Stocks Crash, Hit By Biggest Sell Program On Record; Retail Favorites Implode

Stocks Crash, Hit By Biggest Sell Program On Record; Retail Favorites Implode

Tyler Durden

Thu, 06/11/2020 – 15:06

If it feels like this is a market that is increasingly careening from one extreme to the other, it’s because it is.

Just three weeks after we recorded the highest TICK print in history, when it hit a record 2,049, at the start of Thursday’s furious selloff, the number of stocks falling on the NYSE exceeded those rising by a record 2,058 as the biggest selling program on record swept across stocks, sending the S&P tumbling more than 5%, with every stock in the Dow deep in the red.

As Bloomberg’s Sarah Ponczek notes, while this isn’t the first time extreme TICK readings have appeared this year, most thrusts have been in favor of buying, at least in recent months.

While many investors had been expecting a selloff after the record 40% rally from the March 23 lows, with technical indicators pointing to the most overbought market since 1991…

… and retail daytraders declaring they are “better than Buffett” by scooping bankrupt firms left and right and sending them soaring, the fact that the market is crashing one day after one of the Fed’s most dovish announcement in history is certainly ominous.

And for nobody more so than the same retail traders who helped push stocks to the stratosphere in recent months: a Goldman index of “Retail Favorite” stocks, has plunged almost 10% today and is down almost 20% from its all time high hit just this Monday.

Then again, it will take much more than a one-day selloff to spook the horde of retail traders who after the recent surge in their holdings – today’s crash notwithstanding – now feel virtually invincible.

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Luongo: “Today, We’re Living Orwell’s Nightmare On Crack”

Luongo: “Today, We’re Living Orwell’s Nightmare On Crack”

Tyler Durden

Thu, 06/11/2020 – 14:45

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

People wonder why I love Star Wars so much.

When dealing with people who have a bad religion, in this case The State, there is no limit to their demands. As a religion the State is merciless. It has no capacity for forgiveness. It dictates. We obey or eventually we get shot.

That’s what has been substituted in the West for Christianity. And Christianity, across nearly all of its sects, has failed to contain the State or provide the means and the frameworks to reinforce constructive behavior.

Boomerville is real folks, it’s on fire right now and our political leadership has taken a knee to the mob.

If you bargain with them they will just use that as a stepping stone to the next demand. The mayor of Seattle, Jenny Durkan, gave Antifa the East Precinct.

Two days later after setting up an autonomous zone within the city, they show up at City Hall to demand her resignation for not doing more.

This is why you don’t negotiate with terrorists, whether they wear a government badge and uniform, a scarf around their head or black masks and hoodies.

We have negotiated with all of these different looters and takers for too long.

We have no one to blame but ourselves for this mess.

Remember, governments don’t bargain with us. They pretend to in election years. They dictate because they have the monopoly power over the use of force. As the society degrades and more behavior is outlawed more black markets spring up.

In the case of the Drug War the economic incentive to first deal drugs and then defend the business is what has created the upward spiral of violence and distrust.

Police are tasked with using force to stop drug trafficking. They use violence to do this. The dealers are incentivized through economic demand to defend their businesses with equal or greater violence while also finding ways to artificially boost demand.

I could have just as easily used military weapons and foreign policy to describe the same problem. Remove the illegality, you dismantle the incentive structure.

But it also applies to the willingness of people to break out against the lock downs of COVID-19.

Because the State can use violence to suppress people’s choices but it cannot suppress their desire to make that choice. Remove the violence and the behavior returns.

But at some point there is a limit to what level of violence and pettiness by the State the people will endure. And when that limit is reached, it explodes.

Place that explosion in the context of cultural degradation and ennui where basic definitions of culture, economics and biology are inverted and you get what’s happening across America and Europe right now.

Seattle is getting a first hand lesson on how this plays out.

My latest podcast talks about this and Jonathan Pageau’s ideas of where we are in the cultural cycle.

Today we live in Orwell’s nightmare on crack. Not only are genders questioned, words hurt more than broken ribs, war is waged for peace, diversity strength, families are tyrannical and freedom coercion.

But let’s not forget where this comes from — debt is money, savings is anti-growth, finance is production, work is for suckers and risk is the other guy’s problem.

There are looters everywhere on all sides of the divide. The Mayor of Seattle just learned the most valuable lesson, there is no placating people who hate you.

Your bargains without defending yourself are simply weakness. She will be the first one canceled because today she found out that no one is pure enough to be on their side.

And if they are canceling her, what do you think they’ll do to the rest of us if we continue appeasing them?

*  *  *

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Will the Cops Who Killed Kenneth Chamberlain After Illegally Breaking Into His Apartment Ever Be Held Accountable?

Around 5 a.m. on November 19, 2011, Kenneth Chamberlain, a 68-year-old former Marine and retired corrections officer with a heart condition, accidentally set off his LifeAid medical alert pendant while sleeping in his White Plains, New York, apartment. Unable to contact Chamberlain via its two-way audio box, LifeAid called the White Plains Department of Public Safety. Seventeen minutes later, police officers arrived to help Chamberlain. Instead they ended up killing him.

Nine years later, Chamberlain’s family is still trying to hold the officers who shot him dead after breaking into his home for no discernible reason accountable for their egregious actions that day, which needlessly turned an erroneous medical call into a lethal confrontation. The case vividly shows how hard it is to obtain compensation under 42 USC 1983, a federal statute that authorizes lawsuits against government officials who violate people’s constitutional rights.

In 2013 a federal judge dismissed several claims against the White Plains officers based on qualified immunity, which shields officials from liability when the rights they allegedly violated were not “clearly established” at the time. Three years later, the court dismissed several more claims. Then a jury rejected the two remaining claims, which alleged that Officer Anthony Carelli violated the Fourth Amendment and committed assault and battery under New York law by shooting Chamberlain. In 2018 the Justice Department closed its investigation of the incident, concluding that there was insufficient evidence to charge any of the officers.

The U.S. Court of Appeals for the 2nd Circuit recently revived some of the dismissed civil rights claims against those officers. But it remains highly uncertain whether Chamberlain’s family will ever obtain any measure of justice for a senseless death that could have been avoided if police had not decided to treat a man they were ostensibly trying to help as a dangerous criminal.

The details laid out in the 2nd Circuit’s May 29 decision, most of which are uncontested, are damning. Responding to the erroneous medical alert, the police dispatcher sent an ambulance and a squad car to Chamberlain’s apartment. “Despite the dispatcher’s warning that Chamberlain was a person with mental illness,” the court says, “the officers began banging loudly on his door and shouting demands that they be allowed to enter.” Chamberlain called LifeAid, saying, “The White Plains Police Department [is] banging on my door and I did not call them and I am not sick.” The LifeAid operator called the police dispatcher, trying to cancel the supposed rescue attempt. “They’re gonna make entry anyway,” the dispatcher replied. “They’re gonna open it anyway.”

Chamberlain repeatedly told the cops at the door he had not called for help and did not need it. At least one officer acknowledged that information, saying, “Mr. Chamberlain, your medical alert went off accidentally.” But the cops would not take no for an answer.

“Because Chamberlain continued to refuse to open his door, the officers radioed for
tactical reinforcements,” the 2nd Circuit says. “There were approximately twelve officers in the augmented police force when they attempted to gain entry. They were armed with heavy ‘tactical gear,’ including handguns, a beanbag shotgun, Taser, riot shield, and pepper spray.”

The police used a master key they obtained from the White Plains Housing Authority, which owned Chamberlain’s apartment, to unlock the door. When a slap lock prevented the door from opening completely, the cops used a Halligan bar to stop Chamberlain from closing it. At this point, they could clearly see that Chamberlain was fine, as he had been saying “lucidly, repeatedly, and emphatically” all along.

Seeing the heavily armed officers breaking into his apartment despite his insistence that they had no reason to be there, Chamberlain was understandably alarmed. “You gonna shoot me,” he said. “You got your gun ready.” Chamberlain “shouted repeatedly that he was convinced that the police were there to kill him.” That turned out to be a self-fulfilling prophecy.

Chamberlain grabbed a kitchen knife to fend off the intruders. “They have their guns out,” he told the LifeAid operator. “I have a weapon. I am protecting myself.” Now the cops, who had already viewed Chamberlain as a threat requiring “tactical reinforcements,” were even more convinced. “Every time we come to the door he sticks a knife out,” one of them complained.

While trying to force their way into the apartment, the cops mocked and belittled Chamberlain. “You ain’t no young kid,” one said. “You a grown-ass man.” Chamberlain’s relatives allege worse taunts—including “motherfucker” and “I don’t give a fuck, nigger”—that the defendants denied. The officers refused to let Chamberlain talk to his niece, who lived in the same building, or his sister, who was on the line with LifeAid from her home in North Carolina.

After an hour-long impasse, “despite Chamberlain’s repeated pleas that the
officers leave and the availability of a relative on-site to attempt to defuse the
situation, the officers forcibly removed Chamberlain’s door from its hinges.” At this point, “Chamberlain was standing some six to eight feet behind the doorway wearing only a pair of boxer shorts.” The cops entered and “in swift succession, tased Chamberlain (unsuccessfully), fired several beanbag shots at him (largely ineffectively), and fired two shots at him with a handgun. One of those bullets passed through Chamberlain’s lungs and ribs and severed his spine, killing him.”

Following George Floyd’s death in Minneapolis and the ensuing protests, there has been much discussion of reforms that could help prevent such horrifying incidents, including “de-escalation techniques.” Training in those techniques reportedly is one of the reforms favored by Republican senators. What is de-escalation? Exactly the opposite of what the cops did in White Plains.

At every step, the officers seemed determined to turn an accidental medical alert—an alert they knew was accidental—into a death sentence. They perversely insisted on “helping” a man who manifestly did not need it, who told them so over and over again, and rejected the intercession of relatives who might have helped calm him down. Far from showing compassion for a man they supposedly were trying to help, they taunted him. “Instead of treating Chamberlain as a critically ill patient,” the 2nd Circuit observes, “the officers acted as though he were a criminal suspect.” They broke into his home without cause, dressed for battle, and gunned him down because he had the temerity to defend himself.

If the leading exemplar of chutzpah is the legal strategy of a man who murders his parents and pleads for mercy because he is now an orphan, the defense used by the cops in this case has to count as a close second. They argued that their armed invasion of Chamberlain’s home was justified based on the “emergency aid” exception to the Fourth Amendment’s warrant requirement, meaning the “aid” that Chamberlain did not need and did not want.

“Based on the facts alleged and otherwise before the district court, viewed in
the light most favorable to Appellant, we conclude that a reasonable, experienced
officer would not have determined there was probable cause to believe that
Chamberlain needed urgent medical attention,” the 2nd Circuit says. “The officers outside of his apartment knew that the Life Alert system had been activated accidentally. The Life Aid operator informed the police dispatcher that Chamberlain was not in need of medical assistance. And Chamberlain himself firmly and repeatedly informed the officers that he had not called for help and was not in need of assistance of any kind, let alone urgent medical aid.”

Was it “clearly established” at the time that forcibly entering Chamberlain’s home without a warrant based on “exigent circumstances” that did not exist violated the Fourth Amendment’s ban on “unreasonable searches”? The district court thought not. The appeals court disagreed.

“The law was clearly established at the time of entry that a warrantless entry into a private dwelling, absent exigent circumstances, is unlawful,” the 2nd Circuit says. “It was further established that a warrantless entry in response to a medical concern is unlawful absent probable cause to believe that a person inside is in immediate danger.”

Because of this decision, Chamberlain’s family will finally be allowed to proceed with their unlawful-entry claims against five officers. The 2nd Circuit also ruled that the facts regarding the use of beanbag rounds need to be developed more before deciding whether the officer who fired them at Chamberlain should receive qualified immunity for that use of force. Likewise with the family’s claims that two officers contributed to Chamberlain’s death by failing to properly supervise the operation.

But as the 2016 verdict in favor of Officer Carelli shows, qualified immunity is by no means the only barrier to successfully suing police officers for constitutional violations. Even when plaintiffs manage to get their day in court, jurors are highly sympathetic to police officers and loath to second-guess their decisions.

During the trial, Carelli testified that he had “no other option” but to shoot Chamberlain “to protect the other officers.” Sgt. Keith Martin backed up that account. “I don’t believe I’d be standing here” if Carelli had not shot Chamberlain, Martin testified. “I thought I was going to get stabbed.” The officers said Chamberlain charged at Martin, knife in hand, leaving Carelli no choice.

Randolph McLaughlin, the lawyer representing Chamberlain’s family, disputed that account, saying Chamberlain was on the floor when he was shot. McLaughlin argued that the trajectory of the fatal bullet “makes it impossible for him to be holding a knife in his hand and advancing on police.” McLaughlin also questioned the cops’ claim that Chamberlain, a frail 68-year-old, was unfazed by four beanbag rounds.

In a situation like this, jurors tend to side with the police, whom they view as brave public servants risking their lives to protect the community. But in this case, the cops were supposed to be protecting Chamberlain, the man they killed. That outcome was completely avoidable, regardless of what Chamberlain did after the officers illegally broke into his home. It was the duty of these officers to avoid it, and they failed abysmally. Their actions demonstrated that they had no regard for Chamberlain’s life, let alone the sanctity of his home. Yet with or without qualified immunity, they may never be held accountable for actions that would send ordinary citizens to prison for life.

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Another Broken Market: “FX Trading Has Been Reduced To A Leap Of Faith In The Fed Put”

Another Broken Market: “FX Trading Has Been Reduced To A Leap Of Faith In The Fed Put”

Tyler Durden

Thu, 06/11/2020 – 14:24

With a growing chorus of established traders and strategists echoing what we have been saying for the past decade about the Fed’s catastrophic impact on capital markets, overnight BofA’s FX strategists led by Ben Randol have taken aim at yet another market which, until recently at least, appeared somewhat immune to the tinkering of central banks: currency trading.

As the bank’s FX traders posit, “traditional fundamentals have not mattered” as “FX trading has been reduced to a leap of faith in the Fed “put,” as evidenced by SPX being the only significant factor on average across the top G5 currency pairs in our multivariate framework for the last 10 weeks.” In short moves in equities – which are a function of central bank intervention in fixed income – now determine moves in FX.

Yet unlike some suggestions, such as that from Jim Bianco, that the Fed will never again be able to ease back off the accelerator, BofA has a somewhat optimistic conclusion, writing that “eventually, equity factor dominance will fade, and FX will once again reflect macro fundamentals.” Or so one hopes. That said, the bank’s traders writes that they have “serious doubts about the sustainability of the recent USD decline absent clarity on the longer-term pattern of recovery across the global economy, and particularly given the surge higher in relative US growth in recent quarters.” They argue that “even if the US growth advantage plummets to zero (from nearly 3% in 1Q), rate differentials are not justified below current levels. In fact, lags in relative growth suggest that US rates should rise on a relative basis. Alternatively put, US growth has to meaningfully underperform in the quarters ahead to justify lower relative rates and a weaker USD. Whatever the outcome, the pattern of global recovery from COVID-19 needs to be watched carefully as it will undoubtedly influence FX and the broader USD. Until then, however, the equity grip on FX could last a bit longer.”

In short, if anyone wants to trade stocks without actually trading central-bank manipulated stocks, the FX market is a welcome alternative.

The full BofA note is below.

FX market upended by liquidity-fueled equity rally

Getting FX right since late March-i.e., short USD broadly and long higher beta FX-has required buying into the strong US equity market rally. This has been made all the more challenging by the anticipatory nature of the market response in 2020 vs 2008-09, during which delivery on a massive monetary stimulus, not simply announcement, was required to stabilize markets.

As our factor analysis shows, traditional fundamentals have not mattered. FX trading has been reduced to a leap of faith in the Fed “put,” as evidenced by SPX being the only significant factor on average across the top G5 currency pairs in our multivariate framework for the last 10 weeks. This is unprecedented and antithetical to the way FX markets are supposed to work, as macro factors related to relative cycle and terms of trade have simply not been relevant. We do see the equity grip on FX eventually loosening as conditions normalize. Initial evidence suggests this may be starting to happen. This will make the pattern of recovery across the global economy critical for FX and the broad USD directionally. Absent significant US cyclical underperformance (not our baseline), we find it hard to rationalize a bearish long-term USD outlook and expect a medium-term rebound ahead.

A deluge of liquidity (again), but this time is different

COVID-19 prompted a Fed monetary policy response of historic proportions, but the risk asset response in comparison to 2008-09 has been strikingly different. Whereas in 2008-09 it took a 2.5x balance sheet expansion to finally stabilize the equity market after six months, the market began rocketing higher in 2020 merely on the announcement effect of stepped-up asset purchases (Chart of the day). Thus far, driven by a 1.75x rise in Fed assets, SPX has rallied by about 40% over the last 10 weeks, a somewhat faster rebound compared to early 2009, as well as more “efficient” one in the sense that it was achieved by proportionately less asset expansion in percentage terms. Global central banks are involved also. Our projections suggest the aggregate global central bank balance sheet will ultimately expand by 50% (+$7tn) in YoY terms (Chart 1). The world finds itself awash in liquidity – again.

Clearly, there are contextual factors to consider. First, in dollar terms the Fed’s expansion has been larger at $3tn and counting vs about +$1.3tn in the initial 2009 run-up. After all, levels do matter in addition to rates of change. Second, this time around US fiscal expansion has been highly aggressive at mid-double digits as measured in percent of GDP. And third, whereas the financial system was under existential threat in 2008, so far we have not seen this type of shock materialize, probably a self-reinforcing result of the Fed’s preemptive actions to stabilize markets. To be clear, we are not saying that the directional response of risk assets is ultimately wrong this time. But its anticipatory nature unambiguously suggests belief in a Fed “put” is operative. Indeed, balance sheet-based econometric models would have been bearish risk over the last couple of months, not bullish. Essentially, this is because in 2008-09 as Fed assets expanded risk assets fell (a negative correlation). In this way, the present reaction is akin to a leap of faith, made all the more striking by substantial downside economic and potential solvency risks lurking amid the worst global recession in modern history this year.

The point of all this is not to debate the equity market’s highly bullish verdict to date (we are skeptical), but rather describe in objective, quantifiable terms the profound effect that US equity market buoyancy-itself a reflection of generous liquidity provision-has had on the FX market. This “beach ball under water” effect has been truly seismic and disruptive to FX, as we aim to show. Although broader global sentiment shifts likely play a role, our analysis suggests US equity performance, specifically, has emerged as a critical driver of recent US dollar weakness and higher beta FX outperformance (Chart 2). While some FX risk premium compression is the inevitable by-product of aggressive policy response, recent FX market dynamics suggest that this time has been different, and moreover very challenging to call.

The great FX factor rotation

Our rolling multivariate factor analysis of USD-based FX pairs suggests a clearly visible rotation of explanatory factors occurring around the onset of financial market turbulence and subsequent policy response (Chart 3). Into February, a traditional paradigm prevailed under which 2y spot interest rate differentials were the dominant factor. Notably that month, terms of trade began to assert particularly late in the month as commodity (emphasis: energy) price weakness in response to spreading COVID-19 led to FX depreciation in cyclically sensitive pairs, particularly USD/CAD, AUD/USD and USD/NOK. From 20 February through mid-March, terms of trade supplanted spot interest rates as the sole statistically significant factor, as accelerating commodity price weakness spurred an ever-higher rate of adjustment among commodity-oriented FX. The broader USD rallied on perceived “safe haven” status as FX risk premium rose, effecting higher beta FX as well as EUR/USD and USD/JPY, which had initially adjusted on carry unwinds.

And then there was SPX

Beginning 20 March, the week of the Fed “bazooka,” the SPX factor took over as the sole statistically significant explanatory factor in our FX framework. Aside from brief resurgences in spot interest rates and economic data surprises (the latter likely reflective of a market briefly focused on the pattern of G10 growth profiles under COVID-19 influence), it has remained so ever since. Make no mistake, SPX is a consistent factor presence, being statistically significant on average about 45% of the time over the last 15 years, a distant second to spot rate differentials (significant on average about 80% of the time). This makes sense as US equities are correlated to global risk appetite, which tends to influence FX risk premium. However, two things stand out about the current factor configuration that are worth emphasizing.

First, with a beta of 0.20 on average since end-March (z-score of about 1), FX sensitivity to SPX has been notably elevated. This means that on average a 10% move higher in SPX is associated with a -2% move lower in spot USD on the pairs. For some pairs, SPX sensitivity has been more muted; for others, stronger (Chart 4). EUR initially benefitted from the first leg of the equity rally with a beta of about 0.10, as was the case more broadly vs USD. The beta then flipped negative from late April through late May, likely reflecting Euro Area policy coordination issues, before once again rising back to 0.10 as of early June. Consistent with historical pattern, JPY has consistently traded with a negative SPX beta in the -0.10 to -0.20 range since the equity rally began, but this influence has fallen off over the last week. GBP has consistently exhibited a positive beta around the 0.20 average, though it spiked higher (over 0.40) into April as the sterling selloff reversed sharply higher. CAD began the year with a high SPX beta of about 0.30, which compressed and fell out of significance during the risk meltdown as the terms-of-trade shock became the sole driver of adjustment. It has since risen back to 0.15. For AUD, sensitivity to SPX has been remarkably high and a standout story in G10 FX. Its SPX beta has steadily risen from 0.30 in the initial stages of the market rally to nearly 0.60 at present, meaning that a 10% rise in SPX has mapped to about a 6% rise in AUD/USD on average, about the 90th percentile historically.

Second and more importantly, SPX dominance as sole explanatory factor on average for the last 10 weeks in our multivariate framework is simply unprecedented. A review of history confirms this. Recently, the period late 2018 through early 2019 was no doubt an equity-influenced FX market (traditional fundamental factors remained statistically significant as well), but not an equity-driven one. One has to go back to the first half of August 2014 to find the last instance of sole equity factor dominance, and this lasted for a mere two weeks. Prior to that, we find September 2009, which is probably the closest macro analog in terms of crisis followed by policy response. We should point out, however, that by that point in the 2009 equity market rally US growth had rebounded into positive territory, in stark contrast to now (we are at the depths of contraction). The point being, there has never been a prior instance of the FX market being as a blatant a reflection of the US equity market for this length of time in the last 15 years, according to our analysis.

So what happens now?

Eventually, equity factor dominance will fade, and FX will once again reflect macro fundamentals. Our analysis suggests this could be starting to happen. Interest rate differential beta coefficients are beginning to rise toward more “normal” levels for some pairs, approaching thresholds of statistical significance (Chart 5). These include GBP/USD, USD/CAD and AUD/USD (for EUR/USD the coefficient is actually negative at present). To the extent that relative interest rates and the dollar reflect the broader relative growth cycle, this is a positive sign that fundamentals will start to matter for FX again. Related, we have serious doubts about the sustainability of the recent USD decline absent clarity on the longer-term pattern of recovery across the global economy, and particularly given the surge higher in relative US growth in recent quarters (Chart 6). Even if the US growth advantage plummets to zero (from nearly 3% in 1Q), rate differentials are not justified below current levels. In fact, lags in relative growth suggest that US rates should rise on a relative basis. Alternatively put, US growth has to meaningfully underperform in the quarters ahead to justify lower relative rates and a weaker USD. Whatever the outcome, the pattern of global recovery from COVID-19 needs to be watched carefully as it will undoubtedly influence FX and the broader USD. Until then, however, the equity grip on FX could last a bit longer.

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Facebook Says Page Celebrating “Dead Cops” Doesn’t Violate Its Community Standards

Facebook Says Page Celebrating “Dead Cops” Doesn’t Violate Its Community Standards

Tyler Durden

Thu, 06/11/2020 – 14:05

Authored by Paul Joseph Watson via Summit News,

Facebook has refused to remove a page celebrating “dead cops,” saying that it does not violate their community standards.

The page is titled The Only Good Cops Are Dead Cops and openly incites violence against police officers.

However, when it was reported to Facebook moderators, they reviewed the page and said that although it may be “offensive,” it doesn’t violate any specific community standards.

Meanwhile, another Facebook page set up by concerned parents that was critical of ‘Drag Queen Story Hour’ was banned by the social media giant.

500 Mom Strong was removed for “transphobic language,” including one post that merely stated, “Reminder: Women don’t have to be polite to someone who is making them uncomfortable.”

However, half a dozen other 500 Mom Strong parody pages set up by LGBT activists were left untouched.

“When I asked them about the half dozen other fake 500 Mom Strong pages that were put up by drag queens [and] used to parody 500 Mom Strong, I received no answer and the pages are still active,” said founder Anna Hall Bohach.

“There is also a fake profile, created by drag queens, using my name and information that has been reported multiple times by my friends and me that Facebook refuses to remove. I asked the Facebook representative about it and I still have yet to receive an answer,” she added.

*  *  *

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Market Bloodbath Unleashes Furious Robinhood-Based Dip-Buying

Market Bloodbath Unleashes Furious Robinhood-Based Dip-Buying

Tyler Durden

Thu, 06/11/2020 – 13:50

With stocks tumbling, and on pace for their worst day since the March turmoil, everyone’s favorite “new normal” indicator of irrational exuberance, the Robinhood brokerage is having a tough day, with the top 5 stocks down almost 10%, and the 15% most popular names in the past week tumbling over 15%.

Source: @NoonSixCap

This is taking place at a time when as Eric Balchunas points out, media mentions of the word “Robinhood” have surpassed mentions of the word “Vanguard.”

And yet despite today’s dismal market, which incidentally sees a big drop on relatively modest volume unlike the mega pukes observed in March, which indicates that institutions aren’t in full unwind mode…

… after shaking off the initial tumble, “hooders” appear to be doing what they do best, and after some early selling since the market opened, they are back in full BTFD mode, with far more position increases than decreases among the most popular stock of the day.

Why?

Because as Jim Bianco noted earlier, “the next time markets stumble, small investors can expect even more aggressive action by the Fed, such as buying equities. This is why they have the confidence to chase collapsed stocks like airlines, cruise ships, retailers and energy companies with reckless abandon. The rampant speculation has no reason to stop. In fact, many small investors are surely hoping for another market pullback to buy aggressively like they did in March.”

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Entering The Window Of Gigantic Positives

Entering The Window Of Gigantic Positives

Tyler Durden

Thu, 06/11/2020 – 13:35

Authored by Jeffrey Snider via Alhambra Investments,

According to Mexico’s Instituto Nacional de Estadística y Geografía (INEGI), the production of light automobiles rebounded in May 2020. Up more than 494% from April, the country managed to piece together 22 thousand units last month. And that was still 93.7% fewer than had been assembled during May 2019.

Auto production had been down almost 99%, so the rebound to -93.7% seems especially large particularly when you focus in on the short run rate of change. Near 500% sounds like an awesome turnaround, a sign of maybe something big, if that’s all you know.

COVID-19 shutdowns are being blamed, the disruption to supply chains which in autos are integrated across geography. Yet, why is the auto industry the only one forced into near-total stoppages? Not just in April, now for the second straight month and not just in Mexico.

Carmakers are an extreme example of what is surely an underlying economic problem, only (somewhat) caused and unleashed by the governmental overreach.

There’s more than just COVID-19 in these numbers, especially autos where especially liquidity and cash for working capital is crucial. Inventory + lack of liquidity = going out of business fire sales. Preserve cash at all costs, even if it means shutting everything down in every manufacturing location. Temporarily, of course.

The Big “D.”

There’s even the difference between sales and production to further corroborate the difficulties. US auto sales, an important contributor to Mexico’s vehicle industry, actually did rebound in May according the American Bureau of Economic Analysis. Bottoming out at a pace of 8.7 million (SAAR) in April, light vehicle sales came back to 12.2 million in May.

That was still down about 30% from the same month in 2019, of course, but it sure wasn’t anywhere approaching zero. Apparently, dealerships and their customers hadn’t been totally prevented from their business in the same way we are supposed to believe automakers had been.

No, the difference between production and sales is extreme caution being exercised by a cash-intensive industry pushed precariously on edge. Jay Powell’s magic words won’t (can’t) keep the lights on.

Gigantic positive numbers like we’re going to see more and more don’t mean as much as you’ll be led to believe. They only seem awesome if you completely ignore the even larger minuses which have preceded them everywhere.

For the record, car production in Brazil blew away Mexico’s “measly” +500%. Compared to April, Brazilian volume surged 2,232% in May. Then again, that was only because Brazil beat Mexico in April, too, only on the downside. While the latter managed -98.8%, the former had produced -99.3%.

The numbers look huge when you’ve been forced into starting from so small. If you aren’t careful, gargantuan positives can distract you from noticing the even more enormous hole and the tremendous damage you’ve already been stuck with. This kind of distraction will be the exact purpose of many over the coming months.

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Will the Cops Who Killed Kenneth Chamberlain After Illegally Breaking Into His Apartment Ever Be Held Accountable?

Around 5 a.m. on November 19, 2011, Kenneth Chamberlain, a 68-year-old former Marine and retired corrections officer with a heart condition, accidentally set off his LifeAid medical alert pendant while sleeping in his White Plains, New York, apartment. Unable to contact Chamberlain via its two-way audio box, LifeAid called the White Plains Department of Public Safety. Seventeen minutes later, police officers arrived to help Chamberlain. Instead they ended up killing him.

Nine years later, Chamberlain’s family is still trying to hold the officers who shot him dead after breaking into his home for no discernible reason accountable for their egregious actions that day, which needlessly turned an erroneous medical call into a lethal confrontation. The case vividly shows how hard it is to obtain compensation under 42 USC 1983, a federal statute that authorizes lawsuits against government officials who violate people’s constitutional rights.

In 2013 a federal judge dismissed several claims against the White Plains officers based on qualified immunity, which shields officials from liability when the rights they allegedly violated were not “clearly established” at the time. Three years later, the court dismissed several more claims. Then a jury rejected the two remaining claims, which alleged that Officer Anthony Carelli violated the Fourth Amendment and committed assault and battery under New York law by shooting Chamberlain. In 2018 the Justice Department closed its investigation of the incident, concluding that there was insufficient evidence to charge any of the officers.

The U.S. Court of Appeals for the 2nd Circuit recently revived some of the dismissed civil rights claims against those officers. But it remains highly uncertain whether Chamberlain’s family will ever obtain any measure of justice for a senseless death that could have been avoided if police had not decided to treat a man they were ostensibly trying to help as a dangerous criminal.

The details laid out in the 2nd Circuit’s May 29 decision, most of which are uncontested, are damning. Responding to the erroneous medical alert, the police dispatcher sent an ambulance and a squad car to Chamberlain’s apartment. “Despite the dispatcher’s warning that Chamberlain was a person with mental illness,” the court says, “the officers began banging loudly on his door and shouting demands that they be allowed to enter.” Chamberlain called LifeAid, saying, “The White Plains Police Department [is] banging on my door and I did not call them and I am not sick.” The LifeAid operator called the police dispatcher, trying to cancel the supposed rescue attempt. “They’re gonna make entry anyway,” the dispatcher replied. “They’re gonna open it anyway.”

Chamberlain repeatedly told the cops at the door he had not called for help and did not need it. At least one officer acknowledged that information, saying, “Mr. Chamberlain, your medical alert went off accidentally.” But the cops would not take no for an answer.

“Because Chamberlain continued to refuse to open his door, the officers radioed for
tactical reinforcements,” the 2nd Circuit says. “There were approximately twelve officers in the augmented police force when they attempted to gain entry. They were armed with heavy ‘tactical gear,’ including handguns, a beanbag shotgun, Taser, riot shield, and pepper spray.”

The police used a master key they obtained from the White Plains Housing Authority, which owned Chamberlain’s apartment, to unlock the door. When a slap lock prevented the door from opening completely, the cops used a Halligan bar to stop Chamberlain from closing it. At this point, they could clearly see that Chamberlain was fine, as he had been saying “lucidly, repeatedly, and emphatically” all along.

Seeing the heavily armed officers breaking into his apartment despite his insistence that they had no reason to be there, Chamberlain was understandably alarmed. “You gonna shoot me,” he said. “You got your gun ready.” Chamberlain “shouted repeatedly that he was convinced that the police were there to kill him.” That turned out to be a self-fulfilling prophecy.

Chamberlain grabbed a kitchen knife to fend off the intruders. “They have their guns out,” he told the LifeAid operator. “I have a weapon. I am protecting myself.” Now the cops, who had already viewed Chamberlain as a threat requiring “tactical reinforcements,” were even more convinced. “Every time we come to the door he sticks a knife out,” one of them complained.

While trying to force their way into the apartment, the cops mocked and belittled Chamberlain. “You ain’t no young kid,” one said. “You a grown-ass man.” Chamberlain’s relatives allege worse taunts—including “motherfucker” and “I don’t give a fuck, nigger”—that the defendants denied. The officers refused to let Chamberlain talk to his niece, who lived in the same building, or his sister, who was on the line with LifeAid from her home in North Carolina.

After an hour-long impasse, “despite Chamberlain’s repeated pleas that the
officers leave and the availability of a relative on-site to attempt to defuse the
situation, the officers forcibly removed Chamberlain’s door from its hinges.” At this point, “Chamberlain was standing some six to eight feet behind the doorway wearing only a pair of boxer shorts.” The cops entered and “in swift succession, tased Chamberlain (unsuccessfully), fired several beanbag shots at him (largely ineffectively), and fired two shots at him with a handgun. One of those bullets passed through Chamberlain’s lungs and ribs and severed his spine, killing him.”

Following George Floyd’s death in Minneapolis and the ensuing protests, there has been much discussion of reforms that could help prevent such horrifying incidents, including “de-escalation techniques.” Training in those techniques reportedly is one of the reforms favored by Republican senators. What is de-escalation? Exactly the opposite of what the cops did in White Plains.

At every step, the officers seemed determined to turn an accidental medical alert—an alert they knew was accidental—into a death sentence. They perversely insisted on “helping” a man who manifestly did not need it, who told them so over and over again, and rejected the intercession of relatives who might have helped calm him down. Far from showing compassion for a man they supposedly were trying to help, they taunted him. “Instead of treating Chamberlain as a critically ill patient,” the 2nd Circuit observes, “the officers acted as though he were a criminal suspect.” They broke into his home without cause, dressed for battle, and gunned him down because he had the temerity to defend himself.

If the leading exemplar of chutzpah is the legal strategy of a man who murders his parents and pleads for mercy because he is now an orphan, the defense used by the cops in this case has to count as a close second. They argued that their armed invasion of Chamberlain’s home was justified based on the “emergency aid” exception to the Fourth Amendment’s warrant requirement, meaning the “aid” that Chamberlain did not need and did not want.

“Based on the facts alleged and otherwise before the district court, viewed in
the light most favorable to Appellant, we conclude that a reasonable, experienced
officer would not have determined there was probable cause to believe that
Chamberlain needed urgent medical attention,” the 2nd Circuit says. “The officers outside of his apartment knew that the Life Alert system had been activated accidentally. The Life Aid operator informed the police dispatcher that Chamberlain was not in need of medical assistance. And Chamberlain himself firmly and repeatedly informed the officers that he had not called for help and was not in need of assistance of any kind, let alone urgent medical aid.”

Was it “clearly established” at the time that forcibly entering Chamberlain’s home without a warrant based on “exigent circumstances” that did not exist violated the Fourth Amendment’s ban on “unreasonable searches”? The district court thought not. The appeals court disagreed.

“The law was clearly established at the time of entry that a warrantless entry into a private dwelling, absent exigent circumstances, is unlawful,” the 2nd Circuit says. “It was further established that a warrantless entry in response to a medical concern is unlawful absent probable cause to believe that a person inside is in immediate danger.”

Because of this decision, Chamberlain’s family will finally be allowed to proceed with their unlawful-entry claims against five officers. The 2nd Circuit also ruled that the facts regarding the use of beanbag rounds need to be developed more before deciding whether the officer who fired them at Chamberlain should receive qualified immunity for that use of force. Likewise with the family’s claims that two officers contributed to Chamberlain’s death by failing to properly supervise the operation.

But as the 2016 verdict in favor of Officer Carelli shows, qualified immunity is by no means the only barrier to successfully suing police officers for constitutional violations. Even when plaintiffs manage to get their day in court, jurors are highly sympathetic to police officers and loath to second-guess their decisions.

During the trial, Carelli testified that he had “no other option” but to shoot Chamberlain “to protect the other officers.” Sgt. Keith Martin backed up that account. “I don’t believe I’d be standing here” if Carelli had not shot Chamberlain, Martin testified. “I thought I was going to get stabbed.” The officers said Chamberlain charged at Martin, knife in hand, leaving Carelli no choice.

Randolph McLaughlin, the lawyer representing Chamberlain’s family, disputed that account, saying Chamberlain was on the floor when he was shot. McLaughlin argued that the trajectory of the fatal bullet “makes it impossible for him to be holding a knife in his hand and advancing on police.” McLaughlin also questioned the cops’ claim that Chamberlain, a frail 68-year-old, was unfazed by four beanbag rounds.

In a situation like this, jurors tend to side with the police, whom they view as brave public servants risking their lives to protect the community. But in this case, the cops were supposed to be protecting Chamberlain, the man they killed. That outcome was completely avoidable, regardless of what Chamberlain did after the officers illegally broke into his home. It was the duty of these officers to avoid it, and they failed abysmally. Their actions demonstrated that they had no regard for Chamberlain’s life, let alone the sanctity of his home. Yet with or without qualified immunity, they may never be held accountable for actions that would send ordinary citizens to prison for life.

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Is Attending a Political Protest More Important than Attending a Funeral?

Over at my Times of Israel blog, I note the sudden shift of position of leading American (non-Orthodox) rabbis about the relative importance of preventing the spread of Coronavirus.

For example, that the Reform movement’s guidance, still up at its website, is that “Congregations should not facilitate or endorse any physical gathering of persons who do not already live in the same house.” However, leaders of Reform Judaism (among others) have now endorsed mass anti-racism protests, calling them the equivalent of “praying with your feet,” while apparently still holding to the position that traditional group prayer is forbidden, even if (unlike the protests) socially distanced.

You can read the whole post here.

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Cops Who Shot Homeless Man 22 Times While He Lay on the Ground Are Not Protected by Qualified Immunity, Appeals Court Rules

Five police officers who shot a homeless schizophrenic man 22 times after stopping him for walking in the street instead of on the sidewalk are not protected by qualified immunity, a federal appeals court ruled Tuesday. The officers can be sued in connection with the incident, cutting against a legal doctrine that often allows public officials to avoid liability for misconduct if the actions in question have not been explicitly addressed by a court precedent.

On March 13, 2013, Wayne Jones was walking in the street near downtown Martinsburg, West Virginia, when Officer Paul Lehman of the Martinsburg Police Department (MPD) began following him in his patrol car. After tailing him for approximately one minute, Lehman parked the vehicle and asked Lehman why he was walking in the street, a violation of state and city law. 

Lehman next requested that Jones provide identification; Jones replied that he had none. Lehman then asked Jones if he had any weapons. “What’s a weapon?” Jones replied; Lehman told him “anything—guns, knives, clubs” qualified. Jones responded that he had “something.” 

Lehman then shouted at Jones to put his hands on the police car, to which Jones asked “What are you trying to do?”; “What do you want?”; and “What did I do to you?” Lehman declined to answer, instead opting to tase Jones. MPD Officer Daniel North, who had been called in for backup, arrived at the scene and tased Jones as well.

Jones then began running down the street. North eventually caught Jones and punched him “in the brachial,” or upper arm. Jones ended up cornering himself on a nearby stoop, where North was joined by Officer William Staub, who put Jones in a chokehold after managing, with North, to drag him off the ledge. Staub said he employed the tactic “just to kind of stop [Jones] from resisting.” A “loud choking or gurgling sound” can be heard on Staub’s audio recorder, according to the suit.

Subsequently, two more officers—Officers Eric Neely and Erik Herb—arrived at the scene. Neely tased Jones for a third time, and North proceeded to apply “a drive stun without any probes.” Another officer can reportedly be seen on video kicking Jones. 

After putting Jones in another chokehold, Staub claims that he felt “a sharp poke in his side” and saw Jones wielding “a fixed blade knife in his hand.” All five officers moved back, forming a semi-circle around Jones, who—despite testimony from the officers that their efforts “had no visible effect”—remained motionless on the ground. By Lehman’s own admission, Jones “did not make any overt acts with the knife towards the officers.”

The group of police officers killed Jones anyway, firing 22 bullets into him as he lay facedown.

Jones’s estate consequently filed suit against those cops and the City of Martinsburg, alleging that the officers violated Jones’ Fourth Amendment rights by using excessive force and his 14th Amendment rights by killing him; and that the City of Martinsburg is responsible for those unconstitutional acts by improperly training and inadequately disciplining their police department.

The United States District Court for the Northern District of West Virginia dismissed the suit and granted all five officers qualified immunity. But on Tuesday, the U.S. Court of Appeals for the 4th Circuit overturned that dismissal. Writing for the unanimous panel, Circuit Judge Henry Franklin Floyd summed up in plain terms the absurd question before the court: “decid[ing] whether it was clearly established that five officers could not shoot a man 22 times as he lay motionless on the ground.”

Such is the essence of qualified immunity, the legal doctrine that gives public servants license to infringe on your rights so long as their behavior isn’t prohibited almost identically by existing case law. In other words, the cops in question sought protection for murdering Jones by claiming that the judiciary had not concretely determined that killing someone who was lying still on the ground was a violation of that person’s rights. That the lower court granted the officers’ request further elucidates the inane nature of the doctrine.

Sadly, federal courts grant qualified immunity in cases like these with alarming regularity. In Howse v. Hodous (2020), the U.S. Court of Appeals for the 6th Circuit gave qualified immunity to two officers who allegedly assaulted and arrested a man on bogus charges for the crime of standing outside of his own house. There was also the sheriff’s deputy in Coffee County, Georgia, who shot a 10-year-old boy while aiming at a non-threatening dog; the cop in Los Angeles who shot a 15-year-old boy on his way to school because the child’s friend had a plastic gun; and two cops in Fresno, California, who allegedly stole $225,000 while executing a search warrant.

The above officers and many others have received qualified immunity because their actions had not been expressly ruled unconstitutional by the courts, leaving the people they hurt with no recourse to sue for medical bills or lost assets. These cases are not exceptions. Courts grant qualified immunity to police officers in over half the cases in which police attorneys invoke the doctrine. 

In the case filed by Jones’ estate, there are several reasons to withhold qualified immunity. It had already been “clearly established that law enforcement may not constitutionally use force against a secured, incapacitated person—let alone use deadly force against that person,” Judge Floyd notes in his ruling, citing Kane v. Hargis (1993) and Brockington v. Boykins (2011). “Because a reasonable jury could find that Jones was secured, incapacitated, or both, we need not reach whether the officers’ actions were so ‘flagrantly unlawful’ as to refute any claim of qualified immunity.”

But Floyd also highlights that the officers appear from an audio recording to have known they should not have shot Jones. After firing the 22 fatal bullets, the officers can be heard agreeing to exaggerate the threat they faced in order to avoid being held legally liable for their actions. “When searching Jones’s lifeless body, officers found a small fixed blade knife tucked into his right sleeve,” the judge writes. “After being told that state police were coming to investigate, officers can be heard saying that the incident would be a ‘cluster’ and that they were going to ‘have to gather some f**king story.'”

That might explain, the judge writes, the inconsistency in the officers’ stories. “Jones was armed with a knife, which was tucked into his sleeve, and yet which he somehow used to stab an officer,” Floyd says. “Given the relatively inaccessible location of the knife, and the physical inability to wield it given his position on the ground, the number of officers on Jones, and Jones’s physical state by this time, it would be particularly reasonable to find that Jones was secured while still armed.”

Judge Floyd further emphasizes that the escalation and the corresponding use of force was harshly disproportionate to the crime for which Jones was stopped. He “was not an armed felon on the run, nor a fleeing suspect luring officers into a high-speed car chase,” Floyd writes. “Jones was walking in the road next to the sidewalk, away from the dark shadows and blind corners of buildings at night. He was without housing and had a knife on his person. As a pedestrian, he should have been on the sidewalk, but Officer Lehman never told him that.”

Judge Floyd further notes that Lehman “quickly escalated the encounter,” failing to consider other potential factors—like Jones’ mental state—that might have influenced his responses. “What we see is a scared man who is confused about what he did wrong, and an officer that does nothing to alleviate that man’s fears,” the judge writes. “That is the broader context in which five officers took Jones’s life.”

The death of George Floyd, an unarmed black man who was killed by former Minneapolis police officer Derek Chauvin, has propelled qualified immunity to the forefront of American political debate and energized opposition to the doctrine, with Rep. Justin Amash (L–Mich.) introducing a bill that would eliminate it nationwide. 

“Before the ink dried on this opinion, the FBI opened an investigation into yet another death of a black man at the hands of police, this time George Floyd in Minneapolis,” Judge Floyd wrote. “This has to stop.”

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