I am happy to share a draft article, titled What Rights are “Essential”? The 1st, 2nd, and 14th Amendments in the Time of Pandemic. Readers of this blog will likely have seen much of this content in many posts on this issue. I hope it provides a single compendium to study the first six months of the litigation. And I chart the path forward of future litigation. Here is the abstract:
Under conventional constitutional doctrine, courts pose familiar questions. Is a right “fundamental” or “non-fundamental”? Is a classification “suspect” or “non-suspect”? Should a law be reviewed with “strict scrutiny” or with “rational basis scrutiny? But during the COVID-19 pandemic, a novel question prevailed: was a right “essential” or “non-essential.” If a right was deemed “non-essential,” then the state could regulate, restrict, and even prohibit that right. Modern constitutional doctrine was simply set aside during the emergency. Different states drew different lines. Some states deemed the free exercise of religion and the right to keep and bear arms as “essential,” but access to abortions were deemed “non-essential.” Other states did the opposite: religion and guns were “non-essential,” but abortions were “essential.” And in general, the courts declined to intervene so long as the state also restricted “comparable” activities.
Can the free exercise of religion be anything but essential? Can the sole method of obtaining a firearm be deemed non-essential? And under controlling Supreme Court precedent, can abortions be deemed mere elective surgeries? This article provides an early look at how the courts have interpreted the First, Second, and Fourteenth Amendments during the time of pandemic.
Part I begins with a detailed survey of the emergency lockdown measured issued in March and April of 2020. First, we will study the limits placed on religious worship. Second, we will review how Governors regulated firearm stores—the sole means in many states by which people can obtain a gun. Third, we will recount how four states interpreted their ban on “non-essential” surgeries to prohibit certain types of abortions.
Part II revisits an old, but timely precedent from 1905: Jacobson v. Massachusetts. During the COVID-19 pandemic, Governors viewed Jacobson as a constitutional get-out-of-jail-free card. It isn’t. Jacobson concerned a challenge based on the Due Process Clause of the Fourteenth Amendment—what we would today call substantive due process. It is a mistake to simply graft Jacobson onto the modern framework of constitutional law.
Part III introduces two competing approaches to understand the free exercise of religion during the pandemic. Chief Justice Roberts articulated the first view in his concurrence in South Bay Pentecostal Church v. Newsom. Here, the Court deferred to the government’s determination of what is “non-essential.” Justice Kavanaugh developed the second model in his dissent in Calvary Chapel Dayton Valley v. Sisolak. With this approach, the Court does not defer to the government’s designation of what is “non-essential.” Under the Calvary Chapel approach, the free exercise of religion is presumptively “essential,” unless the state can rebut that presumption.
Part IV extends these two frameworks to the context of the Second Amendment. Under the South Bay framework, prospective firearm owners would have to show that these decisions were irrational. But with the Calvary Chapel approach, the right to sell firearms would presumptively be deemed a “most-favored right.”
We are still in the early stages of the COVID-19 pandemic. To date, the courts have largely settled on the South Bay approach. Perhaps this framework may have made sense in the tumultuous beginning. However, as our understanding of the pandemic settles, and we learn to live with COVID-19, the courts will resume a normal approach to constitutional law. And Justice Kavanaugh’s Calvary Chapel approach charts the path forward.
I welcome comments. Thanks!
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Is The Yield Curve About To Collapse? Tyler Durden
Thu, 10/08/2020 – 17:10
We previously showed that when it comes to Wall Street bets on what the Treasury yield curve does next, there has never been greater confidence in even more steepening: as the below chart of leveraged and speculator net positions in 30Y futures shows, traders have never been more short, with the latest CFTC data showing combined net shorts in long bonds both at records with a combined net short of over 620,000 contracts.
The rationale is simple: with virtually everyone is expecting a fiscal stimulus flood whether before or after the election which Wall Street is now convinced will be won by Biden – as a reminder, Goldman recently predicted that the “increasingly likely” Blue Sweep would mean up to $7 trillion in new fiscal stimulus and a surge higher in 10Y yields…
… and is aggressively betting on even further steepening, the level of short positions in long bond futures is staggering although as Bloomberg’s Stephen Spratt warns, it’s not the first time this year risks have looked so lopsided: “with almost all of Wall Street calling for a steeper curve back in early June, the 5-, 30-year spread drifted flatter over the following six weeks.”
However, to Spratt, the question is whether traders can hold on until after Nov. 3 given yield curve risk is now clearly skewed toward short-term flattening, and even a small flattening move may quickly avalanche into a huge squeeze sending 30Y yields far lower.
His Bloomberg colleague Richard Jones agrees, writing today that the recent steepening in Treasury calendar spreads “looks premature, given that material fiscal stimulus will probably be forthcoming 1Q 2020 at the earliest.” As Jones explains, since late September, 2s10s steepened to ~62bps and 5s30s to ⁓123bps. This but has gathered pace in recent weeks as a Biden victory (and potential sweeps of both houses of Congress) became increasingly likely, with Goldman pounding the drum on both as discussed previously. And, as pointed out above, the notion is that Democrats will be more open to expansive fiscal policy, especially in the grips of the pandemic.
But, as Jones cautions, “therein lies the rub” – over the next 5 to 6 months or so, before a big government aid package can be passed, “the virus will continue to be a massive public health and economic headwind. And, without an aggressive fiscal impulse during the height of an American winter, the pandemic could theoretically become as virulent and disruptive as it was 6-7 months ago.”
To be sure, there’s already signs that Covid is making a significant comeback even before the winter and “it’s hard to see that situation improving any time soon.”
Finally, Mizuho’s Peter Chatwell joins the chorus of strategists warning that a major flattening is in store, and in a note this morning warns that his strategic recommendation of US curve steepening “is currently looking crowded” adding that “the Biden clean sweep trade has become a common narrative, and looks close to fully priced given current opinion polling.”
Yet, on the flip side, there are several triggers that could see the “blue wave” priced more realistically. Meanwhile, as he further notes, this week’s heavy Treasury supply likely kept the curve artificially steep.
With that in mind, Chatwell is calling it a day on his profitable steepener reco, and is now urging client to put on “tactical UST flatteners” as he looks to capture post-supply flattening performance before re-engaging with bear-steepeners.
Any sharp flattening in the yield curve would have dramatic cross-asset consequenes, and as the Mizuho strategist says, “flattening in 10s30s is likely to have a strong correlation with risk-off trading in other markets.”
Finally, a flattener may now be the best way to “hedge” another Trump “surprise” victory: while stocks will continue rising assuming the Fed will always step in to bail them out, the real action will be in inflation expectations, and the fact that under a second Trump admin, the fiscal juice will slow down to a trickle – at least in the context of Biden’s $7 trillion – especially if covid is contained early next year.
In short, with everyone absolutely certain – and Goldman pounding the table – that the curve can only go even steeper, it is almost guaranteed that the next move in the curve will be flatter… and if there is enough momentum to spark a short covering squeeze, we just may see one of the most violent curve repricings in history.
via ZeroHedge News https://ift.tt/3nwTcde Tyler Durden
The status quo is about to discover that it can’t stop the hard rain or protect its fragile sandcastles.
You’ll recognize A Hard Rain Is Going to Fall as a cleaned-up rendition of Bob Dylan’s classic “A Hard Rain’s a-Gonna Fall”. Since the world had just avoided a nuclear conflict in the Cuban Missile Crisis, commentators reckoned Dylan was referencing a nuclear rain. But he denied this connection in a radio interview, stating: “…it’s just a hard rain. It isn’t the fallout rain. I mean some sort of end that’s just gotta happen….” ( Source)
Which brings us to the present and America’s dependence on the sandcastles of monopoly, corruption, free money and a two-tier legal/political system. You know, BAU–business as usual. A hard rain’s a-gonna fall on these sand castles because, well, the end of unsustainable stuff has just gotta happen, as the man said.
Here’s the problem with monopoly, corruption, free money and a two-tier legal/political system: they impoverish and diminish everyone who isn’t an insider or in the top 10% Protected Class, as these are institutionalized forms of legalized looting: monopolies and cartels raise costs by smothering competition, corruption is a hidden tax on everyone not at the feeding trough, free money devalues the dollar, robbing everyone forced to use it, and a two-tier legal system enriches the few (corporate criminals never go to prison) and undermines the social contract via blatant unfairness and lack of justice.
As for the two-tier political system: monopoly, corruption and Fed free money have undermined democracy. Regardless of who wins the election, lobbyists and billionaires will still dominate the day-to-day business of political pay-to-play.
By enriching and protecting the few at the expense of the many, America’s business as usual has eroded the social contract and trust in institutions and authority. When everybody’s on the take and has an insider skim, then denying a conflict of interest simply confirms the ubiquity of conflicts of interest.
The pendulum has swung to such extremes of unfairness, corruption and inequality that the swing back will be monumental in scale and duration.
Another reason a hard rain’s gonna fall is America’s core institutions have been obsolete for years or decades, but those feeding at the trough refuse to allow any change that threatens their place at the trough.
Peter Drucker explained how tectonic shifts in the economic order obsoletes entire sectors in his 1993 book Post-Capitalist Society. Drucker mentions higher education and healthcare as sectors ripe for the plow, yet these politically sacrosanct sectors have ground on unchanged for decades, vacuuming up trillions in borrowed money to keep from being obsoleted.
Despite the best efforts of self-serving insiders, sand castles still melt in a hard rain. Speaking of sand castles, consider the vast number of sectors teetering on massive excess capacity: commercial real estate, retail space, restaurants, etc. Two generations ago, going to a restaurant–even a fast-food outlet–was a rare event. Since then, it somehow became a birthright to eat out once or twice a day.
A hard rain’s a-gonna fall on over-capacity and debt-dependent spending.Free money for financiers constructed a fragile sandcastle of too much of everything but actual value, so now the status quo frantically seeks to protect every melting sandcastle of over-capacity.
The status quo is about to discover that it can’t stop the hard rain or protect its fragile sandcastles. Whatever piles of sand are left after the rain will be swept away by the karmic tide as the pendulum swings back: the way of the Tao is reversal.
DoubleLine: The Pandora’s Box Of Fed’s Digital Currency Will Ignite An “Inflationary Conflagration” Tyler Durden
Thu, 10/08/2020 – 16:30
We most recently described the Fed’s stealthy plan to deposit digital dollars to “each American” during the next crisis as a unprecedented monetary overhaul, but more importantly, a truly stealthy one: to be sure, there has barely been any media coverage of what may soon be a money transfer by the Fed – a direct stimulus to any and all Americans – in an attempt to spark inflation after years of losing the war with deflation.
That’s why we were happy to read that none other than Jeff Gundlach’s DoubleLine, one of the highest profile asset managers today, published a paper authored by fixed income portolio manager Bill Campbell exposing what it called “The Pandora’s Box of Central Bank Digital Currencies”, in which it echoed our claims, writing that “such a mechanism could open veritable floodgates of liquidity into the consumer economy and accelerate the rate of inflation. While central banks have been trying without success to increase inflation for the past decade, the temptation to put CBDCs into effect might be very strong among policymakers. However, CBDCs would not only inject liquidity into the economy but also could accelerate the velocity of money. That one-two punch could bring about far more inflation than central bankers bargain for.”
It then proceeds to blast this new development:
The temptations of CBDCs are not limited to excesses in monetary policy. CBDCs also appear to be an effective mechanism for bypassing the taxation, debt issuance and spending prerogatives of government to implement a quasi-fiscal policy. Imagine, for example, the ease of enacting Modern Monetary Theory via CBDCs. With CBDCs, the central banks would possess the necessary plumbing to directly deliver a digital currency to individuals’ bank accounts, ready to be spent via debit cards.
Which, of course, is precisely the intention and not only the beginning of the end of fiat and paper currencies but also the catalyst that will send alternative assets and especially gold soaring.
While the full note is below and we urge all readers to go over it, we will skip right to the end of Campbell’s paper in which he quotes from the former Philadelphia Fed president Charles Plosser who in 2012 warned of precisely this outcome:
“Once a central bank ventures into fiscal policy, it is likely to find itself under increasing pressure from the private sector, financial markets, or the government to use its balance sheet to substitute for other fiscal decisions.”
As Campbell correctly concludes, “with a flick of the digital switch, CBDCs can enable policymakers to meet, or cave in to, those demands – at the risk of igniting an inflation conflagration, abandoning what little still survives of sovereign fiscal discipline and who knows what else. I hope the leaders of the world’s central banks will approach this new financial technology with extreme caution, guarding against its overuse or outright abuse.”
We hope so too, but we know better: once it becomes available, it’s pretty much game over. The DoubleLine strategist shares that sentiment:
It’s hard to be optimistic. Soon our monetary Pandoras will possess their own box full of new powers, perhaps too enticing to resist.”
The Pandora’s Box ofCentral Bank Digital Currencies
Over the past decade, central banks have added to their policy toolkit such practices as quantitative easing (QE) and, in Europe and Japan, negative interest rates. Formerly viewed as unconventional, these tools are now seen as necessary, even conventional, methods of monetary policy in a developed world struggling to produce inflation. For their next step into the unknown, central banks are readying a technology that could shatter what remains of the wall between sovereign government fiscal policy and central banking. This innovation is central bank digital currencies (CBDCs). These have the potential to become an inflation game changer, but the world’s central bankers should proceed with great caution. Implementation of CBDCs might open a Pandora’s box of unintended consequences, fiscal as well as monetary, overwhelming our would-be masters of money.
Disinflation: Bête Noire of the Central Banks
Inflation so far has not materialized in many developed markets, defying years of extraordinary policy efforts to stoke it. The European Central Bank (ECB) has failed to generate durable inflation at the targeted 2% level despite engaging in QE since March 2015 and implementing negative interest rate policy since June 2014. The Bank of Japan has failed to do so despite engaging in QE since March 2001 and negative rate policy since January 2016. Even the U.S. Federal Reserve has been unable to bring about stable inflation at 2% for a decent period of time despite engaging in QE since December 2008.
According to the quantity theory of money, large increases in money supplies should push inflation higher. Thus at the time QE was introduced in the U.K., Europe and the U.S., policymakers understandably were hopeful of achieving their inflation targets. Some observers in fact worried that QE might exceed those targets and trigger runaway inflation. Both those hopes and fears have proved premature. Instead, developed economies remain stuck in a disinflationary environment.
Observers have pointed to various causes of the conundrum of persistent disinflation. Demographics, technology and the growing stock of debt rank high among the troublemakers, but monetary levers have virtually no influence over the first two of these variables, and the third lies in the hands of sovereign government, not central banking. So I believe that central bankers are focusing on other disinflation culprits – namely, the entrapment of liquidity inside the banking system and the decline in the velocity of money. Their “solution” is the creation of CBDCs.
Velocity of Money and Liquidity Traps
The velocity of money is the rate at which money is exchanged in an economy through transactions between lenders and borrowers, buyers and sellers. If the number of transactions increases relative to the quantity of goods and services, prices should rise because the total amount of money in circulation has gone up. Conversely, if the number of transactions falls relative to the quantity of goods and services, sellers will reduce prices to try to make sales, pushing inflation down.
At its outset in the U.S. in December 2008, QE was expected to unleash an enormous amount of liquidity into the broader economy, raising the velocity of money and thus generating inflation. In fact, the opposite has happened. The liquidity produced by QE has become stuck inside the financial system, and the velocity of money has plummeted. The evidence from the monetary metrics could not be starker. As measured by the Federal Reserve’s M2 monetary aggregate, the U.S. money supply has soared to all-time highs. The velocity of M2, however, has declined and then plunged to all-time lows as GDP growth for years remained lackluster and then nosedived amid the COVID-19 lockdowns. (Figure 1)
To understand lackluster growth amid massive QE, it is important to remember that QE has expanded liquidity in the banking sector but not to the broader economy. At its heart, QE is a process whereby the central bank will “purchase” a bond from a bank and pay for that bond by crediting the bank’s excess reserve account. Excess reserves stay within the banking sector until used by banks for lending or market-making activity. Unfortunately, banks have grown more cautious in their lending practices. They have focused the majority of their credit extension to larger corporations, ignoring to a large extent smaller businesses, which employ most of the working population, and consumers.1 Fewer loans to such customers means less money in circulation in the economy.
Thus, much of the liquidity produced by QE has not found its way into the broader economy. Instead, this liquidity has served merely to drive up the value of stocks, bonds or other financial assets. Moreover, because central banks resort to QE during economically challenging times, when disinflationary or outright deflationary forces are at their greatest, the funneling of large excesses of liquidity into the banking system comes at the exact moment such banks are least likely to accelerate loan growth.
This dynamic adversely impacts the lower-income segments of the population, which have a much higher tendency to consume (usually out of necessity), in contrast to the wealthier segments that are characterized by much higher savings rates. (Figure 2) In a prior paper, I highlighted one method to address this issue by focusing more on lending to small and midsized enterprises.2 However, central banks are up to something new and different if not radical. If implemented, CBDCs have the potential to expand central banking beyond the scope of its traditional monetary province into fiscal policy.
Central Bank Digital Currencies
CBDCs have thus far been confined to the realm of research, but this is about to change. In a little-noticed press release on Sept. 9, Mastercard announced progress on a platform that will allow central banks to evaluate use cases for CBDCs. “The platform,” the release states, “enables simulation of issuance, distribution and exchange of CBDCs between banks, financial service providers and consumers.”3 If the central bank can distribute a digital currency into the consumer banking infrastructure to directly reach consumers, consumers can purchase goods and services with that currency via their Mastercard debit cards. In effect, CBDCs would circumvent the problem of rising risk aversion on the part of bankers. Not only would CBDCs represent a powerful new monetary tool, they are so unconventional as to be quasi-fiscal in nature.
The lines between fiscal and monetary policy have become ever more blurred by the need to use both instruments to help deal with the challenges of a growth shock, weak inflation, a weak jobs market and income inequality. Governments across the globe are dealing with rising deficits and debt stocks in the face of these demands, which can lead to authorities overreaching in the use of these powers. In 2012, Charles I. Plosser, then president of the Federal Reserve Bank of Philadelphia, warned of this mission creep. “In a world of fiat currency,” Mr. Plosser wrote, “central banks are generally assigned the responsibility for establishing and maintaining the value or purchasing power of the nation’s monetary unit of account. Yet, that task can be undermined or completely subverted if fiscal authorities independently set their budgets in a manner that ultimately requires the central bank to finance government expenditures with significant amounts of seigniorage in lieu of tax revenues or debt.”4
Eight years later, Mr. Plosser’s cautionary counsel seems démodé in policy circles. CBDCs had moved well beyond a handful of policy research departments even before the epiphenomena of the COVID-19 pandemic and population lockdowns. In a survey published in January, the Bank of International Settlements reported that 80% of the world’s 66 central banks were engaged in some sort of work on digital currencies.5
Although its Governing Council has not decided on whether to move forward with a CBDC, the ECB appears to be laying its groundwork. In an Oct. 2 news release, the ECB announced the publication of a “comprehensive report on the possible issuance of a digital euro” by the Eurosystem High-Level Task Force on central bank digital currency, a unit comprising representatives of the ECB and the 19 central banks in the euro area. A public consultation on the digital euro will begin Oct. 12. “A digital euro,” according to the news release, “would be an electronic form of central bank money accessible to all citizens and firms – like banknotes, but in a digital form – to make their daily payments in a fast, easy and secure way. It would complement cash, not replace it.”6
In the U.S., Cleveland Fed President Loretta J. Mester stated in a Sept. 23 speech, “Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.”7
It is not a big leap from this statement to envision how one could extend such emergency payments to all sorts of policy goals or even political considerations, such as the growing consternation around wealth and income inequality. Historically, it has been up to recognized fiscal authorities to distribute money, or redistribute wealth, in this fashion. Given the persistence of the COVID-19 crisis and the potential for a fall resurgence in cases, concomitant curbs in economic activity (i.e., further lockdowns) could unleash a deflationary shock to the economy. Indeed, a demand shock puts significant downward pressure on inflation as producers lose pricing power when consumers stop purchasing because they’ve lost their jobs or cannot go out and spend money in any case. The past several decades provided ample evidence of the negative impact of falling economic activity on prices. (Figure 3)
Yet the policy implications are what we must keep an eye on as new digital policy tools become available to central bankers. Central banks and other financial institutions appear to be well along in the process of developing CBDCs. In the event of a new demand and disinflation shock, it is likely central banks will use them.
Floodgates (Monetary, Fiscal and Political)
With QE, central banks have printed excess reserves that have benefited only the very wealthy and large institutions. The innovation of a digital currency system as described by Mastercard could deliver stimulus directly to consumers. Such a mechanism could open veritable floodgates of liquidity into the consumer economy and accelerate the rate of inflation. While central banks have been trying without success to increase inflation for the past decade, the temptation to put CBDCs into effect might be very strong among policymakers. However, CBDCs would not only inject liquidity into the economy but also could accelerate the velocity of money. That one-two punch could bring about far more inflation than central bankers bargain for.
When first implementing QE, central banks promised that this measure would be temporary and would be unwound after the crisis ended, a pledge that I have doubted for a while.8 Central banks as we know have perpetuated QE as part of their updated toolbox of monetary policies. The first use of digital currencies in monetary policy might start small as policymakers, out of caution, seek to calibrate this experiment in quasi-fiscal stimulus. However, such initial restraint could give way to growing complacency and greater use of the tool – just as we saw with QE. The temptations of CBDCs are not limited to excesses in monetary policy. CBDCs also appear to be an effective mechanism for bypassing the taxation, debt issuance and spending prerogatives of government to implement a quasi-fiscal policy. Imagine, for example, the ease of enacting Modern Monetary Theory via CBDCs. With CBDCs, the central banks would possess the necessary plumbing to directly deliver a digital currency to individuals’ bank accounts, ready to be spent via debit cards.
Let me quote again from Charles I. Plosser’s warning in 2012: “Once a central bank ventures into fiscal policy, it is likely to find itself under increasing pressure from the private sector, financial markets, or the government to use its balance sheet to substitute for other fiscal decisions.” With a flick of the digital switch, CBDCs can enable policymakers to meet, or cave in to, those demands – at the risk of igniting an inflation conflagration, abandoning what little still survives of sovereign fiscal discipline and who knows what else. I hope the leaders of the world’s central banks will approach this new financial technology with extreme caution, guarding against its overuse or outright abuse. It’s hard to be optimistic. Soon our monetary Pandoras will possess their own box full of new powers, perhaps too enticing to resist.
Another Coup? Trump Slams “Crazy Nancy” After Speaker Unveils 25th Amendment Panel Tyler Durden
Thu, 10/08/2020 – 16:18
During Thursday morning’s weekly press conference, Nancy Pelosi ominously told reporters that she would have more to say about the 25th amendment on Friday morning.
>@mkraju just asked pelosi if it was time to invoke the 25th amendment@SpeakerPelosi said she’ll talk about that tomorrow
Now, we know what she was talking about. In an email to Congressional reporters, Pelosi advised them of a press briefing that will be held at 1015ET on Friday to introduce a new bill called the Commission on Presidential Capacity to Discharge the Powers and Duties of Office Act.
New – Pelosi and Raskin to introduce bill creating a commission to review President’s health and fitness for office. This is what she was referring to when she referred to 25th Amendment. She’s having a press conference tomorrow pic.twitter.com/nCXxzyfG16
The legislation would create a Commission on Presidential Capacity to Discharge the Powers and Duties of Office.
The exact function of the commission is unclear, but we suspect that, if it were to pass, the body would be responsible for making recommendations to the administration about whether power should be transferred to the Vice President via either Section 3 or Section 4 of the 25th amendment.
Trump had some comments.
Crazy Nancy is the one who should be under observation. They don’t call her Crazy for nothing! https://t.co/7vE0Jvq0dM
While we await to learn more about the medication, we wouldn’t be surprised to learn that this is all part of a ploy by the Dems to try and publicize the timing of Trump’s last negative COVID-19 test, something the White House has been suspiciously tight-lipped about since Trump revealed his status a week ago.
via ZeroHedge News https://ift.tt/2GPUzTi Tyler Durden
Large stimulus, small stimulus, skinny stimulus, pre-election stimulus, post-election stimulus, state stimulus, airline stimulus, no stimulus… today had everything (well nothing)…
…but it seems the algos are exhausted as stocks generally shrugged along ignoring the headlines and tweets, hovering at the pre-Trump ‘no-deal’ Tweet levels all day…
Small Caps (once again) outperformed with Nasdaq lagging…
Nasdaq 100 is at 2-month lows relative to Small Caps…
Source: Bloomberg
One glance at the S&P 500 futures’ intraday price action and you could be mistaken for thinking its just another Robinhood-sponsored penny stock party…
Utter chaos in the VIX complex today…
Airline stocks showed where the highest beta is…
Source: Bloomberg
Bond yields drifted very gently lower all day…
Source: Bloomberg
Real yields tumbled today…
Source: Bloomberg
The dollar also fell very modestly…
Source: Bloomberg
Bitcoin bounced – thanks to news that Square had invested heavily in the cryptocurrency…
Source: Bloomberg
And oil prices jumped on Saudi/OPEC optimistic jawboning (WTI topped $41)…
Gold futures rallied back up near $1900 once again…
Finally, you just have to laugh at the run on “Most Shorted” stocks (squeezing higher for 9 of the last 10 days)…
“Abnormally low rates for a long period during times when economic slack is no longer a concern can result in excessive risk-taking, as businesses and firms take on additional debt and accumulate more risky assets in search of better returns – potentially bidding up asset prices to unsustainable levels. The financial pressures associated with such behavior build gradually, and only become clear in the next economic downturn.”
“In the United States, we do not have a cohesive set of regulatory and supervisory tools to moderate risk build-ups. And while we do have the Financial Stability Oversight Council, we do not have a regulatory and supervisory body endowed with tools and structures that can be deployed to limit financial stability risks.”
So we should probably ignore this…
Source: Bloomberg
via ZeroHedge News https://ift.tt/36MGDVm Tyler Durden
As Attention-Starved Celebs Strip Down Over ‘Naked Ballots’, WarnerMedia Plans To Slash 1000s Of Jobs Tyler Durden
Thu, 10/08/2020 – 15:45
As the motion picture industry begins to death-spiral into oblivion due to the pandemic, attention-starved celebrities are going topless to implore people to avoid ‘naked ballots’ – due to a law in 16 states which requires voters to insert their mail-in ballots into two separate envelopes in order to be counted.
“If you don’t do exactly as I tell you,” said comedian Sarah Silverman, “then your ballot could get thrown out.“
Yet, while bored Hollywood celebs – including for some reason Amy Schumer, are ‘raising awareness’ via nudity, Hollywood itself appears to be in dire straits thanks to plummeting box-office sales which have already put the world’s largest theater chains in a precarious position.
According to the Wall Street Journal, WarnerMedia is planning a restructuring which would mean thousands of job cuts, as the company seeks to cut costs by as much as 20% in the wake of sagging income from movie sales, cable subscriptions and TV ads, according to ‘people familiar with the matter.’
The restructuring would begin within weeks, and would affect employees across Warner Bros. assets such as HBO, TBS and TNT.
The Journal notes that rivals Disney and Comcast have slashed jobs in recent months as their film and TV businesses are similarly struggling.
“Like the rest of the entertainment industry, we have not been immune to the significant impact of the pandemic,” said a WarnerMedia spokesman, who added that the company would ‘reorder its operations to focus on growth opportunities.’ “We are in the midst of that process and it will involve increased investments in priority areas and, unfortunately, reductions in others.”
While Warner’s TV assets are suffering, their movie business is also sucking wind – after their uber-expensive sci-flick “Tenet” flipped, leading the studio to push “Wonder Woman 1984” from an October release to the end of the year.
Meanwhile, “Dune,” which was supposed to premiered during the holidays has been bumped until next year at the soonest, while “The Batman” has similarly been bumped from 2021 to 2022.
The layoffs will mark the second wave of job cuts, after WarnerMedia handed out over 500 pink slips in August.
And while nobody knows the exact size of WarnerMedia’s workforce, its predecessor employed around 26,000 people before AT&T acquired them in 2018 for approximately $85 billion. By the end of June, AT&T’s headcount was 243,000.
via ZeroHedge News https://ift.tt/30K1bcY Tyler Durden
Peter Schiff appeared on RT Boom Bust along with Michele Schneider of MarketGauge to talk about market reaction to the stimulus stalemate, the impact of the upcoming election, and the prospects of the dollar.
The interview was recorded before President Trump tweeted the rug out from under the hope of a stimulus deal and cut off negotiations with the Democrats. At the time, Peter said it was certainly possible we could get another round of “so-called” stimulus, but none of it actually helps the underlying economy.
It doesn’t do anything to increase productive output of the economy. It does stimulate the markets. It makes stock prices go up. So clearly, there’s an interest for that. But that doesn’t help the actual economy. All it does is debase the value of our money.”
Peter said he thinks the prospects for a Biden victory is decisively negative for both the economy and the stock market.
The only silver lining in that cloud from the perspective of the stock market is since the economy will be so much weaker under Biden, the Fed will be called on to do even more monetary stimulus. So, they’ll be a lot more inflation created, a lot more money printing in a Biden administration than in the Trump administration, although we’re going to get a lot in both regardless of the outcome. But we’ll probably have even more of it if Biden wins than Trump. So, that could provide more fuel for the stock market bubble. But remember, taxes on corporate earnings are going to rise substantially, not only on the corporate level but on the individual level, because corporations are subject to double taxation. So, we’re talking about massive increases on corporate taxes, effective tax rate, that substantially reduces the value of those corporations. So, it’s going to take a massive amount of air to blow up a bigger bubble given that the fundamental value of stocks will be so much lower under Biden than would be the case under Trump.”
Peter also talked about gold and the dollar, saying he thinks gold is building a base of support around the old all-time record high.
We got up to $1,900 back in 2011 and then gold sold off and pulled back down near a thousand. But now, we’ve really broken through those highs, and I think once we finish building this new base of support, gold is going significantly higher. And yes, in that same environment, the US dollar is going to lose a lot of value, not just in terms of gold, where it will lose the most value, but in terms of a lot of other fiat currencies that will lose less value than the dollar.”
Peter said that means we can expect the cost of living in the US to go way up.
People who are staying at home and living off of government checks, those checks are not going to buy nearly as much because the price of everything they need to live is going to be getting higher and higher and higher. So, the value of those benefits is going to go lower and lower until ultimately, if we completely destroy the value of the dollar and we have hyperinflation, then none of it matters. It doesn’t matter how much money the government sends you if you can’t buy anything with it.”
via ZeroHedge News https://ift.tt/3iJPzge Tyler Durden
Here’s What Chinese Citizens Saw The Moment Pence Spoke About China In Debate Tyler Durden
Thu, 10/08/2020 – 15:05
Chinese national media aired Wednesday night’s vice presidential debate between Vice President Mike Pence and Sen. Kamala Harris, however, Chinese censors cut off the feed at the moment US policy toward China was raised.
The debate feed was cut inside China apparently in order to prevent citizens from hearing Pence criticize the Chinese Communist government. While the rest of the world heard Pence explain how “China is to blame” for the coronavirus pandemic, this is what viewers inside China beheld on their screen through the duration of the comments:
It was first noted in a viral tweet by Canada’s Globe and Mail correspondent Nathan VanderKlippe based in Beijing.
He took a photo of his TV screen in Beijing at the moment China was raised by the moderator, noting “China censored Pence’s comments on China. Signal returned when Harris began talking again.”
The text written in both Chinese and English asked viewers to stand by, perhaps misleadingly giving the impression there was a ‘technical difficulty’.
China censored Pence’s comments on China. Signal returned when Harris began talking again. pic.twitter.com/0VEMAqDA95
“How would you describe our fundamental relationship with China? Are we competitors, adversaries, enemies?” debate moderator Susan Page had asked.
However it was clear the communist authorities wanted to censor Pence’s comments such as the following:
“China and the World Health Organization did not play straight with the American people,” Pence added. “They did not let our personnel into China to get information on the coronavirus until the middle of February.”
Interestingly the feed did return in time for Harris to respond in a more China-friendly way with, “The Trump administration’s perspective and approach to China has resulted in the loss of American lives, American jobs, and America’s standing.”
Harris was accused in Conservative media of dodging the question, as she didn’t explain further but pivoted to charging President Trump with having “a weird obsession” with undoing any of the “accomplishments” of the Obama administration.
That’s because when asked whether China is an enemy or adversary, Kamala Harris completely dodged the question. https://t.co/ZLw4lajmRL
The whole episode also makes clear Beijing’s preference for who it would like to see in the White House. And if there does end up being a foreign policy debate between Trump and Biden, currently very much up in the air and in doubt, we don’t expect China to air it at all.
via ZeroHedge News https://ift.tt/30MhKFw Tyler Durden
The heyday is over. The question for department stores now is whether there will be a new day.
Certainly, the pandemic has made that already sticky question all the more difficult to answer. But many retailers in the space had been trying. Early this year, for example, Macy’s inched toward rehabilitation as it outlined plans to get away from so many enclosed malls, close more than 100 stores and improve its private labels. Late last year, Nordstrom made strides executing its vision for a 21st century department store when it put the finishing touches on its retail ecosystem in New York City. Now, forced to institute layoffs and take on new debt, they and many others are just hoping to hang on through the holidays.
Yet the pandemic, as devastating as it’s been to people’s lives and livelihoods, didn’t provoke the current existential crisis for these retailers. That came earlier, through consolidation and over-expansion — especially at Macy’s, which broke several cities’ hearts when it took over and renamed their local department stores as with Chicago’s beloved Marshall Field’s in the Loop 14 years ago. E-commerce is a factor, but by now, department stores are e-commerce players too. More devastating have been the declines— possibly all related —of the middle class, the mall and the need to dress up for workor occasions.
The Great Recession was technically over by 2010, but retail has never been the same since. And the last 10 years have been especially brutal to department stores. The following timeline provides a few snapshots of how things have gone.
Department stores in the last decade
2010
Things are looking up for most department stores as they recoup from the Great Recession.
Nordstrom looks back at 2010 as a “terrific year that exceeded our expectations,” noting that it opened three full-line stores and 17 off-price Racks in the period, topping 200 locations for the first time.
Macy’s boasts that the impact of nearly doubling in size through its takeover of the May Company a few years before came “to fruition in 2010,” propelling it to a national brand through the conversion of nearly 600 stores from regional banners to Macy’s stores and centralization of its operations.
Southern retailer Belk, the largest privately owned department store in the U.S., updates its logo and unveils a new slogan, “Modern. Southern. Style.”
Kohl’s says it will open 30 new stores, for a total of 1,089 in 49 states.
Dillard’s, with a footprint largely in the South and Southwest and a strong private label portfolio, announces a new line of women’s apparel and accessories from Arkansas native Korto Momolu, who unveils the collection at New York Fashion Week. At the end of the year the company acquires a former Target distribution facility with plans to grow online sales.
J.C. Penney hires Ron Johnson, who enjoys a renowned reputation as Apple’s store guru, as CEO. He takes swift and drastic measures in pricing and merchandising that are immediately controversial with its customer base and investors.
Sears wins “Mobile Retailer of the Year” from the Mobile Commerce Awards for innovations like bar codes in its catalogs and online order pickup services, offered at a time when few retailers are paying attention to the channel.
2012
EMarketer expects online apparel sales to help push U.S. e-commerce up 15.4% to $224.2 billion, a rise blamed for lagging traffic to malls and their department store anchors.
Macy’s closes five stores, but also opens five stores. In its annual report, the company attributes the year’s performance to “a three-pronged business strategy known by the acronym of M.O.M. — My Macy’s, Omnichannel and MAGIC Selling.” The company says Bloomingdale’s will focus “on an upscale niche.”
The economic recovery continues, but consumers remain wary. The Organisation for Economic Co-operation and Development releases a report detailing how income inequality is rising in the U.S. and is already starker than in other countries studied by the group, a situation some analysts believe is pressuring retailers like department stores that sell to middle-income consumers.
In a settlement with the New York State Attorney General over allegations of racially profiling customers in its Herald Square flagship, Macy’s agrees to pay $650,000, hire an anti-discrimination expert and train employees.
Mall vacancies spike — almost 15% of malls are 10% to 40% empty (compared to 5% that empty nine years before) and 3.4% are more than 40% empty, which one Green Street analyst tells the New York Times indicates a “death spiral.”
Private equity firm Sycamore buys Belk for $3 billion, the first department store in its retail-heavy portfolio.
Sears establishes a real estate investment trust with its extensive land holdings and raises $2.7 billion.
2016
About two-thirds of all shoppers are spending at off-price retailers and making 75% of apparel purchases there, according to research from the NPD Group, while Moody’s Investors Service finds that growth at off-price retailers T.J. Maxx, Ross, and Burlington will outpace specialty and department stores.
Also announcing plans to step down is Macy’s CEO Terry Lundgren, who orchestrated Macy’s explosive expansion early in the century. He also announces the closure of 100 stores. Later he also casts doubt on Amazon’s ability to handle the logistics of selling apparel.
2017
Apparel sales shrink to a new low of 3.1% of the average U.S. consumer’s budget, down from 5.9% in 1987. When they do buy clothes, many shop on price and eschew department stores in favor of discounters like mass merchants, fast-fashion retailers or off-pricers.
Sears announces it will shutter 150 Kmart and Sears stores — some 400 by the end of the year — and sells its iconic Craftsman tools line to Black and Decker for $900 million. In May, CEO Sears CEO Edward Lampert tells shareholders, “We don’t need more customers. We have all the customers we could possibly want.”
Lord & Taylor opens a digital storefront on Walmart.com, a move deemed “Crazy. Loony. Madness,” by retail analyst Howard Davidowitz.
After sweeping away much of its women’s apparel inventory and conducting a series of focus groups, J.C. Penney institutes a new strategy evocative of Ron Johnson’s controversial approach of years before.
Jeff Gennette takes over from Terry Lundgren as CEO of Macy’s, as planned.
Barneys New York unveils its immersive “The Drop” event in partnership with fashion streetwear company Highsnobiety, reprising it in Los Angeles the following year.
2018
Some department stores begin to take extreme measures.
After years shrinking its physical footprint by 75%, selling off critical assets and laying off thousands, Sears files Chapter 11, with plans to close 142 stores. Among its closures for the year is its last location in hometown Chicago.
Barneys New York announces “The High End,” a “luxury cannabis lifestyle shop” at its Beverly Hills flagship. Months later, after toppling into bankruptcy, however, the department store survives only as a brand licensed to Saks, with plans to close all locations, most immediately.
Goldman Sachs loosens its dress code, one of the last blue-blood firms to open the door to “business casual,” further imperiling sales of men’s suits.
HBC sells Lord & Taylor’s Manhattan flagship to coworking startup WeWork for $850 million; the building is in Amazon’s hands within two years. The Canadian department store conglomerate later sells Lord & Taylor itself to apparel rental site Le Tote for $100 million. HBC also shuts its specialty home stores in Canada and announces a 20-store cut to Saks Off 5th’s off-price fleet.
Nordstrom stops reporting store comps, a metric analysts use to assess a retailer’s strength. Executives also tell analysts that its merchandise-free Local concept — which serves as a hub for returns, e-commerce pickup, and services like tailoring — is its future. The company opens two Locals in New York just ahead of the October debut of its first flagship in the city.
Several department stores report holiday comp declines in a season notable for its markdowns, but that is quickly overshadowed by the arrival of the COVID-19 pandemic to the U.S. Supply chains are roiled and department stores, with other nonessential retailers, are forced to temporarily close their doors for weeks as public health officials scramble to contain the coronavirus.
Beginning in March, department stores of all stripes institute mass furloughs and pull various financial levers as the coronavirus pandemic takes a toll. Credit Suisse analysts deem department stores the “worst positioned” in retail to survive the pandemic’s challenges, “due to high debt levels, and low mixes of discretionary costs to cut (most have already had several rounds of cost cuts).”
Green Street in April says the disease outbreak contracted a five-to 10-year trend of department stores exiting as mall anchors to the point where a little more than half of U.S. mall-based department stores could close for good by the end of 2021.
Macy’s Polaris plans are put on ice as the pandemic disrupts business, and later the retailer says it will lay off nearly 4,000 corporate employees, including Story founder Rachel Shechtman. Macy’s reduces its Thanksgiving Day parade to a television-only event in Herald Square in place of its traditional blocks-long procession.
Macy’s is dropped from the S&P 500 in April. When Kohl’s is dropped in September, it brings the number of department stores listed on that stock market index to zero. As Kohl’s is ejected in September, online marketplace Etsy is added.
via ZeroHedge News https://ift.tt/2GD5AaZ Tyler Durden
