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Ringgit Routed As Opposition Set To Win Malaysian Election, Army Deployment Rumors

Unofficial results from Malaysia’s general election Wednesday show the opposition alliance is making strong gains at the expense of the ruling coalition, and along with rumors of the Malaysian Army’s deployment, the Ringgit has tumbled into the red for 2018…

Results are in for 57 out of 222 seats — Prime Minister Najib Razak’s Barisan Nasional has won 30, with the opposition alliance taking 23

As AP reports, in the federal election, Prime Minister Najib Razak’s National Front is lagging behind the opposition, which campaigned on a platform of saving Malaysia from a corrupt elite after a multibillion-dollar corruption scandal at a state investment fund set up by Najib.

At least two Cabinet ministers appear to have lost their parliamentary seats and the opposition also made gains in state contests, potentially threatening the grip of Najib’s party on Johor state, where it was founded, and other states.

“There is a massive swing across races. It’s a big shift. This is a repudiation of Najib’s government from all walks of life from the very rural northern states to the more industrial southern coast,” said Bridget Welsh, a Southeast Asia expert at John Cabot University in Rome.

Angered by the graft scandal, Mahathir, who was prime minister for 22 years until 2003, emerged from political retirement and joined the opposition in an attempt to oust Najib, his former protege.

Malaysia’s chairman of the opposition coalition Mahathir says he believes Prime Minister Najib is unable to win based on the opposition’s own quick vote count. He tells supporters he thinks his alliance will secure the 112 seats needed for a majority, and take five states.

“From our official count, they are not forming government.”

If Mahathir is right, he’d be returning to office at the age of 92. For now, though, the official tally from the Election Commission stands at 44 seats counted.

Additionally, pictures began to circulate showing the Malaysia army being deployed – which spooked markets – but the military swiftly denied these “rumors circulating on social media that army assets and personnel have been stationed to control Putrajaya,” according to an official statement from armed forces late Wednesday.

The statement urged the public to immediately stop circulating the pictures.

 

And along with the rest of the EM FX market, the Ringgit (1mo NDFs in this case) is plunging…

Additionally, MSCI Malaysia ETF is tumbling…

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Why Persuade When You Can Punish? New at Reason

CensorshipA couple of months ago, Marriott fired Roy Jones, a 49-year-old social-media manager. His offense? He liked a tweet praising Marriott for listing Tibet as a country, rather than as a part of China. The Chinese government objected, and soon Jones was gone. (Marriott said its own listing of Tibet as a country was a mistake, but its mistake was not enough to save Jones’ job. Neither was the fact that Twitter is banned in China, so most citizens can’t access it.)

China’s government is notoriously touchy; it doesn’t like Winnie the Pooh, whom it thinks looks too much like Chinese President Xi Jinping. It also is hyper-vigilant about those things it finds offensive. In a column for The Washington Post, Josh Rogin quotes Katrina Lantos Swett, head of a human-rights group, who says “China is not content with censoring and controlling its own citizens. It is using the immense power of its financial resources in every country in the world.”

This is totalitarianism: not merely an effort to maintain authority over a populace, but to wield total control over everything even remotely related to China, and to stamp out anything that presents even a minor threat to official doctrine. There’s a lot of that going around these days. A. Barton Hinkle explains.

View this article.

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After The Party… The Hangover: The State Of America’s Debt Slaves

Authored by Wolf Richter via WolfStreet.com,

After the party, the hangover.

Total consumer credit rose 5.1% in the first quarter, compared to a year earlier, or by $184 billion, to $3.824 trillion (not seasonally adjusted), according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. That 5.1% year-over-year increase isn’t setting any records – in 2011, year-over-year increases ran over 11%. But it does show that Americans are dealing with the economy and their joys and woes the American way: by piling on debt faster than the overall economy is growing.

The chart below shows the progression of consumer debt since 2006. In line with seasonal patterns for first quarters, consumer credit (not seasonally adjusted) edged down from Q4, as the spending binge of the holiday shopping season turned into hangover, an annual American ritual:

Note how the dip after the Financial Crisis – when consumers deleveraged mostly by defaulting on those debts – didn’t last long. Over the 10 years since Q1 2008, consumer debt has now surged 47%. Over the same period, the consumer price index has increased 16.9%:

Auto loans and leases for new and used vehicles rose by 3.8% from a year ago, or by $41 billion, to $1.118 trillion.

It was one of the smaller increases since the Great Recession: The peak year-over-year jumps occurred at the peak of the new vehicle sales boom in the US in Q3 2015 ($87 billion or 9%). However, the still standing records were set in Q1 and Q2 2001 near the end of the recession, with each quarter adding around $93 billion, or 16%, year-over-year.

Loan balances are impacted by prices of vehicles, number of vehicles financed, the average loan-to-value ratio, duration of prior loans (when they’re paid off), and other factors. So this chart is not necessarily a reflection of how many new and used vehicles were sold.

The green line in the chart indicates the old data. In September 2017, the Federal Reserve implemented a big adjustment of consumer credit data going back through Q4 2015. This adjustment was based on survey data collected every five years. So routine. The adjustments hit auto-loan balances disproportionately, knocking them down by $38 billion retroactively for Q4 2015. To show the distortive effect of the adjustment – and to show that it wasn’t the collapse of the car business – I added the old data in green.

Credit card debt and other revolving credit in Q1 rose 5% year-over-year (not seasonally adjusted) to $977 billion. This growth rate was down from the 5.6%-6.8% Trump-bump increases that started in Q4 2016 and ran through Q4 2017. So it was somewhat of a disappointment for those wanting to see consumers drown in high-cost (or high-profit) debt.

On a quarterly basis, and in line with seasonal patterns, revolving credit card balances fell by $52 billion from the shopping season debt-pile up in Q4, as the annual hangover began. In dollar terms it was the steepest Q4-Q1 plunge since Q1 2010. In percentage terms (-5.1%), it was the steeped since Q1 2012.

But wait… Q4 credit card balances of $1.03 trillion had been an all-time record, finally beating the record of Q4 2008. And Q1 2018, at $977 billion, set a record for any first quarter, beating Q1 2008 by a smidgen ($973 billion). So Americans did their job piling on high-profit debt.

Student loans in Q1 jumped by 5.4% ($77.8 billion) year-over-year to $1.51 trillion. While a shocking increase, it was the slowest year-over-year percent increase going back to 2007, the beginning of the data series: In fact, between 2007 and Q3 2012, these year-over-year increases ranged from 11% to 15%!

But it’s not like more people are going to college. Higher-education enrollment had peaked in 2010 and declined at least through 2015, according to the last data available from the National Center for Education Statistics. And yet, over the 10 years from Q1 2008 to Q1 2018, student loan balances soared by 146%, from $619 billion to $1.521 trillion. Over the same period, the consumer price index rose 16.9%.

Students added $902 billion to their debts over the past 10 years — a debt that will dog them for decades to come. And for most of this debt, taxpayers are on the hook. But who obtained the money?

A whole economy has sprung up around this bonanza, with entire industries getting fat: Investors in private colleges; the student housing industry, which has become an asset class within commercial real estate; companies like Apple that supply students with whatever it takes; the textbook industry; overpaid top administrators; construction companies and affiliated industries building university-owned projects, from mega-stadiums to glitzy administrative buildings; Wall Street by making it all possible; and many more. But hey, that’s how you get GDP and corporate profits to grow. It’s a dirty job, but someone’s got to do it.

This is the brick & mortar part of e-commerce. Read…  As Malls Melt Down, Industrial Properties Heat Up 

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The Morning After: How The World Reacted To Trump’s Withdrawal From The Iran Nuclear Deal

One day after Trump announced he will withdraw the US from Obama’s landmark 2015 deal to curb Iran’s nuclear program while reinstating the “harshest of sanctions” on the Persian Gulf country, and giving US allies 180 days to extricate themselves from Iranian oil deals as it seeks to economically isolate and curb oil exports from the #3 OPEC producer, this is how the world and capital markets are reacting.

This following summary, prepared by Bloomberg, includes reactions from governments and companies in Europe and Asia, market impact and views from analysts.

EUROPEAN GOVT REACTIONS:

  • U.K., France, Germany say they will remain parties to Iran deal
    • Trump’s envoy in Berlin stokes furor over Iran 1 day into role
    • U.K.’s Johnson: Iran deals doable without violating U.S. sanctions
  • EU fights to keep Iran nuclear deal alive after Trump’s exit
    • EU vows to protect its economic investments, interests in Iran
  • Spain will defend Iran treaty with European partners, Rajoy says
  • IAEA inspectors say Iran still sticking to nuclear commitments
  • Putin warns of “fragile” world a day after Trump exits Iran deal
    • Russia deeply disappointed by U.S. pullout from Iran deal
  • EU plans to shield its companies if Trump ditches Iran deal

EUROPEAN COMPANY REACTIONS:

  • Spain’s Cepsa will switch from Iran crude in event of sanctions
  • Poland’s Lotos says Trump decision on Iran is “neutral” for co.
  • Poland’s Orlen says its delivery terms are flexible
  • Maersk CEO says fallout of Iran decision is unclear
  • Serica looks at implications for North Sea Rhum field
  • European cos that rushed into Iran now prepare to rush back out
  • April 19: Total CEO to stop Iran project if no U.S. exemption

ASIAN GOVT REACTIONS:

  • Trump seen facing rebellion from Iran’s biggest oil customers
  • China expresses regret over U.S. decision on Iran
  • Japan to seek waiver from U.S. Sanctions on Iranian crude
    • Japan will work to maintain Iran deal: foreign minister
  • S. Korea to seek exemption from U.S. sanctions on Iran oil
  • India sees oil supply from Iran constrained after U.S. sanctions

ASIAN COMPANY REACTIONS:

  • Indian refiners say they’ll look to keep paying Iran in euros
  • Taiwan’s CPC watching crude prices closely on Iran sanctions
  • Taiwan’s Formosa can replace Iran oil with other Mideast supply
  • Fuji Oil says undecided on how to respond to U.S.- Iran sanctions
  • Japan’s Jera says Iran sanctions impact may spread to LNG market

MARKET/PRODUCER/SUPPLY REACTIONS:

  • Oil rises as Trump tells buyers to cut back on Iranian crude
  • Ship insurer group sees big impact from Iran sanctions
  • Here’s how the biggest oil buyers can tackle Trump’s Iran action
  • U.S. seeks to quickly curb Iran oil after scrapping deal
  • China oil futures trade volume rises to record on Iran sanctions
  • IEA says it stands ready to ensure oil market is well supplied
  • Saudi Arabia ready to “mitigate” impact of Iran sanctions
  • Dubai refiner’s supply dilemma deepened by Trump Iran deal exit
  • Kuwait to help mitigate any shortage in oil supply: minister

ANALYST VIEWS:

  • EA: Saudi output to rise if Iran sanction losses significant
  • Bernstein: Oil could rise toward $90 after move on Iran deal
  • Orient: China may be cautious in opposing U.S.-Iran sanctions
  • UBS: Iran oil exports may fall by 200k-500k b/d in next 6 months
  • Barclays: Iran output seen unaffected in 2018 by Trump move
  • Drewry: Sanctions on Iran may create space for shale exports
  • “Disaster” for Asia if U.S. sanctions Iran condensate
  • CICC: U.S. sanctions on Iran to keep Brent around $75- $80
  • OANDO: Oil price volatility to continue on U.S. Iran deal exit
  • EIG: U.S. exiting nuclear deal may remove 700K b/d of Iran oil
  • MUFG: China may keep Iran crude imports despite U.S. sanctions

REACTION FROM WITHIN IRAN:

  • Barbs, flag burning and despair: Iran reacts to U.S. deal exit
  • Rouhani: Iran to Prepare for Enrichment if Needed After 3 Weeks
  • Rouhani: Iran Can Achieve Benefits of JCPOA With 5 Countries

Source: Bloomberg

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End of Iran Deal Underscores a Weakness of Obama’s ‘Pen and Phone’ Presidency

Say what you will about Donald Trump pulling the United States out of the Iran deal. Personally, I wish the United States had stayed in. But this sort of zig-zag is exactly what happens when you end up governing with your pen and your phone, as Barack Obama did.

Faced with a recalcitrant, obstructionist Republican Congress that he helped bring to power two years into his presidency, Obama increasingly gave up on getting congressional approval for anything: military actions, immigration policy, trade policy, net neutrality, environmental regulations. Instead, as Damon Root wrote a few years back, Obama did exactly what he once had criticized his predecessor for and went full Andrew Jackson:

In December 2007 presidential candidate Barack Obama told The Boston Globe that if he won the 2008 election, he would enter the White House committed to rolling back the sort of overreaching executive power that had characterized the presidency of George W. Bush. “The President is not above the law,” Obama insisted.

Once elected, however, President Obama began to sing a different sort of tune. “We’re not just going to be waiting for legislation,” Obama announced. “I’ve got a pen and I’ve got a phone…and I can use that pen to sign executive orders and take executive actions and administrative actions.”

Well, you live by the pen and you die by the pen, and so DACA, the Paris Accords, and the Iran deal (routinely described as “one of President Barack Obama’s signature foreign policy achievements“) are down the tubes.

If Obama had tried to negotiate the Iran deal as a treaty, rather than an agreement, he would have needed the Senate to sign off on it. Same thing with U.S. involvement in the Paris Accords and a bunch of other “signature achievements.” He would almost have certainly gotten nowhere with a Republican opposition whose “top priority” was, according to “Cocaine Mitch” McConnell, making Obama “a one-term president.” It would have taken extraordinary leadership, especially in the teeth of a recession and the wake of the one-party passage of Obamacare, to get much of anything done.

But what was it that Obama used to say? “Elections have consequences,” and you’ve got to play with the cards you’re dealt. It’s not complicated: You can either do the hard work to build a consensus and pass lasting legislation or you can toss off victories that won’t last very long. Now Trump, like Bush and Obama, is mostly opting for the latter. What is it with these baby-boomer presidents anyway? Not a single one could pass the marshmallow test.

Indeed, gridlock didn’t stop the president and Congress from pulling together when they wanted to. As Veronique de Rugy and I wrote in 2012:

the ostensibly gridlocked Congress reauthorized the Export-Import Bank program that gives money to foreign companies to buy U.S. goods; extended sharply reduced rates for government-subsidized student loans; re-upped the Essential Air Service program that subsidizes airline service to rural communities; and voted against ending the 1705 loan-guarantee program that gave rise to green-tech boondoggles such as Solyndra and Abound. None of these were party-line votes—all enjoyed hearty support from both Democrats and Republicans.

Another instance of budding bipartisanship is the pork-laden farm bill that extends sugar subsidies, maintains crop subsidies and creates a “shallow-loss program” that effectively guarantees incomes for farmers at a time when that sector is doing historically well. The bill passed the Senate with 16 GOP votes. Though the House version of the bill is still being worked out, no one doubts it will not only pass, but largely resemble the Senate version.

My point in bringing up the relative ease with which Trump pulled America out of the Iran deal isn’t (simply) to bash Obama. He’s out of office, and Trump and the GOP own the state of the nation. It’s to underscore the low-grade, slow-moving constitutional infection that has plagued the 21st century like Hep C. If Congress refuses to do its job, which is to write laws and give clear limits to the executive branch, all we have to look forward to is a series of four- or eight-year lurches in this direction and that as the presidency slides from Republican to Democrat and back again. This is no way to run a corner market, much less a country. But it won’t stop until the group Mark Twain identified as America’s only native criminal class starts to actually do its job.

Final point to the NeverTrumpers: Realize that everything The Donald does simply by pen and phone will be just as easily countermanded as Obama’s own “signature achievements.” If a president’s signature ain’t on a piece of actual legislation, it might as well be written in pencil.

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These Are Retail Investors’ Favorite Stocks… And Why Goldman May Be Shorting Them

Yesterday we reported that according to Goldman Sachs, creator of the Hedge Fund VIP Basket of 50 most popular stocks among the hedge fund community, the recent underperformance of this basket…

… coupled with the disappointing response to stocks beating in Q1 earnings season, was a growing threat to market stability as it portended that a liquidation “cliff” event could be just one sharp drop in the S&P away.

This is how Goldman phrased it:

Investors should be attentive to the positioning dynamics currently driving stock performance. If the S&P 500 takes another turn lower, popular positions will likely underperform, with mutual fund and retail favorites particularly vulnerable, while hedge fund favorites look poised to outperform if the market continues to rally.

This growing concern about hedge fund skittishness emerged as, somewhat paradoxically, retail investors turned increasingly more bullish after a period of broader liquidation at the start of earnings season; in other words as hedge funds turned more bearish, retail investors become increasingly bullish. Said otherwise: the smart money has been increasingly selling to the dumb money.

Needless to say, this is a very precarious disequilibrium, as the subtlest hint of a trend reversal within the retail community – ostensibly a confirmation that the smart money has been dumping – could unleash a retail liquidation wave. Which is a problem because as the next chart from Goldman shows, retail investors have been a growing influence on markets, with retail trading soaring to record levels at the start of 2018, and prompting the market “blow off top” that prompted many concerns among the institutional community.

Indeed, as Goldman adds, household equity allocations entering 2018 were at the highest levels since 2001:

Equities in total accounted for 42% of household financial assets at the start of 2018. However, increased allocations to global equities have kept domestic equity allocations from exceeding the 2007 level of 32%.

At the same time, US margin debt has risen to the highest levels on record as retail investors have never been more levered to further market upside (putting them at great risk of margin calls).

In other words, while the HF VIP basket has been getting hit recently, making hedge funds increasingly cautious, retail exuberance soared, however that too appears to be ending.

As Goldman further notes, whereas retail sentiment rose sharply with equity prices after the passage of tax reform in late 2017, declined as the equity market corrected in early 2018; furthermore “the difference between shares of bullish and bearish respondents to the American Association of Individual Investors (“AAII”) survey reached 44 pp on January 3, the largest spread since December 2010. In January and February sentiment began to weaken, and turned net bearish in late March.”

As sentiment fell, retail investors reduced broad market exposure through mutual funds and ETFs at the same time as they trimmed their individual equity positions. US equity mutual funds and ETFs experienced nearly $30 billion of  inflows in late January, shortly after AAII readings peaked. From February through early April, $63 billion flowed out of US equity funds alongside falling sentiment. In late April, however, AAII sentiment and flows both recovered; equity funds have received $14 billion of inflows during the last three weeks.

So what happens if this bearish sentiment persists? Goldman could not be any clearer, warning that “if the S&P 500  takes another turn lower, popular [hedge fund] positions will likely underperform, with mutual fund and retail favorites particularly vulnerable.”

And while we already know the Top 50 most popular hedge fund positions (shown here), what about the “retail favorites” that Goldman believes would be crushed in the next downturn? Courtesy of Goldman, here is the bank’s estimation of the names that make up the retail trading favorites. This is how Goldman screens:

Our screen of “retail trading favorites” is constructed using fund position filings and Google Trends search data. The list consists of Russell 1000 stocks that outperformed the S&P 500 in 2017 while experiencing little to no increase in hedge fund and mutual fund ownership, as disclosed in positioning filings at the start and end of the calendar year. Stocks in the list also evidenced high average Google search volume during the year. The list attempts to capture stocks for which retail investor trading is an important driver of share price movement, in contrast with stocks where retail investors make up a large share of ownership but may be less active traders

If Goldman is right that a market correction would lead to a liquidation of the most widely held names, shorting this basket, while going long the most shorted hedge fund names (detailed previously) could be one of the more profitable pair trades heading into a volatile summer season.

Here is the list of top retail favorite stocks:

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WTI Tops $71 After Surprise Crude Draw, Production Spikes

WTI/RBOB extended gains overnight (WTI at 3.5yr highs) following Trump’s Iran decision and a surprise crude draw reported by API, and DOE data confirmed the draw (even larger) along with gasoline and distillate draws. US crude production jumped to a new record high.

“It’s the time of year when you expect oil draws because refiners start coming back fairly soon from maintenance season,” says James Williams, president of energy researcher WTRG Economics.

API

  • Crude -1.85mm (+1mm exp)

  • Cushing +1.653m

  • Gasoline -2.055mm

  • Distillates -6.674mm – biggest draw since 2004

DOE

  • Crude -2.197mm (+1mm exp)

  • Cushing +1.388mm

  • Gasoline -2.174mm

  • Distillates -3.791mm

Over the last couple of weeks, U.S. crude inventories have built up, in part helped by an unusual drop in refining activity, at least compared with last year’s trends, but that trend is over this week with crude surprisingly drawing down 2.197mm barrels…

Distillate inventories are near their five-year lows on a seasonal basis…very unseasonal!

Bloomberg’s Javier Blas notes a key statistic: Year-to-date, U.S. crude inventories have risen by ~11.5 million barrels. To put that into perspective, consider that over the same period in 2017 they built ~48.8 million barrels.

The difference shows the impact of OPEC and its allies production cuts, particularly Saudi Arabia. The kingdom is shipping a lot less crude into the U.S. year-to-date (722,000 barrels a day) than it did during the same period of last year (1.20 million barrels a day).

Crude imports tumbled…

US Crude Production continues to soar – up an impressive 84k b/d last week to 10.703mm b/d

 

With WTI hovering around $71 ahead of today’s DOE data (ramping off yesterday’s Iran decision) and popped above it as the dat hit…

“One of the most important deadlines for oil markets was yesterday, with the announcement the U.S. is reinstating sanctions against Iran,” said Luisa Palacios, a director at Medley Global Advisors LLC, in a telephone interview Tuesday. “The second most important deadline is May 20, when Venezuela holds presidential elections.”

Investors traded about $1.8 billion worth of the SPDR S&P Oil & Gas Exploration & Production ETF yesterday, more than three times the average daily turnover for the fund and the most since November 2016.

The largest trade was worth $13.8 million when a trader bought 348,000 shares of the fund.

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Top Secret Intel Source Aiding Mueller Probe Is Source Of Latest Clash Between Nunes And DOJ

House Intel Committee Chairman Devin Nunes (R-CA) was denied a cache of classified information by the Department of Justice (DOJ) after the White House backed senior FBI and national intelligence officials who told them the materials were too hot to give to him – and “could risk lives by potentially exposing the source, a U.S. citizen who has provided intelligence to the CIA and FBI, reports the Washington Post, citing multiple sources. The FBI made the urgent request to the White House last Wednesday claiming that even a redacted version of the request could risk lives by exposing a top-secret intelligence source.

Which begs the question:

White House officials agreed to the DOJ’s request with President Trump’s blessing – however the Post notes “it is unclear whether Trump was alerted to a key fact — that information developed by the intelligence source had been provided to the Mueller investigation.” 

Whatever the case, the U.S. intelligence community clearly doesn’t trust Nunes with this information. 

For the intelligence agencies, Nunes’s request threatened to cross a red line of compromising sources and methods of U.S. intelligence-gathering, according to people familiar with their views. Intelligence officials fear that providing even a redacted version of the information Nunes seeks could expose that person and damage relationships with other countries that serve as U.S. intelligence partners. –Washington Post

Nunes requested the information in a classified April 24 letter to the Justice department. Due to the confidential nature, we don’t know exactly what the DOJ is holding back, however he told reporters this week that he is investigating FBI Foreign Intelligence Surveillance Act (FISA) abuse and “other matters.” 

The Post notes that the involvement of the White House marks a rare “moment of alignment between the Justice Department and Trump, who has relentlessly criticized Attorney General Jeff Sessions and other top Justice officials for the probe into Russia’s interference in the 2016 election led by special counsel Robert S. Mueller III.” 

House Republicans and the DOJ are now in a heated battle over the actual risk to the agency’s top-secret source – with Nunes saying Sunday that he may try to hold Sessions in contempt for refusing to comply with his request. 

Nunes told OAN News: “The bottom line is we’ve had this investigation going for a long time into FISA abuse that occurred by the executive branch.”

“We need documents to be able to verify if things were done properly or improperly, so that’s what we’re waiting on. So we sent a letter a few weeks ago, a classified letter. That letter was not responded to, it was ignored. We issued a subpoena… We got back on Thursday that they will not comply, so now we have no other choice but to move to hold the Attorney General in contempt if they don’t provide the documents.”

“They are citing spurious national security concerns to evade congressional oversight while leaking information to The Washington Post ostensibly about classified meetings,” Nunes told The Post. “Congress has a right and a duty to get this information and we will succeed in getting this information, regardless of whatever fantastic stories the DOJ and FBI spin to the Post.”

Administration officials tell The Post that they are concerned Trump will change his mind and support Nunes’ argument. 

The role of the intelligence source in the Mueller investigation may now be seized upon by conservative Republicans who have publicly accused the Justice Department and intelligence agencies of overreach and misuse of their surveillance powers. –WaPo

To that end, several House GOP drafted articles of impeachment against Deputy Attorney General Rod Rosenstein as a “last resort” if he doesn’t hand Congress more information. 

In a similar vein, Nunes threatened to impeach DAG Rosenstein and FBI Director Chris Wray if they didn’t immediately hand over an unredacted copy of the two-page document outlining the original scope and mandate of the Mueller Special Counsel investigation. The DOJ eventually acquiesced to Nunes’ threat, providing him with access to modestly redacted copies – for which Nunes thanked Rosenstein.

That said, Rosenstein pushed back in comments at the Freedom Forum Institute – telling the audience that while he is willing to work with Congressional investigators – he will draw the line when he needs to, exclaiming that the Justice Department was “not going to be extorted” into handing over documents that could harm national security or interfere with ongoing investigations. 

“If we were to just open our doors to allow Congress to come and rummage through the files, that would be a serious infringement on the separation of powers, and it might resolve a dispute today, but it would have negative repercussions in the long run, and we have a responsibility to defend the institution,” Rosenstein said.

Not everyone agrees…

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Wholesale Inventories, Sales Growth Disappoint In March

Wholesale Sales and Inventories disappointed in March, both slowing to +0.3% MoM.

  • Wholesales Sales slowed from an upwardly revised +1.1% MoM in Feb to +0.3% MoM in March.
  • Wholesale Inventories slowed from +0.9% MoM in Feb to +0.3% MoM in March (lower than the +0.5% MoM expected).

Wholesale Sales growth YoY continues to outpace Inventory growth (which is a somewhat positive point)…

 

Finally, the Wholesale inventory-to-sales ratio held steady at 1.26x, although Automotive ticked up to 1.171x as did Metals and Hardware.

The weaker than expected inventory growth may shade a little off GDP estimates but it is now very backward-looking so unlikely to warrant a growth panic.

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New York Times Editorial Board Thinks Uber Is Too Popular, Demands Price Floors

The problem with ridesharing is it works too well. Or that’s the thesis of an editorial this week in The New York Times.

Sure, the Times concedes, these app-based transit companies are making intracity travel easier. Ridesharing apps have “been a boon to people trying to get around town,” especially those ill-served by public transit. But they also “lay waste to the livelihoods of taxi drivers and turn New York’s already busy streets into glorified parking lots.”

To remedy this problem, America’s paper of record taps a couple ideas that have been gathering dust since the 1930s, including a price floor for rides, a minimum guaranteed fare for drivers, and subjecting ridesharing companies to the same regulations as taxis (because “it makes little sense for the city to regulate the old and new guard of for-hire cars differently when many New Yorkers use them interchangeably”).

Some of these ideas are already getting traction. New York Mayor Bill de Blasio has suggested capping the number of ridesharing cars allowed in the city, while New York City Councilman Brad S. Lander (D-Brooklyn) has introduced a bill that would give the city’s Taxi and Limousine Commission the power to set a price floor for ridesharing drivers and to mandate that these drivers be paid at least the same as drivers of traditional taxis.

What these politicians and editorialists are missing is that what the Times calls the “Uber problem” is evidence of the model’s success.

Falling returns to taxi operators means consumers are opting for a service that better meets their needs and is offered at a lower price. Increasing traffic congestion shows that consumers are making the switch, and indeed that ridesharing is expanding the market for trips within New York City.

In other words, more people are travelling to places they want to be, and they’re doing so at a lower cost. These benefits are accruing to riders because of an innovative business model that allows ridesharing companies to both route around the taxi cartel and to rapidly expand or contract the size of their fleets in response to how many people want rides at a given time. Far from welcoming this innovation, the Times and likeminded officials want to tear it all down with price floors and one-size-fits-all regulations.

Such rules will only make the city’s transportation problems worse.

For starters, trying to craft regulations that treat taxi companies and Uber drivers the same because customers flit between the two services is nonsensical when their business models are so different. You might as well decide to regulate Greyhound and Southwest identically because both service the same demand for intercity travel.

The likely result—particularly given the Times‘ interest in protecting the taxi industry—will be to saddle rideshare companies with ill-fitting regulations that raise costs and deter them from even operating in the city.

A price floor would likely be even worse, pricing sensitive riders out of the market while failing to provide drivers with a better wage, to help the taxi industry, or even to tackle congestion.

Currently, drivers for Uber, Lyft, and other services enter or leave the market based on the price they can fetch for offering a ride, which is in turn based on the number of people demanding rides at a given time. Should the government impose a price floor on rides while changing nothing else, fewer riders will be willing to pay the higher mandated fares while more drivers will not get the hint that their services are no longer in demand.

The result will be plenty of drivers still circulating the city’s roads hunting for a shrinking pool of customers, increasing congestion and competing with taxis, but without the benefit of actually taking people to and from their destination.

The only fix proposed by the Times that has any promise is congestion pricing—basically a dynamic toll that rises or falls with the number of cars on the road—and then plowing that into shoring up the city’s ailing public transit system.

At the risk of having to hand back my libertarian card, I don’t think there’s anything wrong with asking drivers to pay more for a faster trip, then using that that money to compensate deterred motorists with better transit service that offers them a real alternative to driving. In theory, that should work in a place like New York City, and particularly Manhattan, where transit can serve as a substitute for a lot of automobile trips.

In practice, it’s far from clear that the dreadfully incompetent Metropolitan Transportation Authority, which runs the city’s buses and trains, would actually spend any additional revenue wisely. So even this solution has problems.

Still, points for a proposal that mimics one of the innovative elements of ridesharing—a dynamic price managing supply and demand across the road network—rather than trying to squeeze innovation out of the system altogether.

The goal should be to create more options for riders looking to get where they want go. Companies like Uber and Lyft are doing just that. Any future reforms should build on what they’re doing, not regulate them out of existence.

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