Trump Mulls Commutation for Disgraced Former Illinois Gov. Rod Blagojevich

President Donald Trump is reportedly considering commuting the federal prison sentence for former Illinois Democratic Governor Rod Blagojevich. His comments to reporters on Air Force One last night have unleashed yet another round of outrage.

Blagojevich is about halfway through a 14-year prison sentence for political corruption. He was convicted of pay-to-play tactics that involved allegations he attempted to sell the U.S. Senate seat vacated by Barack Obama after Obama was elected president.

Trump’s reasons for considering commuting Blagojevich’s sentence are personal to the point of comic absurdity. When talking to reporters last night, Trump pointed out that Blagojevich had been on his show, Celebrity Apprentice, before saying he thought that Blagojevich had been “treated unbelievably unfairly.” He blamed Blagojevich’s conviction on former FBI Director James Comey’s “gang and all these sleazebags.” The Wall Street Journal notes that some conservative commentators have been hot on the fact that Robert Mueller was director of the FBI when Blagojevich was arrested. The idea that any of that would or should relate to how Trump is being treated and investigated is utter nonsense (nobody had an inkling at the time that Trump would become president), but that’s the kind of environment we’re in.

Trump furthermore complained to reporters last night, “You have drug dealers that get not even 30 days, and they’ve killed 25 people.” We can only hope that was deliberate hyperbole, and that Trump doesn’t actually believe this.

As is typical, the “optics” are inspiring the most anger. While Trump was talking about Blagojevich’s raw deal, federal Immigration and Customs Enforcement officers were rounding up hundreds of immigrants working at meat processing plants in Mississippi for suspicion of being in the country illegally (many of those people have since been released). Attorney General William Barr has announced the Justice Department will resume executing inmates on death row after a decades-long moratorium, and Trump has made it clear that he’d like to see even more prisoners face the death penalty. The administration has continued Obama’s war on whistleblowers, as Reality Winner languishes in federal prison for leaking documents that show how Russian hackers attempted to infiltrate and potentially manipulate voting systems across the country. More recently, Daniel Everette Hale, who exposed problems with how drones were being used for assassination strikes in foreign countries under Obama, was arrested and charged by Trump’s administration with a host of crimes.

In other words, Trump talking about Blagojevich’s unfair treatment sounds pretty hollow coming from the head of an administration that should be remembered for its intentional, callous, and reckless cruelty (Support for the FIRST STEP Act aside).

And yet, Trump’s not wrong on this. The Wall Street Journal notes that Rev. Jesse Jackson (whose son was also caught up in a corruption case years later) is encouraging Trump’s mercy. The relevant question here is whether there’s a public safety need to keep Blagojevich in a federal prison cell. The answer is a resounding no.

Blagojevich poses no physical threat to anyone outside of a federal prison. His political record is so tainted that he’d have a hard time running any sort of scam in the free world. The only reason to keep him in prison is to debase and punish him for abusing the powers of his office. That desire is understandable, but we should be asking ourselves whether there’s any real value to his continued incarceration and whether that value exceeds the cost of keeping him behind bars.

Trump appears motivated to exercise mercy for the wrong reasons: his personal relationship with Blagojevich and his desire to undermine anybody remotely connected to the investigation against him and his campaign. But it is nevertheless important to foster an attitude of mercy toward federal prisoners, who face excessive sentences and do not have the option of parole.

We should be encouraging Trump to free more prisoners, even if that means he’ll free some of them for the wrong reasons.

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Stocks, Bonds, & Gold Gain As Easing Hopes Hide Global Risks

Another buyback-sponsored surge in stocks met with gains in bonds and bullion…

Once again all eyes were on the yuan fix overnight which was set weaker than 7/USD for the first time since 2008, but was slightly stronger than expected (and thus interpreted as China seeking stability)…

Source: Bloomberg

Chinese stocks managed modest gains only again after the fix (and better than expected trade data), but remain well in the red for the week…

Source: Bloomberg

European markets surged intraday with France’s CAC40 back into the green for the week…

Source: Bloomberg

Swissy was safe-haven bid against the Euro as Italian politics reared its ugly head again…

Source: Bloomberg

US Equity markets were ramped back to unchanged on the week…

Small Caps and Nasdaq outperformed on the day…

Dow futures have retraced Fib 61.8% of the post-Powell plunge…

 

3rd day of a huge short squeeze…

Source: Bloomberg

 

Kraft Heinz crashed to record lows…

Source: Bloomberg

 

BYND was battered back below its Secondary offering price

 

VIX dropped back to a 16 handle today..

 

Stocks and bond yields dramatically decoupled this afternoon…

Source: Bloomberg

Treasury yields surged early on but between the Italian political news and better-than-expected tail in the 30Y auction, yield tumbled back lower in the afternoon… and are still dramatically lower on the week…

Source: Bloomberg

2Y underperformed, flattening the curve modestly (and a new cycle low in 2s10s)…

Source: Bloomberg

It was another large range day for bonds though (11bps in 30Y after the longest-duration auction ever)…

Source: Bloomberg

Mirroring yesterday’s yield plunge and surge…

Source: Bloomberg

The Dollar Index ended the day lower, but remained in the narrow range of the week…

Source: Bloomberg

Cryptos were lower on the day with Bitcoin still the week’s biggest gainer…

Source: Bloomberg

Another failed attempt at $12k overnight…

Source: Bloomberg

WTI bounced back today on the heels of more chatter from Saudi on stem price drops (and hope of another trade truce with China)…

Source: Bloomberg

Oil prices surged over 3% today, extending yesterday’s Saudi bounce gains…

 

 

Iron Ore prices continue to plummet…

Source: Bloomberg

Gold managed gains as it surged back higher on the auction/Italian headlines…

 

And finally, with today’s re-plunge in TSY yields (and the likely shift in Bund yields due to Italy crisis), negative-yielding debt debacles are leading gold higher…

Source: Bloomberg

And as a quick reminder, Gold remains the biggest winner since The FOMC meeting and stocks worst…

So on the week: Stocks are unchanged, TSY yields are down 14bps, Gold is up 3%, and the dollar is fractionally lower. One of these things is not like the other!!

via ZeroHedge News https://ift.tt/2GXGiBj Tyler Durden

Trump Mulls Commutation for Disgraced Former Illinois Gov. Rod Blagojevich

President Donald Trump is reportedly considering commuting the federal prison sentence for former Illinois Democratic Governor Rod Blagojevich. His comments to reporters on Air Force One last night have unleashed yet another round of outrage.

Blagojevich is about halfway through a 14-year prison sentence for political corruption. He was convicted of pay-to-play tactics that involved allegations he attempted to sell the U.S. Senate seat vacated by Barack Obama after Obama was elected president.

Trump’s reasons for considering commuting Blagojevich’s sentence are personal to the point of comic absurdity. When talking to reporters last night, Trump pointed out that Blagojevich had been on his show, Celebrity Apprentice, before saying he thought that Blagojevich had been “treated unbelievably unfairly.” He blamed Blagojevich’s conviction on former FBI Director James Comey’s “gang and all these sleazebags.” The Wall Street Journal notes that some conservative commentators have been hot on the fact that Robert Mueller was director of the FBI when Blagojevich was arrested. The idea that any of that would or should relate to how Trump is being treated and investigated is utter nonsense (nobody had an inkling at the time that Trump would become president), but that’s the kind of environment we’re in.

Trump furthermore complained to reporters last night, “You have drug dealers that get not even 30 days, and they’ve killed 25 people.” We can only hope that was deliberate hyperbole, and that Trump doesn’t actually believe this.

As is typical, the “optics” are inspiring the most anger. While Trump was talking about Blagojevich’s raw deal, federal Immigration and Customs Enforcement officers were rounding up hundreds of immigrants working at meat processing plants in Mississippi for suspicion of being in the country illegally (many of those people have since been released). Attorney General William Barr has announced the Justice Department will resume executing inmates on death row after a decades-long moratorium, and Trump has made it clear that he’d like to see even more prisoners face the death penalty. The administration has continued Obama’s war on whistleblowers, as Reality Winner languishes in federal prison for leaking documents that show how Russian hackers attempted to infiltrate and potentially manipulate voting systems across the country. More recently, Daniel Everette Hale, who exposed problems with how drones were being used for assassination strikes in foreign countries under Obama, was arrested and charged by Trump’s administration with a host of crimes.

In other words, Trump talking about Blagojevich’s unfair treatment sounds pretty hollow coming from the head of an administration that should be remembered for its intentional, callous, and reckless cruelty (Support for the FIRST STEP Act aside).

And yet, Trump’s not wrong on this. The Wall Street Journal notes that Rev. Jesse Jackson (whose son was also caught up in a corruption case years later) is encouraging Trump’s mercy. The relevant question here is whether there’s a public safety need to keep Blagojevich in a federal prison cell. The answer is a resounding no.

Blagojevich poses no physical threat to anyone outside of a federal prison. His political record is so tainted that he’d have a hard time running any sort of scam in the free world. The only reason to keep him in prison is to debase and punish him for abusing the powers of his office. That desire is understandable, but we should be asking ourselves whether there’s any real value to his continued incarceration and whether that value exceeds the cost of keeping him behind bars.

Trump appears motivated to exercise mercy for the wrong reasons: his personal relationship with Blagojevich and his desire to undermine anybody remotely connected to the investigation against him and his campaign. But it is nevertheless important to foster an attitude of mercy toward federal prisoners, who face excessive sentences and do not have the option of parole.

We should be encouraging Trump to free more prisoners, even if that means he’ll free some of them for the wrong reasons.

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Was Charging Sarah Palin With Complicity in Mass Murder an Honest Mistake?

This week a federal appeals court revived former Republican vice presidential candidate Sarah Palin’s defamation lawsuit against The New York Times, which falsely accused her of complicity in the 2011 Tucson shooting that killed six people and gravely injured then-Rep. Gabrielle Giffords (D–Ariz.). The crucial issue in the case is not the truth or falsity of that thoroughly debunked charge but the mental state of Times Editorial Page Editor James Bennet, who included the canard in a 2017 editorial. Did he make an honest mistake, or did he, because of his animus against Palin and Republicans generally, repeat the smear even though he knew or suspected it was false?

The latter interpretation bolsters Palin’s case against the Times, but even the “honest mistake” theory is a mortifying indictment of the paper and the people who run it. If Bennet’s editorial is not an example of casual libel masquerading as political commentary, it is at least an object lesson in the cognitive biases that lead smart people astray and feed the mindless partisanship that makes rational debate impossible.

According to the claim that Bennet repeated, a map circulated by Palin’s political action committee, SarahPAC, helped incite the Tucson shooter’s murderous violence by marking 20 congressional districts, including Giffords’, with stylized crosshairs. Yet the map, which was part of the debate over Obamacare, plainly had nothing to do with violence. “20 House Democrats from districts we carried in 2008 voted for the health care bill,” the caption said. “IT’S TIME TO TAKE A STAND.”

That was obviously a call for opposing the re-election of Obamacare supporters, not for murdering them. And the idea that such run-of-the-mill politicking somehow inspired the Tucson shooter—whose politics leaned left, whose motives were mysterious, and whose behavior and ideas were weird enough to earn him a diagnosis of paranoid schizophrenia—was risible.

Yet in his editorial, written six years after the Tucson attack, Bennet casually revived this long-discredited idea. “In 2011, when Jared Lee Loughner opened fire in a supermarket parking lot, grievously wounding Representative Gabby Giffords and killing six people, including a 9-year-old girl, the link to political incitement was clear,” he wrote. “Before the shooting, Sarah Palin’s political action committee circulated a map of targeted electoral districts that put Ms. Giffords and 19 other Democrats under stylized cross hairs.” Bennet not only said the “link” between the SarahPAC map and the Tucson shooting was “clear”; he falsely claimed the map depicted Giffords and the other legislators.

The next day, the Times ran a correction acknowledging that Bennet had “incorrectly stated that a link existed between political rhetoric and the 2011 shooting of Representative Gabby Giffords,” when “in fact, no such link was established.” It added that “the editorial also incorrectly described a map distributed by a political action committee before that shooting.”

As Palin was quick to point out, Bennet should have known that what he wrote was not true. Before joining the Times, he had served as editor of The Atlantic for a decade, a period when the magazine he oversaw ran several articles debunking the anti-Palin smear. Furthermore, a 2011 ABC News article to which he linked in the editorial explained the problems with his thesis and plainly stated that “no connection has been made between this graphic and the Arizona shooting.”

During a 2017 hearing before U.S. District Judge Jed Rakoff, who was overseeing Palin’s defamation case, Bennet testified that he did not recall reading any of the articles contradicting his claim in The Atlantic, the Times, or anywhere else. He also said he did not bother to read the articles collected by the writer who composed the first draft of the editorial, including a column that said “Loughner was likely insane, with no coherent ideological agenda” and a Times editorial that said “it is facile and mistaken to attribute this particular madman’s act directly to Republicans or Tea Party members.”

Taking Bennet at his word, Rakoff dismissed Palin’s suit. “What we have here,” he wrote, “is an editorial, written and rewritten rapidly in order to voice an opinion on an immediate event of importance, in which are included a few factual inaccuracies somewhat pertaining to Mrs. Palin that are very rapidly corrected. Negligence this may be; but defamation of a public figure it plainly is not.”

On Tuesday, a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit unanimously disagreed:

In both the original complaint and the PAC [proposed amended complaint], Palin’s overarching theory of actual malice is that Bennet had a “pre‐determined” argument he wanted to make in the editorial. Bennet’s fixation on this set goal, the claim goes, led him to publish a statement about Palin that he either knew to be false, or at least was reckless as to whether it was false. The PAC contains allegations that paint a plausible picture of this actual‐malice scenario in three respects: (1) Bennet’s background as an editor and political advocate provided sufficient evidence to permit a jury to find that he published the editorial with deliberate or reckless disregard for its truth, (2) the drafting and editorial process also permitted an inference of deliberate or reckless falsification, and (3) the Times’ subsequent correction to the editorial did not undermine the plausibility of that inference.

The court concluded that Palin’s complaint “plausibly states a claim for defamation and may proceed to full discovery.” The Times may yet succeed in arguing that Bennet simply messed up. The paper’s quick and embarrassing correction, along with the self-refutation contained in the ABC News article to which Bennet linked, does suggest that he did not deliberately lie, although it is still possible he was reckless enough to meet the “actual malice” standard for proving defamation of a public figure.

The most plausible explanation for this sorry episode is that Bennet vaguely remembered the alleged link between the SarahPAC map and the Tucson shooting, decided it fit the story he was trying to tell about the dangers of extreme political rhetoric, and was thereafter blind to any contrary evidence. His blindness was not necessarily willful, but that does not make it less disturbing.

To the contrary, the likelihood that Bennet sincerely believed Sarah Palin had blood on her hands dramatically illustrates the insidious power of confirmation bias to reinforce an us-versus-them mentality. If you think Republicans are the sort of people who blithely encourage violence through vicious attacks on their political opponents, you will be inclined to accept the notion that Palin is somehow responsible for the attempted assassination of Gabrielle Giffords. And once you’ve accepted that bizarre theory, facts are unlikely to dislodge it, if you even notice them.

When people think this way, it is hard to take them seriously, even when they are making valid points. Fair-minded readers who know how readily James Bennet accepted a decisively discredited charge against a politician he does not like are apt to be skeptical, for instance, of New York Times editorials blaming Donald Trump for feeding the anti-immigrant bigotry that motivated the man who murdered 22 people in El Paso last weekend. Any cause-and-effect theory connecting the president’s ugly rhetoric to that hideous crime is belied by the fact that the shooter’s hatred of Hispanics, by his own account, predated Trump’s election. But there is a serious argument to be made about the dangerous divisions on which Trump thrives; it’s just not one I would trust the Times editorial page to make in a careful and intellectually honest fashion.

That situation is fine, I suppose, if opinion journalists are simply in the business of reinforcing people’s prejudices. But if they are actually trying to persuade people, it’s a problem.

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oward Marks: “Is It The Fed’s Job To Keep Market Dislocations At Bay Forever?”

Howard Marks, co-founder of Oaktree has emerged as the latest (billionaire) voice to criticize the Fed (after Carl Icahn did it earlier in the day) for cutting interest rates last month, according to an interview with Bloomberg TV. Marks believes that more monetary stimulus will simply boost asset prices further, which will just serve to widen the income inequality gap. To which, we and anyone can only respond: he is absolutely correct.

Sure, it’s a relatively simple concept, but then again so is not racking up $22 trillion in debt and catalyzing debt bubbles that, depending on sector, are approaching or have already eclipsed levels seen before the 2008 Great Recession. 

Marks opens his latest memo to clients, dated July 26, asking, “…is it the Fed’s job to sustain expansions and keep market dislocations at bay ad infinitum?”

With the bull market now passing a decade-long with record low unemployment, Marks says the economy simply doesn’t need the Fed’s help. He argues that the rate cut last week will make it harder for people with less savings, and also lenders, to earn decent returns.


 

Marks said: “The process of lowering the rates causes assets to inflate. There will be more wealth piled up by the people who have assets and it’ll be harder for people who just have a little bit of savings to make a return.”

 

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“Nobody Speaks For The United States”: Trump Bashes Macron Over Mixed Signals Toward Iran

President Trump took to Twitter Thursday to express frustration over the US “maximum pressure” campaign designed, according to prior statements, to bring the Iranians back to the table to “negotiate a better deal” after the White House’s unilateral pull out of the 2015 nuclear deal brokered under Obama. He slammed EU countries, particularly France, for sending mixed signals.

“Iran is in serious financial trouble,” Trump stated. “They want desperately to talk to the US…”. Of course, all evidence suggests otherwise, which is why the president followed by calling out European powers for thwarting US policy efforts at taking Iranian oil exports down to zero. “I know Emmanuel means well, as do all others, but nobody speaks for the United States but the United States itself,” Trump continued.

A report in a major Middle East publication Al Monitor claimed Macron had invited Iran’s President Hassan Rouhani to meet with Trump at ​the G7 summit in Biarritz in late August; however, a follow-up Reuters report quoted a French diplomat as saying the story was false.

The Reuters story stated unambiguously:

Iranian President Hassan Rouhani has not been invited to this month’s G7 summit, a French diplomat said on Wednesday, denying a media report published as European leaders seek a way to defuse a brewing confrontation between Tehran and Washington.

While Trump didn’t specify in his tweet exactly what he was referring to, it appears his words were aimed at the reports that suggested France was claiming to act with US backing, while simultaneously sidestepping US sanctions, which have lately included the US Treasury targeting Iran’s top diplomat, FM Javad Zarif. 

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Was Charging Sarah Palin With Complicity in Mass Murder an Honest Mistake?

This week a federal appeals court revived former Republican vice presidential candidate Sarah Palin’s defamation lawsuit against The New York Times, which falsely accused her of complicity in the 2011 Tucson shooting that killed six people and gravely injured then-Rep. Gabrielle Giffords (D–Ariz.). The crucial issue in the case is not the truth or falsity of that thoroughly debunked charge but the mental state of Times Editorial Page Editor James Bennet, who included the canard in a 2017 editorial. Did he make an honest mistake, or did he, because of his animus against Palin and Republicans generally, repeat the smear even though he knew or suspected it was false?

The latter interpretation bolsters Palin’s case against the Times, but even the “honest mistake” theory is a mortifying indictment of the paper and the people who run it. If Bennet’s editorial is not an example of casual libel masquerading as political commentary, it is at least an object lesson in the cognitive biases that lead smart people astray and feed the mindless partisanship that makes rational debate impossible.

According to the claim that Bennet repeated, a map circulated by Palin’s political action committee, SarahPAC, helped incite the Tucson shooter’s murderous violence by marking 20 congressional districts, including Giffords’, with stylized crosshairs. Yet the map, which was part of the debate over Obamacare, plainly had nothing to do with violence. “20 House Democrats from districts we carried in 2008 voted for the health care bill,” the caption said. “IT’S TIME TO TAKE A STAND.”

That was obviously a call for opposing the re-election of Obamacare supporters, not for murdering them. And the idea that such run-of-the-mill politicking somehow inspired the Tucson shooter—whose politics leaned left, whose motives were mysterious, and whose behavior and ideas were weird enough to earn him a diagnosis of paranoid schizophrenia—was risible.

Yet in his editorial, written six years after the Tucson attack, Bennet casually revived this long-discredited idea. “In 2011, when Jared Lee Loughner opened fire in a supermarket parking lot, grievously wounding Representative Gabby Giffords and killing six people, including a 9-year-old girl, the link to political incitement was clear,” he wrote. “Before the shooting, Sarah Palin’s political action committee circulated a map of targeted electoral districts that put Ms. Giffords and 19 other Democrats under stylized cross hairs.” Bennet not only said the “link” between the SarahPAC map and the Tucson shooting was “clear”; he falsely claimed the map depicted Giffords and the other legislators.

The next day, the Times ran a correction acknowledging that Bennet had “incorrectly stated that a link existed between political rhetoric and the 2011 shooting of Representative Gabby Giffords,” when “in fact, no such link was established.” It added that “the editorial also incorrectly described a map distributed by a political action committee before that shooting.”

As Palin was quick to point out, Bennet should have known that what he wrote was not true. Before joining the Times, he had served as editor of The Atlantic for a decade, a period when the magazine he oversaw ran several articles debunking the anti-Palin smear. Furthermore, a 2011 ABC News article to which he linked in the editorial explained the problems with his thesis and plainly stated that “no connection has been made between this graphic and the Arizona shooting.”

During a 2017 hearing before U.S. District Judge Jed Rakoff, who was overseeing Palin’s defamation case, Bennet testified that he did not recall reading any of the articles contradicting his claim in The Atlantic, the Times, or anywhere else. He also said he did not bother to read the articles collected by the writer who composed the first draft of the editorial, including a column that said “Loughner was likely insane, with no coherent ideological agenda” and a Times editorial that said “it is facile and mistaken to attribute this particular madman’s act directly to Republicans or Tea Party members.”

Taking Bennet at his word, Rakoff dismissed Palin’s suit. “What we have here,” he wrote, “is an editorial, written and rewritten rapidly in order to voice an opinion on an immediate event of importance, in which are included a few factual inaccuracies somewhat pertaining to Mrs. Palin that are very rapidly corrected. Negligence this may be; but defamation of a public figure it plainly is not.”

On Tuesday, a three-judge panel of the U.S. Court of Appeals for the 2nd Circuit unanimously disagreed:

In both the original complaint and the PAC [proposed amended complaint], Palin’s overarching theory of actual malice is that Bennet had a “pre‐determined” argument he wanted to make in the editorial. Bennet’s fixation on this set goal, the claim goes, led him to publish a statement about Palin that he either knew to be false, or at least was reckless as to whether it was false. The PAC contains allegations that paint a plausible picture of this actual‐malice scenario in three respects: (1) Bennet’s background as an editor and political advocate provided sufficient evidence to permit a jury to find that he published the editorial with deliberate or reckless disregard for its truth, (2) the drafting and editorial process also permitted an inference of deliberate or reckless falsification, and (3) the Times’ subsequent correction to the editorial did not undermine the plausibility of that inference.

The court concluded that Palin’s complaint “plausibly states a claim for defamation and may proceed to full discovery.” The Times may yet succeed in arguing that Bennet simply messed up. The paper’s quick and embarrassing correction, along with the self-refutation contained in the ABC News article to which Bennet linked, does suggest that he did not deliberately lie, although it is still possible he was reckless enough to meet the “actual malice” standard for proving defamation of a public figure.

The most plausible explanation for this sorry episode is that Bennet vaguely remembered the alleged link between the SarahPAC map and the Tucson shooting, decided it fit the story he was trying to tell about the dangers of extreme political rhetoric, and was thereafter blind to any contrary evidence. His blindness was not necessarily willful, but that does not make it less disturbing.

To the contrary, the likelihood that Bennet sincerely believed Sarah Palin had blood on her hands dramatically illustrates the insidious power of confirmation bias to reinforce an us-versus-them mentality. If you think Republicans are the sort of people who blithely encourage violence through vicious attacks on their political opponents, you will be inclined to accept the notion that Palin is somehow responsible for the attempted assassination of Gabrielle Giffords. And once you’ve accepted that bizarre theory, facts are unlikely to dislodge it, if you even notice them.

When people think this way, it is hard to take them seriously, even when they are making valid points. Fair-minded readers who know how readily James Bennet accepted a decisively discredited charge against a politician he does not like are apt to be skeptical, for instance, of New York Times editorials blaming Donald Trump for feeding the anti-immigrant bigotry that motivated the man who murdered 22 people in El Paso last weekend. Any cause-and-effect theory connecting the president’s ugly rhetoric to that hideous crime is belied by the fact that the shooter’s hatred of Hispanics, by his own account, predated Trump’s election. But there is a serious argument to be made about the dangerous divisions on which Trump thrives; it’s just not one I would trust the Times editorial page to make in a careful and intellectually honest fashion.

That situation is fine, I suppose, if opinion journalists are simply in the business of reinforcing people’s prejudices. But if they are actually trying to persuade people, it’s a problem.

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No, Texas Did Not Respond to El Paso Shooting by Passing Lenient Gun Laws

In the aftermath of mass shootings in El Paso and Dayton, U.S. media are struggling to report accurately on Texas’s gun laws. A Time headline this week, for example, reads, “Texas to Enact at Least 9 Pro-Gun Laws in Wake of El Paso’s Mass Shooting.” This is technically accurate since new gun laws are taking effect on September 1. But the timing of the article and the headline suggest that the nine laws in question are a response to the shooting in El Paso, or, at best, are being enacted despite it.  

In reality, Texas’s recent spate of gun law changes are unrelated to the recent mass shooting in the western part of the state: all nine bills were signed by Governor Greg Abbott over the course of May and June and were slated to take effect at the beginning of September. While the text of the Time piece makes this clear, it wasn’t the only publication that wrote a headline suggesting Texas responded to a gun-related tragedy by further liberalizing its gun laws. 

A Daily Beast headline from yesterday reads, “Texas to Loosen Gun Laws to Allow Firearms in Churches and on School Grounds,” while a USA Today headline says, “After El Paso Walmart shooting, Texas to welcome guns in mosques, churches and school grounds.” A Yahoo Lifestyle headline claims, “After Massacre, Texas Moves Forward With Dumbest Gun Law Ever Conceived.” Even a cursory glance at when these laws were signed, let alone introduced, shows these bills took months to move through the legislature and were signed by Abbott several months ago.

Take HB 2363, for example, which now allows some foster homes to store locked guns and ammunition in the same location. And HB 302, which prohibits landlords from banning tenants or their guests from carrying weapons on the landlord’s property, provided the person is a lawful gun owner. HB 1143 bans school districts from regulating the way lawful gun owners store firearms in locked vehicles on school property. Perhaps the most oddly specific law taking effect in September is HB 1177, which pertains to gun owners’ right to concealed carry their firearms with them without a license for up to 48 hours during mandatory evacuations (an issue presented during Hurricane Harvey, which hit the southeastern side of the state in 2017).

None of these laws will reduce gun use. Some libertarians may even object to the law that prohibits landlords from banning guns because of its infringement on property rights. Nevertheless, Texas legislators are supposed to create laws that reflect the will of their constituents and many of their constituents support strong Second Amendment protections. It would be both constitutionally suspect and politically foolish for elected representatives to flout the will of the people who elected them and curtail gun rights in the wake of a mass shooting.

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Who Is Buying And Who Is Selling Stocks Here

There is once again confusion as to what is going on in the markets: Monday’s violent selloff, which was accompanied by extremely heavy volume and which saw both active funds, systematic investors and passive entities liquidating, has given way to the now traditional, no participation levitation, the consequence of buybacks and algos forced to chase gamma. The result is that stocks are virtually unchanged for the week despite a huge volume imbalance to the downside, as if the sellers are just biding their time when to start hitting bids again.

As Nomura’s Masanari Takada puts it best, “investors in US equities seem not to all be on the same page” and he adds that right now is “precisely when one might expect the US market to see the sort of spontaneous rebound that often follows a selloff, and we think the market is likely to resist further downside thanks to a combination of bargain-hunting by fundamentals-oriented investors and contrarian buying by ultra-short-term traders through perhaps 15 August.”

However, as the Nomura quant warns, if key market indices fail to climb back above trend-chasers’ major trigger lines (at around 2,960 for the S&P 500 and around 7,720 for the NASDAQ 100), then he would expect “trend-followers that are currently sitting on unrealized losses (including CTAs) to start exiting their long positions in equities at a quickening pace.” Meanwhile, as of now, the Nomura quant merely sees the rebound in US stocks as a technical rally that looks like no more than a bump in the road on the way down.

Why? Because as shown in the charts below, stock market sentiment, both in the US and globally, is parked well into negative territory. This evidence of risk-avoiding sentiment among investors implies that risk appetite has eroded substantially, according to Nomura.

Worse, there is confusion within the trading community what to do here, as speculative traders are not aligned in their trading stances. According to Nomura, contrarian buying at the moment is probably being led by 1) ultra-short-term investors (with investment horizons of around 10 days) targeting a near-term reversal, and 2) global macro hedge funds that are still bullish on fundamentals.

Among systematic trend-chasers, however, CTAs stand ready to sell. Loss-cutting exits from long positions by CTAs will probably remain the order of the day for as long as the S&P 500 is below 2,960 and the NASDAQ 100 is below 7,720. The present market rebound could well turn out to be a mere technical rally if CTAs treat it as an opportunity to sell.

Meanwhile, traditional long/short funds have slightly pared their net long exposure, a continuation of the observation we made three weeks ago in “An Unprecedented Market Divergence: Robots Are All In Stocks As Humans Flee.” One factor here appears to be the progression of a defensive sector rotation as long/short funds scale back their long positions in cyclical sectors and add to their long positions in defensive sectors. Long/short funds had turned bullish on the IT sector and financials in July, but Nomura estimates that their net positions in these sectors now have already swung to being neutral or slightly short.

Meanwhile, in his latest note – bullish of course (“a short period of stabilization, markets will likely regain previous highs, and hence we see this sell-off as a medium-term buying opportunity”) – JPMorgan’s Kolanovic does a granular analysis of who are the sellers and buyers of stock here.

  • First, on the seller (i.e. “negative impact”) side, Kolanovic notes that most outflows are expected to come from volatility-targeting strategies. This includes insurance annuity products, hedge fund platforms, risk parity funds and others. He further notes that “these strategies were running equity exposure at ~65th percentile, and not ‘maximum leverage’ as some have reported. Also for most of the days, bond and equity moves were offsetting, in part mitigating the impact on multi-asset portfolio volatility and speed of de-leveraging. However 3%+ move on Monday has triggered significant selling from these funds with more assets to be sold.
  • Second, trend-following  strategies were significant sellers on Monday, per Kolanovic, who adds that “these strategies had very low equity beta going into the sell-off. Equity positions were not at historical highs (and equity beta was very low in part due to short oil and industrial metal positions). As the equity indices breached short- and medium- term signals these funds rapidly sold equities (Monday). However, the risk of CTA selling going forward is low. Next leg of selling would come with breach of longer-term signals (e.g., 200d ma), which is now 3% below current level.” On the other hand, these strategies could also start buying equities if shorter signals turn positive (e.g., 50d and 100d ma), which are only 1-2% above current level. 
  • Thiid, as discussed on Monday, dealers option gamma positions turned very short on Friday. That was a significant driver of Monday’s sell-off. However, reversion of these flows helped move the market higher on Tuesday as we also pointed out earlier today. Short gamma exposure is not equity negative on its own (works both on up and down days), but will drive realized volatility higher, which is not positive for the market.

So who’s buying? Take a wild guess:

  • First and foremost, accelerated buyback activity – as ~85% of companies exited blackout period, buyback activity has been increasing. More importantly, the majority of buyback activity is sensitive to stock price declines, and an 8% drop in SPX has activated accelerated programs, as we also discussed earlier today. According to JPM, average activity of ~$3 billion per day has likely tripled to nearly ~$10 billion of purchases per day. This on its own can meaningfully cushion volatility targeting selling pressure.
  • Second, Kolanovic sees positive flows from fixed-weight portfolio trigger rebalances, to wit:Most of fixed-weight portfolios rebalance on month- or quarter-end. However, many also have built-in triggers to rebalance immediately if equity-bond spread moves beyond a certain threshold. Equity drop of 7% and bond rally of 3% (+10% spread) would have triggered many of these rebalances leading to equity inflows.
  • Third, as noted earlier, the equity beta of global hedge fund indices was very low going into selloff – it dropped to ~20th percentile from 60th percentile a few weeks before. At the same time, many real money managers (e.g., pension funds) have significant equity underweight and bond overweight. Due to this positioning, the JPM quant concludes that the large equity selloff/bond rally was expected to result in above-average level of opportunistic buying (e.g., buying the dip in tech stocks).

So what happens next? Well, in a market in which everyone now does only what everyone else is doing, should the low-volume levitation continue, expect the S&P to rally back to all time highs soon. Alternatively, if a short risk trigger emerges, or if the sellers reappear again in size, then the next stop in the S&P will be 2,800 and lower.

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No, Texas Did Not Respond to El Paso Shooting by Passing Lenient Gun Laws

In the aftermath of mass shootings in El Paso and Dayton, U.S. media are struggling to report accurately on Texas’s gun laws. A Time headline this week, for example, reads, “Texas to Enact at Least 9 Pro-Gun Laws in Wake of El Paso’s Mass Shooting.” This is technically accurate since new gun laws are taking effect on September 1. But the timing of the article and the headline suggest that the nine laws in question are a response to the shooting in El Paso, or, at best, are being enacted despite it.  

In reality, Texas’s recent spate of gun law changes are unrelated to the recent mass shooting in the western part of the state: all nine bills were signed by Governor Greg Abbott over the course of May and June and were slated to take effect at the beginning of September. While the text of the Time piece makes this clear, it wasn’t the only publication that wrote a headline suggesting Texas responded to a gun-related tragedy by further liberalizing its gun laws. 

A Daily Beast headline from yesterday reads, “Texas to Loosen Gun Laws to Allow Firearms in Churches and on School Grounds,” while a USA Today headline says, “After El Paso Walmart shooting, Texas to welcome guns in mosques, churches and school grounds.” A Yahoo Lifestyle headline claims, “After Massacre, Texas Moves Forward With Dumbest Gun Law Ever Conceived.” Even a cursory glance at when these laws were signed, let alone introduced, shows these bills took months to move through the legislature and were signed by Abbott several months ago.

Take HB 2363, for example, which now allows some foster homes to store locked guns and ammunition in the same location. And HB 302, which prohibits landlords from banning tenants or their guests from carrying weapons on the landlord’s property, provided the person is a lawful gun owner. HB 1143 bans school districts from regulating the way lawful gun owners store firearms in locked vehicles on school property. Perhaps the most oddly specific law taking effect in September is HB 1177, which pertains to gun owners’ right to concealed carry their firearms with them without a license for up to 48 hours during mandatory evacuations (an issue presented during Hurricane Harvey, which hit the southeastern side of the state in 2017).

None of these laws will reduce gun use. Some libertarians may even object to the law that prohibits landlords from banning guns because of its infringement on property rights. Nevertheless, Texas legislators are supposed to create laws that reflect the will of their constituents and many of their constituents support strong Second Amendment protections. It would be both constitutionally suspect and politically foolish for elected representatives to flout the will of the people who elected them and curtail gun rights in the wake of a mass shooting.

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