N.Y. Officials’ Endorsement of Anti-Racism Protests Leads to Successful Religious Freedom Challenge to Gathering Ban

From Judge Gary Sharpe’s opinion today in Soos v. Cuomo (N.D.N.Y.):

Pending is an application for preliminary injunctive relief filed by plaintiffs Reverend Steven Soos, Reverend Nicholas Stamos, Daniel Schonbrun, Elchanan Perr, and Mayer Mayerfeld … seek an order restraining and enjoining defendants Andrew M. Cuomo, Governor of the State of New York; Letitia James, Attorney General of the State of New York; and Bill de Blasio, Mayor of the City of New York: (1) from enforcing any gathering limits to outdoor religious gatherings; and (2) from imposing any limitation on indoor gathering … for religious gatherings in parity with the 100% occupancy allowed for favored “essential businesses,” day camps and special education classes, or, alternatively, at least 50% occupancy in keeping with what is permitted for “non-essential” businesses and every other indoor activity allowed to continue under Phases Two and Three except religious activity, which alone is still arbitrarily confined to 25% occupancy.

The judge’s statement of the facts noted the government’s response to the anti-racism protests:

Mass race-related protests have erupted across the nation, including in the State of New York, in response to the death of African-American George Floyd on May 25, 2020. Protesters, sometimes in groups of thousands, have taken to the streets of New York City as well as other major cities in the State of New York. During this time, a “social media campaign” has encouraged theaters in New York, which are to be closed until “Phase Four” of New York’s reopening plan, to open their lobbies and restrooms for protesters.

[1.] [Response to the Protests by] Governor Cuomo

During a press conference held on June 1, 2020, when asked if he would “suggest people not go out and protest,” Governor Cuomo answered: “No, I think you can protest, but do it smartly and intelligently…. There were protests all across the country. Protest. Just be smart about it. With this virus, you can do many things now as long as you’re smart about it, right? You can reopen, you can go into a store and you can do a lot of things, just be smart.”

When asked what the difference is “between protesting and a business, say, in the city who wants to reopen smartly if it’s not at the phase yet that they’re technically allowed to,” Governor Cuomo answered: “Well, that’s where we’re at, but it has to be a business where you can be smart. Be smart, meaning socially distant. You don’t conduct business in a way where you have people within six feet. You have to wear the mask. You have to do the hand sanitizer. That’s where we’re going to be.”

During a press conference held on June 4, 2020, when asked about his reopening plans, and if there was a way to “allow high school graduation ceremonies with social distancing,” Governor Cuomo remarked: “Did you hear anything that we’ve been talking about for the past 96 days? … [Y]eah I know everybody wants to go to a high school graduation, I get it. Not if they’re going to die.” When asked how he is able to justify opening a patio for outside dining, but will not allow high school graduation ceremonies with social distancing, Governor Cuomo answered: “What difference does it make? … The issue is a public health issue and you don’t want people sick and dead. It’s about death, it’s about balancing the risk versus the reward, balancing the desires and wants versus the consequences.”

During this same press briefing, Governor Cuomo also stated, “I want to thank the protestors…. I stand with the protestors on the point that we need meaningful reform.”

When explaining the modification of non-essential gatherings for houses of worship to no greater than 25% of the indoor capacity of such location, provided in Order 202.38, Governor Cuomo explained, in part: “We are going to accelerate the opening of temples, mosques, [and] churches…. 25 percent occupancy is not as easy as 100 percent occupancy but 100 percent occupancy is a mass gathering and you really can’t do social distancing.” He further advised New Yorkers to “[b]e smart. It does not mean you go to a temple or a mosque and you sit right next to a person. You have to socially distance.”

[2.] [Response to Earlier Gatherings and Then to the Protests by] Mayor de Blasio

On April 28, Mayor de Blasio appeared in Williamsburg at a Jewish funeral gathering, which was dispersed by the New York Police Department (NYPD). Via Twitter, Mayor de Blasio wrote: “Something absolutely unacceptable happened in Williamsburg tonite [sic]: a large funeral gathering in the middle of this pandemic. When I heard, I went there myself to ensure the crowd was dispersed. And what I saw WILL NOT be tolerated so long as we are fighting the Coronavirus.” This was followed by another tweet: “My message to the Jewish community, and all communities, is this simple: the time for warnings has passed. I have instructed the NYPD to proceed immediately to summons or even arrest those who gather in large groups. This is about stopping this disease and saving lives. Period.”

During a June 2, 2020 media conference, when asked: “What about the retail store owner facing imminent financial ruin or the religious person who cannot [attend a] house of worship? What about their pain and anger?” Mayor de Blasio replied, in part: “When you see a nation, an entire nation simultaneously grappling with an extraordinary crisis seeded in 400 years of American racism[,] I’m sorry[,] [t]hat is not the same question[] as the understandably aggrieved store owner, or the devout religious person who wants to go back to services.”

On June 4, 2020, Mayor de Blasio, without a mask, attended and addressed a political gathering, held in memory of George Floyd. Neither the ten-person limit on outdoor gatherings, nor the social distancing protocols, were adhered to….

The court then turned to the legal analysis:

Having carefully reviewed the relevant issues, and with a firm understanding that the executive branch response to the pandemic has presented issues with a degree of complexity that is unrivaled in recent history, it is plain to this court that the broad limits of that executive latitude have been exceeded. That is not to say that Governor Cuomo or Mayor de Blasio have utterly failed in their reaction to COVID-19. To the contrary, the State of New York, at the moment anyway, is among the best situated states in terms of infection and mortality rates. While there is more clarity every day with respect to the best practices for slowing the spread of COVID-19, there is wide and reasonable disagreement about exactly how to implement rules and regulations to achieve those ends, and, as is particularly present in this case, even more so with respect to reopening in a way that promotes safety, economic viability, and the enjoyment of all the rights that the people of this country and the State of New York are guaranteed. As the Chief Justice recognized in Newsom, it is not the judiciary’s role to second guess the likes of Governor Cuomo or Mayor de Blasio when it comes to decisions they make in such troubling times, that is, until those decisions result in the curtailment of fundamental rights without compelling justification….

“The general applicability requirement [under the Free Exercise Clause] prohibits the government from ‘in a selective manner impos[ing] burdens only on conduct motivated by religious belief.'” “It ‘protect[s] religious observers against unequal treatment, and inequality [that] results when a legislature decides that the governmental interests it seeks to advance are worthy of being pursued only against conduct with a religious motivation.'” “While ‘[a]ll laws are selective to some extent, … categories of selection are of paramount concern when a law has the incidental effect of burdening religious practice.'” “A law is therefore not generally applicable if it is substantially underinclusive such that it regulates religious conduct while failing to regulate secular conduct that is at least as harmful to the legitimate government interests purportedly justifying it.”

“Individualized exemptions are [another] way in which a law can fail to be generally applicable.” In Smith, the Supreme Court explained that, “where the State has in place a system of individual exemptions, it may not refuse to extend that system to cases of ‘religious hardship’ without compelling reason.” Case law within this Circuit supports the notion that individualized de facto exemptions can demonstrate that a challenged law is not generally applicable, and is therefore subject to heightened scrutiny. Along these lines, when the challenged law does not carve out an exemption on its face, the history of enforcement is relevant to the existence of an exemption….

The State argues, in overly-simplistic fashion, that the challenged laws only incidentally impose a burden on religious exercise, and they are neutral and generally applicable, and therefore, only rational basis need be shown, which is self-evident: preventing the spread of COVID-19.

The State was silent with respect to the mass race protests in its written submissions until it filed a supplemental memorandum of law following the return on the motion. In that supplement, the State argues that Governor Cuomo’s “political speech” cannot support a de facto exemption vis-à-vis the mass race protests.

The City initially responded with respect to only the ten-person indoor/outdoor limitation that was applicable in New York City during Phase 1. It argues, like the State, that the challenged laws are neutral and generally applicable, but, unlike the State, the City initially acknowledged the mass race protests and contended that they are not comparable because protests occur outside and religious activity typically occurs inside. Further the City asserts, relying on Calvary Chapel Dayton Valley v. Sisolak (D. Nev. June 11, 2020), that the enforcement of the challenged laws against protesters creates safety concerns and, absent clear patterns of unconstitutional selective enforcement, the court should not second guess the State’s determinations. In its supplemental submission, the City contends that the orthodox Jewish plaintiffs “may no longer seek redress for their alleged injuries” because, as of June 22, New York City has entered Phase 2, which lifts the ten-person indoor/outdoor limitation and imposes a 25% indoor capacity limitation. The City also amplifies its contention, explained for the first time during the motion return, that a de facto exemption has not been created for mass race protesters.

In light of the developments and natural progression of the challenged laws since the motion return, the restrictions and limitations at issue are: (1) a 25% indoor capacity limitation for Phases 2 and 3; (2) a twenty-five-person outdoor gathering limit in Phase 3 locations; and (3) a ten-person outdoor gathering limit in Phase 1 and 2 locations. And the  City’s argument that Schonbrun, Perr, and Mayerfeld “may no longer seek redress” because their region has gone into Phase 2, is rejected. While it is true that their allegations are tailored to the ten-person indoor/outdoor limitation that existed when this matter was commenced, it is readily and reasonably inferable from their allegations that the 25% indoor capacity limitation would continue to burden their free exercise of religion.

The court then held that the restrictions likely weren’t generally applicable, and thus likely violated the Free Exercise Clause:

Assuming, without deciding, that the challenged laws are neutral, plaintiffs have demonstrated a likelihood of success on the merits with respect to their free exercise claim because it appears that the challenged laws are not generally applicable, and that they would fail strict scrutiny.

[1.] 25% Indoor Capacity Limitation

On its face, the 25% indoor capacity limitation applies only to houses of worship. Indeed, that limitation is the only one of its kind in the tangle of executive orders and the Guidance Document that have been issued in response to the pandemic; in other words, no other secular entity, save for those that remain closed in their entirety until Phase 4 or beyond, are limited to only 25% capacity. The “nonessential businesses,” dubbed “Phase 2 industries” by executive order, that enjoy a 50% capacity limitation are, however, not justifiably different than houses of worship.

For example, offices, retail stores that are not inside of shopping malls, and salons were permitted to open at 50% capacity beginning in Phase 2. To a greater or lesser degree, the Phase 2 industries involve the congregation of people for a length of time. And restaurants in Phase 3 locations are permitted to open at 50% capacity indoors. Restaurant patrons sit and congregate with family and friends in close proximity for a lengthy period of time, and have close contact with their hosts and servers. Face coverings may be removed while seated. Additionally, special educational services will be permitted during “the summer term in school districts” with no indoor capacity limitations.

All of this is to demonstrate that these secular businesses/activities threaten defendants’ interest in slowing the spread of COVID-19 to a similar or greater degree than those of plaintiffs’, and demonstrate that the 25% indoor capacity limitation on houses of worship is underinclusive and triggers strict scrutiny review.

{There is also an arguable basis to find a de facto exemption in light of the open lobbies social media campaign. In light of the court’s conclusion that the 25% indoor capacity limitation is not generally applicable because it is underinclusive, it need not reach the individualized exemption argument. Admittedly, the basis of such an argument here is on far shakier footing, given the lack of acknowledgment or endorsement by defendants, than it is with respect to the mass race protests discussed below.}

[2.] Twenty-Five-Person Outdoor Limitation in Phase 3; Ten-Person Outdoor Limitation in Phases 1 and 2

Despite the State’s claim that enforcement power rests with local authorities in an effort to show that selective enforcement against mass race protesters is not a de facto exemption imposed by Governor Cuomo or Attorney General James, Governor Cuomo clearly has authority over the New York State Police and broad powers of enforcement. And, in any case, Governor Cuomo’s comments, which applauded and encouraged protesting and discouraged others from violating the outdoor limitations, likely demonstrate the creation of a de facto exemption.

Mayor de Blasio is a “local authority” with clear enforcement power and has at his disposal one of the largest municipal police departments in the world, and has also actively encouraged participation in protests and openly discouraged religious gatherings and threatened religious worshipers as set forth above. The City’s argument that temporary selective enforcement of the challenged laws with respect to mass race protests is a matter of public safety based on the rationale of Sisolak would perhaps be legitimate but for Mayor de Blasio’s simultaneous pro-protest/anti-religious gathering messages, which clearly undermine the legitimacy of the proffered reason for what seems to be a clear exemption, no matter the reason.

Governor Cuomo and Mayor de Blasio could have just as easily discouraged protests, short of condemning their message, in the name of public health and exercised discretion to suspend enforcement for public safety reasons instead of encouraging what they knew was a flagrant disregard of the outdoor limits and social distancing rules. They could have also been silent. But by acting as they did, Governor Cuomo and Mayor de Blasio sent a clear message that mass protests are deserving of preferential treatment.

Another case of individualized exemption seems even more obvious. The State has specifically authorized outdoor, in-person graduation ceremonies of no more than 150 people beginning today, June 26.  This is an express exemption from the ten- or twenty-five-person outdoor limits that apply across Phases 1, 2, and 3, and the State must extend a similar exemption to plaintiffs absent a compelling reason to the contrary. And there is nothing materially different about a graduation ceremony and a religious gathering such that defendants’ justifications for a difference in treatment can be found compelling.

The judge therefore restrained the defendants

  • from enforcing any indoor gathering limitations against plaintiffs greater than imposed for Phase 2 industries, provided that plaintiffs follow social distancing requirements as set forth in the applicable executive orders and guidance; and
  • from enforcing [presumably, also just against plaintiffs -EV] any limitation for outdoor gatherings provided that participants in such gatherings follow social distancing requirements as set forth in the applicable executive orders and guidance ….

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The one statue that remains untouched: Vladimir Lenin

Are you ready for this week’s absurdity? Here’s our Friday roll-up of the most ridiculous stories from around the world that are threats to your liberty, risks to your prosperity… and on occasion, inspiring poetic justice.

Today we tackle the woke.

NYC’s inspiring breakthrough in the science of contact tracing

“Contact tracing” is a tactic whereby public health officials attempt to track where you’ve been, and who you’ve been in contact with, in their efforts to contain a pandemic.

And we’ve seen a lot of contact tracing efforts lately.

New York City hired thousands of contact tracing specialists who are tasked with calling everyone who tests positive for Covid-19 and interviewing them to help identify who else they might have infected.

But now New York City’s Comrade Mayor Bill de Blasio has instructed his contract tracers to specifically NOT ask if an infected person attended a Black Lives Matter protest.

Seriously… what’s the point?

The entire idea of contact tracing is to find out who else might have been in close proximity. To deliberately NOT ask someone if they’ve been in close proximity of thousands of other people sort of defeats the purpose of the entire contract tracing program to begin with.

Naturally, New York City health officials have already said that any spike in Covid infections should be blamed on racism, and not mass gatherings of people.

And that’s what constitutes science in 2020.

This is another obvious sign of woke intersectionality.

Governments act like public health is their number one concern. They shut down the entire economy and refused to allow people to attend worship services, all to keep us safe from a strand of ribonucleic acid.

But in actuality they’re far more concerned with building political credibility with protestors, and they’re willing to completely make up science in order to do so.

Click here for the full story

Protesters destroy statues of an ex-slave, abolitionist… leave Lenin untouched

A statue in San Francisco of Miguel Cervantes, author of Don Quixote, was defaced with the word “bastard” spray painted onto it by protesters.

What protesters may not know is that the Spanish author actually spent five years as a slave after being captured off the coast of Africa.

Outside of Wisconsin State Capitol the statue of Hans Christian Heg was also toppled.

Heg was an anti-slavery activist who joined a militia that fought slave traders. Then he joined the Union Army during the Civil War, and died in battle, fighting to end slavery.

Perhaps statues in general are sinful in the new social order.

Except for the statue of Vladimir Lenin in Seattle. His statue has remained untouched.

Click here to read about Cervantes and here for Heg.

UK court fines man for calling an Irish guy a leprechaun

A man who insulted his ex-girlfriend’s new boyfriend was charged with a racially motivated crime.

He used the “grossly offensive” term “leprechaun” to refer to his ex’s new boyfriend, who is Irish.

The court fined him £280… and I can only imagine the Holy Hell that the Twitter mob will unleash upon him.

Click here for the full story.

Duluth Minnesota to delete “Chief” from town titles

The town of Duluth Minnesota decided to remove the term “Chief” from town titles.

They will rename titles such as “Chief Administrative Officer” so that it won’t be offensive to Native Americans.

The police and fire chiefs are also apparently open to taking on new titles.

Mayor Emily Larson explained that the word chief “is language that is offensive to people who are indigenous and actually offensive to a lot of people, especially when there is other language available.”

Chief is actually an Old French word meaning principal, first, leader, or most important.

It is also related to chef, so that should also probably be deleted from the lexicon.

Click here to read the full story.

Source

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As New York City Reopens, Businesses Balance Public Health and Staying Afloat

NYC Phase 2

On Monday, New York City officially entered Phase 2 of its reopening plan, having recorded record-low COVID-19 infection rates in the previous week.

The new phase expands which types of businesses can open their doors. Salons, barbershops, offices, and retail stores are all allowed to reopen with proper precautionary measures, as are playgrounds and places of worship.

The previous phase had been restricted to low-contact industries such as construction, with retail service limited to curbside pickup.

In addition, the city’s Open Restaurants plan will allow restaurants to expand from takeout and delivery to limited outdoor dining. Restaurants have particularly suffered from coronavirus-related loss of business: According to the Wall Street Journal, 53 percent of shuttered restaurants on Yelp have permanently gone out of business, compared to 35 percent of closed retail outlets.

The Open Restaurants program would allow restaurants to use sidewalks and curbs, as well as existing patio space, to set up tables and chairs for outdoor dining this week; seating is supposed to expand to open streets on nights and weekends by July. Mayor Bill de Blasio believes the plan could save up to 5,000 businesses and 45,000 jobs.

Phase 2 also allows many more New Yorkers to return to the workspace after three months of remote work or joblessness. De Blasio estimates that 300,000 people could get back to work following this loosening of restrictions.

The reopenings will also benefit New York’s public transit system, which has suffered heavy financial losses due to underuse. The MTA expects Phase 2 to increase daily subway ridership to 1 million New Yorkers—a far cry from last year’s average of 5.5 million, but a change from just 366,000 at the peak of New York’s outbreak.

New York’s Phase 2 guidelines are still as arbitrary as one could expect from a state reopening plan. While offices, salons, and retail stores have been permitted to operate at half capacity, churches are restricted to just 25 percent. Playgrounds will finally reopen (with appointed “social distancing ambassadors” at New York’s 1,700 parks), but team sports are banned.

In light of unclear city guidelines and lingering uncertainty about the pandemic’s path, businesses continue to set their own safety criteria beyond the government’s recommendations, permitting many employees to work from home for the foreseeable future.

Early signs suggest that a lot of those workers will stay at home even if the government says they’re welcome to commute. One real estate company reported that just 5.2 percent of its employees reported back to its reopened offices on Monday. And a survey by the Partnership for New York City found that across 60 Manhattan-based businesses, just 10 percent of the workforce will return to the office by August.

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N.Y. Officials’ Endorsement of Anti-Racism Protests Leads to Successful Religious Freedom Challenge to Gathering Ban

From Judge Gary Sharpe’s opinion today in Soos v. Cuomo (N.D.N.Y.):

Pending is an application for preliminary injunctive relief filed by plaintiffs Reverend Steven Soos, Reverend Nicholas Stamos, Daniel Schonbrun, Elchanan Perr, and Mayer Mayerfeld … seek an order restraining and enjoining defendants Andrew M. Cuomo, Governor of the State of New York; Letitia James, Attorney General of the State of New York; and Bill de Blasio, Mayor of the City of New York: (1) from enforcing any gathering limits to outdoor religious gatherings; and (2) from imposing any limitation on indoor gathering … for religious gatherings in parity with the 100% occupancy allowed for favored “essential businesses,” day camps and special education classes, or, alternatively, at least 50% occupancy in keeping with what is permitted for “non-essential” businesses and every other indoor activity allowed to continue under Phases Two and Three except religious activity, which alone is still arbitrarily confined to 25% occupancy.

The judge’s statement of the facts noted the government’s response to the anti-racism protests:

Mass race-related protests have erupted across the nation, including in the State of New York, in response to the death of African-American George Floyd on May 25, 2020. Protesters, sometimes in groups of thousands, have taken to the streets of New York City as well as other major cities in the State of New York. During this time, a “social media campaign” has encouraged theaters in New York, which are to be closed until “Phase Four” of New York’s reopening plan, to open their lobbies and restrooms for protesters.

[1.] [Response to the Protests by] Governor Cuomo

During a press conference held on June 1, 2020, when asked if he would “suggest people not go out and protest,” Governor Cuomo answered: “No, I think you can protest, but do it smartly and intelligently…. There were protests all across the country. Protest. Just be smart about it. With this virus, you can do many things now as long as you’re smart about it, right? You can reopen, you can go into a store and you can do a lot of things, just be smart.”

When asked what the difference is “between protesting and a business, say, in the city who wants to reopen smartly if it’s not at the phase yet that they’re technically allowed to,” Governor Cuomo answered: “Well, that’s where we’re at, but it has to be a business where you can be smart. Be smart, meaning socially distant. You don’t conduct business in a way where you have people within six feet. You have to wear the mask. You have to do the hand sanitizer. That’s where we’re going to be.”

During a press conference held on June 4, 2020, when asked about his reopening plans, and if there was a way to “allow high school graduation ceremonies with social distancing,” Governor Cuomo remarked: “Did you hear anything that we’ve been talking about for the past 96 days? … [Y]eah I know everybody wants to go to a high school graduation, I get it. Not if they’re going to die.” When asked how he is able to justify opening a patio for outside dining, but will not allow high school graduation ceremonies with social distancing, Governor Cuomo answered: “What difference does it make? … The issue is a public health issue and you don’t want people sick and dead. It’s about death, it’s about balancing the risk versus the reward, balancing the desires and wants versus the consequences.”

During this same press briefing, Governor Cuomo also stated, “I want to thank the protestors…. I stand with the protestors on the point that we need meaningful reform.”

When explaining the modification of non-essential gatherings for houses of worship to no greater than 25% of the indoor capacity of such location, provided in Order 202.38, Governor Cuomo explained, in part: “We are going to accelerate the opening of temples, mosques, [and] churches…. 25 percent occupancy is not as easy as 100 percent occupancy but 100 percent occupancy is a mass gathering and you really can’t do social distancing.” He further advised New Yorkers to “[b]e smart. It does not mean you go to a temple or a mosque and you sit right next to a person. You have to socially distance.”

[2.] [Response to Earlier Gatherings and Then to the Protests by] Mayor de Blasio

On April 28, Mayor de Blasio appeared in Williamsburg at a Jewish funeral gathering, which was dispersed by the New York Police Department (NYPD). Via Twitter, Mayor de Blasio wrote: “Something absolutely unacceptable happened in Williamsburg tonite [sic]: a large funeral gathering in the middle of this pandemic. When I heard, I went there myself to ensure the crowd was dispersed. And what I saw WILL NOT be tolerated so long as we are fighting the Coronavirus.” This was followed by another tweet: “My message to the Jewish community, and all communities, is this simple: the time for warnings has passed. I have instructed the NYPD to proceed immediately to summons or even arrest those who gather in large groups. This is about stopping this disease and saving lives. Period.”

During a June 2, 2020 media conference, when asked: “What about the retail store owner facing imminent financial ruin or the religious person who cannot [attend a] house of worship? What about their pain and anger?” Mayor de Blasio replied, in part: “When you see a nation, an entire nation simultaneously grappling with an extraordinary crisis seeded in 400 years of American racism[,] I’m sorry[,] [t]hat is not the same question[] as the understandably aggrieved store owner, or the devout religious person who wants to go back to services.”

On June 4, 2020, Mayor de Blasio, without a mask, attended and addressed a political gathering, held in memory of George Floyd. Neither the ten-person limit on outdoor gatherings, nor the social distancing protocols, were adhered to….

The court then turned to the legal analysis:

Having carefully reviewed the relevant issues, and with a firm understanding that the executive branch response to the pandemic has presented issues with a degree of complexity that is unrivaled in recent history, it is plain to this court that the broad limits of that executive latitude have been exceeded. That is not to say that Governor Cuomo or Mayor de Blasio have utterly failed in their reaction to COVID-19. To the contrary, the State of New York, at the moment anyway, is among the best situated states in terms of infection and mortality rates. While there is more clarity every day with respect to the best practices for slowing the spread of COVID-19, there is wide and reasonable disagreement about exactly how to implement rules and regulations to achieve those ends, and, as is particularly present in this case, even more so with respect to reopening in a way that promotes safety, economic viability, and the enjoyment of all the rights that the people of this country and the State of New York are guaranteed. As the Chief Justice recognized in Newsom, it is not the judiciary’s role to second guess the likes of Governor Cuomo or Mayor de Blasio when it comes to decisions they make in such troubling times, that is, until those decisions result in the curtailment of fundamental rights without compelling justification….

“The general applicability requirement [under the Free Exercise Clause] prohibits the government from ‘in a selective manner impos[ing] burdens only on conduct motivated by religious belief.'” “It ‘protect[s] religious observers against unequal treatment, and inequality [that] results when a legislature decides that the governmental interests it seeks to advance are worthy of being pursued only against conduct with a religious motivation.'” “While ‘[a]ll laws are selective to some extent, … categories of selection are of paramount concern when a law has the incidental effect of burdening religious practice.'” “A law is therefore not generally applicable if it is substantially underinclusive such that it regulates religious conduct while failing to regulate secular conduct that is at least as harmful to the legitimate government interests purportedly justifying it.”

“Individualized exemptions are [another] way in which a law can fail to be generally applicable.” In Smith, the Supreme Court explained that, “where the State has in place a system of individual exemptions, it may not refuse to extend that system to cases of ‘religious hardship’ without compelling reason.” Case law within this Circuit supports the notion that individualized de facto exemptions can demonstrate that a challenged law is not generally applicable, and is therefore subject to heightened scrutiny. Along these lines, when the challenged law does not carve out an exemption on its face, the history of enforcement is relevant to the existence of an exemption….

The State argues, in overly-simplistic fashion, that the challenged laws only incidentally impose a burden on religious exercise, and they are neutral and generally applicable, and therefore, only rational basis need be shown, which is self-evident: preventing the spread of COVID-19.

The State was silent with respect to the mass race protests in its written submissions until it filed a supplemental memorandum of law following the return on the motion. In that supplement, the State argues that Governor Cuomo’s “political speech” cannot support a de facto exemption vis-à-vis the mass race protests.

The City initially responded with respect to only the ten-person indoor/outdoor limitation that was applicable in New York City during Phase 1. It argues, like the State, that the challenged laws are neutral and generally applicable, but, unlike the State, the City initially acknowledged the mass race protests and contended that they are not comparable because protests occur outside and religious activity typically occurs inside. Further the City asserts, relying on Calvary Chapel Dayton Valley v. Sisolak (D. Nev. June 11, 2020), that the enforcement of the challenged laws against protesters creates safety concerns and, absent clear patterns of unconstitutional selective enforcement, the court should not second guess the State’s determinations. In its supplemental submission, the City contends that the orthodox Jewish plaintiffs “may no longer seek redress for their alleged injuries” because, as of June 22, New York City has entered Phase 2, which lifts the ten-person indoor/outdoor limitation and imposes a 25% indoor capacity limitation. The City also amplifies its contention, explained for the first time during the motion return, that a de facto exemption has not been created for mass race protesters.

In light of the developments and natural progression of the challenged laws since the motion return, the restrictions and limitations at issue are: (1) a 25% indoor capacity limitation for Phases 2 and 3; (2) a twenty-five-person outdoor gathering limit in Phase 3 locations; and (3) a ten-person outdoor gathering limit in Phase 1 and 2 locations. And the  City’s argument that Schonbrun, Perr, and Mayerfeld “may no longer seek redress” because their region has gone into Phase 2, is rejected. While it is true that their allegations are tailored to the ten-person indoor/outdoor limitation that existed when this matter was commenced, it is readily and reasonably inferable from their allegations that the 25% indoor capacity limitation would continue to burden their free exercise of religion.

The court then held that the restrictions likely weren’t generally applicable, and thus likely violated the Free Exercise Clause:

Assuming, without deciding, that the challenged laws are neutral, plaintiffs have demonstrated a likelihood of success on the merits with respect to their free exercise claim because it appears that the challenged laws are not generally applicable, and that they would fail strict scrutiny.

[1.] 25% Indoor Capacity Limitation

On its face, the 25% indoor capacity limitation applies only to houses of worship. Indeed, that limitation is the only one of its kind in the tangle of executive orders and the Guidance Document that have been issued in response to the pandemic; in other words, no other secular entity, save for those that remain closed in their entirety until Phase 4 or beyond, are limited to only 25% capacity. The “nonessential businesses,” dubbed “Phase 2 industries” by executive order, that enjoy a 50% capacity limitation are, however, not justifiably different than houses of worship.

For example, offices, retail stores that are not inside of shopping malls, and salons were permitted to open at 50% capacity beginning in Phase 2. To a greater or lesser degree, the Phase 2 industries involve the congregation of people for a length of time. And restaurants in Phase 3 locations are permitted to open at 50% capacity indoors. Restaurant patrons sit and congregate with family and friends in close proximity for a lengthy period of time, and have close contact with their hosts and servers. Face coverings may be removed while seated. Additionally, special educational services will be permitted during “the summer term in school districts” with no indoor capacity limitations.

All of this is to demonstrate that these secular businesses/activities threaten defendants’ interest in slowing the spread of COVID-19 to a similar or greater degree than those of plaintiffs’, and demonstrate that the 25% indoor capacity limitation on houses of worship is underinclusive and triggers strict scrutiny review.

{There is also an arguable basis to find a de facto exemption in light of the open lobbies social media campaign. In light of the court’s conclusion that the 25% indoor capacity limitation is not generally applicable because it is underinclusive, it need not reach the individualized exemption argument. Admittedly, the basis of such an argument here is on far shakier footing, given the lack of acknowledgment or endorsement by defendants, than it is with respect to the mass race protests discussed below.}

[2.] Twenty-Five-Person Outdoor Limitation in Phase 3; Ten-Person Outdoor Limitation in Phases 1 and 2

Despite the State’s claim that enforcement power rests with local authorities in an effort to show that selective enforcement against mass race protesters is not a de facto exemption imposed by Governor Cuomo or Attorney General James, Governor Cuomo clearly has authority over the New York State Police and broad powers of enforcement. And, in any case, Governor Cuomo’s comments, which applauded and encouraged protesting and discouraged others from violating the outdoor limitations, likely demonstrate the creation of a de facto exemption.

Mayor de Blasio is a “local authority” with clear enforcement power and has at his disposal one of the largest municipal police departments in the world, and has also actively encouraged participation in protests and openly discouraged religious gatherings and threatened religious worshipers as set forth above. The City’s argument that temporary selective enforcement of the challenged laws with respect to mass race protests is a matter of public safety based on the rationale of Sisolak would perhaps be legitimate but for Mayor de Blasio’s simultaneous pro-protest/anti-religious gathering messages, which clearly undermine the legitimacy of the proffered reason for what seems to be a clear exemption, no matter the reason.

Governor Cuomo and Mayor de Blasio could have just as easily discouraged protests, short of condemning their message, in the name of public health and exercised discretion to suspend enforcement for public safety reasons instead of encouraging what they knew was a flagrant disregard of the outdoor limits and social distancing rules. They could have also been silent. But by acting as they did, Governor Cuomo and Mayor de Blasio sent a clear message that mass protests are deserving of preferential treatment.

Another case of individualized exemption seems even more obvious. The State has specifically authorized outdoor, in-person graduation ceremonies of no more than 150 people beginning today, June 26.  This is an express exemption from the ten- or twenty-five-person outdoor limits that apply across Phases 1, 2, and 3, and the State must extend a similar exemption to plaintiffs absent a compelling reason to the contrary. And there is nothing materially different about a graduation ceremony and a religious gathering such that defendants’ justifications for a difference in treatment can be found compelling.

The judge therefore restrained the defendants

  • from enforcing any indoor gathering limitations against plaintiffs greater than imposed for Phase 2 industries, provided that plaintiffs follow social distancing requirements as set forth in the applicable executive orders and guidance; and
  • from enforcing [presumably, also just against plaintiffs -EV] any limitation for outdoor gatherings provided that participants in such gatherings follow social distancing requirements as set forth in the applicable executive orders and guidance ….

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‘Throw a Billion Dollars from the Helicopter’ Is a Grand-Slam Attack on Publicly Financed Stadiums

jeffwilliams

Throw a Billion Dollars from the Helicopter is a new documentary about the wildly successful (and incredibly stupid) 2016 ballot initiative led by Jeff Williams, the mayor of Arlington, Texas, to throw $500 million in subsidies at a new ballpark for the Texas Rangers. If you care at all about sports, you’ll want to stream this movie, at the risk of killing whatever residual pleasure you might still get from watching baseball. And if you care about tax policy, crony capitalism, and good governance, you’ll want to watch it too, even though—spoiler alert—the ragtag bunch of ex–Tea Party renegades opposed to an indefensible giveaway got bowled over like Ray Fosse trying to protect the plate against Pete Rose at the 1970 All-Star Game.

Director Michael Bertin advances two intertwined storylines. The first is tight study of local politics, showing how Arlington Mayor Jeff Williams came into office in 2015 as a small-government, tax-cutting, low-spending character straight out of central casting. Once in office, Williams almost immediately starting pimping for taxpayers to cover half the cost of a new billion-dollar stadium for the Rangers (a team once partly owned by former President George W. Bush).

Williams expertly works the levers of local boosterism, and Bertin relishes showing the mayor and other stadium supporters invoking the phrase “world-class city” over and over again. The new ballpark will feature a retractable roof! It will be not just a stadium but a family “destination” with bars, restaurants, and concert venues! All of which will be “world class” and make Arlington a “world-class city”! Smaller cities—Arlington has about 400,000 residents and is part of the Dallas-Forth Worth metro area—often have inferiority complexes, and sports leagues and national chains know how to take advantage of that when looking for sweetheart subsidy deals.

“Someone in Cleveland once said that, without the sports teams, Cleveland is just Omaha,” Bertin told me yesterday in an interview. In 2009, Arlington lured the Dallas Cowboys from Irving, largely by giving billionaire team owner Jerry Jones $325 billion in subsidies.

Opposing the stadium is group called Citizens for a Better Arlington, a handful of folks left over from the Tea Party movement. They come across as an amiable group of people who don’t want the city to issue $500 million in bonds to cover half the cost of the park, especially since the old one was opened relatively recently (in 1994) and remains popular with fans. The bonds would be paid off by continuing a half-cent sales tax put in place to cover the debt incurred on the Cowboys’ deal, plus a series of hospitality taxes on rental cars, hotel rooms, stadium parking, and tickets. It’s a classic David-and-Goliath story, with the stadium backers funneling hundreds of thousands of dollars into the campaign while opponents scrape together loose change to cover the cost of yard signs and Xeroxed factsheets.

The second storyline deals with the phoney-baloney economic analysis that gets mustered up every time a team owner and pliant politicians want to sell a stadium to wary taxpayers. The Stanford economist Roger Noll compares stadiums to pyramids in ancient Egypt, structures built to honor dead pharaohs but paid for by the sweat and toil of living, breathing people. Noll and others point out that entertainment spending is generally a fixed pie and that local residents substitute one option for another. Teams thus don’t create new spending; they take it from other businesses, most of whom are actually paying property and other taxes. Bertin drives home the fact that most stadium boosters talk about the “economic impact” of having a team, not the actual economic benefits. Invariably, when you factor in the costs of building and financing a stadium and all the extra giveaways to team owners (who keep most or all revenue from parking, concessions, and the like), stadium projects are municipal money pits.

As Bertin shows, Irving’s economy has boomed relative to Arlington’s since the Cowboys vamoosed. It might be true that Cleveland without sports teams is just Omaha, but Omaha has a median household income of nearly $54,000 while Cleveland’s is just over $27,000.

The movie’s title comes from the University of Chicago economist Allen Sanderson, a longtime critic of subsidized stadiums (and a one-time Reason contributor). Rather than spending massive amounts on a stadium deal to keep a team in town, Sanderson says you’d get a bigger payoff by taking the money, converting it $20 bills, renting an aircraft, and then throwing “a billion dollars from the helicopter” while hovering over a city.

The good news is that publicly financed stadiums and arenas seem to be on the decline. As one economist mentions toward the end of the movie, “Arlington is the old world” when it comes to things. Here’s hoping.

A first-time filmmaker, director Bertin tells me that he started the project because he loved baseball. Before the coronavirus shut down sports (including the planned opening of Arlington’s new billion-dollar stadium), he used to get MLB’s streaming package that allowed him to watch just about any game he wanted to on his computer. Working on the documentary has kind of ruined it all for him, because it’s just so awful to watch teams bilk taxpayers for so much money. Speaking as a fan of baseball, football, soccer, college basketball, and the Olympics (the biggest boondoggle of them all!), understanding the economics of most modern sports had me turning away long before COVID-19 cancelled everything.

Oh, well. At least we’ve got documentaries like Throw a Billion Dollars from the Helicopter to pass the sports-free days.

Bonus video: “5 Cities That Got F*cked by Hosting the Olympics.”

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Designing Institutions that Promote Foot Voting and Minimize Potential Downsides

Free to Move—Final Cover

In previous posts based on my new book Free to Move: Foot Voting, Migration, and Political Freedom, I explained what the book is about and why I wrote it, described the advantages of foot voting over ballot box voting, took a closer look at the three major types of foot voting, and summarized the book’s answers to a number of common justifications for restricting migration rights. In this post—the last in the series—I provide an overview of the final two chapters of the book, which explain how both domestic constitutions and international law can be structured in ways that facilitate foot voting, while minimizing potential downsides.

There are many ways in which domestic constitutional law can promote foot voting. Some are relatively obvious. For example, it can ban restrictions on migration from one state or locality to another. At least until the current Coronavirus crisis, modern Americans have taken interstate mobility for granted; and even now states have enacted only relatively modest restrictions on it, such as 14-day quarantines for people arriving from high-risk locations. Historically, however, state governments imposed more severe restrictions, including trying to keep out African-Americans and “paupers”—often citing the same sorts of justifications that are today used to justify restricting international migration. Internal mobility is still restricted in some other countries today, notably including China, with its hukou system.

Foot voting can also be facilitated by constitutional limitations on the scope of central government power. The more issues are devolved to regional or local governments, the greater the opportunities for people to “vote with their feet” between them. The same goes for constitutional rights that leave issues such as speech, religion, and other questions to the private sector. That facilitates foot voting between private institutions, which often offers greater choice, higher quality, and lower moving costs than is possible with public-sector foot voting.

Constitutional limits on central government subsidization of regional and local governments can help facilitate foot voting by incentivizing competition between jurisdictions seeking to attract new taxpayers. As I discuss elsewhere in the book, this is entirely compatible with a centralized system of redistribution to the poor, provided that the funds go to poor people directly rather than getting channeled through subnational governments.

At the same time, strong constitutional protection for property rights in immobile assets can prevent subnational governments from expropriating or otherwise exploiting immobile property to make up for the fact that they cannot “trap” mobile assets. This is one of several ways in which constitutional law can mitigate potential downsides of foot voting.

Constitutional design can also be used to facilitate international migration. The most obvious way is by placing tight limits on the national government’s power to exclude immigrants, as the US Constitution was understood to do during the Founding era and long after. If the central government is nonetheless given a broad power to exclude, that power should at least be subject to the same limitations as other national government powers. For example, it cannot be used to exclude migrants on the basis of race, ethnicity, religion, speech, and other criteria that would be unconstitutional in the context of other government policies. Sadly, current US Supreme Court precedent instead largely exempts immigration restrictions from constitutional constraints that apply to other policies.

In federal systems, the constitution can allow subnational jurisdictions to issue visas to immigrants, who otherwise would not have been accepted by the central government. Such systems already exist in Canada and Australia, and the US should consider adopting a similar approach, as has been proposed by GOP Senator Ron Johnson and Democratic presidential candidate Joe Biden, among others (see discussion of their proposals in Chapter 7).

While the central government’s power to ban migrants should be severely restricted, it should have the power to adopt “keyhole solutions” limiting potential negative side effects of migration. These may include restricting eligibility for the franchise and for welfare payments, temporary quarantine provisions to limit the spread of disease, and—possibly—imposing special taxes or entry fees, where necessary to offset costs. Most Western governments, in fact already have such powers. They should be kept limited so as to prevent their use as backdoor restrictions on immigration.

In Chapter 7, I also discuss a range of less obvious ways in which constitutional rights can facilitate foot voting. They include protections for freedom of religion, broad rights to marriage—including same-sex marriage, economic liberties, property rights, due process rights for people arrested and detained by the government, and others.

I certainly do not claim that the protection and expansion of foot voting should be the only factor considered in constitutional design; still less do I believe that there is one constitutional structure that is ideal for every nation. But foot voting should be an important element in evaluating constitutions, one that is too often neglected.

In Chapter 8, I consider the implications of foot voting for international law and global governance. In the first part of that chapter, I describe how foot voting can be promoted by expanding the range of people who qualify as a “refugees” whom governments are forbidden to expel. Current US and international law draw a sharp distinction between “economic” migrants and those fleeing persecution based on race, ethnicity, gender, and other similar characteristics. I argue that this distinction is untenable, in large part because it ignores the fact that many “economic” refugees are actually victims of oppressive government policies. I discuss a number of proposals for incrementally expanding refugee rights, and also consider which types of refugees should be given priority in a second-best world where we cannot (at least not yet) establish a general presumption of free migration for all.

The last part of Chapter 8 offers a warning against the dangers of world government and strong forms of “global governance.” While such ideas may seem consonant with the cosmopolitan orientation of Free to Move and especially with the critique of ethnic nationalism in Chapter 5, they are in fact inimical to foot voting. The reason is simple: a world government is a regime with no exit—one whose authority we cannot use foot voting to escape. Moreover, foot voting and political freedom would be even more seriously compromised if the world government became corrupt, oppressive, authoritarian—or—worst of all—degenerated into a totalitarian state. The same risks arise, albeit to a lesser degree, from proposals for strong forms of “global governance” that fall short of full world government.

In the book, I discuss why the risks of world government are not sufficiently mitigated if that government is democratic, has a federal structure, or both. Among other things, there is good reason to fear that a global democratic or federal state wouldn’t stay that way in the medium to long-run. The discussion of world government in Chapter 8 expands on “A Cosmopolitan Case Against World Government,”  a 2017 article I wrote for the World Government Research Network. In that article—and more fully in the book—I also discuss why world government and global governance are subjects worth thinking about and debating, even though it is unlikely that a world government will be established in the near future.

I do not claim that world government or strong global governance can never be justified. If, as advocates claim, they are the only way to forestall some enormous evil like global nuclear war or environmental catastrophe, then their benefits might outweigh the enormous risks. But there should at least be a strong presumption against creating such dangerous institutions. In the book, I explain why the problems world government advocates cite as justifications are better addressed by other means. Some of them might even be exacerbated rather than ameliorated by the establishment of a world state.

In these chapters and in other parts of the book, I emphasize how my argument is both radical and moderate at the same time. It is radical because I advocate a massive expansion in foot voting rights, both domestic and international. But it is moderate because I emphasize that there is much to be gained from more moderate incremental reforms. Even a modest 10% increase in the number of new immigrants allowed into the US and other liberal democracies would mean vastly greater freedom and happiness for millions of people. A 10% increase in domestic freedom of movement in the United States—accomplished by reducing obstacles to mobility such as exclusionary zoning—would also benefit large numbers of people, particularly the poor and disadvantaged.

At various points in the book, I discuss a number of incremental reforms that can expand both domestic and international freedom of movement without major changes to current political institutions. But I also emphasize that the ultimate goal should be the one Frederick Douglass outlined in a great 1869 speech on immigration, decrying then-widespread opposition to Asian migration to the United States:

There are such things in the world as human rights. They rest upon no conventional foundation, but are external, universal, and indestructible. Among these, is the right of locomotion; the right of migration; the right which belongs to no particular race, but belongs alike to all and to all alike. It is the right you assert by staying here, and your fathers asserted by coming here. It is this great right that I assert for the Chinese and Japanese, and for all other varieties of men equally with yourselves, now and forever.

This is the last in the series of posts based on my new book Free to Move. Like previous posts in the series, it provides only an overview of points discussed in much greater depth in the book itself. I hope those interested in these will consider reading it. As previously promised, I will donate 50% of all royalties generated by the book to causes benefiting refugees.

NOTE: The Introduction to  Free to Move, which provides an overview of the rest, is available for free download on the SSRN website here.

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China Warns US That “Crossing Red Lines” Puts Trade Deal At Risk

China Warns US That “Crossing Red Lines” Puts Trade Deal At Risk

Tyler Durden

Fri, 06/26/2020 – 11:22

The US bill imposing mandatory sanctions on Chinese individuals and entities who “materially contribute to the contravention of China’s obligations” to Hong Kong’s autonomy – and banks that do “significant transactions” with them – was passed unanimously by the Senate on Thursday, with the House of Representatives working on its own version; the final bill gets passed to President Trump, who either signs it or vetoes it – in which case it has a veto-proof majority anyway. This, as Rabobank’s Michael Every wrote, is the constitutional dynamic that has been described several times in the last 12 months for China-focused bills with serious consequences for not just international relations, but international business and finance.

“So far the results have not hit markets: but this bill cuts out the middleman and takes us straight to the biting sanctions”, Every concluded.

But while we await the sanctions to kick in, moments ago we learned once again that China is hardly impressed by the latest developments, and in “quietly delivering a message” to Washington, Chinese leaders have “accused Washington of meddling in areas such as Hong Kong, where China is imposing a sweeping national-security law, and Taiwan.”

According to a report in the journal, during a meeting between Mike Pompeo and China’s top diplomat last week in Hawaii, Yang Jiechi listed these actions as well as China’s “strong dissatisfaction” with a bill President Trump signed last week mandating sanctions against Chinese officials and entities deemed responsible for mass detention of Uighur Muslim in China’s northwestern Xinjiang region.

While Yang reiterated Beijing’s commitment to carrying out the trade deal, he stressed that both sides had to “work together,” said people familiar with the conversations. A Chinese official said that meant “the U.S. side should refrain from going too far with meddling” and that “Red lines shouldn’t be crossed.”

The report then notes that shortly after the meeting concluded, Vice Premier Liu He said that Beijing’s ability to carry out the trade deal required the U.S. to “ease off” pressure on other fronts.

“The two countries should create conditions and atmosphere, and eliminate interference, to jointly implement the Phase One agreement,” Liu said in written remarks to a high-profile financial forum held in Shanghai on June 18.

“You can’t keep asking us to buy your stuff and at the same time keep beating up on us,” said Mei Xinyu, an analyst at a think tank affiliated with China’s Commerce Ministry. “That’s not how it works.”

In short, while Peter Navarro may have fumbled his message earlier this week when he said that the trade deal was off, only to immediately reverse himself when futures plunged and even Trump scrambled to tweet that the deal is still in place, the ball is now in Beijing’s court which – in order to project strength following the just passed sanctions – may decide that it is in Beijing’s best interest to kill the Phase 1 trade deal (especially if that helps get the pro-China Biden elected). And after all, it’s not like China is actually complying with the terms of the deal -as we noted last week, China is currently lagging its import pledges made as part of the “Phase One” deal by some 87%.

And with China’s economy on edge, it is virtually impossible that Beijing will force more companies to uproot existing supply chains and shift to US-sourced production just to appease a US president who is seen by a majority of China’s population as taking an increasingly aggressive stance toward China.

While the news helped push US stocks to session lows, the yuan was mostly unchanged, perhaps because China remains on holiday.

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Oil Market Optimism Is Entirely Misplaced

Oil Market Optimism Is Entirely Misplaced

Tyler Durden

Fri, 06/26/2020 – 11:15

Authored by Cyril Widdershoven via OilPrice.com,

  • The recent optimism in oil markets has left many analysts scratching their heads, with no real fundamental reason for the shift in sentiment.

  • Demand projections that suggest Asia or the world economy will be moving back to pre-pandemic levels anytime soon are laughable.

  • The only justifiable optimism for oil markets at the moment is the optimism surrounding 2021 when we will likely see a monumental supply crunch. 

Optimism is supposedly back in oil markets, with the Global Research team at Bank of America lifting its oil price forecast for this year and next as demand recovers from coronavirus-linked shutdowns, the OPEC+ output cut deal curtails supply, and producers slash capital expenditure. The bank now sees Brent crude oil averaging $43.70 per barrel in 2020, up from a previous estimate of $37. In 2021 and 2022, the bank forecasts average prices of $50 and $55 a barrel respectively. BofA also forecast that “a pattern of falling inventories across most regions should emerge as we move into H2 2020. As a result, we expect the full Brent crude oil curve to return into backwardation by year-end”.  Norwegian consultancy Rystad Energy, however, has warned that the downside risk in oil markets is still very much alive. In its weekly webinar, Rystad’s Head of Oil Markets, Bjornar Tonhaugen stated that “Brent prompt futures are under pressure this morning with bearish traders selling below US$40, in a reminder that not all is well yet in the market”. He also indicated that while mainstream analysts are optimistic and see a recovery and upward potential for oil, the short-term reality is far from certain.

When looking at the foggy picture currently being painted by the news, publications, and facts on the ground, the only real conclusion that can be drawn is that the ongoing price rally is not yet based on market fundamentals. The ongoing demand hike, as shown by some analysis in Asia, is not based on recovering demand of consumers or industry, but largely caused by refinery runs that are taking advantage of the relatively low oil prices. Using oil in storage to produce oil products is a normal economic phenomenon, preparing higher-margin products for the future while also opening up some additional storage space for new imports.

Overall, then, optimism should be tempered, as there are not yet any real signs of improvement available in the major economic regions, especially in the U.S. and EU, that would suggest a move towards a pre-coronavirus economy. Oil market analysts and investors seem to forget that current economic figures, which are already extremely bad, are possibly only the tip of the iceberg. When looking at the economic situation in the Eurozone-area, and the EU in general, positive economic figures are largely the result of governmental financial support and will worsen when that support is reduced. Current stimulus packages are not sustainable, and a high level of bankruptcies and lay-offs are to be expected before the end of the summer. 

The economic backbone of major industries in Europe, automotive, airlines, tourism, and even manufacturing, is facing a bleak and very insecure couple of years. Demand for crude oil and products will be hit hard if the expected rise in unemployment becomes a reality. The U.S. and other major markets are not looking any better. The current U.S. stimulus packages are propping up some sectors of the economy, while already historically high unemployment figures will lead to foreclosures, higher credit debts, and failed repayments of car loans, etc. Demand for crude oil, in the world’s second-largest consuming market, seems to be heading towards a cliff. 

Asian figures, which are being presented by several parties as looking promising, are again unlikely to meet expectations. Chinese production figures and GDP growth were already a subject of much debate before the global pandemic, and now it is going to suffer from lower demand in trade and possible political conflicts. A combination of trade wars, the EU’s reluctancy to keep its doors open to China’s economic might, and a continuing struggle to stave off an internal economic crisis, does not bode well for the Asian giant. Demand for China’s products is down and will continue to decline if its main clients (the E.U. and U.S.) are hit by an economic recession. 

Even within the physical oil market itself, it seems that optimism is being misplaced. OPEC+  production cuts are holding, but compliance is at less than 90 percent, which means the main producers are still hitting the markets with additional unwanted oil volumes. Saudi Arabia, UAE, and Kuwait are keeping to their commitments, but Iraq and others are struggling. At the same time, a prolonged production cut strategy is no longer sustainable for several producers as their economies are in shambles, and unrest is brewing. Non-OPEC producers are also looking for a way out, and Russia has indicated that it doesn’t see any long-term options for a production cut. U.S. oil production, which has been hit by both COVID and an OPEC+ oil price war, is currently struggling but has the potential to come back online quickly. If oil prices remain in the $35-40 per barrel range, we will see a re-emergence of several shale oil players and additional (unwanted) volumes in the market. Furthermore, global crude oil storage volumes are still at historically high levels. Last week’s optimistic forecasts of draws of storage volumes is likely a one-off. The fact remains that there is still too much oil available, but SPRs are being used to improve storage figures.

Another reason for our overly optimistic outlook is that the profit strategy of downstream companies has resulted in higher volumes of product in storage, as demand for products is low. This can be seen in U.S. crude stockpiles which were reported to have grown by more than expected, adding to worries about oversupply.  American Petroleum Institute (API) reported that U.S. crude inventories rose by 1.7 million barrels last week, well ahead of analysts’ expectations for a 300,000-barrel build. While product volumes showed a storage draw, optimism here is based on the fact that fuel consumption is picking up as some economies ease lockdown measures. When looking at the real figures, demand for products is still way below normal figures for the same time last year. Another major worry is that China, the world’s top crude importer, is also expected to slow crude imports in the third quarter, after record purchases in recent months, as higher oil prices hurt demand and refiners worry about a second virus outbreak. 

Looking at fundamentals, combined with increased economic and geopolitical unrest globally, there is no real justification for oil market optimism in 2020. Both the summer and autumn of 2020 will be volatile periods for oil markets, with a possible economic recession of an unknown magnitude hitting the global economy. Optimism should instead be pointed towards 2021. A combination of low investments upstream, combined with potential new unrest in MENA (Libya-Iraq) or removal of the weak parties in upstream, will lead to a supply crisis. Beneath the fog of the current demand discussions and fake optimism about the economic growth of Asia and other regions, there is a supply crisis forming which will hit the market hard. The year 2021 will recharge oil and gas with a bang, as we jump from a demand-driven market to a supply-driven situation. Prices will increase, even with a global economic crisis, but revenues will be distributed to new power players that will replace the current U.S.-E.U. centric oil and gas upstream sector. An average crude oil price (Brent) of above $40 per barrel is wishful thinking in 2020. We may witness hikes, but general fundamentals are showing a $30-$34 range rather than a $40-45. 

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Who Is The Next Wirecard?

Who Is The Next Wirecard?

Tyler Durden

Fri, 06/26/2020 – 10:55

Now that the multi-year saga of German fintech megafraud Wirecard is finally over, the pain is only just starting for disgraced German regulator BaFin (with the EU launching an investigation into its borderline criminal “regulation” which punished short sellers while never once looking at the real fraud).

Also let’s not forget about the company’s “auditor” EY (aka Ernst & Young), which as we learned today could have caught the WireFraud years earlier… if they had only done their damn job.

Which brings us to the next point: who is the next WireCard? To be sure in a time of frenzied buying where fundamentals don’t matter (thanks Fed) and lax auditing standards in a world where stocks just go up no matter the news, it is only a matter of time before the other cockroaches are spotted.

One obvious place to start is a look at the other EY clients, which reveals something fascinating: virtually every company that is at the forefront of S&P500 leadership is currently a client of the disgraced auditor: from Apple, to Amazon, to Alphabet and Facebook! The four biggest and most popular companies in the world are currently audited by a company that ignored billions in missing cash for years. In fact, one could go so far as to say that if there is fraud in any one of these 4 names, it could singlehandedly unleash the next market crash.

The list of EY’s top clients is shown below (ranked by market cap).

One wonders: if the rating agencies were the permissive factor for the 2008 crisis, will shoddy auditors be the straw that finally bursts the biggest bubble of all time?

But while that is certainly an important discussion, we will save it for another time, and instead shifting back to the most likely next usual suspect to implode under its own fraudulent weight, we go to a report published overnight by Neil Campling of Mirabaud Securities – best known for being the only analyst to correctly have a price target of zero for Wirecard – titled the next “Big Disaster” and which lists 20 warning signs to watch out for when seeking to short the next WireFraud.

1. Massively promotional CEO who actively looks for publicity and spends a lot of time courting Wall Street/investors etc and is very media savvy

2. Huge CEO/Senior Management compensation package NOT tied to cash flow or Earnings but just to Sales and/or the stock price, creating the possibility of egregious wealth creation if the stock goes up a lot. Huge pledging of collateral by the CEO in return for margin loans to fund a billionaire lifestyle

3. Management compensation generally way out of line with peers despite notably less profitability

4. Glossy future projections that have a habit over a long period of being proven to be too optimistic

5. Questionable product quality, ie defects (boon??) or debatable technological leads over similar products

6. Some evidence of self certifying, whether it be through strange international subsidiaries or not having an Auditor or experiencing unusual and slightly sudden end of quarter surges in revenues, up to and including the last day

7. Unusual or unverified and large Receivables in a business where the product is exchanged for cash up front

8. Evidence that the company is existing on a shoestring, not paying Suppliers, Employees, Landlords etc

9. Unusual margin progression, with SG +A going down over time despite a rising global footprint, or GM’s staying flat despite much lower ASP’s over time, for instance.

10. High levels of Gross Debt. Cash balances not matched by notable Interest Income thereby suggesting they are fraudulent

11. High employee turnover, especially in the LEGAL and FINANCE areas. Co-founders or Board members leaving.

12. Aggressive pursuit via paid third parties and/or “heavies” of any critics or people who have too many questions, which in any case are “boring”

13. Dislike of Hedge Funds

14. Possible Narcissistic Personality Disorder on the part of the CEO. Additional points if he/she uses Twitter a lot

15. Large cabal of outcasts/weirdos/bloggers/Twitter groups who have been saying for years that everything is amiss but just get a lot of criticism because the stock keeps going up ergo they must be idiots

16. Slowing top line growth rate despite all the hoopla and supposed “growth stock” status. Evidence of competitors rapidly eroding unsustainably high market share.

17. Loss making. Ideally never made a profit but likes to pretend it did or failing that, that it will for sure in 2-3 years due to highly questionable new products. But the 2-3 years gets pushed out constantly

18. Extensive use/exclusive use of NON-GAAP Accounting and occasional bridging to get from a Net Loss to a (small) Net Profit via poorly explained one-offs/Other Items/unusually large Credits of some kind in a desperate attempt to get into an Index by illicit means

19. Weak Board, preferably also small and ideally in hock in some way to the CEO, who therefore do his/her bidding. Helps if some of them are related physically to the CEO.

20. Gullible media, gullible analysts and dozens of paid bloggers who produce Price Targets out of nowhere based on “Option Value” or put another way products that are at least 5 years away from having any material impact.

There is one very famour company that checks every single one of the above boxes. In fact, it is a name that is very familiar to our readers. Which is why the only question we have at this point: is PWC starting to sweat?

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S&P Plunges To Critical Technical Level, Bond Yields Hit One-Month Lows

S&P Plunges To Critical Technical Level, Bond Yields Hit One-Month Lows

Tyler Durden

Fri, 06/26/2020 – 10:46

It’s been quite a morning for bad news and its hitting markets:

  • 1000ET *TEXAS GOVERNOR ORDERS TAVERNS TO CLOSE IN RESPONSE TO VIRUS

  • 1050ET *CHINA MESSAGES THAT U.S. PRESSURE COULD JEOPARDIZE PURCHASES OF U.S. EXPORTS

  • 1100ET *HARRIS COUNTY, TX, TO DECLARE TOP-LEVEL EMERGENCY ON COVID-19

The volatility in markets is allowed to leak out as The Fed balance sheet shrinks for the second week in a row

Maybe Powell will need to start printing again?

The S&P 500 just broke down and bounced at its 200-day moving-average…

Dow futures have tumbled nearly 600 points to 25k with small caps leading the collapse (down 2.5% on the day)…

Pushing The Dow back to two-week lows…

And bond yields are plunging, with 30Y back to one-month lows…

But stocks have a long way to fall to catch down to reality…

The Dollar has broken out to its strongest since May…

Mnuchin, get someone on the phone!

via ZeroHedge News https://ift.tt/31fa3sm Tyler Durden