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Reason Weekly Contest: Apple vs. the Feds

PhoneWelcome back to the Weekly Reason Contest! This week’s question is:

Apple refuses to hand over an encryption key to the Feds. The Feds are fed up. Come up with the name of the next Apple device to foil the government.

How to enter: Submissions should be e-mailed to contest@reason.com. Please include your name, city and state. This week, kindly type “APPLE” in the subject line. Entries are due by 11 p.m. Eastern Time, Monday, Feb. 29. Winners will appear on March 4. In the case of identical or similar entries, the first one received gets credit. First prize is a one-year digital subscription to Reason magazine, plus bragging rights. While we appreciate kibbitzing in the comments below, you must email your answer to enter the contest. Feel free to enter more than once, and good luck!

And now for the results of last week’s contest: We asked you to predict the name of the next app company to enter the, uh, growing app-connected sex toy market.  You banged out:

THE WINNER

Screwber — Robert Ryan, Dallas City, IL

SECOND PLACE:

Rüber:  The safe sex app for handheld devices — Tim Whalen, Manassas, VA

THIRD PLACE:

Backdoor, by Apple — Drew Beardslee, Grand Rapids, MI

HONORABLE MENTIONS:

The Bedroomba – Let’s keep it clean

eGovernment – Now it screws you over the Internet — Tim Whalen, Manassas, VA

Plug and Play Toy Company  — S.R.

Jingles to Tingles  — David Pinto, Longmeadow, MA

iTapMyself – Brian Too Embarrassed , Alamosa, CO

Firm Consent: An app-controlled sex toy that stops every ten seconds to ask, “Is this okay?” Requires the user to scribe their initials and enter the date and time to resume function. — Dan Mahoney, Baja, MX

Clitbit — Robert Ryan, Dallas City, IL

Sit On My Facebook — Robert Ryan. Dallas City, IL

iTouch Myself

I’d App That

Menage a Tron — C.M.

Mistress Siri asks you the questions, worm. — Colin Blake, Boston, MA

AND FROM THE COMMENTS:

Atlas Plugged

The Mountin’ Head

Von Pleezes

Horny Birds

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IRS Takes On “Strong Christian” Trump: Says Audit Is No Reason To Hide Tax Returns

Following Mitt Romney's establishmentism and last night's attacks, Donald Trump's tax returns are the new narrative of this news cycle. Trump claimed he cannot (or is unwilling to) release his tax returns since he is currently under audit (which he says is "maybe because of the fact that I am a strong Christian…").

In recent weeks, as NYMAG.com reports, the GOP front-runner has faced escalating pressure to release his tax returns.

 

 

But, for now he has not released them. So when asked whether he would make the documents public last night, Trump claimed that the IRS had made it impossible for him to do so.

 “As far as my return, I want to file it, except for many years, I've been audited every year,” Trump said.

 

“Twelve years or something like that. Every year they audit me, audit me, audit me … I will absolutely give my return, but I'm being audited now for two or three [years' worth] now so I can't.”

 

Asked by CNN’s Chris Cuomo to explain his troubles with the IRS, Trump reasoned, “Maybe because of the fact that I am a strong Christian … you see what's happened, you have many religious groups complaining about that."

Romney, who got the ball rolling Wednesday by tweeting that there was "good reason to believe that there's a bombshell in Donald Trump's taxes," was also unimpressed.

However, according to NBC’s Frank Thorp V, the IRS disagrees, saying in a statement that "Federal privacy rules prohibit the IRS from discussing individual tax matters. Nothing prevents individuals from sharing their own tax information."

 

 

The showdown between Trump's lawyers and The IRS continues…


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Rate-Hike Odds Surge To Highest Since January

Be careful what you wish for: equity exuberance (the biggest short-squeeze in 5 years) has circled back to create the circumstances for its own  demise as The Fed is increasingly cornered by rising income, rising spending, low unemployment, and high inflation. Rate-hike odds have surged back to their highest since January, and with December rate hike odds jumping back over 50% following the Japan NIRP crash, imply there is now a greater than half probability of another rate hike in 2016.

 

Time for a sell-off before the March FOMC…


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Hedge Funds Suffer $25Bn In Redemptions As Total Assets Drop To Lowest Since May 2014

Is the “2 and 20” model finally dying?

After not only underperforming the market by 7 years in a row, but generally disappointing even relative to benchmarks, the hedge fund industry started off 2016 with such a deplorable P&L whimper that has even eclipsed the first months of the financial crisis.

 

Worse, after years of investors stoically refusing to redeem their money from underperforming hedge funds, their patience appears to have run out and according to eVestment data cited by Bloomberg, investors pulled a net $21.5 billion, the most in the opening month of a year since 2009, while losses led to a $43.2 billion drop in assets under management. Notably, hedge funds that suffered losses last year were hit by redemptions worth $24.8 billion in January.

As a result, assets managed by hedge funds globally last month fell to $2.96 trillion at the end of January; this is the first time the hedge fund industry has managed less than $3 trillion in AUM since May 2014.

As Bloomberg adds, equity, fixed-income and multistrategy hedge funds suffered net outflows, though interest in those betting on commodities rose for the fifth straight month in January as investors pledged $1.2 billion, the most since mid-2014.

“This is a major reversal of a trend which dates back to mid-2012,” eVestment said in a statement on Friday. “Hedge fund investors appear to firmly believe there are significant opportunities in the commodity space.”

The surge of outside capital into commodities may explain why despite ongoing weakness in fundamentals across the commodity space, driven by both China and concerns about oil storage overflowing, there has been a strong base for crude in the upper-$20 range, and also explain the torrid jump in various metal commodities over the past two months.

But while it remains to be seen if hedge funds are right to rush into commodities, or just early, one thing is certain: one of the most prominent hedge fund activist investors, Bill Ackman, is certainly not having a good day and will surely be facing even more redemptions after not suffering a -17.3% return YTD, but also after today’s massive surge in his infamous short Herbalife, which as of this moment is up nearly 25% after the company reported its long-running feud with the FTC may be close to conclusion.


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Rescheduled 7 Year Auction Results In Ugly, Tailing Mess

As we reported yesterday, the surprising catalyst which for some still unknown reason unleashed yesterday’s torrid market rally and selloff in Treasurys, was the announcement by the US Treasury that it would reschedule yesterday’s 7 Year auction due to “technical issues.”

Moments ago this auction finally priced, this time without any drama, and what a difference 24 hours makes.

While yesterday the 7 Year was trading at about 1.43%, moments ago it priced at a yield of 1.568%…

… which while the lowest since May 2013, was in two words, an “ugly mess”, railing the When Issued of 1.542% by a whopping 2.6 bps, the biggest tail since October 2011, and suggesting that there may well have been a buyer strike both today and perhaps yesterday as well. As a reminder, the Treasury has not provided any details on the reason for the delay.

The internals were just as ugly: the Bid to Cover closed at 2.25, far below last month’s 2.63, below the 12 MMA of 2.46 and in fact the lowest since February of 2009.

Finally the allotment was a disappointment as well, because following January’s record Indirect takedown of 69.4%, this time foreign central banks ended up holding only 53.5% of the final auction, with Directs responsible for 14.2% and Dealers holding 32.3%.

Overall, a very ugly auction and one which still leave many questions to be answered, most importatnly why did it not take place at its scheduled time yesterday. We will likely never know.


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CONFIRMED – The U.S. Military Asks Tech Companies to Tweak Their Algorithms to Promote Certain Content

Screen Shot 2016-02-26 at 9.51.05 AM

You probably had no idea, but representatives from Silicon Valley, Hollywood and the U.S. government came together earlier this week to privately discuss how they could jointly fight ISIS propaganda online. Never mind the fact that ISIS is the child of reckless and inhumane preemptive wars of aggression perpetrated by the U.S. government in the first place. Such introspection naturally never crosses the mind of government bureaucrats ostensibly attempting to understand the epic disasters of their own creation.

So who attended the meeting? We don’t know for sure because the plebes aren’t entitled to know such things. Fortunately, we have become privy to some information thanks to Buzzfeed News. Here’s what we learned:

WASHINGTON, D.C. — They flew in from New York, San Francisco, and Los Angeles to hole up in a windowless D.C. conference room for nearly five hours on Wednesday — representatives of the country’s top tech and entertainment companies brainstorming with U.S. counterterrorism officials to tackle one tough question: how to stop the spread of ISIS online.

continue reading

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Oscar Tax Breaks: New at Reason

Who will win at the Oscars Sunday night? Not taxpayers, writes Jared Meyer:

Film is a heavily subsidized industry, and the majority of states have tax incentive programs that lower the cost of production. These tax credits are determined by production costs, not profits, and many credits are transferrable or refundable. When a film’s tax liabilities are below its allotted refundable credits, taxpayers end up directly paying film companies the difference.

The Martian, one of this year’s nominees, cost $108 million to produce and was filmed in California, Texas, and Louisiana. All three states have film tax credit programs, but Louisiana’s 40 percent partially-transferrable credit is the largest.

New York’s fully-refundable 30 percent film tax credit is the most generous in the nation, with an annual limit of $420 million. Brooklyn and Bridge of Spies, two of this year’s nominees, were filmed in New York, and their budgets were $12 million and $40 million, respectively.

View this article.

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President Trump Would Be Worse Than President Clinton: New at Reason

David Harsanyi argues a Trump presidency could be even worse than a Clinton one. While a Clinton administration would likely face gridlock, Trump could be more effective:

Just as some Republicans are already warming to the idea of his candidacy, the temptation in Congress to follow “Trumpism”—a philosophy based on the vagaries of one man—will be strong. Trump’s inclination is never to free Americans from the state, but rather to do a better job administering the state (“we’re gonna take care of everybody!”) through great deals and assertive leadership. Or in other words, everything the Founding Fathers didn’t want the presidency to be.

So, while gridlock will still hold up most of the issues conservatives care about, chances are high—considering his long history of supporting big government—that Trump would try and cobble together a populist coalition for the polices that conservatives hate. This will end up marginalizing ideological conservatism from within the party.

View this article.

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Obama Administration to Expand Sharing of NSA Data from Snooping

Hey it's one of those "back room" discussions John Kasich thinks they should have to decide how much privacy Americans should have.At the same time that Republican candidates at last night’s debate were signing on to the FBI’s claim (a completely untrue claim) that they only wanted to force Apple to help them access a single phone, Charlie Savage at The New York Times was reporting a plan by the Obama administration to increase the number of people and government agencies allowed to review data collected by the National Security Agency (NSA).

While these two issues are not directly connected, it’s an important reminder that when you’re dealing with the government (or any large institution) whatever authority it is granted is bound to expand whenever possible. And in this case, it’s actually likely a direct result of intelligence agencies trying to do a better job of evaluating the information that it collects, something that has been a consistent problem in anti-terror efforts. It’s not that the government isn’t getting the right information; it’s not sharing the information with the right people.

But the problem is that—because we are now aware that the NSA has been collecting absurd amounts of data about American citizens “incidentally” as part of its anti-terror efforts—such a plan potentially means more eyeballs may end up looking at private information about you and me:

The change would relax longstanding restrictions on access to the contents of the phone calls and email the security agency vacuums up around the world, including bulk collection of satellite transmissions, communications between foreigners as they cross network switches in the United States, and messages acquired overseas or provided by allies.

The idea is to let more experts across American intelligence gain direct access to unprocessed information, increasing the chances that they will recognize any possible nuggets of value. That also means more officials will be looking at private messages — not only foreigners’ phone calls and emails that have not yet had irrelevant personal information screened out, but also communications to, from, or about Americans that the N.S.A.’s foreign intelligence programs swept in incidentally.

Civil liberties advocates criticized the change, arguing that it will weaken privacy protections. They said the government should disclose how much American content the N.S.A. collects incidentally — which agency officials have said is hard to measure — and let the public debate what the rules should be for handling that information.

“Before we allow them to spread that information further in the government, we need to have a serious conversation about how to protect Americans’ information,” said Alexander Abdo, an American Civil Liberties Union lawyer.

What will happen under this new system is that the NSA will be able to allow other federal agencies (like the CIA and FBI) raw access to surveillance data that has not had “irrelevant” information about American citizens who are not suspected of any sort of criminal behavior masked or redacted. The current system puts the NSA in charge of deciding what to share and requires them to mask information incidentally swept up by surveillance.

The Obama Administration has been working on this plan since 2009 (though it was authorized initially by an executive order by George W. Bush in 2008). I imagine it never occurred to them that Americans would discover how much of this information is about us, not suspected terrorists; otherwise this probably wouldn’t have even been a story. Thanks again, Edward Snowden!

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World Trade Collapses Most Since Crisis

One question now dominates the global macro discussion: has subdued global growth and trade become the norm in the post-crisis world?

That is, have lackluster growth and trade become structural and endemic rather than transient and cyclical?

Those are the burning questions that keep central bankers (not to mention sellside economists) up at night and they are front and center at the G-20 in Shanghai.

Warning signs abound. The Baltic Dry is in a veritable free fall. Germany’s manufacturing juggernaut is showing signs of faltering. The BRICS have ceased to be a reliable driver of global growth. US freight volumes are falling for the first time in years. And the list goes on.

“We have seen this burst of globalization, and now we’re at a point of consolidation, maybe retrenchment,” WTO chief economist Robert Koopman said last autumn. “It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”

As we noted earlier this month, to the extent Maersk is a bellwether, things are looking pretty grim. Maersk Line – the company’s golden goose and the world’s largest container operator – racked up $182 million in red ink last quarter and the outlook for 2016 isn’t pretty either. The company now sees demand for seaborne container transportation rising a meager 1-3% for the year.

On Thursday we got the latest evidence that the wheels are falling off. According to new data from the Netherlands Bureau of Economic Policy Analysis’s World Trade Monitor, global trade (defined as the value of goods that crossed international borders) plunged nearly 14% in 2015.

That’s the first contraction since 2009.

“The new data released on Thursday represent the first snapshot of global trade for 2015,” FT notes. “But the figures also come amid growing concerns that 2016 is already shaping up to be more fraught with dangers for the global economy than previously expected.” 

While the numbers weren’t as dire in volume terms, they certainly look rather “recessionary” and “deflationary” in dollar terms. Have a look:

Similarly, have a look at the following alternate measure:

So again we say the following: up to and until such a time as central bankers figure out how to print trade, the global economy is in very deep trouble and it’s just a matter of time before the worldwide deflationary supply glut gets “liquidated” – literally…


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