A Frenzy Of Speculative Excess

A Frenzy Of Speculative Excess

Authored by Jesse Felder via TheFelderReport.com,

One For The Ages, Part Tres

Last year I started a series of posts titled, “One For The Ages,” (here are Part One and Part Deux) intended to chronicle what I see as a frenzy in speculative activity in the markets that typically comes around only once in a generation (although it seems my generation has had more than its fair share). This is the third in the series.

J.P. Morgan famously said, “Nothing so undermines your financial judgement as the sight of your neighbor getting rich.” And only in the age of social media could we ever have as many neighbors getting so fabulously rich all at the same time as we do today.

We are social creatures. So when those around us begin to behave in a much riskier way, it makes extreme risk taking seem normal.

Today, social media makes it seem like we are surrounded by consummate risk takers and so many of us are taking risks in the markets that would seem utterly deranged outside of the context of the larger social group.

Combine the social proof of widespread risk taking, magnified by social media, with the addictive properties that a platform like Robinhood is built upon, adapted from social media, then throw in free trading and you have a recipe for a speculative mania like we have never seen before.

Oh, yeah. And then give them all free money to play with.

It’s not hard to see exactly where all those “stimmy” checks went.

They went into Robinhood accounts and then into so-called “blank check companies”…

…and if those weren’t speculative enough, they went into meme stocks.

And if those near-bankrupt companies weren’t risky enough, they piled into the penny stocks of delisted names…

…many of which have already filed for bankruptcy, like Blockbuster.

And if bankrupt stocks weren’t risky enough, there’s the case of a blatant hoax garnering enough speculative interest to achieve a valuation equal to the GDP of the Cayman Islands.

Of course, Robinhood also makes it extremely easy for novice traders to get approved for options trading.

Those “stimmy” checks sure do buy a lot more call options (most of which are far out-of-the-money and expire in less than a week) than they do outright shares.

And if you think this new wave of newbie traders isn’t affecting the broad markets, think again.

Of course, it’s not just retail traders; it’s also wannabe George Soroses at large institutions, “adding fuel to the fire.”

And boy have they gone “risk on” lately.

The combination of retail crowding into popular “gamma squeeze” names and institutions following, or more likely front-running them…

…has resulted in an incredible run in the prices of those stocks.

And this phenomenon isn’t relegated to some obscure group. It can also be seen in the largest stocks in the market.

Coming back to Soros, the incredible performance of those mega-cap tech stocks over the past year has reflexively created an unprecedented surge in the expectations for long-term earnings growth.

All told, it appears the current stock market mania has infected everyone from teenagers playing hooky from their zoom classes to day trade options to major institutions trying to piggy back on those trades to analysts tripping over themselves to try to justify the highest valuations in history.

Perhaps it would behoove them to remember another famous J.P. Morgan quote: “I made a fortune getting out too soon.”

Tyler Durden
Mon, 02/22/2021 – 14:37

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Despite Starkly Different COVID-19 Policies, the U.S. and the U.K. Saw Similar Drops in Cases Around the Same Time

Boris-Johnson-2-22-21-Newscom

Newly identified COVID-19 cases have fallen dramatically in both the United States and the United Kingdom since early-to-mid January, notwithstanding strikingly different government policies aimed at controlling the pandemic. The comparison casts further doubt on the assumption that broad legal restrictions play a crucial role in reducing virus transmission.

Despite the lockdowns that all but a few governors imposed last spring, the United States has seen more COVID-19 deaths per capita than the vast majority of countries. But it still has fared better than several European countries that imposed wider and more prolonged legal restrictions. The countries with higher death rates include the U.K, which has gone through several rounds of national lockdowns.

In early November, the Prime Minister Boris Johnson responded to surging infections with a new lockdown that closed most businesses, banned indoor gatherings of two or more people from different households, and required everyone to stay home without a “reasonable excuse.” The rules were loosened in early December, then tightened again the week before Christmas. While the United States also saw a big increase in daily new cases in the fall and winter, it did not lead to anything like the nationwide lockdown imposed in the U.K., although some states did tighten their restrictions on social and economic activity.

Despite the stark difference in policy, both countries saw remarkably similar COVID-19 trends this winter. According to Worldometer’s numbers, the seven-day average of new cases peaked in the U.K. on January 9; it peaked in the U.S. two days later. That number then fell sharply in both countries. As of yesterday, it was down 81 percent in the U.K. and 73 percent in the U.S.

Daily deaths are also falling in both countries. As of yesterday, the seven-day average in the U.K. was down 61 percent from the peak on January 23. In the U.S., it was down 43 percent from the peak on January 26. Given the dramatic drop in daily new cases that began more than a month ago, daily deaths should continue to fall.

“British experts attribute the decline to a strict national lockdown,” The New York Times reports. “Vaccines don’t explain it: Even though a quarter of the population has been vaccinated, only the earliest recipients had significant protection by Jan. 10, when cases there started to drop. Those early doses mostly went to health-care workers and elderly patients already in the hospital.”

What about the United States? “Although the United States did not impose a national lockdown, voluntary changes in behavior, along with some degree of immunity in hard-hit communities, may have helped prevent an even worse outcome after the holidays,” the Times says, citing Johns Hopkins epidemiologist Caitlin Rivers. “During the winter, when things were getting really bad, I think people saw how bad things were getting in their community and made different choices,” Rivers told the Times. “They canceled gatherings, they stayed home more, they reached for the mask, and those things really do help, put together, to reduce transmission.”

Here in the United States, Rivers thinks voluntary precautions were largely responsible for reversing the upward trends in cases and deaths. Yet in the U.K., according to the Times, “British experts” are crediting the government’s decisive action. While Americans chose to be more cautious, in other words, Brits had to be forced. The premise that U.K. residents are more reckless than Americans and less inclined to comply with COVID-19 safeguards seems implausible, although it is convenient for lockdown enthusiasts.

The same story of starkly different policies and similar outcomes emerges from a comparison of Texas and California, the two most populous states. While California Gov. Gavin Newsom ordered a new lockdown on December 3, Texas Gov. Greg Abbott did not impose new restrictions, and the state remained largely open. Yet since mid-January, the two states have seen almost the same drop in the seven-day average of newly reported cases, which has fallen by 85 percent in California and 81 percent in Texas.

Notwithstanding its much stricter regulations, California saw a bigger increase in new infections during December and January, when the seven-day average tripled. In Texas during the same period, the average doubled. Nationwide in the United States, the average rose 50 percent. In the U.K., it quadrupled.

Since politicians are more inclined to impose restrictions when they see infections rising dramatically, it is not surprising that Johnson and Newsom decided new lockdowns were necessary. But on the face of it, those policies, despite the economic and social costs they entailed, were not actually necessary to bring case numbers back down. Since jurisdictions that took a much looser approach saw similar declines around the same time, it seems official commands do not play as important a role in reducing the spread of COVID-19 as many politicians imagine.

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Despite Starkly Different COVID-19 Policies, the U.S. and the U.K. Saw Similar Drops in Cases Around the Same Time

Boris-Johnson-2-22-21-Newscom

Newly identified COVID-19 cases have fallen dramatically in both the United States and the United Kingdom since early-to-mid January, notwithstanding strikingly different government policies aimed at controlling the pandemic. The comparison casts further doubt on the assumption that broad legal restrictions play a crucial role in reducing virus transmission.

Despite the lockdowns that all but a few governors imposed last spring, the United States has seen more COVID-19 deaths per capita than the vast majority of countries. But it still has fared better than several European countries that imposed wider and more prolonged legal restrictions. The countries with higher death rates include the U.K, which has gone through several rounds of national lockdowns.

In early November, the Prime Minister Boris Johnson responded to surging infections with a new lockdown that closed most businesses, banned indoor gatherings of two or more people from different households, and required everyone to stay home without a “reasonable excuse.” The rules were loosened in early December, then tightened again the week before Christmas. While the United States also saw a big increase in daily new cases in the fall and winter, it did not lead to anything like the nationwide lockdown imposed in the U.K., although some states did tighten their restrictions on social and economic activity.

Despite the stark difference in policy, both countries saw remarkably similar COVID-19 trends this winter. According to Worldometer’s numbers, the seven-day average of new cases peaked in the U.K. on January 9; it peaked in the U.S. two days later. That number then fell sharply in both countries. As of yesterday, it was down 81 percent in the U.K. and 73 percent in the U.S.

Daily deaths are also falling in both countries. As of yesterday, the seven-day average in the U.K. was down 61 percent from the peak on January 23. In the U.S., it was down 43 percent from the peak on January 26. Given the dramatic drop in daily new cases that began more than a month ago, daily deaths should continue to fall.

“British experts attribute the decline to a strict national lockdown,” The New York Times reports. “Vaccines don’t explain it: Even though a quarter of the population has been vaccinated, only the earliest recipients had significant protection by Jan. 10, when cases there started to drop. Those early doses mostly went to health-care workers and elderly patients already in the hospital.”

What about the United States? “Although the United States did not impose a national lockdown, voluntary changes in behavior, along with some degree of immunity in hard-hit communities, may have helped prevent an even worse outcome after the holidays,” the Times says, citing Johns Hopkins epidemiologist Caitlin Rivers. “During the winter, when things were getting really bad, I think people saw how bad things were getting in their community and made different choices,” Rivers told the Times. “They canceled gatherings, they stayed home more, they reached for the mask, and those things really do help, put together, to reduce transmission.”

Here in the United States, Rivers thinks voluntary precautions were largely responsible for reversing the upward trends in cases and deaths. Yet in the U.K., according to the Times, “British experts” are crediting the government’s decisive action. While Americans chose to be more cautious, in other words, Brits had to be forced. The premise that U.K. residents are more reckless than Americans and less inclined to comply with COVID-19 safeguards seems implausible, although it is convenient for lockdown enthusiasts.

The same story of starkly different policies and similar outcomes emerges from a comparison of Texas and California, the two most populous states. While California Gov. Gavin Newsom ordered a new lockdown on December 3, Texas Gov. Greg Abbott did not impose new restrictions, and the state remained largely open. Yet since mid-January, the two states have seen almost the same drop in the seven-day average of newly reported cases, which has fallen by 85 percent in California and 81 percent in Texas.

Notwithstanding its much stricter regulations, California saw a bigger increase in new infections during December and January, when the seven-day average tripled. In Texas during the same period, the average doubled. Nationwide in the United States, the average rose 50 percent. In the U.K., it quadrupled.

Since politicians are more inclined to impose restrictions when they see infections rising dramatically, it is not surprising that Johnson and Newsom decided new lockdowns were necessary. But on the face of it, those policies, despite the economic and social costs they entailed, were not actually necessary to bring case numbers back down. Since jurisdictions that took a much looser approach saw similar declines around the same time, it seems official commands do not play as important a role in reducing the spread of COVID-19 as many politicians imagine.

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NatGas Traders Begged For Cash As Arctic Blast Paralyzed Texas Energy Market

NatGas Traders Begged For Cash As Arctic Blast Paralyzed Texas Energy Market

Stories are emerging from veteran gas traders about the events leading up and during one of the worst energy crises in years. As the polar vortex began to dump frigid air into the central U.S. and Texas, “urgent phone calls came over the holiday weekend: traders of natural gas needed more money, and fast,” said Bloomberg.

As temperatures dove earlier this month and spot prices for natgas skyrocketed 300-fold in a matter of days, traders in the physical gas market realized they had a considerable problem developing: exchanges demanded collateral due to the unprecedented volatility. 

Readers may recall, on Feb.12, natgas prices across the Great Plains erupted as supply froze in pipes due to Arctic conditions produced by the polar vortex split. By Feb. 13, traders had to come up with collateral by Tuesday (Monday was a market holiday (Presidents’ Day/Washington’s Birthday)), or they would be forced out of their positions for massive losses. 

Desperate for cash to meet margin requirements, some traders turned to “European parent companies that could deliver so-called margin payments on their behalf to the exchanges sooner. The cash showed up in different currencies, but it did the trick,” said Bloomberg. 

“I’ve been through a lot: The ’98 and ’99 power spikes in the Midwest, the California crisis” of 2000-2001, said Cody Moore, head of gas and power trading at Mercuria Energy America.

“Nothing was as broadly shocking as this week.”

Source: Bloomberg

With supply frozen in pipes and much of Texas’ power generation produced by natgas, the power and gas markets hit record high spot prices last week. While natgas prices in some locations hit $1,250 per million British thermal units, wholesale power for delivery hit its $9,000-per-megawatt-hour price cap as demand exceeded supply leading to one of the worst controlled blackouts in the nation’s history. 

At one point, Bloomberg calculated that up to 15 million Texans plunged into darkness during the winter blast. 

… and of course, there were winners and losers in the energy space during this entire fiasco. Jerry Jones, the billionaire owner of the Dallas Cowboys, was able to sell natgas for extraordinary high premiums. One of the losers, Atmos Energy Corp., a top supplier of gas in the U.S., is in the process of raising cash after it committed to securing $3.5 billion worth of natgas during the chaos. 

Ahead of the big freeze, natgas trader Paul Phillips of Denver-based Uplift Energy, who also advises gas producers, told clients to prepare. We wrote a very similar note titled “”Overwhelming Signal” – Major Winter Storm Threats For Million Of Americans Within Next Five Days.” 

One energy trader said, “we’ve officially hit the ‘Holy Fucking Shit Levels’ here…” This came as spot prices at the Oneok delivery hub in Oklahoma went from $9 on Feb. 10 to $60 on Feb. 11 to $500 on Feb. 12. 

But the spot gas price spikes now being seen were triggering truly outsized demands: According to one trader, a small market participant with a margin requirement of $100,000 saw that balloon to $1 million. Larger companies had to find tens of millions of dollars. Many spot gas trades are conducted via next-day contracts on Intercontinental Exchange Inc., which boosted its margin requirements.

After the market closed Friday, stunned traders scrambled to work out how much additional funds they would need to set aside for the following week. Some trading houses were extremely nervous. An executive at one said he was worried that some counterparties could go bust and leave his firm with positions to fill on the spot market. – Bloomberg

As natgas supply froze, it became quite clear to ERCOT, Texas’ largest power company, that controlled rolling blackouts would begin. 

Some traders looking to raise more collateral urgently tapped credit lines, while lenders sprang into action. One bank was able to extend credit facilities by $500 million and have them in place when the markets reopened, according to a person working there. Other lenders also took similar action, according to other people with knowledge of the situation. “Nobody wanted to trade a liquidity event, so they stepped up,” one banker said. – Bloomberg

As markets reopened on Feb. 16, natgas prices shot through the roof as weather conditions deteriorated in central U.S. and Texas. Another winter storm resulted in more weather chaos for the state. At one point, Oneok spot prices on Wednesday topped $1,250 while power prices in Texas exceeded the $9,000-per-megawatt-hour price cap. 

Phillips said natgas orders filled in the Western Rockies at prices as high as $350. “I thought maybe the highest we could get was $20 this week, to be honest,” he said.

Uplift’s clients were doing everything they could last week to keep natgas flowing. Some producers used portable heaters to keep pipes from freezing. “Some of our producer clients felt morally obligated that the gas was flowing,” Phillips said.

Chris Bird’s Oklahoma-based Exponent Energy used similar measures to keep gas wells from freezing. They used propane gas torches to keep wellheads from freezing. During the deep freeze, his company made $3 million in revenue, compared with $800k for all of last year.

John Woods, an independent trader, said while the energy crisis unfolded across the central U.S. and Texas, natgas was still flowing to gas export terminals. He said, “disgusting price-gouging that we have not seen since the California energy crisis” was observed. 

By Feb. 16, Texas Gob. Greg Abbott announced a ban on natgas shipment out of the state borders. Even then, more chaos in energy markets unfolded as one energy trader, according to Bloomberg, lost $1 million in minutes, having bet right before Abbott’s ban that gas would continue to flow to the West Coast. 

The gas export ban also spilled over into Mexico, where power plants were unable to get filled. This led to widespread outages for households and factories in Northern Mexico. 

As power generation was restored later in the week and natgas prices normalized on Feb. 18, Oneok spot prices crashed 99% to ‘norms’ around $4 as temperatures rose. 

While many Texans got their first taste of what it was like to live in a third-world country for a week, with blackouts and lack of clean water, the energy fiasco could jeopardize the perception of how reliable natgas supplies are in the U.S. 

Serious financial difficulties may emerge from energy firms who were blindsided by soaring energy and electricity prices. 

“We’ll have to see what kind of defaults come to the surface,” John Kilduff, trader and founding partner at Again Capital, said. “That will dictate who can stay in.

Tyler Durden
Mon, 02/22/2021 – 14:11

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Kansas Bill Would Make Gold And Silver Legal Tender In The State

Kansas Bill Would Make Gold And Silver Legal Tender In The State

Authored by Michael Maharrey via SchiffGold.com,

A bill introduced in the Kansas House would recognize gold and silver specie as legal tender and repeal all taxes levied on it. The legislation would pave the way for Kansans to use gold and silver in everyday transactions, a foundational step for the people to undermine the Federal Reserve’s monopoly on money.

The Federal Reserve is the engine that drives the most powerful government in the history of the world. Ron Paul popularized the slogan “End the Fed,” but Congress is nowhere near abolishing the central bank.  It can’t even come up with the will to audit the Fed.

Even though state action can’t end the Fed, there are steps states can take that will undermine the Federal Reserve’s monopoly on money. By passing laws that encourage and incentivize the use of gold and silver in daily transactions by the general public, policy changes at the state level such as the Kansas Legal Tender Act has the potential to create a wide-reaching impact and set the foundation to nullify the Fed’s monopoly power over the monetary system.

A coalition of four Republicans introduced House Bill 2123 (HB2123) on Jan. 25. The legislation would make gold and silver legal tender in the state, recognizing it as a medium of exchange for the payment of debts and taxes. In effect, gold and silver specie would be treated as money, putting it on par with Federal Reserve notes in Kansas.

Under the proposed law, “Legal tender” means a recognized medium of exchange for the payment of debts and taxes. Specie legal tender would be defined as:

(a) Specie coin issued by the United States government at any time; or

(b) any other specie that a court of competent jurisdiction, by final and unappealable order, rules to be within state authority to make or designate as legal tender

By allowing the court to designate additional specie to be used as legal tender, Kansas could free its citizens from potential supply constraints imposed by the use of only United States minted gold and silver coin. More importantly, the people of the state of Kansas would be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington D.C.

Practically speaking, the passage of HB2123 would allow residents to use gold or silver coins to pay taxes and other debts owed to the state. In effect, it would put gold and silver on the same footing as Federal Reserve notes.

HB2123 would also repeal property and capital gains taxes on gold and silver.

“No specie or legal tender shall be characterized as personal property for taxation or regulatory purposes.”

Passage of this bill would build on a foundation set in 2019 when Kansas repealed the sales tax on gold and silver.

Kansas could become the fourth state to recognize gold and silver as legal tender. Utah led the way, reestablishing constitutional money in 2011. Wyoming and Oklahoma have since joined.

KNOCKING DOWN BARRIERS

Taxes on gold and silver erect barriers to using gold and silver as money by raising transaction costs. HB2123 would exempt gold and silver bullion from state capital gains taxes. Passage of this legislation would eliminate a barrier to investing in gold and silver. It would also make it more practical to gold and silver in everyday transactions, a foundational step for people to undermine the Federal Reserve’s monopoly on money.

In effect, states that collect taxes on purchases of precious metals act as if gold and silver aren’t money at all.

Imagine if you asked a grocery clerk to break a $5 bill and he charged you a 35 cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what South Carolina’s capital gains tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, South Carolina would treat specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender and breaking down the Fed’s monopoly on money.

“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.

LEGALIZING THE CONSTITUTION

Passage of HB2123 would effectively legalize the US Constitution in Kansas.

The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” Currently, all debts and taxes in South Carolina are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress or with coins issued by the US Treasury — very few of which have gold or silver in them.

The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the US government wouldn’t be able to maintain all of its unconstitutional wars and programs.

Passage of HB2123 would reestablish gold and silver as legal tender in the state and take a step toward that constitutional requirement, ignored for decades in every state.

It would also begin the process of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the state and local levels, and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

Constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.

“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”

Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state-by-state level is what will get us there.

Tyler Durden
Mon, 02/22/2021 – 13:50

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Supreme Court Rejects Opportunity to Reconsider Penn Central

Today the Supreme Court denied a petition for certiorari in Bridge Aina Le’a v. Hawaii Land Use Commission. This case invited the Court to reconsider the Penn Central balancing test which is applied to more regulatory takings claims under the Fifth Amendment’s Takings Clause. Alas, this was an invitation the Court declined to accept.

Justice Thomas issued a brief solo opinion dissenting from the denial of certiorari explaining why, in his view, the time is right to reconsider Penn Central. Of note, he cites a range of scholarship, from scholars across the ideological spectrum, expressing dissatisfaction with the Penn Central factors. I reproduce his dissent below.

I recently explained that “it would be desirable for us to take a fresh look at our regulatory takings jurisprudence, to see whether it can be grounded in the original public meaning of the Takings Clause of the Fifth Amendment or the Privileges or Immunities Clause of the Fourteenth Amendment.” Murr v. Wisconsin, 582 U. S. ___, ___ (2017) (dissenting opinion) (slip op., at 1).

Our current regulatory takings jurisprudence leaves much to be desired. A regulation effects a taking, we have said, whenever it “goes too far.” Pennsylvania Coal Co. v.
Mahon, 260 U. S. 393, 415 (1922). This occurs categorically whenever a regulation requires a physical intrusion, Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S.
419 (1982), or leaves land “without economically beneficial or productive options for its use,” Lucas v. South Carolina Coastal Council, 505 U. S. 1003, 1018 (1992). But such
cases are exceedingly rare. See, e.g., Brown & Merriam, On the Twenty-Fifth Anniversary of Lucas: Making or Breaking the Takings Claim, 102 Iowa L. Rev. 1847, 1849–1850 (2017) (noting that in more than 1,700 cases over a 25-year period, there were only 27 successful takings claims under Lucas—a success rate of just 1.6%). For all other regulatory takings claims, the Court has “generally eschewed any set formula for determining how far is too far,” requiring lower courts instead “to engage in essentially ad hoc, factual inquiries.” Tahoe-Sierra Preservation Council, Inc. v. Tahoe
Regional Planning Agency, 535 U. S. 302, 326 (2002) (internal quotation marks omitted). Factors might include (1) “[t]he economic impact of the regulation on the claimant,” (2) “the extent to which the regulation has interfered with distinct investment-backed expectations,” and (3) “the character of the governmental action.” Penn Central Transp. Co. v. New York City, 438 U. S. 104, 124 (1978); see also Lingle v. Chevron U. S. A. Inc., 544 U. S. 528, 538–539 (2005). But courts must also “‘weig[h] . . . all the relevant circumstances.'” Tahoe-Sierra Pres. Council, 535 U. S., at 322. As one might imagine, nobody—not States, not property owners, not courts, nor juries—has any idea how to apply this standardless standard.

This case illustrates the point. After an 8-day trial and with the benefit of jury instructions endorsed by both parties, the jury found a taking. The District Court, in turn, concluded that there was an adequate factual basis for this verdict. But the Ninth Circuit on appeal reweighed and reevaluated the same facts under the same legal tests to conclude that no reasonable jury could have found a taking. These starkly different outcomes based on the application of the same law indicate that we have still not provided courts with a “workable standard.” Pomeroy, Penn Central After 35 Years: A Three Part Balancing Test or One Strike Rule? 22 Fed. Cir. B. J. 677, 678 (2013). The current doctrine is “so vague and indeterminate that it invites unprincipled, subjective decision making” dependent upon the decisionmaker. Echeverria, Is the Penn Central Three-Factor Test Ready for History’s Dustbin? 52 Land Use L. & Zon. Dig. 3, 7 (2000); see also Eagle, The Four-Factor Penn Central Regulatory Takings Test, 118 Pa. St. L. Rev. 601, 602 (2014) (“[T]he doctrine has become a compilation of moving parts that are neither individually coherent nor collectively compatible”). A know-it-when-you-see-it test is no good if one court sees it and another does not.

Next year will mark a “century since Mahon,” during which this “Court for the most part has refrained from” providing “definitive rules.” Murr, 582 U. S., at ___ (slip op., at 7). It is time to give more than just “some, but not too specific, guidance.” Palazzolo v. Rhode Island, 533 U. S. 606, 617 (2001). If there is no such thing as a regulatory
taking, we should say so. And if there is, we should make clear when one occurs.
I respectfully dissent.

 

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Supreme Court Rejects Opportunity to Reconsider Penn Central

Today the Supreme Court denied a petition for certiorari in Bridge Aina Le’a v. Hawaii Land Use Commission. This case invited the Court to reconsider the Penn Central balancing test which is applied to more regulatory takings claims under the Fifth Amendment’s Takings Clause. Alas, this was an invitation the Court declined to accept.

Justice Thomas issued a brief solo opinion dissenting from the denial of certiorari explaining why, in his view, the time is right to reconsider Penn Central. Of note, he cites a range of scholarship, from scholars across the ideological spectrum, expressing dissatisfaction with the Penn Central factors. I reproduce his dissent below.

I recently explained that “it would be desirable for us to take a fresh look at our regulatory takings jurisprudence, to see whether it can be grounded in the original public meaning of the Takings Clause of the Fifth Amendment or the Privileges or Immunities Clause of the Fourteenth Amendment.” Murr v. Wisconsin, 582 U. S. ___, ___ (2017) (dissenting opinion) (slip op., at 1).

Our current regulatory takings jurisprudence leaves much to be desired. A regulation effects a taking, we have said, whenever it “goes too far.” Pennsylvania Coal Co. v.
Mahon, 260 U. S. 393, 415 (1922). This occurs categorically whenever a regulation requires a physical intrusion, Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S.
419 (1982), or leaves land “without economically beneficial or productive options for its use,” Lucas v. South Carolina Coastal Council, 505 U. S. 1003, 1018 (1992). But such
cases are exceedingly rare. See, e.g., Brown & Merriam, On the Twenty-Fifth Anniversary of Lucas: Making or Breaking the Takings Claim, 102 Iowa L. Rev. 1847, 1849–1850 (2017) (noting that in more than 1,700 cases over a 25-year period, there were only 27 successful takings claims under Lucas—a success rate of just 1.6%). For all other regulatory takings claims, the Court has “generally eschewed any set formula for determining how far is too far,” requiring lower courts instead “to engage in essentially ad hoc, factual inquiries.” Tahoe-Sierra Preservation Council, Inc. v. Tahoe
Regional Planning Agency, 535 U. S. 302, 326 (2002) (internal quotation marks omitted). Factors might include (1) “[t]he economic impact of the regulation on the claimant,” (2) “the extent to which the regulation has interfered with distinct investment-backed expectations,” and (3) “the character of the governmental action.” Penn Central Transp. Co. v. New York City, 438 U. S. 104, 124 (1978); see also Lingle v. Chevron U. S. A. Inc., 544 U. S. 528, 538–539 (2005). But courts must also “‘weig[h] . . . all the relevant circumstances.'” Tahoe-Sierra Pres. Council, 535 U. S., at 322. As one might imagine, nobody—not States, not property owners, not courts, nor juries—has any idea how to apply this standardless standard.

This case illustrates the point. After an 8-day trial and with the benefit of jury instructions endorsed by both parties, the jury found a taking. The District Court, in turn, concluded that there was an adequate factual basis for this verdict. But the Ninth Circuit on appeal reweighed and reevaluated the same facts under the same legal tests to conclude that no reasonable jury could have found a taking. These starkly different outcomes based on the application of the same law indicate that we have still not provided courts with a “workable standard.” Pomeroy, Penn Central After 35 Years: A Three Part Balancing Test or One Strike Rule? 22 Fed. Cir. B. J. 677, 678 (2013). The current doctrine is “so vague and indeterminate that it invites unprincipled, subjective decision making” dependent upon the decisionmaker. Echeverria, Is the Penn Central Three-Factor Test Ready for History’s Dustbin? 52 Land Use L. & Zon. Dig. 3, 7 (2000); see also Eagle, The Four-Factor Penn Central Regulatory Takings Test, 118 Pa. St. L. Rev. 601, 602 (2014) (“[T]he doctrine has become a compilation of moving parts that are neither individually coherent nor collectively compatible”). A know-it-when-you-see-it test is no good if one court sees it and another does not.

Next year will mark a “century since Mahon,” during which this “Court for the most part has refrained from” providing “definitive rules.” Murr, 582 U. S., at ___ (slip op., at 7). It is time to give more than just “some, but not too specific, guidance.” Palazzolo v. Rhode Island, 533 U. S. 606, 617 (2001). If there is no such thing as a regulatory
taking, we should say so. And if there is, we should make clear when one occurs.
I respectfully dissent.

 

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Supreme Court Allows NY State Prosecutors to Obtain Trump Tax Returns

TaxReturn

In an unsigned on-sentence order issued earlier today, the Supreme Court is allowing New York state prosecutors to obtain former President Donald Trump’s tax returns. Here’s the order in all its glory:

The application for a stay presented to Justice Breyer and referred to the Court is denied.

There are no concurring opinions or recorded dissents to the order. The ruling is not a surprise, because it is a natural outgrowth of the Court’s 7-2 ruling in Trump v. Vance last year, where the majority made clear that presidents have no special right to prevent state prosecutors from issuing criminal subpoenas to access their tax returns (though they can still raise the same objections as are available to ordinary citizens targeted by similar investigations). And, at this point, of course, Trump is no longer president, so any special privileges associated with that office would no longer apply in any case.

This ruling doesn’t necessarily mean that Trump will be charged with any financial crimes as a result, much less convicted. But it will make it easier for New York prosecutors to find any evidence of such criminality, if it is out there. And, given Trump’s history, few informed observers would be surprised if it turned out he engaged in some illegal activity here.

Trump v. Vance should not be confused with Trump v. Mazars, a more complex decision issued the same day, addressing the power of congressional committees to subpoena presidential tax returns. In Mazars, the Court rejected Trump’s extreme position that Congress had virtually no power to subpoena presidential tax returns. But it also didn’t unequivocally side with the Democratic-controlled House of Representatives. Instead, a 7-2 majority created a complex balancing test. I critiqued that test and suggested what I think is a superior alternative here.

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Hedge Funds Reverse Course: Turn Most Short On Small Caps In Eight Months

Hedge Funds Reverse Course: Turn Most Short On Small Caps In Eight Months

As Bloomberg’s Elena Popina writes this morning, Hedge funds were among the biggest fans of small-cap companies since late spring, putting money into the group with the consistency other corners of the market could only envy. However, it now appears that “their confidence is starting to wane.”

According to CFTC data, between May and last month, hedge funds bet on gains in the Russell 2000 Index every week but one, a persistence unmatched in their S&P 500 or tech megacap bets. But that bullish sentiment started to shift this month, when hedge funds first turned short on small caps, then widened their bearish bets a week later. As of Friday, their net short exposure, at 9,000 contracts, is the largest in eight months.

As Popina cautions, “whether these negative wagers are here to stay is anyone’s guess, but it does show that hedge funds’ affection toward small caps, intact for most of last year, is starting to wane.” It’s happening at a time when small companies are expected to be the biggest winners from rising inflation, a weaker dollar and better economic growth.

Meanwhile, what hedge funds are actually doing once again contrasts to what they say they are doing. Investor surveys from the likes of Bank of America showed small caps are among the top picks for this year, and the group’s 15% rally so far this year shows the wager has been prescient.

According to last week’s BofA FMS, close to a record 31% of investors continue to think small caps will outperform large caps in the next 12 months…. yet ironically they are now taking the opposite bets at least in futures.

One likely reason for the shift in sentiment: implied volatility in the group remains above 30, the level it’s been at since a market sell-off in October. In the options market, uncertainty about the rally is still high, with the volume of put options outpacing calls by more than three times.

In any case, after some struggles last week when the Russell drifted lower from recent all time highs, the Russell is unchanged on Monday after some initial weakness.

Tyler Durden
Mon, 02/22/2021 – 13:30

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Republicans Willing To Ditch GOP For Trump, USA Today Poll

Republicans Willing To Ditch GOP For Trump, USA Today Poll

Authored by Steve Watson via Summit News,

A USA Today/Suffolk University poll released Sunday revealed that around half of Republicans are willing to leave the party behind and jump ship to a Trump led third party.

The findings serve as a stark reminder to the party that President Trump is still the preeminent figure in US conservative politics.

The poll reveals that 46% of Republicans would follow Trump to a new party, with only around a quarter (26%) saying they would stay with the GOP. The remaining respondents are undecided.

The poll also found that a majority of Trump voters (54%) are more loyal to the candidate than the GOP (34%).

Only 19% said that they feel voters should ditch Trump and embrace establishment Republicans in the GOP.

The poll also found that the Democrat impeachment show trial made just 4% of Republican voters less supportive of Trump, while 42% say it made them more supportive, and 54% say it didn’t affect their support.

The poll found that Trump voters want him to run again in 2024 by a 2-1 margin, with 85% saying they would vote for him in a general election, after 76% saying they support him for the Republican nomination.

Suffolk University Political Research Center Director David Paleologos also noted that, according to the poll, there has been “a seismic shift in the landscape of trusted news sources for conservatives in the country.”

Just before Trump was elected in 2016, Fox News had a 58% trust rating among conservatives. That is now down to just 34%.

Tyler Durden
Mon, 02/22/2021 – 13:10

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