US Q3 GDP Now Seen Surging 20% By Atlanta Fed

US Q3 GDP Now Seen Surging 20% By Atlanta Fed

Tyler Durden

Mon, 08/03/2020 – 13:18

One day after the BEA reported last Thursday that US GDP crashed an annualized 32.9% in the second quarter, the biggest drop since the great depression…

… the Atlanta Fed published its first GDPNow “nowcast” estimate for the third quarter, which came in at a relative subdued 11.9%, and far below sellside consensus estimates of an 18% print in the third quarter.

Perhaps shamed by Wall Street optimism, just one day business later the Atlanta Fed moments ago announced that its latest revision as of Aug 3 pushed up its Q3 GDP estimate by a whopping 65%, and its GDPNow model now estimates that real GDP growth in the third quarter of 2020 is 19.6%. The reason for the massive repricing? This morning’s Manufacturing ISM Report (which beat expectations) and construction spending report (which missed badly).

Following the latest data, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real GDP investment growth increased from 14.4% and -1.7%, respectively, to 22.4% and 11.1%, respectively. Also, the nowcast of third-quarter real government spending growth increased from 5.7% to 6.8%.

If the Atlanta Fed is correct, the annualized Q3 GDP print would be the highest on record.

Of course, it goes without saying that if Congress fails to roll over the emergency unemployment benefits which expired last month – and which as we previously noted are instrumental in the record 25% of personal income that is funded by the US government…

… Q3 GDP will end up being another unmitigated disaster.

via ZeroHedge News https://ift.tt/3gqryL2 Tyler Durden

Safety, Liquidity, Or Return – Why Cash Is An Important Hedge

Safety, Liquidity, Or Return – Why Cash Is An Important Hedge

Tyler Durden

Mon, 08/03/2020 – 13:05

Authored by Lance Roberts via RealInvestmentAdvice.com,

Over the past few months, we have been writing a series of articles highlighting our concerns of increasing market risk.  Here is a sampling of some of our more recent posts on the issue.

The common thread among these articles was to encourage our readers to evaluate the current market “risks” and take some relevant actions. To wit:

“There remains an ongoing bullish bias that continues to support the market near-term. Bull markets built on “momentum” are very hard to kill. Warning signs can last longer than logic would predict. The risk comes when investors begin to “discount” the warnings and assume they are wrong.

It is usually just about then the inevitable correction occurs. Such is the inherent risk of ignoring risk.

In reality, there is little to lose by paying attention to “risk.”

The current deviation between the stock market, the economy, corporate profits, and earnings suggests something isn’t quite right.

“While the rally off the March lows has been substantial, there is still a vast disconnect between the markets and the underlying economic fundamentals. Given the divergence was driven by unprecedented monetary policy, the eventual reversion could be climatic.”

Equity prices are currently outpacing expectations for near-term profits, forming a price-earnings melt-up akin to what was seen in the late 1990s. Furthermore, the S&P 500’s price-sales ratio is also flashing a similar warning.

The Difficult Part

Despite many clear warnings that suggest that current risk outweighs the reward, investors fail to act due to the “Fear Of Missing Out.” (aka FOMO) I recently received an interesting email which makes this point clearly:

“The market is going higher and will continue to do so indefinitely, as long as the Fed is injecting liquidity into the market. If you are removing risk, you are missing out.”

As stated above, the most significant risk to investor capital is “ignoring the risk”

Just because you see a bear in the woods, and choose to ignore it, doesn’t mean it will ignore you. 

“The reason we suggest selling any rally is because, until the pattern changes, the market is exhibiting all traits of a ‘topping process.’ As the saying goes, a market-top is not an event; it’s a process.” – RIA

It’s Your Brain

There are several psychological factors which make managing risk extremely difficult:

  • Investors are slow to react to new information (they anchor), which initially leads to under-reaction but eventually shifts to over-reaction during late-cycle stages.

  • The “herding” effect ultimately drives investors. A rising market leads to “justifications” to explain over-valued holdings. In other words, buying begets more buying.

  • Lastly, as the markets turn, the “disposition” effect takes hold, and winners are sold to protect gains, but losers are held in the hopes of better prices later. 

In our portfolio management practice, technical analysis is a critical component of the overall process. It carries just as much weight as the fundamental analysis. As I have often stated:

“Fundamentals tell us WHAT to buy or sell. Technicals tell us WHEN to do it.”

Currently, our analysis suggests there is a deteriorating technical backdrop, combined with our outlook for continued disappointment in earnings and corporate profits recovery.

Such suggests that we reduce equity risk modestly, and further increase our cash hedge, until there is more “clarity” with respect to where markets are heading next.

This brings me to the most important point.

The 3-Components Of All Investments

In portfolio management, you can ONLY have 2-of-3 components of any investment or asset class:  Safety, Liquidity & Return. The table below is the matrix of your options.

The takeaway is that cash is the only asset class which provides safety and liquidity. Obviously, the safety comes at the cost of return. This is basic.

But what about other options?

  • Fixed Annuities (Indexed) – safety and return, no liquidity. 

  • ETF’s – liquidity and return, no safety.

  • Mutual Funds – liquidity and return, no safety.

  • Real Estate – safety and return, no liquidity.

  • Traded REIT’s – liquidity and return, no safety.

  • Commodities – liquidity and return, no safety.

  • Gold – liquidity and return, no safety. 

You get the idea. No matter what you chose to invest in – you can only have 2-of-the-3 components. Such is an important, and often overlooked, consideration when determining portfolio construction and allocation. The important thing to understand, and what the mainstream media doesn’t tell you, is that “Liquidity” gives you options. 

I learned a long time ago that while a “rising tide lifts all boats,” eventually, the “tide recedes.” I made one simple adjustment to my portfolio management over the years, which has served me well. When risks begin to outweigh the potential for reward, I raise cash.

The great thing about holding extra cash is that if I’m wrong, I simply make the proper adjustments to increase the risk in my portfolios. However, if I am right, I protect investment capital from destruction and spend far less time ‘getting back to even.’ Despite media commentary to the contrary, regaining losses is not an investment strategy. 

8 Reasons To Hold Cash

1) We are speculators, not investors. We buy pieces of paper at one price with hopes of selling at a higher price. Such is speculation in its purest form. When risk outweighs rewards, cash is a good option. 

2) 80% of stocks move in the direction of the market. If the market is falling, regardless of the fundamentals, the majority of stocks will decline also.

3) The best traders understand the value of cash. From Jesse Livermore to Gerald Loeb, each believed in “buying low and selling high.” If you “sell high,” you have raised cash to “buy low.”

4) Roughly 90% of what we think about investing is wrong. Two 50% declines since 2000 should have taught us to respect investment risks.

5) 80% of individual traders lose money over ANY 10-year period. Why? Investor psychology, emotional biases, lack of capital, etc. Repeated studies by Dalbar prove this. 

6) Raising cash is often a better hedge than shorting. While shorting the market, or a position, to hedge risk in a portfolio is reasonable, it also merely transfers the “risk of being wrong” from one side of the ledger to the other. Cash protects capital and eliminates risk. 

7) You can’t “buy low” if you don’t have anything to “buy with.” While the media chastises individuals for holding cash, it should be somewhat evident that without cash you can’t take advantage of opportunities.

8) Cash protects against forced liquidations. One of the biggest problems for Americans  is a lack of cash to meet emergencies. Having a cash cushion allows for handling life’s “curve-balls,” without being forced to liquidate retirement plans.Layoffs, employment changes, etc. are economically driven and tend to occur with downturns that coincide with market losses. Having cash allows you to weather the storms.

Conclusion

Importantly, I want to stress that I am not talking about being 100% in cash.

I am suggesting that holding higher levels of cash during periods of uncertainty provides both stability and opportunity.

With the political, fundamental, and economic backdrop becoming much more hostile toward investors in the intermediate term, understanding the value of cash as a “hedge” against loss becomes much more important. 

Given the length of the current market advance, deteriorating internals, high valuations, and weak economic backdrop, reviewing cash as an asset class in your allocation may make some sense.

Chasing yield at any cost has typically not ended well for most.

Of course, since Wall Street does not make fees on investors holding cash, maybe there is another reason they are so adamant that you remain invested all the time.

via ZeroHedge News https://ift.tt/3hZN5dV Tyler Durden

Gun Stocks Bang Higher As July Background Checks Jump 79%

Gun Stocks Bang Higher As July Background Checks Jump 79%

Tyler Durden

Mon, 08/03/2020 – 12:51

Firearms stocks moved higher on Monday after gun background checks rose 79% in July year-over-year amid violent protests which have gripped major cities across the United States. That said, the number of checks was lower than all-time records set in March and June.

Shares in Ruger and Smith and Wesson enjoyed gains of more than 5% and 9% respectively on Monday, while taser manufacturer Axon Enterprise were up more than 5%.

The FBI ran over 3.6 million background checks through the National Instant Criminal Background Check System (NICS) last month – the third-highest on record, behind 3.9 million checks in June and 3.7 million checks in March.

Guns have been flying off the shelves since the May 25 killing of George Floyd, who died after a Minneapolis police officer knelt on his neck for more than eight minutes – an incident which triggered nationwide protests against the police and racial inequality, which have devolved into violence and property destruction in major cities as well as several suburbs.

via ZeroHedge News https://ift.tt/39R2kD3 Tyler Durden

Face Masks Confuse Facial Recognition Technology

westendrf524287

Americans can’t agree on whether face masks are a good way to reduce the threat of transmitting COVID-19. We’ve even turned mask-donning into a symbol of partisan affiliation; those who would make them compulsory everywhere face off against those who refuse them under all circumstances. But we should at least be able to agree that face coverings are a great way to defeat the surveillance stateespecially now that the U.S. government has conceded that masks confuse the hell out of facial recognition technology.

“Using unmasked images, the most accurate algorithms fail to authenticate a person about 0.3% of the time,” the U.S. National Institute of Standards and Technology (NIST), a federal agency, reported last week. “Masked images raised even these top algorithms’ failure rate to about 5%, while many otherwise competent algorithms failed between 20% to 50% of the time.”

Notably, the NIST test focused on one-to-one matching of a face against a single photo, as you might do to unlock a cellphone or at a passport checkpoint. One-to-one systems are carried out under conditions of near-ideal lighting and camera placement, and so are more reliable than one-to-many matches of faces against databases that are conducted during surveillance of public places. Masks should be expected to be even more effective at increasing failure rates of one-to-many facial recognition systems.

“The more of the nose a mask covers, the lower the algorithm’s accuracy,” the NIST report adds of the digitally simulated coverings used in the study. “The study explored three levels of nose coverage—low, medium and high—finding that accuracy degrades with greater nose coverage.”

Perhaps more surprisingly, black masks turned out to defeat matching algorithms more thoroughly than did light-blue masks. The researchers speculate that very dark and very light masks might confuse cameras’ automatic light-exposure controls. So, the ninja look isn’t just aesthetically pleasing, it’s also practical from a privacy perspective.

The NIST report confirms fears voiced in a May 22 Department of Homeland Security (DHS) notice that people could take advantage of mask-wearing to defeat surveillance efforts. Part of the recent BlueLeaks hack of law enforcement documents published by Distributed Denial of Secrets, the notice warned:

We assess the widespread use of masks for public safety could likely continue to impact the effectiveness of face recognition systems even after federal or state mandates for their use are withdrawn as portions of the general population will likely continue to voluntarily wear face coverings in public even after restrictions on social gatherings are lifted or until an effective COVID-19 vaccine is publicly available.

The notice also talked of other means of defeating facial recognition technology, including blue and green lasers to blind cameras, “clothing or accessories with images of faces, license plates, or pixelated images” to confuse algorithms, and specialized hats and other accessories that emit infrared light that can wash-out camera images.

I’ll add here that I performed a casual experiment with an infrared flashlight clipped to the visor of a baseball cap, and my face was mostly obscured by a white blob on the image transmitted by a home-security camera.

Some clever entrepreneurs have deliberately targeted the market for surveillance-defeating fashion, producing dazzling eyeglasses and distracting clothing intended to drive facial recognition technology to distraction. The tactic is apparently effective, although perhaps at the price of making people look a bit like Elton John impersonators.

Now you can add to the list of effective anti-surveillance tools the fabric masks that some jurisdictions require us to wear in the name of  public health.

That government officials are going to end up awfully conflicted over whether to mandate or forbid masks in the years to come is obvious from the case of Hong Kong. Last October, the Hong Kong government banned the wearing of facial coverings in public places because pro-democracy demonstrators had adopted them to deter surveillance efforts by Chinese authorities. Now, the same officials require the wearing of masks in public places as part of efforts against the pandemic.

It’s hard to be a control freak.

Similar concerns prevail in the U.S. as federal and state law enforcement agencies convert databases from sources including the U.S. State Department and state motor vehicle departments into a treasure trove of images against which to match surveillance of public places. As of last summer, the FBI had compiled a collection of 640 million faces to peruse.

Government officials may promote mask-wearing now but, as the DHS notice demonstrates, they’re already worried about the effect that normalizing facial coverings has on high-tech surveillance programs. It could be frustrating to spend years developing sophisticated algorithms, and networks of cameras connected to vast databases, only to see the expensive effort thwarted by the popularization of the bandit look.

That’s not to say that face masks are necessarily an absolute check on surveillance. As the NIST report points out, concealing the face to one extent or another reduces the reliability of facial recognition technology, but it doesn’t completely eliminate matches.

Some security companies—particularly those serving China’s police state—claim that their facial recognition technology can work around masks by matching images of people’s eyes. “But the system struggles to identify people with both a mask and sunglasses,” Reuters reports.

NIST plans to assess such mask-accommodating technology in the near future.

“We have begun by focusing on how an algorithm developed before the pandemic might be affected by subjects wearing face masks,” says Mei Ngan, an author of the report. “Later this summer, we plan to test the accuracy of algorithms that were intentionally developed with masked faces in mind.”

NIST also plans to test one-to-many searches to assess the impact of face masks on surveillance of public places.

For privacy-minded people who are skeptical of public health arguments in favor of face masks, the pandemic may prove to be less of a reason to wear face coverings than an excuse to do just that. And we may as well throw in sunglasses and a hat, just to be sure.

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A Very Blessing Through All One’s Days

When I was a high school senior looking at schools, I visited Yale for a student weekend. I didn’t end up at Yale, but a plaque I saw in the Jonathan Edwards College dining hall made a deep impression on me. I don’t know who Robert Chapman Bates was, but his words influenced the course of my life. As I’m about to start my 28th year as a professor (and my 15th at St. John’s), his quote still rings true for me. Here it is, for all the other professors who follow this blog. Happy new semester, everyone:

But if you can’t help it, do go into teaching

For it is the only profession I know of

In which even discouragement and defeat are sweet;

In which the unattained goal is a reward;

In which the not-complete failure is a triumph

And a very blessing through all one’s days.

— Robert Chapman Bates, Fellow of this College 1933-1942

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Some clear thinking on gold at its all-time high

For as long as I can remember, I’ve been a fan of Bruce Lee.

I was probably about four years old when I first watched one of his movies. And I was instantly hooked. The guy was legendary.

As a teenager, I learned more about how he lived, and I began to admire his tenacity, discipline, and relentless pursuit of self-improvement… qualities that I endeavored to attain.

I remain a fan to this day. In fact there’s even a Bruce Lee mural on the wall at our office in Chile.

So when I had the opportunity to purchase some of Bruce Lee’s artwork a few years ago– sketches that he drew with his own hand– I jumped at the chance.

It cost me around $8,000… but it was the best money I ever spent. I had it professionally framed and hung in my home, and it’s probably my most prized possession.

I doubt I’ll ever sell it. But it’s the only asset that I allow myself to be sentimental about.

In everything else related to money, I force myself to be unemotional. I don’t fall in love with prospective investments, nor do I have an emotional attachment to businesses that I own.

You hear this a lot with entrepreneurs, who often refer to their companies as ‘their baby’.

I don’t have that view. Bruce Lee aside, I’m willing to sell any asset for the right price… especially if someone is willing to pay far more than what I think it’s worth, or what it could be worth in the future.

And this brings me to gold.

The price of gold is now at an all-time high in nearly every major currency, including US dollars. On Friday, in fact, gold briefly passed $2,000 per ounce, and it’s still hovering near that figure now.

A lot of people have an emotional attachment to gold… a borderline fanaticism.

I don’t. I write about gold quite frequently. But I’m not a ‘gold bug’.

My views on gold are unemotional, grounded in a rational understanding of gold’s advantages, and the disadvantages of the financial system. I’ve written about this extensively.

But one important thing to understand about gold is that it can be very difficult to value.

I can much more easily value a business like Apple, or private company that I own. The analysis is never perfect, but I can project future cash flows and market-based asset prices, and derive an appropriate value for what an asset is worth.

But gold does not intrinsically generate cash flow like a business or rental property, so that analysis doesn’t work.

People often try to predict the price of gold by examining certain financial benchmarks.

For instance, in theory there are some loose relationships between the gold price and the money supply. But these relationships are far from perfect.

The previous peak for gold was in 2011 when it reached around $1900. The gold price then fell for more than four years, reaching a low of around $1,000 in December 2015.

Yet during that 4+ year period, the Federal Reserve’s balance sheet increased 70% from $2.6 trillion to $4.4 trillion, and M2 money supply in the US increased 30% from $9.5 trillion to 12.3 trillion.

Gold should have performed well from 2011 to 2015 given all the money the Fed was printing. Yet instead the gold price fell.

There’s another theory that gold prices increases because the dollar is weak. But this relationship is also far from perfect.

In the summer of 2018, I wrote note to our readers suggesting that it was a good time to buy gold, and that the price could double over the next few years.

At the time, the gold price was around $1200. But the ‘Dollar Index,’ i.e. the standard financial benchmark for the US dollar’s relative strength, was around 94.

Today gold is at a record high– up more than 60% since I wrote that article. Yet the dollar index is almost exactly the same– 93.8.

But if the theory is true, the gold price should be the same as it was in summer of 2016.

Finally, there’s a theory that the gold price is correlated with ‘real interest rates’, i.e. the rate of interest after adjusting for inflation.

This relationship is also far from perfect; real interest rates in 2011 and 2012, for example, were negative. Yet the gold price was falling.

Real rates in 2017 were rising. But the gold price was also rising. So this theory is also flawed.

The bottom line is that there’s no magic formula to tell us what the gold price should be. Dollar weakness, real rates, and money supply are all useful indicators. But they’re not predictors.

It’s fair to say, for example, that gold is still undervalued right now relative to recent growth in the Feds balance sheet.

Or that, over very long periods of time as central bankers print money and create inflation, gold tends to keep up.

After all, gold has a 5,000 year track record of holding its value against inflation.

In the short-term, however, the biggest driver of gold prices ironically seems to be emotion… specifically negative emotions like fear and mistrust.

Few people buy gold because they’re happy. Some forward-thinking central banks and investors may buy gold when it’s cheap because they understand its value and potential.

But for the most part, the price rises when people lose confidence in the financial system, in their government, in their central bankers, or in each other.

And that’s what we’re seeing now.

Nearly every government around the world looks incompetent and heavy-handed against the Coronavirus.

Central bankers seem desperate.

Banks are sitting on trillions of dollars of losses, while regulators have actually asked the public ‘please do not withdraw your money.’

And social cohesion has practically collapsed. People are ripping each other apart over masks, social justice, political views, and just about everything else.

It’s hard to have trust and confidence at a time like this. And that’s been a key driver of the gold price.

If you own gold, congratulations. You’ve done well. But don’t be emotional about it.

A record high milestone like this is a good time to check your outlook; be rational and determine whether you want to buy, sell, or hold at this level.

Being rational means being able to see all sides of an issue.

You could easily make a strong case that the fear, uncertainty, and desperation could continue for quite some time. And that, long-term, gold continues to make sense.

You could also make a case that, given how quickly gold has risen in price, a short-term correction may be in order. Or that some of the fear subsides if a Covid vaccine is produced.

Remember that great quote from F. Scott Fitzgerald– “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”

Source

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Face Masks Confuse Facial Recognition Technology

westendrf524287

Americans can’t agree on whether face masks are a good way to reduce the threat of transmitting COVID-19. We’ve even turned mask-donning into a symbol of partisan affiliation; those who would make them compulsory everywhere face off against those who refuse them under all circumstances. But we should at least be able to agree that face coverings are a great way to defeat the surveillance stateespecially now that the U.S. government has conceded that masks confuse the hell out of facial recognition technology.

“Using unmasked images, the most accurate algorithms fail to authenticate a person about 0.3% of the time,” the U.S. National Institute of Standards and Technology (NIST), a federal agency, reported last week. “Masked images raised even these top algorithms’ failure rate to about 5%, while many otherwise competent algorithms failed between 20% to 50% of the time.”

Notably, the NIST test focused on one-to-one matching of a face against a single photo, as you might do to unlock a cellphone or at a passport checkpoint. One-to-one systems are carried out under conditions of near-ideal lighting and camera placement, and so are more reliable than one-to-many matches of faces against databases that are conducted during surveillance of public places. Masks should be expected to be even more effective at increasing failure rates of one-to-many facial recognition systems.

“The more of the nose a mask covers, the lower the algorithm’s accuracy,” the NIST report adds of the digitally simulated coverings used in the study. “The study explored three levels of nose coverage—low, medium and high—finding that accuracy degrades with greater nose coverage.”

Perhaps more surprisingly, black masks turned out to defeat matching algorithms more thoroughly than did light-blue masks. The researchers speculate that very dark and very light masks might confuse cameras’ automatic light-exposure controls. So, the ninja look isn’t just aesthetically pleasing, it’s also practical from a privacy perspective.

The NIST report confirms fears voiced in a May 22 Department of Homeland Security (DHS) notice that people could take advantage of mask-wearing to defeat surveillance efforts. Part of the recent BlueLeaks hack of law enforcement documents published by Distributed Denial of Secrets, the notice warned:

We assess the widespread use of masks for public safety could likely continue to impact the effectiveness of face recognition systems even after federal or state mandates for their use are withdrawn as portions of the general population will likely continue to voluntarily wear face coverings in public even after restrictions on social gatherings are lifted or until an effective COVID-19 vaccine is publicly available.

The notice also talked of other means of defeating facial recognition technology, including blue and green lasers to blind cameras, “clothing or accessories with images of faces, license plates, or pixelated images” to confuse algorithms, and specialized hats and other accessories that emit infrared light that can wash-out camera images.

I’ll add here that I performed a casual experiment with an infrared flashlight clipped to the visor of a baseball cap, and my face was mostly obscured by a white blob on the image transmitted by a home-security camera.

Some clever entrepreneurs have deliberately targeted the market for surveillance-defeating fashion, producing dazzling eyeglasses and distracting clothing intended to drive facial recognition technology to distraction. The tactic is apparently effective, although perhaps at the price of making people look a bit like Elton John impersonators.

Now you can add to the list of effective anti-surveillance tools the fabric masks that some jurisdictions require us to wear in the name of  public health.

That government officials are going to end up awfully conflicted over whether to mandate or forbid masks in the years to come is obvious from the case of Hong Kong. Last October, the Hong Kong government banned the wearing of facial coverings in public places because pro-democracy demonstrators had adopted them to deter surveillance efforts by Chinese authorities. Now, the same officials require the wearing of masks in public places as part of efforts against the pandemic.

It’s hard to be a control freak.

Similar concerns prevail in the U.S. as federal and state law enforcement agencies convert databases from sources including the U.S. State Department and state motor vehicle departments into a treasure trove of images against which to match surveillance of public places. As of last summer, the FBI had compiled a collection of 640 million faces to peruse.

Government officials may promote mask-wearing now but, as the DHS notice demonstrates, they’re already worried about the effect that normalizing facial coverings has on high-tech surveillance programs. It could be frustrating to spend years developing sophisticated algorithms, and networks of cameras connected to vast databases, only to see the expensive effort thwarted by the popularization of the bandit look.

That’s not to say that face masks are necessarily an absolute check on surveillance. As the NIST report points out, concealing the face to one extent or another reduces the reliability of facial recognition technology, but it doesn’t completely eliminate matches.

Some security companies—particularly those serving China’s police state—claim that their facial recognition technology can work around masks by matching images of people’s eyes. “But the system struggles to identify people with both a mask and sunglasses,” Reuters reports.

NIST plans to assess such mask-accommodating technology in the near future.

“We have begun by focusing on how an algorithm developed before the pandemic might be affected by subjects wearing face masks,” says Mei Ngan, an author of the report. “Later this summer, we plan to test the accuracy of algorithms that were intentionally developed with masked faces in mind.”

NIST also plans to test one-to-many searches to assess the impact of face masks on surveillance of public places.

For privacy-minded people who are skeptical of public health arguments in favor of face masks, the pandemic may prove to be less of a reason to wear face coverings than an excuse to do just that. And we may as well throw in sunglasses and a hat, just to be sure.

from Latest – Reason.com https://ift.tt/3fpKIPZ
via IFTTT

A Very Blessing Through All One’s Days

When I was a high school senior looking at schools, I visited Yale for a student weekend. I didn’t end up at Yale, but a plaque I saw in the Jonathan Edwards College dining hall made a deep impression on me. I don’t know who Robert Chapman Bates was, but his words influenced the course of my life. As I’m about to start my 28th year as a professor (and my 15th at St. John’s), his quote still rings true for me. Here it is, for all the other professors who follow this blog. Happy new semester, everyone:

But if you can’t help it, do go into teaching

For it is the only profession I know of

In which even discouragement and defeat are sweet;

In which the unattained goal is a reward;

In which the not-complete failure is a triumph

And a very blessing through all one’s days.

— Robert Chapman Bates, Fellow of this College 1933-1942

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Roubino: Why So Many Cities Are Paralyzed

Roubino: Why So Many Cities Are Paralyzed

Tyler Durden

Mon, 08/03/2020 – 12:30

Authored by John Rubino via DollarCollapse.com,

Sympathy for America’s big-city mayors and their allies is evaporating – generally for good reason. Portland and Seattle, for instance, seemed willing to give rioters a free hand before belatedly stepping in. And of course there’s the amazing quote from Chris Cuomo, the brother of New York’s Governor : 

“Please, show me where it says protesters are supposed to be polite and peaceful.”

The worst-run cities will pay a huge price for this indecision when rioters finally leave but shoppers and merchants don’t come back.

But like most things in this increasingly messy world, the big-city mayor story is way more complicated (and maybe more sympathetic) than it seems at first glance.

Let’s take it in stages.

Many US cities were already headed for bankruptcy

It’s easy to forget that less than a year ago – when the national economy seemed pretty strong and people were borrowing and spending with abandon – the unfunded liabilities of Chicago, Los Angeles, New York and a long list of other venerable cities were already out of control and threatening those governments’ solvency.

In the next recession and/or equities bear market, big pension plans like California’s CalPers and Chicago’s Teachers Pension Fund, were going to topple into some form of default, taking local bond ratings into junk territory and forcing draconian cuts in public services. On DollarCollapse.com there’s a 30-part series called Welcome To The Third World that chronicles the deterioration of public finance and how it will leave many US cities looking more like Caracas than Zurich.

Today’s big-city mayors are just the latest in a long line of leaders who bought labor peace and public sector votes by paying teachers, police, and firefighters way more than was mathematically possible in the long run. But the way can-kicking works is that the people who start the game get out with their reps and fortunes intact while the people in charge at the end get all the blame. In other words, today’s mayors were in deep trouble even in a normal business cycle.

Then came the pandemic

Depending on who’s pontificating, covid-19 is either a deadly health threat or a catastrophic overreaction by ignorant and panicked governments.

Either way, it produced much higher-than-expected health care costs and vastly lower tax revenues, ripping city budgets to shreds. So the inevitable end-of-cycle recession has been replaced by its bigger, meaner, butt-ugly brother, and cities that were teetering on the edge of insolvency are now demonstrably, undeniably broke.

Public workers, in short, were going to be fired in droves and services curtailed on a scale that even the biggest critics of municipal finances didn’t see coming this soon.

Then came the riots

The past few weeks’ civil unrest exploded seemingly out of nowhere — but was actually the inevitable result of an aristocracy systemically impoverishing regular people, combined with a multi-month lockdown that prevented millions from paying for health care or housing, and in many cases food.

Overwhelming burden

Add it all up and the result is an overwhelming financial and political burden for a typical mayor. But the nature of this civil unrest presents a completely different kind of challenge – which takes us to the part that you may not like because it calls for a bit of empathy.

Consider:

Most big-city mayors are liberals, which isn’t surprising given the voting patterns of urban populations. And not just any old liberals, but hard-core, all-in civil-rights-obsessed liberals who remember (or grew up on tales of) the civil rights movement of the 1960s and have modeled their political lives accordingly.

Most of them fantasize about being this generation’s Marin Luther King, leading a massive march on Washington that forces historic changes in how the least among us are treated.

They thought they’d finally gotten their chance when the current protests erupted, and gleefully tried to get in front of the crowd, no doubt hoping to not just encourage it but lead it.

That’s an admirable goal. But this is not Martin Luther King’s movement.

When, for instance, the mayor of Portland showed up expecting to be welcomed with open arms – he was one of them after all – the reaction was just slightly different.

Now Portland and Seattle look like the set of a Mad Max film, and their mayors, along with many others across the country, are confronting not just riots, but a repudiation of their life’s work. If they’re not civil rights leaders, what are they?

That – not their supposed hard-core Marxism — explains the mayors’ indecision: They know they’re required to protect their small businesses and peaceful citizens. But to do that they have to cross their people, who, until just a couple of weeks ago, defined the mayors’ political careers. They’d sooner arrest their own children.

Put another way, big-city Democrat mayors have gone from being – in their own minds – exactly the right people for this historical moment to being exactly the wrong people. They have no idea how to reconcile their self-image and life’s work with this baffling new world, and they’re paralyzed.

And their cities – already headed for catastrophe – might never be the same.

via ZeroHedge News https://ift.tt/3kalBE7 Tyler Durden

Men’s Wearhouse Files For Bankruptcy

Men’s Wearhouse Files For Bankruptcy

Tyler Durden

Mon, 08/03/2020 – 12:15

As we previewed on month ago in ‘Work-From-Home’-Epidemic Set To Bankrupt Suit-Sellers, “I Guarantee It“, on Monday the retail wreck continued on Sunday when Tailored Brands, the owner of Men’s Wearhouse filed for bankruptcy, adding to a list of brick-and-mortar retailers that have succumbed to the economic fallout from the COVID-19 crisis.

The retailer filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. Tailored Brands said in a statement that it has entered into a restructuring agreement with more than 75% of its senior lenders, and that could reduce the company’s debt by at least $630 million. The company also said it has received commitments for $500 million in debtor-in-possession financing from its existing lenders. In the court filing, the company listed both its assets and liabilities in the range of $1 billion to $10 billion.

The Houston, Texas-based retailer, which was already struggling with competition from fast-fashion brands and a shift to online shopping before the pandemic, said it will continue to build on its previously announced plans to reduce its corporate workforce by 20% and shut as many as 500 stores.

The company’s four retail brands, including Moores Clothing for Men and K&G Fashion Superstore, will continue to operate through the process. It employs 18,000 workers and operates 1,274 retail and apparel rental stores in the U.S. and 125 in Canada, according to court documents.

Tailored Brands was in a tough spot before the outbreak: sales had fallen every year since 2016 as Men’s Wearhouse and Jos. A. Bank contended with changing consumer tastes and e-commerce rivals. “The unprecedented impact of Covid-19 requires us to further adapt and evolve,” Chief Executive Officer Dinesh Lathi said in a statement.

Despite its filing which will eliminate most of the company’s debt. Tailored Brands is gradually returning to normal operations after the coronavirus temporarily shut its doors. It re-opened just under half of its stores as of June 5, according to a statement. All of them, as well as e-commerce distribution centers in the U.S. and Canada, were temporarily closed in the first quarter.

The company traces its roots to 1973, when George Zimmer started Men’s Wearhouse in the Houston area. He would go on to become the face of the brand, starring in television commercials spouting his catchphrase “You’re going to like the way you look — I guarantee it,” before he was ousted in 2013. It acquired Jos. A. Bank the following year.

Tailored Brands has hired law firm Kirkland & Ellis LLP as legal advisor, investment bank PJT Partners as financial advisor and AlixPartners as restructuring advisor according to Bloomberg.

* * *

With its filing, Tailored Brands became the latest to collapse as a result of widespread economic lockdowns which have drained revenue, pushing already-struggling companies like J.C. Penney, J. Crew Group, and Neiman Marcus Group into bankruptcy. Lord & Taylor also filed Chapter 11 on Sunday.

The following chart from ReorgFirstDay shows the precipitous surge of retail chain bankruptcies in just the first half of 2020, with many still on deck.

As Reuters notes, apparel retailers have been among the worst hit from the coronavirus crisis as their businesses were considered non-essential and their stores had to be closed. They were forced to limit operations to online, which led to furloughing of staff and unpaid leases and rents.

Separately, Lord & Taylor, a storied department store chain founded in 1826, billed as the oldest in the United States, also filed for Chapter 11 bankruptcy on Sunday.

via ZeroHedge News https://ift.tt/39ScFi0 Tyler Durden