If It’s Tuesday, It’s “Short Squeeze” Time

Who could have seen that coming? “Most shorted” stocks, having recovered from the early squeeze, have been monkey-hammered higher once again as the confidence and home sales data hit. It’s Tuesday after all – so why not buy the junkiest of the junk and ride it for a 3x beta outperformance…

 




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New Home Sales Surge By 18.6% In May, Now Only 63% Below Pre-Crisis Highs

While we will have much more to say about the price dynamics in the West in a follow up post, where the Western housing market appears to be appreciated right now is in the just released New Home Sales report, which showed that in May new home sales soared by a whopping 18.6%, orders of magnitude above the 1.4% increase expected, and resulting in some 504K new houses sold, far above the 439K expected, and certainly above the downward revised April print of 425K. What caused this surge? Simple: the West, which saw a 34% surge in new home sales, from 97K to 130K, the highest one month jump since February 2013.

So a full blown recovery? Well, not quite. Here is the chart showing long-term demand for new homes since the last housing bubble: the May print of 504K was just 64% below the pre-crisis high of 1,389K.

In other words, there is demand for houses… Just existing houses, i.e., those where millionaire can park their laundered cash. New homes, those which typically are the target of first time home buyers, are not doing quite as hot.

 

Finally, one reason why new home sales may have soared in May: the average new home prices just dropped to $319,200: the lowest since August 2013.




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Consumer Confidence Surges To Highest Since Jan 08

The American consumer has not been as confident as this since January 2008… can you feel the confidence? The reaching for credit, the spending beyond your means; what could go wrong? Oddly, despite the exuberance, fewer people expect an increase in income (borrow or charge we assume?). The biggest driver of this confidence appears to be the spike from 79.7 to 99.5 in the Pacific region’s confidence… but plunged in the Mountain and Central regions.

 




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Jonah Goldberg’s Excellent Take-Down of Piketty’s Capital in the Twenty-First Century

PikettyNew York Times columnist and economics
Nobelist Paul Krugman showered ecomiums on French economist Thomas
Piketty’s Capital in the Twenty-First Century calling it a
magnificent,
sweeping meditation on inequality
” and “an awesome work.” While
noting some flaws, the Washington Post’s financial
reporter Steven Pearlstein nevertheless hailed the book as
an
intellectual tour de force, a triumph of economic history
.”
Timothy Shenk at The Nation gushed, “Stands a fair chance
of becoming the most influential work of economics yet published in
our young century.” And these are just a three of the plethora of
over-the-top accolades that can be gleaned from the reviews cited
on the
book’s Amazon page

If the response to Piketty’s book proves anything, it confirms
that intellectuals really, really hate the rich.

Now that the initial furor has died down a bit, Jonah Goldberg
has written a thoughtful analysis of the book and its reception
over at Commentary. In his article, “Mr.
Piketty’s Big Book of Marxiness
,” Goldberg does a thorough job
of reviewing the various criticisms of how Piketty has
(mis)interpreted history and economic data. Goldberg also shows
that most Americans disagree with President Obama’s assertion last
December that a “a
dangerous and growing inequality
… is the defining challenge
of our time.” To the contrary, Goldberg reports…

…in May, when Gallup asked voters what they saw as “the most
important problem facing this country today,” a mere 3 percent
volunteered the gap between rich and poor … A poll in January
conducted by McLaughlin & Associates (for the YG Network) found
that Americans by a margin of 2:1 (64 percent to 33 percent) prefer
expanding economic growth to narrowing the gap between rich and
poor. In 1990, Gallup asked Americans whether the country benefits
from having a class of rich people. Sixty-two percent said yes. In
2012, 63 percent said yes.

It seems that most Americans simply want a fair shake. They
don’t really begrudge the success of others, and to the extent they
do, they don’t want to do much about it. It’s hard to see how any
of this amounts to an inequality-driven powder keg of social unrest
waiting to explode.

So again, who resents the rich? Intellectuals. As Goldberg
nicely explains:

Piketty is a member of the ruling class. Piketty’s way puts
Piketty and his friends in charge of everything. A one-time adviser
to the Socialist politician Ségolène Royal, a star academic and a
columnist for Libération, Piketty is a quintessential member of
what the econo- mist Joseph Schumpeter identified as the “new
class.” Schumpeter’s prediction of capitalism’s demise hinged on
his brilliant insight that capitalism breeds anti-capitalist
intellectuals. Educators, bureaucrats, lawyers, technocrats,
journalists, and artists, often the children of successful
capitalists, always raised in the material affluence of capitalism,
would organize to form a class whose collective interest lay in
seizing economic decisions from the free market. As Deirdre
McCloskey writes: “Schumpeter believed that capitalism was raising
up its own grave diggers—not in the proletariat, as Marx had
expected, but in the sons of daughters of the bourgeoisie itself.
Lenin’s father, after all, was a high- ranking educational
official, and Lenin himself a law- yer. It wasn’t the children of
auto workers who pulled up the paving stones on the Left Bank in
1968.” No, it was actually people like Piketty’s own parents…

Piketty’s argument, with its scientific veneer and authoritative
streams of numbers, is a warrant to empower those who think they
are smarter than the market—and who feel superior to those most
richly rewarded by it.

Goldberg’s
whole article
is well worth your attention.

For more background, see my articles, “Why
President Obama is Wrong on Income Inequality
,” and “Obama’s
‘Opportunity’ Makes Everybody Less Well Off
.”

Disclosure: Jonah and I have been friends for nearly two
decades.

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Politicians For Sale? There’s An App For That

We have not been shy about exposing the dark shadowy under-belly of lobbyists funding politicians (as most recently noted with Cantor’s catastrophe) but now, as Engadget reports, finding out which representatives are in the pocket without a lot of tedious research just got a lot easier. A 16-year-old programmer has developed a browser plugin – Greenhouse – that, when you mouse-over the name of a US lawmaker, will serve up a list of which parties have donated to their campaign funds, and the quantities. Better than flappy-birds?

 

 

Read more from Engadget here

Visit The Greenhouse app page here

And here is the 16-year-old programmer’s credo:

It is my hope that providing increased transparency around the amount and source of funding of our elected representatives may play a small role in educating citizens and promoting change. If you use the extension when reading about a Congressional vote on energy policy, for example, maybe you’ll discover that a sponsor of a bill has received hundreds of thousands of dollars from the oil and gas industry. Or maybe you’ll learn that the top donors to a member of Congress who opposes tort reform are lawyers and law firms. I use data from the last full election cycle (generally 2011-12 for Representatives and 2007-12 for Senators) and plan to update it as more relevant data becomes available. Special thanks to OpenSecrets.org for providing access to that data.

 

The motto of Greenhouse is: “Some are red. Some are blue. All are green.” What it signifies is that the influence of money on our government isn’t a partisan issue. Whether Democrat or Republican, we should all want a political system that is independent of the influence of big money and not dependent on endless cycles of fundraising from special interests. The United States of America was founded to serve individuals, not big interests or big industries. Yet every year we seem to move farther and farther away from our Founders’ vision.




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What If They Passed a Law to Reform Police Misconduct and the DOJ Ignored It?

PoliceWhat if, a long time ago, the federal
government noticed many of the problematic and abusive police
practices
about which we complain today—practices including
excessive force, discriminatory harassment, false arrest, coercive
sexual conduct, and unlawful stops. In response, the federal
government passed a law to rein in such abuses, and assigned the
Justice Department to keep police departments around the country on
the straight and narrow. Then everybody patted themselves on the
back and…business as usual

That’s what Stephen Rushin, a law professor at the University of
Illinois, says happened with Law Enforcement Misconduct Statute
42
U.S.C. § 14141
, passed in 1994. This law, according to the
Department of Justice
:

allows us to review the practices of law enforcement agencies
that may be violating people’s federal rights. If a law enforcement
agency receives federal funding, we can also use the
anti-discrimination provisions of the Omnibus Crime Control and
Safe Streets Act of 1968, and Title VI of the Civil Rights Act of
1964,,,

The problems addressed in our cases include use of excessive
force; unlawful stops, searches, or arrests; and discriminatory
policing. We have looked at bias based on race, ethnicity, national
origin, gender, and sexual-orientation. We have also addressed
unlawful responses to individuals who observe, record, or object to
police actions.

But a funny thing happened on the way to enforcing the
law—basically, it wasn’t. In “Federal
Enforcement of Police Reform
” a paper published in the
Fordham Law Review few weeks ago, Rushin argues that the
law has been used in some high-profile cases in Cincinnati, Los
Angeles, New Orleans, Pittsburgh, Seattle and Washington, D.C., but
that’s just a tiny subset of possible applications.

“Historically, the federal government has only initiated an
average of three formal investigations under Section 14141 per
year,”
he says
. “And the DOJ has only pursued full-scale reform
against an average of about one department per year. There are
around 18,000 police departments in the U.S.”

So scale is part of it; Rushin thinks the Justice Department
just doesn’t have the resources to monitor all the law enforcement
agencies in the country. He suggests giving private parties “a
limited equitable right of action to initiate structural police
reform”—basically, the ability to sue police departments into
changing their ways (individuals who bring such suits now must
demonstrate the department was “deliberately indifferent in its
failure to train or supervise an employee.”)

Rushin also sees a lack of internal will at the Justice
Department to go after abusive police departments, Internal
policies and leadership often deemphasize police misconduct as a
priority. And he sees top-down political pressures having an
impact, too.

“Fighting police misconduct at the federal level is politically
contentious. As my evidence shows, during the Clinton
administration and Obama administration, the DOJ took on an
aggressive posture in fighting police misconduct. During the second
half of the Bush administration, they were generally uninterested
in using the statute.”

Anybody subject to the tender ministrations of federal law
enforcement agencies in recent years might wonder how much of a
priority reining in the ranks is for the current administration or
was during the Clinton years. But perhaps that’s a battle that
needs to be fought separately from reform of state and local
agencies.

Aside from allowing for private litigation, Rushin’s solutions
are a litte vague: greater transparency and “alternative routes to
increase the number of structural police reform cases.” How those
alternative routes would be shielded from the political pressures
that have hobbbled the 1994 law is anybody’s guess.

Because, for sure, the once much-ballyhooed 20-year-old effort
to address police misconduct
doesn’t seem to have had all that much impact at all.

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A.M. Links: New NSA Leak ‘Imminent’ from Snowden, V.A. Scandal Grows, Iraq Falls Apart

  • IRS chief John Koskinen faced sharp questioning on Capitol Hill
    yesterday over the Lois Lerner email scandal. “We have a problem
    with you and you have a problem with credibility,”
    declared
    House Oversight Committee Chairman Darrell Issa
    (R-Calif.).
  • ISIS fighters claim to have seized
    control
    of Iraq’s largest oil refinery.
  • According to a whistle-blower, Veterans Affairs officials in
    Phoenix conspired to
    cover up the deaths
    of at least seven veterans who died before
    receiving care. “My hands were tied. I tried to scream, and did the
    best with what I had. But the vets who were upset and deceased—I
    can’t shake that feeling,” V.A. scheduling clerk Pauline DeWenter

    told
    The Arizona Republic.

Follow Reason and Reason 24/7 on
Twitter, and like us on Facebook. You
can also get the top stories mailed to you—sign up
here
.

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Jacob Sullum on Why ‘You Can Never Drive’

BellaLagoWashington’s five-nanogram rule, modeled after
the per se standard for alcohol, was meant to reassure voters
worried about the threat posed by stoned drivers. But like all per
se standards, it treats some people as unsafe to drive even when
they’re not, writes Jacob Sullum. Last year experiments by KIRO,
the CBS station in Seattle, and KDVR, the Fox affiliate in Denver,
showed that regular cannabis consumers can perform competently on
driving courses and simulators at THC levels far above five
nanograms.

The lack of correspondence between the new standard and
impairment is especially unfair to medical marijuana users, some of
whom may be above the five-nanogram limit all the time, meaning
they are never legally allowed to drive in Washington.

View this article.

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Ed Krayewski on How Iraq Could Become a Terror Threat to the U.S.

One of the
arguments deployed for continued U.S. involvement in Iraq is that
the rise of jihadist groups like the Islamic State in Iraq and
Syria (ISIS) in the region will lead to more terrorism directed at
the United States. “The seeds of 9/11s are being planted all over
Iraq and Syria,” Sen. Lindsey Graham (R-S.C.) warned last
week. As Sen. Rand Paul (R-Ky.) noted this weekend, the
blame for the current instability in the Middle East could be
placed on the disastrous Iraq War waged by the U.S. in the last
decade. Indeed, U.S. interventions across the wider region have
helped Al Qaeda-linked groups like ISIS set up base. Yet,
insofar as the terrorist threat to America is real, writes Ed
Krayewski, U.S. intervention to date has helped to create the
conditions on the ground to incubate such a threat.

View this article.

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Brickbat: Keep Away

While doing research for
a class debate on gun control, Andrew Lampart found he couldn’t
access the National Rifle Association’s website while on campus at
Connecticut’s Nonnewaug High School. But he could go to pro-gun
control sites just fine. Investigating further, he found the state
Republican Party’s website was blocked,
but not that of the Democratic Party. Anti-abortion websites were
blocked, but not those of pro-choice groups. Christian websites,
including that of the Vatican, were blocked, but not Islamic
websites. He complained to the superintendent, but nothing changed.
So he took his findings to the school board. “The board appreciated
hearing the comments from Andrew and agree that he has raised an
important issue that warrants further investigation,” said board
John Chapman.

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