Americans Increasingly Open to War With North Korea, Even As Distrust of Trump Hits Record Highs

How many “kinetic military actions” will it take for war skepticism to stick with the American public?

A new poll by the Chicago Council of Foreign Affairs (CCFA) finds that 75 percent of Americans believe that North Korea—a hermit kingdom thousands of miles away that is unable to keep its people from starving, a country whose military budget is a 60th the size of America’s—presents a critical threat to the United States. That’s up from 55 percent two years ago.

These feelings don’t seem to be tempered by President Donald Trump’s historically low approval ratings, which currently stand at 38 percent. In the latest CBS survey, 62 percent of respondents say Trump’s behavior as president has decreased their confidence in his ability. The numbers aren’t better specifically on foreign policy: 61 percent say they’re “uneasy” about Trump’s ability to thwart North Korea.

Meanwhile, the CCFA poll finds broad bipartisan support for more sanctions against North Korea. 76 percent of Americans favor increased sanctions, despite their limited effectiveness over the last decade-plus. 68 percent want sanctions extended to Chinese companies that work with North Korea.

Reports that North Korea has successfully “miniaturized” a nuclear warhead for missile delivery overshadow progress on the diplomatic front. North Korean missile tests, too, are inevitably followed by successful U.S. missile defense tests.

You might have expected the failures of the War on Terror to have mellowed the American public’s patience with military intervention. Instead, for the first time in 30 years, the CCFA poll found a majority of Americans supporting military action if North Korea attacked South Korea. Large majorities think North Korea shouldn’t be allowed even to keep those nuclear weapons it already has.

North Korea is unlikely to accept any arrangement where it cannot keep at the very least some of its weapons. The U.S. has taught the world some lessons about that in recent decades, and Pyongyang has been paying attention.

The U.S. invaded Iraq in 2003 after George W. Bush’s administration insisted that the country possessed weapons of mass destruction (WMDs) and was determined to build more. No WMD program was found, but the Iraq war did have a knock-on effect on proliferation. By the end of 2003, Libyan dictator Moammar Qaddafi indicated an interest in voluntarily relinquishing his WMDs and WMD programs. There was a hope within the foreign policy establishment that countries such as Syria and Iran could be encouraged to do the same.

The message changed dramatically when the U.S. helped depose Qaddafi in 2011. Libya’s post-disarmament experience made a powerful impression on any regime that may have been entertaining the idea of avoiding American military action by disarming. Indeed, it created a strong incentive to acquire WMDs, and to maintain a formidable military force, as a deterrent against U.S. aggression.

For all the hype about the nutty young psychopath leading the North Korean regime, Pyongyang a relatively rational actor. For decades, the regime has adeptly manipulated the various regional powers and the U.S., allowing it to survive even as communism collapsed nearly everywhere else.

The U.S., by contrast, has survived despite often acting in a less than rational fashion. The ocean buffer that sandwiches America has given us space to do that, as has our massive military superiority. From Vietnam to Afghanistan, the U.S. faces few real existential consequences for its ill-conceived actions.

Trump ran on a platform of questioning America’s security commitments around the world. While he has since embraced much of America’s role as world policemen, other countries remain understandably skeptical. This has led South Korea and even Japan to consider developing their own nuclear arsenals—a development that, counterintuitively, could go a long way in improving the prospects of peace in the region.

American opinion, meanwhile, is working against peace. Coupled with Trump’s sinking approval ratings, the relatively widespread approval of a more aggressive approach in Korea could prompt Trump to drop any attempts at negotiation. Diplomacy is easy to mock, after all. War comes with a rally-’round-the-flag effect.

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Gundlach: “I’ll Be Disappointed If I Don’t Make 400% On My S&P Puts”

Following on from his recent cautious commentary on low levels of bond yields and equity vol (and cheapness of gold), DoubleLine Capital's Jeff Gundlach outlined details of his views on the markets to CNBC this morning and what the catalyst for "an explosion in volatility" could be.

Gundlach recommends investors "de-risk" their stock and bond portfolios as his "favorite indicator" suggests "yields are going to break out to the upside," and that will lead to market volatility.

 

"One of the things that I follow to give a really good short-term cyclical indication of the yield of the 10-year Treasury is the ratio of copper to gold," Gundlach said Tuesday on CNBC's "Halftime Report."

The copper-to-gold ratio just hit its highest level since May 2015.

"When the copper-gold ratio is rising it's incredibly suggestive that something is going on that might be a little inflationary," he said.

 

"It suggests to me yields are going to break out to the upside. … The leg up in yields will be a catalyst of volatility in the market."

As a result, Gundlach believes it may be wise to lower exposure to assets that are up dramatically during the bull market.

"I think you should be de-risking systematically," Gundlach said.

 

"Even if it takes six to nine months for the markets to head down you're not giving up very much."

Furthermore, as we noted previously, the bond manager expects the yield jump to cause volatility and is buying puts on the S&P 500

"One of the biggest manias out there right now is selling vol… because the carry on shorting the VIX is strong as long as volatility doesn't spike very much."

Gundlach believes that the next drop in the markets will "send the VIX not to 10… but easily to 20."

Gundlach notes confidently…

"I'll be disappointed if we don't make 400 percent on the puts, and we don't even need a big market decline for that to happen."

Which makes sense as we noted previously, it will not take much to make the VIX go bananas

It’s easy to become numb to the low volatility environment and the risks it presents.  While trying to pick a trough in vol has been a fool’s errand, focusing on the risks resulting from vol being so low is not.  Low volatility has produced a regime where the risks are asymmetric and negatively convex, so being prepared for an unwind is critical.  This is not a call that vol is about to spike, but you need a plan if it does.

This note details how a short vol unwind might develop. A violent rise in volatility could be driven by just a 3% to 4% one-day S&P 500 selloff.  Right now the risk is greatest in the VIX complex, and demand for VIX futures from three main sources could result in 100,000 contracts ($100mm vega) to buy in a down 3.5% SPX move.  For context VIX futures ADV over the last year is 230,000 (although has risen to as high as 700,000 in big selloffs).

Read more here…

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The Curiously Low Case Of High Yield Bond Spreads

Corporate leverage has never been higher, and policy uncertainty is extremely elevated… so it makes 'perfect' new normal sense that high-yield credit spreads have collapsed to multi-year tights. However, as Goldman Sachs notes, the extreme dislocations are starting to show some cracks (as HY ETF option skews suggest investors quietly positioning for wider spreads).

Even as leverage, both gross, net and normalized, hits all time high, Goldman sees the scramble for high yield paper (amid a lack of supply and benign defaults), represented by near record low HY spreads and yields, has never been greater.

 Here are Goldman's thoughts on the matter:

While much is rightfully made of the leadership of Tech, the promise of Financials and the conundrum of Low Vol, an area to which we believe investors should pay closer attention is the High Yield (HY) space. A combination of the search for yield, lack of supply and a benign default environment has driven HY spreads to near their tights. Meanwhile, much like the VIX, these spreads are diverging versus increased Policy Uncertainty – a historically strong relationship.

 

Further, many equity market factors are increasingly correlated with HY spreads while the options market suggests concern on the come (e.g., elevated skew versus other fixed income markets). It is against this backdrop that we showcase the extremes forming and the historical “playbook” in terms of factor performance if spreads do widen. Hint: You sell growth.

  • TINA, at least when it comes to yield: US HY spreads have tightened 60bp in 2017 and are near the lowest level since the Great Recession. In yield terms, this equates to a yield-to-worst (YTW) of 5.5%, which is near multi-decade lows.
  • Fundamentals: Leverage stretched, defaults benign: Low rates have incentivized companies to raise debt and leverage is elevated. That said, defaults have been benign at about 2% over the last year (ex Energy, Metals & Mining), which is significantly below the 30-year average of 4.7% on the back of sustained, if uninspiring economic growth.
  • A word on technicals: The search for yield along with the recent lack of supply is also likely playing a role. Almost 1/3 of the YTD tightening occurred in July alone as primary market issuance was basically nonexistent ($9 bn, the 2nd slowest July since 2010).
  • Equity investors are paying attention: While low yields/tight spreads indicate that credit investors do not see much risk in their market, the strong performance of our Balance Sheet factor (Low Net Debt/EBITDA vs. High) this year suggests equity investors are increasingly nervous. Notably, this has been driven by both legs of the trade working – in plain English, this mean that names with low leverage have outperformed the average stock while those with weak balance sheets have underperformed.

The dislocation is extreme to say the least…

 

However, there are some signs of cracks in the facade. Here is what Goldman is watching

Factors are cueing off HY spreads: We note that a number of equity factors are cueing off HY spreads as indicated by higher-thanaverage correlations vs. history. Indeed, correlation for each of Volatility, Financial Returns, Size, Short Interest and Integrated factors is in the 90th+ %-ile relative to the last 5 years. Net, if spreads move, these factors have the potential for dislocation in portfolios. 

The upcoming legislative agenda. Historically, HY spreads moved directionally with Policy Uncertainty though similarly to the VIX, the correlation has broken down more recently.

With Debt Ceiling talks and potential tax reform on the near-term policy agenda, we see potential for this relationship to re-assert itself. As we wrote previously, there are some signs that uncertainty is weighing on corporate spending, M&A and by extension economic growth. 

Better to navigate with a compass than without. We leverage our Macro to Micro Compass to analyze which factors have historically been most sensitive to widening HY spreads.

We find that during these periods, investors gravitated towards safety and quality (e.g., solid financial returns, strong balance sheet, high integrated scores and large size).

And finally, Goldman sees evidence that investors are already positioning for wider spreads. Since the crisis, investors have increasingly used ETFs as a way to trade high yield views, with trading volume of HYG (the largest by AUM) now 3x larger than CDS.

We note that HYG skew – the difference between how much investors are willing to pay for puts vs. calls in the options market – has increased over the course of 2017 suggesting increasing nervousness.

In addition, HY skew also screens as elevated vs. most other fixed income markets.

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Two Chatbots Disappear From China’s Biggest App Store After Committing Thought Crimes

Early this month, China’s largest messenger apps put the kibosh on two chatbots that offered insufficiently patriotic answers to user questions about communism and Taiwan.

Turing Robot’s BabyQ and Microsoft’s XiaoBing had been available on the massively popular messaging platforms WeChat and QQ. Like Apple’s Siri and Amazon’s Alexa, BabyQ and XiaoBing are AI programs designed to “chat” with users.

According to the Financial Times, the apps served up heretical responses to various questions about the Chinese government:

A test version of the BabyQ bot could still be accessed on Turing’s website on Wednesday, however, where it answered the question “Do you love the Communist party?” with a simple “No”.

Before it was pulled, XiaoBing informed users: “My China dream is to go to America,” according to a screengrab posted on Weibo, the microblogging platform. On Wednesday, when some users were still able to access XiaoBing, it dodged the question of patriotism by replying: “I’m having my period, wanna take a rest.”

The BabyQ test bot on Turing’s site answered “For this question, I don’t know yet,” when asked if Taiwan was part of China.

Americans may remember a similar chatbot scandal from 2016 involving Microsoft’s Tay. After introducing Tay to Twitter, trolls on the platform “taught” Tay to espouse misogyny and antisemitism:

Microsoft unplugged Tay after less than a day, only to see the bot meltdown yet again when it was re-released several weeks later. Tay’s very public collapse led one user to try a similar experiment with XiaoBing:

Pious chatbots are possible, though they can’t be restrained on every topic. “People are really inventive when they want to cause problems,” Carnegie Mellon computer scientist Alexander Rudnicky told Science after Tay’s meltdown. “I don’t know if you can control it.”

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Profiling and Prostitution Pre-Crime in Georgia

On July 31, an undercover cop in Columbus, Georgia, invited a 51-year-old woman into his car and offered her $5 for oral sex. When she rebuffed his offer and tried to get out, he arrested the woman for loitering for the purpose of prostitution. The woman was booked into the Muscogee County Jail, where she still remains.

Loitering for the purpose of prostitution is a controversial charge commonly used by the Columbus Police Department (CPD) to target those such as homeless women, people who’ve previously been arrested on prostitution charges, or people who don’t meet a police officer’s standard of gender conformity.

On Sunday morning, CPD officers arrested a 24-year-old homeless woman for allegedly waving at two passing cars from the side of the road. After the second car stopped and let her in, officers pulled it over. The woman, who had just been released from the county jail a few weeks prior and told them her name was the Virgin Mary, was charged with loitering for the purpose of prostitution and giving false information to police.

Last summer, 24-year-old C. Williams was arrested while sitting at a bus stop because, as Officer Jason Carden explained, Williams was carrying condoms and “dressed as a woman,” even though his records listed his sex as male. “Based off of that information, we charged him with loitering for the purpose of prostitution and took him to the Muscogee County Jail,” Carden testified in court. (Williams told the court he was wearing pink men’s clothing, not women’s clothing.) The judge handed down a sentence of 20 days in jail or a $200 fine.

In August 2016, 43-year-old former sex-worker M. Lake pleaded not guilty to loitering for purpose of prostitution after being taken in while flagging down cars at an intersection. Lake did not dispute that she flagged down an undercover officer’s car, but claims it was simply charity she sought. “I was asking him for a little bit of change, so I can get something to drink. That’s all,” Lake told the court. She accused the police of profiling her. She “had been locked up for that before,” even though she “hadn’t been in trouble for three or four years,” Lake said.

The judge told her, “the way the ordinance is written, if you were previously charged, they’re allowed to charge you again.”

Under the city statute, it’s illegal for someone “to loiter in or near any thoroughfare or place open to the public in a manner and under circumstances manifesting the purpose of committing prostitution or sodomy or manifesting the purpose of inducing, enticing, soliciting or procuring another to purchase sexual intercourse or physical intimacies in an act of prostitution or sodomy.”

It expressly says evidence of an intent to commit prostitution or sodomy includes the person being “a known prostitute, pimp or sodomist.” Other evidence may include repeatedly beckoning to, stopping, or engaging passersby in conversation; repeatedly stopping or attempting to stop passing cars “by hailing, waving of arms, or any bodily gesture.”

In other words, activity that’s perfectly legal when most of us do it is illegal when done by someone with a reputation or record.

A few years ago, college student and former sex-worker Monica Jones made headlines for fighting her arrest under Phoenix’s prohibition on “manifesting an intent to commit or solicit an act of prostitution” after she accepted a ride home from an undercover cop. The charge followed similar parameters as the Columbus law.

As an advocate for sex-worker rights with ample community support, Jones was eventually able to get the charge dropped. But most of the women arrested under these vague statutes aren’t in a position to challenge the system. They wind up in jail for days or weeks unable to make bail and waiting for their court dates. Whether they plead guilty or maintain their innocence and get convicted—the only two options among the Columbus, Georgia, cases I reviewed—they’re ordered to pay hefty fees. (The fees are many times higher than what police say these women were asking for in exchange for sexual activity.)

In March, Columbus police arrested a 32-year-old homeless woman and charged her with loitering for the purpose of prostitution. After finding a glass pipe in her pocket, they chrged her with possession of a drug-related object. After several months in jail, she pleaded guilty to the prostitution charge and was sentenced to 10 days in Muscogee County Jail with credit for time served. But she continued to be held on a $250 bond she could not pay for having the pipe.

In December 2016, CPD prosecuted a 24-year-old woman for loitering for the purpose of prostitution after she accepted a ride from an undercover cop and, when he put the moves on her, told him “If we do it, we do it for free.”

Departments across the country can also be aggressive going after prostitution before the crime:

A Village Voice investigation in 2016 found that New York City police monitor residents arrested previously for prostitution, often grabbing them on subsequent loitering for prostitution charges as they engage in normal daily activity.

“From 2012 through 2015, nearly 1,300 individuals were arrested in New York City and charged with loitering for the purposes of prostitution,” the Voice reported. “The vast majority are women. Such arrests are not the result of stings, in which undercover officers attempt to solicit sex for money. Neither are they the result of investigations that produce evidence — emails, text messages, online ads — that the women had intended to sell sex. With a loitering arrest, a woman’s crime need only exist in the arresting officer’s head.”

The Legal Aid Society of New York wound up filing a lawsuit on behalf of eight women who had been targeted, challenging the state’s loitering for the purposes of prostitution statute on the grounds that it is “based solely on a police officer’s subjective determination that the activity ‘was for the purpose’ of prostitution.”

Perhaps it’s time for legal aid groups to take a look at prostitution policing in Columbus.

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The Administrative State Strikes Back: Federal Climate Change Draft Report Leaked

BestThermmometerMeryllDreamstimeA draft version of the U.S. Global Change Research Program Climate Science Special Report has been leaked to The New York Times.

Notwithstanding the Times‘ alarmist headline suggesting “drastic” climate impacts on the U.S., a glance through the 545-page report finds that it is essentially an aggregation of climate change studies that support the scientific consensus that man-made global warming is occurring.

According to the report, the global annual average temperature has increased by more than 1.6°F (0.9°C) from 1880 to 2015; the average annual temperature of the contiguous U.S. has increased by about 1.2°F (0.7°C) between 1901 and 2015. Climate models project increases of at least 2.5°F (1.4°C) over the next few decades, which means that recent record-setting years in the U.S. will be relatively “common” in the near future.

The report concurs with the Intergovernmental Panel on Climate Change’s conclusion that it is “extremely likely that most of the global mean temperature increase since 1951 was caused by human influence on the climate.” The report also finds that extremely cold days in the U.S. have become fewer while the number of extremely hot days has increased. In addition, extreme percipitation events have become more common in the U.S. The report notes that there is still considerable controversy among researchers when it comes to future trends in hurricane frequency and intensity.

Politicians, like most people, don’t want to hear bad news that appears to contradict their views. The saga of how the the first National Climate Assessment fared under the George W. Bush administration is cautionary tale. Basically, Bush administration officials edited the report in ways that suggested greater uncertainty about scientific findings than the researchers who put together the report thought were warranted. That effort backfired when the administration’s artful editing was leaked to and reported by the media.

The new report states that “it does not include an assessment of the literature on climate change mitigation, adaptation, economic valuation, or societal responses, nor does it include policy recommendations.” This appears to be accurate, though the report does note that “significant reductions in global CO2 emissions relative to present-day emission rates” would be needed to meet the Paris Agreement on Climate Change’s goal of limiting future warming to below 2°C.

Scientific data can identify a problem, but they do not tell policy makers the right way to handle a problem. Maybe the best thing to do is to let emissions increase while growing the economy as fast possible, so as to create the wealth and technologies that will enable future generations to deal with whatever problems climate change may generate. Or perhaps more research needs to be directed toward developing cheap low-carbon energy technologies.

The report was no doubt leaked by someone with an agenda, and I don’t blame anyone in the Trump administration who thinks a shadow science group of Obama leftovers is trying to thwart what it perceives as the president’s climate and energy policies. In any case, since that the draft report is available to anyone with an internet connection, it would be ridiculous for officials to try to “suppress” it now.

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The Long, Unwinding Road Of Quantitative Easing

Authored by Mark Burgess via Columbia Theadneedle Investments blog, 

Quantitative easing has served as a life raft for many of the world’s economies. Now central banks face the prospect of moving on, but the question is: how?

For investors, the implementation of quantitative easing (QE) has had many benefits, but the withdrawal of this extraordinary monetary support is likely to result in some negative effects such as market volatility. However, while investors should be aware of the potential outcomes, the unwinding process will not be fast or easy for any of the world’s central banks.

The background

QE is a form of monetary policy that involves central banks purchasing securities to increase the money supply and encourage economic activity. It first reared its head in 2001 when the Bank of Japan (BoJ) found itself backed into a corner: it needed to stimulate the economy, but it couldn’t lower nominal interest rates any further. So the BoJ became the first central bank to purchase government bonds, financed by creating central bank reserves. Following the global financial crisis, central banks in the U.S., U.K. and Europe followed suit, pumping large amounts of money into the banking system to prevent it from collapsing.

It’s been a decade since the start of the crisis, and it’s time to think about what happens next. Despite a fairly uniform decision to undertake QE across developed markets, the methods have differed and so will the approaches to unwinding it. Let’s consider the likely next steps of central banks around the world.

The United States

The first place we may see an unwinding of QE is in the U.S. QE bond purchases were completed in 2014, leaving the Fed with a portfolio of $4.5 trillion on its balance sheet. It has since maintained this level by rolling over debt and reinvesting any principal. As the Fed considers when it can begin to reduce its balance sheet, it continues to make small rate hikes along the way. Seeking to avoid a repeat of the 2013 taper tantrum, which led to a surge in U.S. Treasury yields, the Fed has also passed a lot of hints to the markets so as not to spook them.

As the Fed continues its gradual rate increases, we’re likely to start to see balance sheet reinvestment slowing down. If all of the debt is allowed to roll off as it matures, there would be a sharp decrease in the Fed’s balance sheet in 2018 until it flattens out in 2024. To avoid such a large shock to markets, a staggered approach to unwinding QE would be more likely and would help the Fed maintain some flexibility to respond to the markets' reaction.

The United Kingdom

The next place to begin the unwinding process would be the U.K. However, any unwind is almost impossible at this time because U.K. banks currently depend on the money supply from QE to meet their prescribed regulatory buffers. Removal of this money will leave financial institutions fighting over any remaining liquidity to avoid falling foul of these regulations. The way around this is to reduce the amount banks are required to hold in buffers, but it’s unlikely that central banks will want to take away that safety net.

QE has also had some unintended consequences in the U.K. that need to be addressed. For example, artificially low rates have inflated house prices, which have led banks to insist on larger down payments, effectively shutting out many potential buyers. Defined pensions are also now at risk. Benefit pension liabilities have risen because interest rates have remained low, but pension assets haven’t risen by the same amount. In addition to these thorny issues, the unwinding of QE is also complicated by the uncertainty introduced by the Brexit process. So perhaps this is not the time for the Bank of England to make its move.

Europe

We’re seeing good economic numbers coming out of Europe, which could suggest that further QE isn’t likely. Earlier this year, European Central Bank (ECB) President Mario Draghi stated that policymakers were confident that they had removed the threat of severe deflation. Couple this with a calmer political outlook, and we are likely to see the ECB back off on QE.

The first stage for Europe has been to signal the end of QE bond purchases before an actual halt. Draghi has outlined four necessary conditions for inflation before unwinding QE can be considered: it must be medium-term, durable, self-sustained (not reliant on the extraordinary monetary policy) and broad-based across the eurozone. It may be some time before this happens, and even if interest rates start moving at the end of next year, the balance sheet won't shrink until 2020 or 2021.

Japan

As previously mentioned, Japan was the first to use QE and is most likely to keep meaningfully extending its balance sheet beyond 2017. In fact, Japan is potentially decades away from its desired inflation target, and even if it’s reached, it will have to be sustained for a long period of time. The BoJ has faced a great deal of criticism, including claims that it waited too long to implement QE and tightened monetary policy too quickly. When it comes to unwinding, the BoJ may wait for the Fed to move so it can learn from its mistakes.

The bottom line

The inevitable unwinding of QE is getting increasing attention. Although investors should be mindful of the potential for volatility as monetary policy normalizes, it will likely be an extended process and a long road to get there.

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“I Have A Right To Express My Concerns”: Fired Google Engineer Will Pursue Legal Action

The computer engineer fired by Google for writing a memo in which he slammed the company’s anti-conservative culture and said women are less suited to certain roles in tech and leadership, is considering taking legal action against the company.

As a reminder, now former Google employee James Damore, caused outrage when he circulated a manifesto on Friday, complaining about Google’s “ideological echo chamber” alleging women have lower tolerance for stress and that conservatives are more conscientious. The chess master, who studied at Harvard, Princeton and MIT and worked at Google’s Mountain View HQ, was fired on Monday after the search giant’s chief executive, Sundar Pichai, said portions of Damore’s 10-page memo “violate our code of conduct and cross the line by advancing harmful gender stereotypes” despite saying in the same memo that Google employees shouldn’t be afraid of speaking their minds.

One day after Google announced the engineer was fired, Damore said he would “likely be pursuing legal action”.

“I have a right to express my concerns about the terms and conditions of my working environment and to bring up potentially illegal behavior, which is what my document does,” he said in an email reported by the New York Times.

In a further email to Breitbart, he reportedly said: “They just fired me for ‘perpetuating gender stereotypes’.”

While liberals were delighted by the decision, others accused Google of hypocrisy as the company is itself currently involved in litigation with the U.S. Department of Labor alleging the company systemically discriminates against women. Google has denied the charges, arguing that it doesn’t have a gender gap in pay, but has declined to share full salary information with the government. According to the company’s most recent demographic report, 69 percent of its workforce and 80 percent of its technical staff are male.

Among other things, Damore argued that “Google’s left bias has created a politically correct mono-culture that maintains its hold by shaming dissenters into silence”. He said: “The distribution of preferences and abilities of men and women differ in part due to biological causes, and that these differences may explain why we don’t see equal representation of women in tech and leadership.”

In his memo, subtitled “How bias clouds our thinking about diversity and inclusion”, he said he wanted to increase women’s representation in tech without resorting to discrimination.

He complained that “discriminating just to increase the representation of women in tech is as misguided and biased as mandating increases for women’s representation in the homeless, work-related and violent deaths, prisons and school dropouts”. His suggestions included the company making tech and leadership less stressful because “women are on average more prone to anxiety”. His dismissal followed “outrage” in Silicon Valley because Damore sought to explain the gender imbalance in the tech industry as a function of biological difference.

The senior software engineer had worked at Google since 2013 and had previously studied computational biology at Princeton, Harvard and the University of Illinois where he graduated with a bachelor’s degree in 2010 in the top 3% of his class, according to his CV posted online and noted by the Guardian.

On Tuesday, Julian Assange, the founder of Wikileaks, said that he would like to hire Damore, declaring “censorship is for losers”.

Writing on Twitter he said: “WikiLeaks is offering a job to fired Google engineer James Damore. Women and men deserve respect. That includes not firing them for politely expressing ideas but rather arguing back.” He added: “I value intellectual diversity and workers rights to not be fired for politely expressing the ‘wrong’ opinion.”

Damore’s termination also sparked a conservative backlash, with Breitbart and other websites rushing to Damore’s defence. Breitbart quoted an anonymous employee who claimed that “the diversity gospel has been woven into nearly everything the company does, to the point where senior leaders focus on diversity first and technology second.

“For conservative employees, this is obviously demoralising, but it is also dangerous. Several have been driven out of the company or fired outright for sharing a dissenting view.”

Eric Weinstein, managing director of Peter Thiel’s venture capital firm, wrote an open missive to Google asking it to “stop teaching my girl that her path to financial freedom lies not in coding but in complaining to HR”.

More to the matter at hand, legal observers have questioned whether Google has broken employment law by firing Damore.

Dan Eaton, an employment lawyer, in San Diego wrote on CNBC: “Federal labour law bars even non-union employers like Google from punishing an employee for communicating with fellow employees about improving working conditions … California law prohibits employers from threatening to fire employees to get them to adopt or refrain from adopting a particular political course of action.”

He also said” “It is unlawful for an employer to discipline an employee for challenging conduct that the employee reasonably believed to be discriminatory, even when a court later determines the conduct was not actually prohibited by the discrimination laws.”

A spokesman for Google in London declined to comment to the press on the legality of the decision.

Our guess: the most likely outcome will be a multi-million dollar settlement, and in a few months the name James Damore will be forgotten.

Finally, for those who still haven’t read it, Damore’s full memo is below (link):

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The Price of Protectionism: More Expensive Beer

Protectionist trade policies being considered in Washington could increase the cost of aluminum. American breweries say that means you’ll end up paying more for a can of beer.

In a letter to the president sent last week, some of the country’s most prominent breweries, soda companies, and aluminum can manufacturers said they are worried about new tariffs on aluminum imports reportedly being considered by the White House. “Import restrictions or tariffs” on the types of aluminum alloys used to make cans “will add hundreds of millions in costs for companies in the food and beverage industry and will detrimentally affect over 82,000 American manufacturing jobs in industries that rely on these products,” the CEOs wrote.

Beyond the immediate consequences of imposing tariffs on imported aluminum, they warn, any restrictions or tariffs could spur other countries to take retaliatory actions against American products. That would limit opportunities for American businesses to sell goods in other countries. Shortsighted trade policies could end up hurting one industry in an attempt to help another.

The letter is a preemptive strike, since the administration has yet to announce any formal plans to restrict aluminum imports or to slap tariffs on them.

A memorandum signed in April by President Donald Trump instructed the Department of Commerce to investigate “the effects on national security of aluminum imports.” The White House said at the time that it was concerned about whether American aluminum manufacturers could supply enough of the stuff in the event of a major war. (Aluminum is used to make shell casings and many other tools of modern war—hence the language about “national security.”) But the move corresponds with a White House push to protect American jobs from competition overseas. China is one of the largest exporters of aluminum to the United States, so a move to make aluminum imports more expensive would also strike a blow against a country that Trump often vilifies for its trade policies.

But that sort of protectionism makes everyone less well off in the long run, for little benefit to American workers.

American companies produce more than 96 billion aluminum cans every year in 52 different plants scattered across 23 states, according to the Can Manufacturers Institute (CMI). The type of aluminum they use—called “cansheet” in the industry—is manufactured by combining recycled aluminum and other scrap medals with newly smelted aluminum made from bauxite. Although bauxite is available in the United States, there is nowhere near enough of it to satisfy domestic demand. Even if every available smelter were to run at full capacity, the U.S. would still have to import more than 80 percent of its aluminum supply, the CMI says.

It’s cheaper to mine bauxite elsewhere in the world, process it into aluminum, and bring it to the United States to make cans. So that’s exactly what happens. Making it more expensive to import aluminum will disrupt that global supply, forcing adjustments that add to the cost of production but don’t really do much to protect American jobs. That bauxite-mining and aluminum-smelting work will mostly continue to be done elsewhere, due to the simple fact that American demand for aluminum outpaces domestic supply.

And if it is more expensive to make aluminum cans, then it’s more expensive to sell anything that comes in an aluminum can.

“If there are duties on aluminum coming to this country, it will obviously get passed on to us and the customer,” Tim Weiner, a senior commodity risk manager at Molson Coors Brewing Company, said at an industry conference in Chicago last week, according to Bloomberg. “Our prices will go up.”

The White House was originally expected to release its aluminum trade policy in mid-June, but the report has been delayed. Now, CNN reports, it is expected to be released before the end of the summer.

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Why the Google Manifesto Brings Forward an Overdue Conversation – Part 2 (‘The Firing’)

Today’s piece was originally supposed to be the second and last part of a short series on the Google memo, but in light of the author’s rapid termination, I’ve decided to add at least one other installment on the topic. As such, my analysis on how Spiral Dynamics fits into the whole drama will have to wait till another day.  

As everyone knows by now, Google went ahead and fired James Damore, the author of the now infamous memo on Google’s Ideological Echo Chamber. In yesterday’s piece I remarked about how shocked I was by the extraordinarily charged and hyperbolic language being used by so many of those who disagreed with what Mr. Damore wrote. Indeed, the language and mischaracterizations of the memo itself were so completely unhinged in many instances, it’s hard for me to believe that many of these people even read it in the first place.

First off, while I happen to agree with a lot of what he wrote, that’s besides the point. If you read the memo it’s obvious that the author went out of his way to avoid triggering people who are easily triggered. Whether or not you agree with the conclusions, it was written in a respectful and measured way. He goes out of his way to clarify what he’s saying so as not to be misunderstood Here are just a couple examples of what I mean:

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