I Loved You),” encapsulated both the new direction her career was about to take and the FAME sound that was propelling her there. There’s the slinky electric keyboard that starts the song off, and the acoustic piano that chimes in later in a thundering gospel style; there’s a tight rhythm section, and the horns painting a shifting series of colors behind the singer. And then there’s Aretha’s voice, devoting every technique she learned from singing in church to a topic that’s far more worldly. (She was playing that piano too, by the way. Her voice was her greatest musical gift, but it wasn’t her only one.)

In popular consciousness, this music was much more “black” than the poppy products coming out of Motown at the time. But if you did a racial breakdown of the people working behind the scenes, Motown would be a Black Power success story while Muscle Shoals, in the unlikely location of 1960s Alabama, would be integration’s great hope. The cultural historian Charles Hughes once described the FAME sessions of the ’60s as “white rhythm sections combined with integrated horn sections to play on songs by primarily white songwriters sung by black artists, for sale primarily to black audiences (by white-owned record companies).” Musically speaking, the results were frequently brilliant; socially speaking, it was certainly preferable to what you’d find in Montgomery at the time.

But it wasn’t free of tensions, and the most notorious example of things going wrong at FAME came during the Franklin sessions, which fell apart after the musicians started recording a second song, the country-soul ballad “Do Right Woman, Do Right Man.” The fight that erupted wasn’t purely a matter of race. In particular, there was the problem that Aretha’s husband thought one of the trumpet players was hitting on his wife. But given that the clash culminated with husband and trumpter shouting racial slurs at each other at a local motel, it’s safe to say that Muscle Shoals, inspiring as its music could be, had not unlocked the secret to perfect ethnic harmony. Franklin scrammed back north, swearing she’d never return.

But she didn’t need FAME Studios anymore anyway. Muscle Shoals had shown everyone what she could do and be, and now she was going to sit at the top of the world doing and being it. She recorded countless fantastic records from 1967 until her death this week at age 76, and I’m not really sure which one is my favorite. But I know which one is the most essential:

(For past editions of the Friday A/V Club, go here.)

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Trump Taunts Cuomo: “America Never Great” Statement Is Career Threatening

PlanetFreeWill’s Alexander Paul reports  that, in a quick spurt of tweets Friday morning, President Trump continued to slam New York Governor Andrew Cuomo over his assessment that America “was never great.”

“Wow! Big pushback on Governor Andrew Cuomo of New York for his really dumb statement about America’s lack of greatness,” Trump said via Twitter. “I have already MADE America Great Again, just look at the markets, jobs, military- setting records, and we will do even better. Andrew “choked” badly, mistake!”

In a following tweet, Trump called Cuomo’s words “career threatening” and took a shot at his CNN pundit brother, Chris.

When a politician admits that “We’re not going to make America great again,” there doesn’t seem to be much reason to ever vote for him. This could be a career threatening statement by Andrew Cuomo, with many wanting him to resign-he will get higher ratings than his brother Chris!

New York Governor Cuomo, who is being considered a possible contender for the presidency in 2020, told an audience during a bill signing event on Wednesday that: “We are not going to Make America Great Again. It was never that great.”

“We have not reached greatness. We will reach greatness when every American is fully engaged,” he said. “We will reach greatness when discrimination and stereotyping against women, 51 percent of the population, is gone, and every woman’s full potential is realized and unleashed.”

When first commenting on the NY Governor’s statement, Trump expressed disbelief.

“WE’RE NOT GONG TO MAKE AMERICA GREAT AGAIN, IT WAS NEVER THAT GREAT,” the President tweeted Thursday. “Can you believe this is the Governor of the Highest Taxed State in the U.S., Andrew Cuomo, having a total meltdown!”

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Subsidies and Price Controls Aren’t the Answer to Skyrocketing Prescription Drug Prices

At a dinner with business leaders last Tuesday, President Donald Trump promised to do “something” to get drug prices “down really substantially,” reports Reuters.

But what, exactly? This isn’t the first time the president has threatened to shake up the complex world of prescription drug pricing. And even though policy details aren’t really his forte, Trump seems to favor the use of government coercion rather than market forces. Trump railed against Big Pharma, accusing them of “getting away with murder” during his 2016 campaign. More recently, he browbeat Pfizer into reversing some of their drug price increases and released a rather ambiguous “blueprint” to bring down drug prices.

Despite what the president would have you believe, the problem of high drug prices is not one with a simple solution. Subsidies and price controls, options that Trump seems to favor, could slow innovation and hamper progress in the industry. If Trump really wanted to bring down drug prices, that “something” must address the problems of government overreach, including the public funding of prescription drugs, drug patents, and the web of regulation engendered by the Food and Drug Administration—a combination of factors affecting both the supply and demand sides of the equation.

On the demand side, Medicare and Medicaid artificially increase demand for drugs by using tax dollars to subsidize consumption. That enables large pharmaceutical companies to raise their prices without suffering any meaningful decrease in their sales. Medicare Part D, for instance, was enacted in 2003 to help seniors afford prescription drugs, but it has actually trigged the opposite effect. A report from the American Association of Retired Persons, a senior citizens interest group, surveyed 528 medications many older adults take daily and found that “the average retail price was $12,951 in 2015, more than three times the average price for such drugs in 2006.”

“Medicare part D has opened the floodgates for higher prescription prices,” says Mark Thornton, a senior fellow at the Mises Institute and an expert on drug regulation. “The prices for cancer drugs are simply outrageous, but the government continues to pay despite no guarantee they will work.”

In addition, these programs aren’t cheap. In 2016, we spent $672.1 billion on Medicare and $565.5 billion on Medicaid, but healthcare and pharmaceutical costs remain stubbornly high, and are increasing.

The Trump administration’s blueprint endorses price “negotiation” through these federal programs, but this is nothing more than government price controls. These controls might lead to lower prices, but they would almost certainly cause pharmaceutical companies to scale back their research into drug development. As Reason‘s Ronald Bailey discussed back in January, “If price controls pressure the U.S. industry into a more conventional process industry model, like that of the chemical industry, pharmaceutical R&D budgets would be slashed.”

Another problem is the drug patent system, which was conceived to ensure the welfare of American consumers, but now seems to advantage large pharmaceutical companies. Because drug companies are given the opportunity to monopolize drug markets and charge exorbitantly high prices, they are able to freeze out competition that might drag prices down.

“If a manufacturer of acetaminophen, for example, wanted to charge a thousand dollars a tablet, they wouldn’t sell any tablets,” says Gilbert Berdine, associate professor of internal medicine at Texas Tech and a faculty affiliate with Texas Tech’s Free Market Institute. “It would be pointless for them to do that, because a competitor would capture the entire market by underpricing them.”

The White House, however, seems to recognize the issue of extended patents. “Lower-cost drugs are kept out of the market by drug companies gaming regulatory processes and the patent system in order to unfairly maintain monopolies,” reads the administration’s proposal. Serious patent reform would require congressional action, but Trump is right to urge the House and Senate to work on legislation to roll back the arcane patent laws that dominate the pharmaceutical industry.

Drug companies will argue that patents incentivize investment. That’s true. By disproportionately increasing the rewards for producing specific goods, the government essentially offers a subsidy of sorts to drug companies, which certainly boosts production. However, this subsidy, like all others, transfers investment from productive sectors of the economy to the pharmaceutical industry, who don’t have to fear the consequences of competition that control other industries.

“There have been pharmaceutical developments long before there were patents and there would continue to be pharmaceutical developments in the absence of patents,” Berdine says.

Atop this milieu of subsidies, the government restricts supply with a smorgasbord of regulations, mostly promulgated by the FDA, that restricts competition and stymies the discovery process of the market.

“The FDA hampers innovation by requiring extensive and expensive testing,” continues Thornton, “There are tons of drugs and devices that work and would be at low prices and would definitely save and improve lives, but they are unavailable because of the FDA.”

Trump’s FDA Commissioner, Scott Gottlieb, has gained a reputation for his relatively speedy drug approvals, but that doesn’t address the underlying cause of having a massive, bureaucratic agency dedicated to limiting competition in the industry. According to the BrightFocus Foundation, a non-profit focused on supporting medical research, the costs for trials demanded by the FDA can cost hundreds of millions of dollars. This serves as a formidable barrier of entry to startup drug companies looking to introduce potentially life-saving drugs to the marketplace. Massive pharmaceutical companies can afford these regulations, but smaller competitors cannot. This dynamic expands the monopolization of pharmaceutical giants, who can dragoon consumers and insurance companies into paying heavily amplified prices.

Skeptics of laissez-faire are quick to point out the possibility of dangerous drugs being released in the absence of an all-powerful regulatory agency. The FDA’s litany of rules might stop some bad drugs from reaching consumers, but the discipline of the market is a far more effective regulator than a gang of Washington bureaucrats.

“Dangerous drugs that hurt or killed people would lead to lawsuits, not to mention the loss of good will. Ineffective drugs might hang around via the placebo effect, but would probably be competed away in the long run,” argues Thornton.

Trump seems to have a strong penchant for economic deregulation, and if he were to apply this to the pharmaceutical industry, he just might be able to make real progress on an issue that’s stumped many an administration before his.

“The market is a beautiful thing,” says Berdine, “one layer of regulation after another is not going to fix the problems created by the previous layer of regulation.”

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