The news on the virus front lines does sounds better. Although the media fluster about new “second wave” outbreaks in Asia, Europe and the States, the scientists say it will be winter before the real second wave emerges – the key lesson of the Spanish Flu – giving us time to prepare, maintain distancing, improve logistics and build up stocks, innovate treatments and maybe even crack the vaccine (and subsequent vaccine wars..). Tumbling infections mean London could be “free” of the virus in weeks – apparently.
Even more importantly, it’s time for hapless governments to ensure testing regimes are in place, contact tracking apps work and demonstrate they have a plan. If a second wave doesn’t come later this year – fantastic. But if it does… lets be ready.
Otherwise, the economic news is unremittingly bad.
Where to start in terms of just how unlikely the V-Shaped recovery is likely to be? Its not even worth commenting on yesterday’s late stock rally – fueled by bank rumors, and FOMO. Its mad that stocks remain so high when the news is so bleak. But it makes curious investment sense in a world where investors believe Governments and Central Banks have little choice but to bail out battered businesses, pay for jobs, and push prices higher though monetary stimulus.
Yesterday it was Transport for London that warned it was going bust. If I never see the inside of the Drain (Bank to Waterloo) again, it will be too soon…
But Governments have little choice but to spend, spend and spend more. Whole sectors of the economy need long-term Intensive Care and structural investment. Plans are needed to support the sectors most impacted by the crisis: aviation & aerospace, hospitality and tourism. Legions of SMEs and jobs that rely on subcontracting for aerospace firms could go, meaning the implications for jobs and long-term skills will be devastating. The French are preparing to pump billions into life-support for their tourism industry. The Italians, Spanish and Greeks would do the same – if Germany would let them.
A different kind of aid is required across the economy for the sectors hit by the Cascade Effect. Cascading Default Risk is best illustrated in property, where one tenant skipping rents becomes many, meaning landlords default. Property companies tumble and the banks and asset managers that finance or own property suddenly find their property is secured on non-paying assets. Some form of debt foregiveness will be required – which means more state intervention and market distortion. Commercial property is in the firing line, with US Colony Capital defaulting on $3 bln of loans – which includes health care units, which tells you something about the real priorities in US health provision.
We also need grown up politics. Here in the UK, I’m hopeful for Sir Keir Starmer, the new Labour leader, but when the Corbynite rump, a festering nest of rejected polices and irrelevant slogans, demand unions are given the right to decide when workers return, or that all tenants should simply stop paying rents, it’s clear their social consciences are untroubled by consequences.
Rent strikes will benefit a few ne’er-do-wells in the short-term, but ensure defaults on buy-to-lets and a tumble in property prices, and crushing consumer confidence as the middle classes have always considered their homes to be rock-solid bastions of wealth preservation. Local authorities won’t be able to replace private landlords, thus ensuring a long-term rise in homelessness – unless you simply nationalise the whole housing stock as the clock strikes 13 on that bright cold morning in April.
As for the teachers? Too dangerous for them to return to their jobs… We won’t be out the balconies clapping and cheering them at 8pm. The science says they should socially distance in the staff rooms, and kids aren’t the danger. The unions say no. The bottom line is that getting the country’s productivity levels up in the short and long term requires kids back at school. End of.
Then there is the third area where intervention may still be needed – corporate debt. Remember: in Bonds there is Truth! There are a number of very worrying trends underway. Most folk will now be aware of the growing concerns about the risks embedded within CLOS. When the rating agencies expect 15% junk defaults, it’s clear these losses will be magnified in the CLO sector. Junk is now a $2 trillion market (bonds and loans). (Good primer on CLO issues is their piece earlier this week in FT: CLOs: Ground Zero for the next stage of the financial crisis.)
As defaults will rise and corporates will need more cash to survive through the coming recession, we are seeing rates rise dramatically. The double digit coupons we’ve seen on recent airline, aircraft maker, and cruise company deals – demonstrate investors are now demanding, and getting proper risk returns.
That’s maybe good news from investors – in the short-term. Long-term the implications are real rising interest rates will accelerate the corporate clear out as Zombies either get permanent government money or fold. (Interesting piece this morning from Gillian Tett in the FT about how US Bankruptcy courts won’t be able to cope.)
We’re also seeing banks hike their leverage rates, what they charge hedge funds for funds. Banks don’t hold risks, they simply fund them and transfer the risk to others. That’s going to be another cascade effect – despite banks being given zero funding from central banks, they are hiking risk lending rates to funds who now do the bulk of business funding via bonds or direct lending. Everyone from SME lenders to distressed asset players is having to raise their return targets to reflect the higher bank rates being charged. The result is less deals get funded, and less business in total gets done. It’s another area Governments might look at..
And we haven’t even talked about Geopolitics yet! Its getting fraxious as nation’s self-interest trumps even Trump. Vaccine wars?
The prospects for a simple Brexit agreement with the UK actually look better than ever. All the papers think agreement is doomed; there isn’t enough time, Boris is not focused, and it’s going to be a disaster. Relax. Whatever the EU wants, Germany knows which side it’s bread is buttered. If Brits stop buying German cars.. the German courts will be on our side.
It’s rich the EU is starting legal action against the UK because we’ve closed our borders. We’re only letting in the Irish, and for some reason, the French (maybe because they are unlikely to want to visit anyway, but London is one of the largest French cities!) Its time the UK does a Germany and simply makes clear our national self-interest trumps EU rules every time. The EU judges also decided the UK broke the law by exempting Commodity Derivatives from VAT – without begging permission first. There were fears they might have demanded back-taxes on trillions of trades!
The Germans and their Constitutional Court have put Europe on collision course. But, it’s the same here in the UK where the SNP are determined not to squander any opportunity to make a bad situation worse.
The big one is of course China vs US, but we don’t have to worry about that one today, because Donald isn’t minded to speak to Xi right now. But we do have to worry tomorrow about trade wars, real wars, cyber wars and vaccine wars. I suspect this is not going to end well..
The bottom line is what the Virus has triggered is not just a random reversible recession caused by global lockdown, but it’s been the catalyst for the most fundamental tipping of the Global Economic Apple-cart ever. It’s going to take decades to put all the pieces back on the table again…
Meanwhile.
Just how bad are things going to get for the airline business? Some airlines optimistically hope to resume 50% of services from the summer. She-who-is-Mrs-Blain and I won’t be off to Rome for a city break this year. 2 weeks in quarantine when we arrive and another 2 weeks when we come home? I don’t think so.
Much as I love planes, I hate airports and flights. Nothing is so calculated as to frazzle me. It’s going to get worse. Do you want to be able to take less hand luggage, queue to get your temperature taken, queue for longer to dump your baggage – which will cost extra – take longer to get on board, wear a facemask the whole flight, ask permission to go to make an escorted trip to the toilet, and sit in fear of anyone coughing?
Boeing’s CEO says a US domestic carrier is likely to fold this year. No Sh*t Sherlock – that’s what Chapter 11 was invented for. Ryan Air chief Mick O’Leary is suing a sheaf of European givernments following bailouts of domestic airlines. The American’s have bailed airlines out to the tune of $50 bln (wages and support). The Europeans won’t be far behind in terms of money. Whatever governments do, I reckon by the end of the summer 50% of jobs in aviation will have gone.
Yet, US airlines and Boeing were still able to raise over $35 bln from the markets in April!
via ZeroHedge News https://ift.tt/3cBzlUr Tyler Durden
As if the viral-lockdown apocalypse wasn’t already weird enough, now it looks like we’ll be dealing with battalions of cootie cops checking on our comings and goings. Technically, they’re “contact tracers” and their jobs involve speaking with people who test positive for the novel coronavirus, identifying those to whom they may have transmitted disease, and advising self-quarantine and self-monitoring for symptoms. It’s a tactic that has proven useful in other countries when properly implemented, and it’s supposed to focus on actual vectors of infection rather than on whole populations. But “properly implemented” is the key here, because, oh boy, does the prospect of an army of government interrogators set loose upon the land lend itself to abuse.
Much early talk about contact tracing was on technological tools, like phone apps. Those can be helpful, but they raise privacy concerns of their own, which contribute to resistance to their use. That reluctance has revived talk of traditional contact tracing using people to identify and question anybody who tests positive. Words like battalions and army really do capture the vastness of what’s being proposed.
“There are many estimates on the number of contact tracers needed to keep the virus at bay as we reopen communities,” notes the National Association of County and City Health Officials. “Given global experience with contact tracing, as well as staffing needs at local, state, tribal, and territorial health departments across the many disciplines needed for contact tracing, we estimate a surge capacity of at least 100,000 individuals will be needed.”
New York state’s reopening guide explicitly refers to “an army of contact tracers” and sets the hiring of 30 contact tracers per 100,000 residents as one criterion for permitting a region to reopen to normal social and business activity. Ultimately, the state expects to put between 6,400 and 17,000 contact tracers in place.
At ground zero for America’s pandemic crisis, New York City’s “‘Test and Trace Corps’ will launch with 1,000 contact tracers,” Mayor Bill de Blasio announced last week.
There is theoretically potential for doing this professionally and respectfully. The go-to trainer for many of the contact tracing programs is Johns Hopkins University, which has made itself indispensable for tracking the course of the virus. The university offers a free, online, certificate-granting course in contact tracing through Coursera. That course delves not just into the biology of the SARS-CoV-2 virus and the hows and whys of getting information from people, but also ethical considerations including respect for privacy.
But Johns Hopkins University isn’t managing the deployment of the contact tracers it trains; that’s being done by state, city, and local government agencies. And truly, there is no good idea that government officials can’t turn to shit.
In the state of Washington, Gov. Jay Inslee’s phased reopening plan, including an initial 1,371 contact tracers, “is raising questions about privacy rights,” reports KOMO News. “The requirement that businesses keep a log of customers’ names, dates and contact information is getting the most attention.”
Specifically, the state requires that restaurants “create a daily log of all customers and maintain that daily log for 30 days, including telephone/email contact information, and time in. This will facilitate any contact tracing that might need to occur.” That’s records of all customers’ information—not just those who have raised medical concerns.
“There are serious concerns with any plan that would require people to disclose their contact information and whereabouts for tracking,” warns Jennifer Lee of the ACLU of Washington.
In California, Robert Levin, the director of Ventura County Public Health, went one better than Inslee. He had to apologize after a contact tracing program announcement during which, as he put it, “I gave people the impression that if you were isolated, you would be taken out of your home and put into a hotel room or a motel room or sequestered in some other way.”
That’s exactly the sort of “impression” that makes people reticent about volunteering the details of their shopping trips and social interactions to government-employed strangers. And, you guessed it, folks receiving official phone calls are holding back.
“Some people are a little suspicious. Some people hang up after I ask for their date of birth and address,” Jana De Brauwere, a San Francisco contact tracer, told MIT Technology Review. “I understand that, the mistrust of the government, having grown up under communism. But it’s too bad. I feel like they can benefit from this information: how to quarantine themselves, how they can protect their families, and what kind of support is available.”
No matter how large an army of contact tracers is hired, winning people over is critical, because there is no way to make unwilling people cooperate.
“Participation in any contact tracing is voluntary, said Amy Reynolds with the state’s Department of Health,” KING5 reported of Washington’s program. “Reynolds said while the state hopes people will cooperate to help protect the health of loved ones and others who may have been exposed, a patient has the right to refuse to share information with contact tracers.”
Across the country, Massachusetts Gov. Charlie Baker is just one of many public officials begging people to cooperate with contract tracers.
But even if cooperation with contact tracers somehow became mandatory, enforcement would be a hell of a trick. There’s nothing to stop people from lying to government officials they don’t trust, and who continue to give the “impression” that they’ll abuse any information they acquire.
“Countries with authoritarian governments or high levels of social cohesion have successfully used contact tracing, but we don’t have either,” bioethicist Jacob Appel toldAxios.
Arguably, we do have an authoritarian government—but not one that possesses enough efficiency or enjoys enough support to make its whims stick.
So the burden is on public officials to demonstrate to our satisfaction that they’re deploying an army of helpful contact tracers and not a plague of intrusive cootie cops. If they can convince the public of the wisdom of their tactics and the innocence of their intentions, maybe we can work together to resolve our health concerns.
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As if the viral-lockdown apocalypse wasn’t already weird enough, now it looks like we’ll be dealing with battalions of cootie cops checking on our comings and goings. Technically, they’re “contact tracers” and their jobs involve speaking with people who test positive for the novel coronavirus, identifying those to whom they may have transmitted disease, and advising self-quarantine and self-monitoring for symptoms. It’s a tactic that has proven useful in other countries when properly implemented, and it’s supposed to focus on actual vectors of infection rather than on whole populations. But “properly implemented” is the key here, because, oh boy, does the prospect of an army of government interrogators set loose upon the land lend itself to abuse.
Much early talk about contact tracing was on technological tools, like phone apps. Those can be helpful, but they raise privacy concerns of their own, which contribute to resistance to their use. That reluctance has revived talk of traditional contact tracing using people to identify and question anybody who tests positive. Words like battalions and army really do capture the vastness of what’s being proposed.
“There are many estimates on the number of contact tracers needed to keep the virus at bay as we reopen communities,” notes the National Association of County and City Health Officials. “Given global experience with contact tracing, as well as staffing needs at local, state, tribal, and territorial health departments across the many disciplines needed for contact tracing, we estimate a surge capacity of at least 100,000 individuals will be needed.”
New York state’s reopening guide explicitly refers to “an army of contact tracers” and sets the hiring of 30 contact tracers per 100,000 residents as one criterion for permitting a region to reopen to normal social and business activity. Ultimately, the state expects to put between 6,400 and 17,000 contact tracers in place.
At ground zero for America’s pandemic crisis, New York City’s “‘Test and Trace Corps’ will launch with 1,000 contact tracers,” Mayor Bill de Blasio announced last week.
There is theoretically potential for doing this professionally and respectfully. The go-to trainer for many of the contact tracing programs is Johns Hopkins University, which has made itself indispensable for tracking the course of the virus. The university offers a free, online, certificate-granting course in contact tracing through Coursera. That course delves not just into the biology of the SARS-CoV-2 virus and the hows and whys of getting information from people, but also ethical considerations including respect for privacy.
But Johns Hopkins University isn’t managing the deployment of the contact tracers it trains; that’s being done by state, city, and local government agencies. And truly, there is no good idea that government officials can’t turn to shit.
In the state of Washington, Gov. Jay Inslee’s phased reopening plan, including an initial 1,371 contact tracers, “is raising questions about privacy rights,” reports KOMO News. “The requirement that businesses keep a log of customers’ names, dates and contact information is getting the most attention.”
Specifically, the state requires that restaurants “create a daily log of all customers and maintain that daily log for 30 days, including telephone/email contact information, and time in. This will facilitate any contact tracing that might need to occur.” That’s records of all customers’ information—not just those who have raised medical concerns.
“There are serious concerns with any plan that would require people to disclose their contact information and whereabouts for tracking,” warns Jennifer Lee of the ACLU of Washington.
In California, Robert Levin, the director of Ventura County Public Health, went one better than Inslee. He had to apologize after a contact tracing program announcement during which, as he put it, “I gave people the impression that if you were isolated, you would be taken out of your home and put into a hotel room or a motel room or sequestered in some other way.”
That’s exactly the sort of “impression” that makes people reticent about volunteering the details of their shopping trips and social interactions to government-employed strangers. And, you guessed it, folks receiving official phone calls are holding back.
“Some people are a little suspicious. Some people hang up after I ask for their date of birth and address,” Jana De Brauwere, a San Francisco contact tracer, told MIT Technology Review. “I understand that, the mistrust of the government, having grown up under communism. But it’s too bad. I feel like they can benefit from this information: how to quarantine themselves, how they can protect their families, and what kind of support is available.”
No matter how large an army of contact tracers is hired, winning people over is critical, because there is no way to make unwilling people cooperate.
“Participation in any contact tracing is voluntary, said Amy Reynolds with the state’s Department of Health,” KING5 reported of Washington’s program. “Reynolds said while the state hopes people will cooperate to help protect the health of loved ones and others who may have been exposed, a patient has the right to refuse to share information with contact tracers.”
Across the country, Massachusetts Gov. Charlie Baker is just one of many public officials begging people to cooperate with contract tracers.
But even if cooperation with contact tracers somehow became mandatory, enforcement would be a hell of a trick. There’s nothing to stop people from lying to government officials they don’t trust, and who continue to give the “impression” that they’ll abuse any information they acquire.
“Countries with authoritarian governments or high levels of social cohesion have successfully used contact tracing, but we don’t have either,” bioethicist Jacob Appel toldAxios.
Arguably, we do have an authoritarian government—but not one that possesses enough efficiency or enjoys enough support to make its whims stick.
So the burden is on public officials to demonstrate to our satisfaction that they’re deploying an army of helpful contact tracers and not a plague of intrusive cootie cops. If they can convince the public of the wisdom of their tactics and the innocence of their intentions, maybe we can work together to resolve our health concerns.
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The coronavirus crisis has given politicians carte blanche to regulate businesses, without the usual legislative checks and balances and court challenges. If there were any doubt before, we now know without question that politicians—especially in the nation’s largest cities—have absolutely no clue how entrepreneurship, incentives and the economy function. The longer the shutdowns persist, the more obvious this will become to most of us.
Few services have become more important these days than home deliveries. People are supposed to stay at home, but they still need household goods and especially food. Fortunately, a number of tech companies such as DoorDash, Uber Eats and Postmates have developed highly sophisticated and efficient systems for getting restaurant meals served to your door—and at an affordable price.
It’s pretty amazing, really. We recently ordered a meal and it was delivered quickly to our home in a rural area. It’s Adam Smith’s invisible hand at work. Companies use various pricing systems, but it all works voluntarily and seamlessly (from a customer’s perspective). If that meal is too expensive, you don’t have to buy it—or you can choose a competitor that offers something similar at a better price. It’s how the marketplace always works.
Unfortunately, politicians are intent on messing with these arrangements by placing price caps on the commissions that delivery companies charge to restaurants. Such rules aren’t being imposed to protect customers and they certainly won’t help encourage social distancing at a time when people are commanded to shelter in place.
Instead, these “emergency rules” are imposed partly at the behest of the restaurant lobby, which has long complained about the commissions that delivery services charge them, which typically range from 10 percent to 30 percent depending on various factors.
The restaurants are using the pandemic to get special favors and the politicians seem to enjoy passing edicts that are designed to protect favored industries. Politicians are concerned about the plight of restaurants now, given that stay-at-home orders have forced them to halt dine-in service. They must rely on take-out orders and curbside pickups. We’re all sympathetic to their situation.
But these so-called “commission caps” are nothing more than price controls. Such controls—regardless of industry—have a long history of creating shortages. If delivery services can’t charge what the market will bear, many of them will simply stop delivering food, or charge customers higher fees, or stop delivering food from lower-cost restaurants where there’s not enough of a tab for them to profit. It will dampen competition, which is the best way to keep prices low.
When it comes to bad ideas, San Francisco often leads the way. In April, Mayor London Breed, at the urging of the Board of Supervisors, capped home-delivery commissions at 15 percent to help restaurants for the duration of the crisis. There’s an ongoing attempt there to expand the cap beyond the coronavirus shutdowns—and several other cities, including Chicago and New York, are following suit.
For instance, the Washington, D.C. City Council last week voted unanimously in favor of a broad emergency package that would, among many other things, forbid “a third-party food delivery platform to charge a restaurant a commission fee” above 15 percent of the price of the order. The delivery platform may not reduce compensation rates to its drivers as a result of the law. It remains to be seen how the delivery companies will deal with the new rules.
The delivery services have every reason to want restaurants, which are the heart and soul of their business, to remain economically viable. Some of them have voluntarily slashed fees to independent restaurants, waived fees for new restaurants and provided millions of dollars in donations to aid restaurants. But they still need to turn a profit, and to adopt the pricing arrangements that work best for them and their drivers.
If restaurants don’t want to do business with them, they have that option—or they can hire their own delivery drivers. If restauranteurs don’t understand the problem with price caps, then they ought to think about what happen if local officials decided to impose caps on the prices that they charge. Hey, meal prices are too high for many out-of-work Americans, after all. Of course, the results would be that many of them would go out of business.
“These proposals…would place food delivery services in an impossible position,” according to a recent letter from a coalition of market-oriented and taxpayer-protection groups. “Capped fees may be less than the cost of services to delivery companies, essentially forcing these innovators to operate a government-mandated loss.” If the companies pass on higher fees to consumers, many customers “would respond by picking up food at restaurants directly, increasing the risk of transmitting the coronavirus to vulnerable populations.”
As the old libertarian saying goes, “There Ain’t No Such Thing As A Free Lunch (TANSTAAFL).” And there’s no such thing as a free delivery of a lunch, either, no matter how much government officials wish it were so. The best thing is for city officials to let the marketplace figure out the right pricing on its own. By impeding that natural process, governments will only make it harder for their residents to stay home and get meals delivered to their door.
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The coronavirus crisis has given politicians carte blanche to regulate businesses, without the usual legislative checks and balances and court challenges. If there were any doubt before, we now know without question that politicians—especially in the nation’s largest cities—have absolutely no clue how entrepreneurship, incentives and the economy function. The longer the shutdowns persist, the more obvious this will become to most of us.
Few services have become more important these days than home deliveries. People are supposed to stay at home, but they still need household goods and especially food. Fortunately, a number of tech companies such as DoorDash, Uber Eats and Postmates have developed highly sophisticated and efficient systems for getting restaurant meals served to your door—and at an affordable price.
It’s pretty amazing, really. We recently ordered a meal and it was delivered quickly to our home in a rural area. It’s Adam Smith’s invisible hand at work. Companies use various pricing systems, but it all works voluntarily and seamlessly (from a customer’s perspective). If that meal is too expensive, you don’t have to buy it—or you can choose a competitor that offers something similar at a better price. It’s how the marketplace always works.
Unfortunately, politicians are intent on messing with these arrangements by placing price caps on the commissions that delivery companies charge to restaurants. Such rules aren’t being imposed to protect customers and they certainly won’t help encourage social distancing at a time when people are commanded to shelter in place.
Instead, these “emergency rules” are imposed partly at the behest of the restaurant lobby, which has long complained about the commissions that delivery services charge them, which typically range from 10 percent to 30 percent depending on various factors.
The restaurants are using the pandemic to get special favors and the politicians seem to enjoy passing edicts that are designed to protect favored industries. Politicians are concerned about the plight of restaurants now, given that stay-at-home orders have forced them to halt dine-in service. They must rely on take-out orders and curbside pickups. We’re all sympathetic to their situation.
But these so-called “commission caps” are nothing more than price controls. Such controls—regardless of industry—have a long history of creating shortages. If delivery services can’t charge what the market will bear, many of them will simply stop delivering food, or charge customers higher fees, or stop delivering food from lower-cost restaurants where there’s not enough of a tab for them to profit. It will dampen competition, which is the best way to keep prices low.
When it comes to bad ideas, San Francisco often leads the way. In April, Mayor London Breed, at the urging of the Board of Supervisors, capped home-delivery commissions at 15 percent to help restaurants for the duration of the crisis. There’s an ongoing attempt there to expand the cap beyond the coronavirus shutdowns—and several other cities, including Chicago and New York, are following suit.
For instance, the Washington, D.C. City Council last week voted unanimously in favor of a broad emergency package that would, among many other things, forbid “a third-party food delivery platform to charge a restaurant a commission fee” above 15 percent of the price of the order. The delivery platform may not reduce compensation rates to its drivers as a result of the law. It remains to be seen how the delivery companies will deal with the new rules.
The delivery services have every reason to want restaurants, which are the heart and soul of their business, to remain economically viable. Some of them have voluntarily slashed fees to independent restaurants, waived fees for new restaurants and provided millions of dollars in donations to aid restaurants. But they still need to turn a profit, and to adopt the pricing arrangements that work best for them and their drivers.
If restaurants don’t want to do business with them, they have that option—or they can hire their own delivery drivers. If restauranteurs don’t understand the problem with price caps, then they ought to think about what happen if local officials decided to impose caps on the prices that they charge. Hey, meal prices are too high for many out-of-work Americans, after all. Of course, the results would be that many of them would go out of business.
“These proposals…would place food delivery services in an impossible position,” according to a recent letter from a coalition of market-oriented and taxpayer-protection groups. “Capped fees may be less than the cost of services to delivery companies, essentially forcing these innovators to operate a government-mandated loss.” If the companies pass on higher fees to consumers, many customers “would respond by picking up food at restaurants directly, increasing the risk of transmitting the coronavirus to vulnerable populations.”
As the old libertarian saying goes, “There Ain’t No Such Thing As A Free Lunch (TANSTAAFL).” And there’s no such thing as a free delivery of a lunch, either, no matter how much government officials wish it were so. The best thing is for city officials to let the marketplace figure out the right pricing on its own. By impeding that natural process, governments will only make it harder for their residents to stay home and get meals delivered to their door.
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I have just uploaded to SSRN a draft of a forthcoming article I have coauthored with Kristen M. Renberg entitled The Paradoxical Impact of Scalia’s Campaign Against Legislative History. As many readers of this blog will know, in the mid-1980s Judge and then Justice Scalia advocated forcefully against the use of legislative history in statutory interpretation. Justice Scalia’s position, in line with his textualism, was that legislative history was irrelevant and judges should not invoke it. As he pithily summarized his long-held views in a 1996 case, “The text’s the thing. We should therefore ignore drafting history without discussing it, instead of after discussing it.”
Reactions to his attacks among other Justices and prominent circuit judges had an ideological quality, with greater support from ideological conservatives. In response, most (mainly liberal) defenders of legislative history did not suggest that courts should freely cite to all legislative history. Instead they advocated what had been the most common approach until the 1970s – treating committee and conference reports as highly reliable and statements on the floor or in committee hearings as among the least reliable forms of legislative history.
Kristen and I investigated the citation practices of circuit court opinion authors. We had two hypotheses: 1) After Scalia began his attacks on legislative history, Republican judges would be more likely to adopt his position (by avoiding citations to legislative history) than their Democratic counterparts. In other words, judges nominated by Republican Presidents would cite legislative history less often than those nominated by Democratic Presidents. 2) Separately, post-Reagan (i.e., Reagan-and-later) judges would be more likely to adopt Scalia’s position than pre-Reagan judges would (so, e.g., H.W. Bush judges would cite legislative history less often than Nixon judges, and Clinton judges would cite legislative history less often than Carter judges).
The first of these hypotheses is a classic political science argument. Those who advocated for textualism and against legislative history were mainly political conservatives, so we might expect Republican judges to be influenced by those attacks more than their Democratic counterparts. The second hypothesis involves the diffusion of ideas and reflects my own experience as someone who went to law school not long after Scalia began his attacks. My experience as a clerk and a young lawyer was that most of the judges who started deciding cases long before Scalia began his attacks were not moved: they had figured out how they wanted to interpret statutes, and they were happy to cite committee reports, floor statements, etc. pretty freely. As Harold Leventhal, a D.C. Circuit judge prominent in the 1970s, famously summarized, “The use of legislative history [was] the equivalent of entering a crowded cocktail party and looking over the heads of the guests for one’s friends.” However, judges who were relatively new to the bench when Scalia began his attacks, or who took the bench after he began his attacks, appeared to be significantly influenced by them. Simply stated, my experience suggested that post-Reagan judges seem to have been affected by his attacks more than pre-Reagan judges.
But those were just our hypotheses. What did the data show?
Using a dataset containing all published federal appellate court majority opinions between 1965 and 2011 (more than 240,000 opinions), we found only partial support for our hypotheses. Instead, our result was much more interesting than what we had hypothesized. Specifically, we found that the judges we expected to be most influenced by Scalia (Republicans and post-Reagan) were less likely to cite floor statements or committee hearings than were their counterparts. But the Republican and post-Reagan judges were more likely to cite to conference and committee reports than were their counterparts. The judges we expected to be influenced by Scalia accepted one element of his critique and rejected another element, even though he conceptualized those elements as part and parcel of a coherent textualist whole. The attacks on legislative history thus seem to have had the effect of pushing judges who might be expected to be influenced to (re)examine their treatment of legislative history but not, as Scalia had advocated, to ignore it. Instead, they adopted what had been the consensus approach for most of the twentieth century. Scalia influenced, but he did not persuade.
What to make of this? Here is most of our conclusion:
One way of looking at the data we present is that Scalia had meaningful success – he got half a loaf, and half a loaf is significant. He attacked a practice he deemed unprincipled, and although circuit judges did not wholly accept his prescription, Republican and post-Reagan circuit judges who might be expected to be more influenced by Scalia did become more careful than their counterparts in their invocation of legislative history. He thus managed to destabilize the prevailing norms and push many judges to think more carefully about their use of legislative history.
On a different view, many judges may have been influenced by Scalia’s critique of the prevailing approach to legislative history, but they rejected his categorical hostility to it. Under Scalia’s approach, judges should treat legislative history as no more relevant than the weather in Washington D.C. the day the legislation was passed. Prominent liberal judges responded that legislative purpose is relevant, and that there is a principled way of invoking legislative history that looks more to committee reports and less to floor debates and statements at committee hearings. This debate led judges, and in particular Republican and post-Reagan judges, to consider these issues, and they sided with the prominent liberal judges: they concluded that text alone was not sufficient, and that committee reports should be invoked. On this view, Scalia largely failed.
Part of the choice between these positions depends on unknowable considerations. For instance, what would have happened if there had been no attacks on the use of legislative history? Perhaps liberal judges and law professors would have been happy for the 1970s pattern to persist, and so absent those attacks they would not have advocated for the pre-1970s consensus. And maybe the legislative history practices of the 1970s would have continued. Under those circumstances, we would say that the Scalia-led attacks on legislative history were fairly successful, because they brought about the rethinking among liberal judges and law professors noted above, and spurred the movement away from the least reliable forms of legislative history. On the other hand, perhaps even in the absence of any attacks on legislative history liberal judges and law professors would have made the same arguments for the pre-1970s consensus, and perhaps those arguments would have been exactly as successful as they turned out to be in reality. In that scenario, Scalia’s arguments against legislative history achieved nothing, as the same result would have occurred had Scalia never launched any attacks.
These scenarios, as counterfactuals, are of course unprovable. Beyond that, a conclusion about the degree to which Scalia succeeded or failed also depends on judgment calls with no obvious metric – notably, how much weight one puts on the influenced judges’ decrease in citations to floor debates or committee hearings versus their increase in citations to committee reports.
Thus the best answer to the question whether Scalia achieved modest success or instead failed is yes.
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Japan Lifts Emergency Order, Australia Reopens Pubs & Georgia, Texas Vindicated As China Suppresses 2nd Wave: Live Updates Tyler Durden
Fri, 05/15/2020 – 07:59
Summary:
Surge in new cases, deaths fails to materialize in Georgia
Australia reopens pubs this weekend
Spain imposes 14 day quarantine order on foreigners
China reports no new deaths for a month
Japan lifts ‘state of emergency’ for most prefectures
*. *. *
Now that the first movers in the US have compiled three weeks of data on the spread of the virus, public health officials in Georgia along with Gov. Brian Kemp – who pushed ahead with plans to start reopening the state despite warnings from Dr Fauci and President Trump – can cautiously claim vindication.
Enough time has passed to suggest that the resurgence in new cases and deaths that experts – including Dr. Fauci and others at the CDC, as well as outside the federal government – had touted as a virtual certainty haven’t come to pass. Once again, projections for the mayhem caused by the virus seriously overshot the reality, and the earliest states, including Texas, which reported a record single-day jump in deaths yesterday. In reality, the new “record” was just 8 deaths (out of a state of 30 million) higher than the prior record, reported in late April.
In Wisconsin, the site of the first-ever US court decision to strike down a ‘stay at home’ order, Gov. Tony Evers – a Democrat – expressed his frustration and deep concern about the safety of Wisconsin residents.
Asked for his comment on the decision, Evers offered a response weighted with melodrama: “We are in a new chaotic time,” he warned…My advice is this: Be safer at home. Keep on doing what you have been doing.”
We’re still unsure how they arrived at this conclusion. Some polls suggest that as many as 2/3rds of Americans would stay home anyway even if lockdowns were lifted in their respective states. As far as viral suppression is concerned, that’s probably a positive thing.
Even though the number of new cases jumped across the US yesterday, the trend over the last two weeks has been unmistakably lower.
Outside the US, Australia – which wasn’t nearly as badly hit by the virus as the US – is taking another major step on the path to “normalization”: they’re allowing pubs to reopen.
In Australia, the hospitality industry has welcomed the lifting of closure orders in several states after just 14 new coronavirus cases were reported nationwide on Thursday. However, many pubs warned they wouldn’t be able to reopen because the social distancing restrictions would make it impossible to operate profitably.
In China, meanwhile, the National Health Commission reported just 4 new cases of the virus on Friday, all local cross-infections in the north-eastern province of Jilin where a cluster of uncertain origin has been detected in recent days, prompted the government to reimpose a ‘partial lockdown’ while health workers in Wuhan scramble to test as many of the city’s residents as possible over the next 2 weeks. However, across the country, officials haven’t reported a single death from the virus in a month. As always, take that with a grain of salt.
As western Europe moves ahead with its reopening, Spain has begun imposing a 14-day quarantine on travelers arriving into the country a day after France adopted similar measures.
Cross-border workers, travel crew, goods carriers, and medical workers are exempted. The French measure applies to those arriving from Spain and any other country that imposes a quarantine on anyone coming from France. Spain extended to June 15 its strict entry restrictions, even for EU travellers from within the Schengen zone, and limited the airports that can accept passenger flights to Madrid, Barcelona, Málaga, Mallorca and Gran Canaria. Meanwhile, on Friday, the Ministry of Health reported 138 coronavirus deaths, down from 217 the day before, and the second-lowest number in almost two months. The official death toll to date is 27,459, though many suspect many deaths in nursing homes and at home have been left out. Weekly deaths in Catalonia, the new center of Spain’s outbreak (though, to be sure, it’s far less intense as what was happening in Madrid until very recently), remained almost level compared with the previous week.
The scandal surrounding deaths in care homes in the UK continued to intensify as new data from England and Wales suggested that the number of deaths in long-term homes for retirees could be double the official number of roughly 12k.
A day after Japan lifted its ‘state of emergency’ order as the outbreak as once again appeared to subside in Japan (many have joked that Japanese culture is a de facto form of social distancing), Softbank Corp. and McDonald’s Japan said they would start returning to normal operations in 39 of Japan’s 47 prefectures that are now exempt from the emergency declaration. The 39 prefectures account for about 55 percent of Japan’s 126 million people, Nikkei reported.
PM Abe lifted the state of emergency for most prefectures on Thursday, but said hot spots like Tokyo and Osaka and six other prefectures would remain under restrictions until there is convincing containment of the coronavirus.
“Even in areas where the emergency has been lifted, we would like to see people refrain from moving between prefectures as much as possible, at least during this month,” Chief Cabinet Secretary Yoshihide Suga said on Friday. “We hope that people will be able to return to their daily lives in stages.”
Kyodo News reported the other day that antibody tests of 500 Tokyo residents found that 0.6% had been exposed to the virus. That would correlate to about 55,000 cases, based on the 9.2 million population of Tokyo’s 23 central wards – more than 10x the official figure. That mirrors antibody surveillance findings in Madrid and NYC.
Nationwide, Japan has reported 16,203 cases of the coronavirus and 713 death.
Finally, the IOC said Thursday it expects the cost of delaying the summer games in Tokyo will cost more than $800 million.
Around the world, the number of new cases confirmed yesterday climbed modestly vs. the prior day, according to JHU:
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It was shaping up as a nice, quiet rampy end a tumultuous week, when at 630am ET all hell broke loose after Reuters reported that the Commerce Department moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, by amending a foreign direct product rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology” in the process “cutting off Huawei’s efforts to undermine U.S. export controls.”
And while the commerce department did extend the temporary general license for Huawei by another 90 days, the US now “anticipates” this will be the final 90-day extension, effectively giving Huawei – and Beijing – a 3 month ultimatum, one which expires just 2 months before the presidential election.
The report, which culminated a week of increasingly acerbic and belligerent war of words, sent the e-mini S&P future sharply lower into negative territory from modestly positive while triggering a flight to safety…
… as countless US chip suppliers suddenly find themselves scrambling to find a new key client, as well as Huawei which will need an army of new suppliers of semiconductors. Today’s news also confirms what we wrote all the way back in Dec 2018, when we explained that in the escalating trade war with China, Beijing has one giant weak spot and that the US has all the leverage – if it wants to use it – with its near monopoly on advanced semiconductor production, the lack of which can stop Huawei in its tracks.
The rule change is a blow to Huawei, the world’s no. 2 smartphone maker, as well as to Taiwan’s TSMC, a major producer of chips for Huawei’s HiSilicon unit as well as mobile phone rivals Apple and Qualcomm.
Flaring U.S.-China tensions have hung over markets all week, and President Donald Trump said in remarks broadcast Thursday that he doesn’t want to talk to his Chinese counterpart Xi Jinping right now. Stress between the nations is an extra headache for investors as they grapple with the ongoing fallout of the coronavirus.
As if prepared for just this eventuality, mere minutes later China’s Twitter mouthpiece, Global Times Editor in Chief Hu Xijing tweeted that “China will activate the “unreliable entity list”, restrict or investigate US companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes.”
Based on what I know, if the US further blocks key technology supply to Huawei, China will activate the “unreliable entity list”, restrict or investigate US companies such as Qualcomm, Cisco and Apple, and suspend the purchase of Boeing airplanes.
This back and forth, which indicates that a fresh trade war has now broken out, sent futures from comfortably in the green to down almost 1% on the day. It also shook the Yuan out of its recent hypnosis, with the currency tumbling almost 200 pips to 7.13, the lowest level in over a week.
The good news: now we can rally on “hopes” for progress in the trade war as we did every single day of 2019, in addition to “hopes” for a quick reopening from a global pandemic that has cost 40 million US jobs. In short, the world may be in a depression, and one false flag away from trade war turning into kinetic war, but stocks will keep rallying on “optimsm.”
Because in this market for idiots, hope is the only strategy.
There was little hope in Europe, where the Stoxx Europe 600 also trimmed its advance on the news, though it remained higher as Italy edged toward allowing free movement and Germany reported a drop in new infections.
Earlier in the session, Asian stocks gained, led by materials and energy, after falling on Thursday and closed well before the latest news rocked the global economy. Markets in the region were mixed, with Australia’s S&P/ASX 200 and Japan’s Topix Index rising, and India’s S&P BSE Sensex Index and Jakarta Composite falling. The Topix gained 0.5%, with Nomura System Corp and LIFULL rising the most. The Shanghai Composite Index was little changed, with Inesa Intelligent Tech advancing and Jingjin Environmental Protection declining the most.
Then there is the coronavirus pandemic: while the likes of Germany are showing some success at containing the virus, other countries that had quelled the pandemic such as South Korea and China are seeing a rise in cases, underscoring the tough choices policy makers face as they try to resuscitate their economies. Hopes over the rate of infection and a potential compromise on a European recovery fund had helped investors look past data that showed the German economy shrank 2.2% in the first quarter, the most in more than a decade.
In FX, the Bloomberg Dollar Spot index and Treasuries traded in tight ranges Friday, with the former heading for this month’s first weekly gain. The greenback traded mixed versus Group-of-10 peers, before bursting higher following the Huawei news. The euro was steady, after briefly slipping below 1.08 per dollar; Australia’s dollar recovered from a loss that followed after a raft of mixed Chinese data highlighted the challenges confronting the world’s second-largest economy as it seeks to recover from the pandemic.
In commodities, Crude headed for a third weekly gain amid signs the oil market is slowly rebalancing.
Market Snapshot
S&P 500 futures down 0.9% to 2,819
STOXX Europe 600 up 1% to 330.06
MXAP up 0.3% to 144.97
MXAPJ up 0.2% to 466.60
Nikkei up 0.6% to 20,037.47
Topix up 0.5% to 1,453.77
Hang Seng Index down 0.1% to 23,797.47
Shanghai Composite down 0.07% to 2,868.46
Sensex down 0.5% to 30,967.95
Australia S&P/ASX 200 up 1.4% to 5,404.81
Kospi up 0.1% to 1,927.28
German 10Y yield unchanged at -0.543%
Euro up 0.09% to $1.0815
Italian 10Y yield rose 1.5 bps to 1.643%
Spanish 10Y yield fell 0.7 bps to 0.74%
Brent futures up 2.4% to $31.87/bbl
Gold spot up 0.4% to $1,736.66
U.S. Dollar Index down 0.2% to 100.22
Top Overnight News from Bloomberg
Sweden’s central bank just hired consultants from BlackRock to help it buy the corporate bonds at the center of a legal dispute with the country’s parliament
The German economy shrank 2.2% in the first quarter, the most in more than a decade, offering an early flavor of the damage from the coronavirus outbreak
Italy will allow citizens to move freely between its 20 regions starting June 3, according to a draft decree seen by Bloomberg, as Prime Minister Giuseppe Conte’s government opens up the country after more than two months of a stringent lockdown
China said it did not know until Jan. 19 how infectious the new coronavirus is, pushing back against accusations that it intentionally withheld
China’s industrial output increased in April for the first time since the virus outbreak, while retail sales slid more than projected information about the severity of the outbreak in Wuhan from the world
China has a total of five possible vaccines for the coronavirus already in human trials and more will be approved next month, signaling the Asian nation’s rapid progress in the race for immunization
Bank of America sold a $1 billion bond to fund Covid-19 relief efforts, marking the first issuance from a U.S. financial institution that explicitly earmarks all proceeds to tackle the pandemic
Britain and the European Union’s talks about their future relationship are stumbling toward the brink, with few signs of progress being made ahead of a key deadline next month
French Finance Minister Bruno Le Maire pledged government- support measures for the car and aviation industries by the end of June, including incentives to buy electric vehicles
Asian equity markets initially traded indecisively before moving into broadly positive territory; Wall St saw a financial-led session of gains. The APAC session saw mixed Chinese data in which Industrial Production topped estimates but Retail Sales disappointed with a larger than expected contraction. ASX 200 (+1.4%) was buoyed by strength in mining names and with financials cheering the outperformance of their Wall St peers, while Nikkei 225 (+0.6%) initially outperformed due to confirmation the government will lift the State of Emergency in 39 prefectures although the gains were briefly wiped out considering that Tokyo was not included in those areas and with the index oscillating around the 20K level. Hang Seng (-0.1%) and Shanghai Comp. (U/C) were choppy due to the mixed data releases and following the PBoC’s tepid actions whereby it announced a CNY 100bln Medium-term Lending Facility which was half of what had expired yesterday and kept the rate unchanged at 2.95%, but noted that the second phase of its previously announced RRR cuts took effect from today and would release about CNY 200bln of long-term liquidity. Finally, 10yr JGBs were higher but with the gains only marginal amid the indecisive overnight risk tone and with the BoJ also present in the market for relatively reserved JPY 80bln in up to 1yr JGBs, as well as JPY 370bln in the belly.
Top Asian News
China’s Industrial Economy Improves While Consumers Remain Wary
MUFG Sees Smaller-Than-Expected Profit Growth on Bad-Loan Costs
SoftBank Has Spent $2.3 Billion to Buy Own Shares Since March
Bidders Are Lining Up to Buy Virgin Australia After Collapse
European stocks initially held onto gains [Euro Stoxx 50 +0.6%], having missed out yesterday’s post-Europe rally. However, reports that the US is moving to block Huawei from acquiring US integrated semiconductors and chip sets pressured sentiment and stock markets. Spain’s IBEX (-0.5%) is the region’s underperformer amid steep losses in its Financial names – broad-based upside is seen across the rest of the region. Sectors are all in the green with Energy relinquishing its top spot to later underperform; sector breakdown sees Basic Resources and Autos outperforming while Banks reside alongside Construction & Materials. In terms of individual movers, BT (+4.9%) rose as much as 10% at the open amid source reports via the FT that the Co. is in talks to sell a “multibillion-pound stake” in its GBP 20bln Openreach unit to infrastructure investors, adding that talks were reportedly held with Macquarie. However, an internal memo pushed back against this speculator, thus shares trimmed some gains. Elsewhere, Richemont (-2.6%) shares lag the market amid a slew of downbeat YY metrics in which FY20 adj net, operating profit, diluted EPS and net cash position eroded. William Hill (+6.6%) trades higher after announcing that cash burn reduced to around GBP 15mln per month and liquidity in excess of EUR 700mln. The group also said revolving credit facility covenants waived for 2020 and reset for 2021.
Top European News
Germany Enters Historic Recession With Biggest Slump in a Decade
Riksbank Hires BlackRock to Help Pave Way for Corporate Bond QE
BT Insider Buying Brings Skepticism to Deal Talks, Say Analysts
Pandora Gains After Carnegie Increases Price Target by 42%
In FX, notwithstanding an element of Friday fatigue and cautious trade ahead of potentially market-moving US data in the form of retail sales and ip ahead of preliminary Michigan sentiment, the Yen and Dollar look tightly bound above 107.00 amidst a recovery in broad sentiment and particularly large expiries rolling off at the NY cut, with over 2 bn at the figure and 107.50 keeping Usd/Jpy contained. Moreover, the remaining Greenback/G10 pairings are also sticking to relatively tight lines awaiting more decisive direction following choppy and erratic price action so far this week, as the DXY consolidates just off yesterday’s new mtd high (100.56) within a 100.390-160 range.
EUR/AUD/CAD/CHF – As noted above, not much deviation or adverse reaction to Eurozone GDP data that was remarkably close to consensus and largely ignored on the basis that the current quarter will be more telling in terms of gauging COVID-19 contagion. Indeed, after Germany’s 2.2% q/q contraction the Economy Ministry noted no improvement in April vs tangible evidence of recovery from this month, but still predicts a 10% fall overall in Q2. However, the single currency is clinging to 1.0800 vs the Buck following Thursday’s foray below the round number that almost tripped stops at 1.0775. Meanwhile, the Aussie, Loonie and Franc are all meandering between narrow bands against their US counterpart around 0.6460, 1.4045 and 0.9725 respectively, with the former not gleaning much from mixed Chinese data overnight, but the Cad cushioned by firm crude prices and the Chf still wary about ongoing official intervention given further retracement from recent peaks against the Eur to fresh multi-year highs less than 10 pips from 1.0500.
GBP/SEK/NOK/NZD – Cable remains on the cusp of steeper declines unless 1.2200 continues to provide psychological support or the Pound survives another test of 1.2166 from a technical perspective awaiting updates on this week’s last session of UK-EU trade negotiations. Conversely, the Swedish and Norwegian Kronas appear to have run in to some resistance in Euro cross terms ahead of 10.5800 and 10.9500 respectively, but both retain upward thrust towards the upper bounds of 10.7100-10.5600 and 11.1855-10.9250 extremes on the week so far, in contrast to the Kiwi that is languishing under 0.6000 vs its US peer and not far from 1.0800 against the Aussie in wake of clear NIRP inferences from the RBNZ.
EM – Most regional currencies are going through the motions, but the Lira has now touched 6.9000 as its resurgence gathers more steam and the Mexican Peso is taking the Banxico’s latest 50 bp ease in stride. However, the Czech Koruna has been hit by comments from CNB Governor Runok playing down the prospect of implementing an FX regime and resorting to negative rates following mixed Q1 GDP reads vs forecasts, albeit q/q and y/y contractions vs better than expected Hungarian, Polish and Romanian prints.
In commodities, WTI and Brent front-month continue to grind higher amid rosier demand and storage prospects alongside a more bullish supply backdrop. Furthermore, the IEA’s more optimistic comments regarding the demand slump not being as steep as feared underpin the complex. That being said, desks note that despite the above, the market remains in surplus, but the magnitude of inventory builds has declined vs. April levels – resulting in strengthening time spreads and narrower contango – suggesting that market improving fundamentals. “we still believe that in the near-term, the upside is limited given that we are still in a surplus environment and as there is plenty of inventory for the market to digest.” ING writes. WTI June hovers around USD 28.00/bbl having printed a base at USD 27.24/bbl, whilst Brent July dipped just below 32/bbl in a USD 30.84-32.50/bbl intraday band. For reference, OPEC Secretary General Barkindo will be appearing on Bloomberg TV at 1500BST. Meanwhile, spot gold tracks Dollar action and gains further ground above 1700/oz – eyeing potential resistance at USD 1738.50/oz (April 23rd high), having traded in a USD 1729-38/oz band thus far. Copper prices move higher in tandem with the broader risk sentiment, but prices remain contained within recent ranges.
US Event Calendar
8:30am: Retail Sales Advance MoM, est. -12.0%, prior -8.7%
Retail Sales Control Group, est. -4.95%, prior 1.7%
Retail Sales Ex Auto MoM, est. -8.5%, prior -4.5%
8:30am: Empire Manufacturing, est. -60, prior -78.2
9:15am: Industrial Production MoM, est. -12.0%, prior -5.4%
9:45am: Bloomberg May United States Economic Survey
10am: Business Inventories, est. -0.2%, prior -0.4%
10am: JOLTS Job Openings, est. 5,800, prior 6,882
10am: U. of Mich. Sentiment, est. 68, prior 71.8; Current Conditions, est. 62.8, prior 74.3; Expectations, est. 60.2, prior 70.1
4pm: Net Long-term TIC Flows, prior $49.4b
DB’s Jim Reid concludes the overnight wrap
If you promise not to tell anyone I’ll let you into a little secret. I logged off the earliest I have done in 8 weeks last night and went to play golf in what was a beautifully sunny evening. My first game since early March after courses reopened Wednesday. Right from the outset I ensured I was social distancing by driving it onto the third green instead of the first fairway. Thankfully it got better but I’m a bit surprised how shattered I am after a couple of months of not walking round with my clubs.
It’s also amazing how sentiment can turn after a few hours on the golf course. When the S&P 500 continued a tough week by being down -1.9%, 30 minutes into the US session, it was hard not to wonder whether the market was finally having its Wile E. Coyote moment and responding to gravity after successfully running off the edge of the cliff a few weeks back and somehow staying airborne. However the market’s weightlessness returned and an impressive snap back materialised with the S&P 500 closing +1.15% – over 3% up from the lows with Banks (4.10%) leading the charge.
For the majority of the day Technology stocks were down, but the late rally lifted all boats and 21 out of 24 S&P 500 industry groups finished in the green. Since the first historic spike of initial jobs claims on 19 March, 7 out of the 9 Thursdays have seen the S&P rally in the face of massive unemployment numbers. Energy stocks – one of the other laggards YTD with Banks – rallied as well on the back of a large rise in oil prices, with the sector up +0.94% – still lagging the overall index.
As mentioned above, oil had a strong day, with WTI (+8.98%) and Brent (+6.65%) both moving consistently higher throughout the day. The moves came as the International Energy Agency said in their monthly Oil Market Report that they were increasing their estimate of global oil demand in Q2 by +3.2m b/d, though this remained well below last year’s number by 19.9m b/d. Furthermore, they said that global oil supply would fall to a 9-year low in May, thanks to the OPEC+ agreement and other production declines. Saudi Aramco also cut sales to US and Europe by roughly 50%, more than they have cut to Asia already, in an effort to further reduce the overall global oversupply. DB’s Michael Hsueh’s turned bullish on oil yesterday as demand is recovering quicker than anticipated and supply cuts are holding better too. See his brief note here for more.
Overnight, China has released a mixed bag of April activity data. Industrial production surprised to the upside, printing at +3.9% yoy (vs. +1.5% yoy expected and -1.1% yoy last month) however retail sales were -7.5% yoy (vs. -6.0% yoy expected and -15.8% yoy last month). Fixed asset investment data was closer to expectations at -10.3% yoy (vs. -10% yoy expected and -16.1% yoy in YtD March) while the surveyed urban jobless rate came in at 6.0% (vs. 5.9% last month). The NBS noted that the Chinese economy “hasn’t returned to normal level,” and that there are “pent-up demand effects” in the data improvement.
Following that, markets in Asia have eked out small gains this morning with the Nikkei (+0.11%), Hang Seng (+0.40%), Shanghai Comp (+0.18%) and Kospi (+0.14%) all up. Meanwhile, futures on the S&P 500 are down -0.08% while WTI oil prices are up +0.76% to $27.77 as we type.
In other overnight news, Mexico’s central bank lowered rates by 50bps to 5.5% as expected. The central bank board stated in the communique that accompanies its decision that it saw an economic slump deepening in the second quarter, along with a significant contraction in employment.
Back to yesterday where the late US rally was in the face of more worrying news flow yesterday. Starting with the politics, concerns over another escalation in the China-US trade war were sparked by a Fox Business Network interview with President Trump, who said in reference to Chinese president Xi that “right now, I don’t want to speak to him. I don’t want to speak to him.” Furthermore, he added that “we could cut off the whole relationship. If we did, what would happen? You’d save $500 billion”. So certainly not comments that bode well for the prospects of global trade once the coronavirus has passed. And when it came to the coronavirus, Trump described himself as “very disappointed” in Beijing’s failure to prevent the virus at the start. Meanwhile, the US Senate passed a legislation yesterday that would pave the way for targeted sanctions against government officials in China over alleged human rights abuses against Muslim ethnic minority groups in the country’s northwest. The legislation directs the White House to submit a report to Congress within 180 days identifying those deemed responsible for torture, extrajudicial detention, forced disappearance and other “flagrant denial(s)” of human rights in China’s Xinjiang Uygur Autonomous Region.
The jitters were then further exacerbated after the weekly US initial jobless claims were released. They showed that 2.981m made claims in the week through May 9. That was well above the 2.5m reading expected, and was the smallest weekly decline (-195k) since the peak back in late March, raising fears that the scale of the ongoing job losses aren’t easing as fast as investors had been hoping for, particularly given the equity rally we’ve seen in recent weeks. However, Connecticut said later in the day that it incorrectly reported unemployment claims at 298,680, about 10 times higher than the correct number of 29,846 due to a “data entry reporting error” which likely inflated the initial claims number. Any revisions will be reflected in the next release on May 21. The one consolation with yesterday’s data was that continuing claims, which covered the previous week up to May 2, came in at 22.833m (vs. 25.120m expected), with the insured unemployment rate up “just” 0.3 percentage points to 15.7%.
Before the late US rally these negative stories set the tone and Europe closed weak with the Stoxx 600 falling -2.17%. Even with the eventual rally in US stocks and oil, investors still sought out safe havens, with gold climbing +0.82% to reach a new 7-year high. Indeed, the turmoil this year has meant that gold is one of the top-performing global assets, with a YTD return of +14.04%. US Treasuries also rallied, with 10yr yields down -3.1bps to 0.622%. In Europe, peripheral spreads over bunds widened however, with those on both Italian (+2.8bps) and Spanish (+2.5bps) ten-year debt paring back yesterday’s moves tighter.
The global negative rates chatter continued yesterday, though once again it was generally denied. Bank of England Governor Bailey said that negative rates were “not something we are currently planning or contemplating”, though he did also add that it’s “always wise not to rule anything out forever”. Meanwhile St. Louis Fed Bullard added to Chair Powell’s remarks the previous day, saying that the Fed wasn’t considering negative interest rates. And over in Japan, Governor Kuroda said that he didn’t think it was necessary for the BoJ to cut the policy rate further.
Finally, the latest round of Brexit negotiations between the UK and the EU on their future relationship will wrap up today. That leaves just one more round at the start of June before a key high level meeting takes place later next month. Yesterday, we heard from Prime Minister Johnson’s spokesman that the UK’s chief negotiator, David Frost, told the cabinet that the EU had “asked far more from the UK than they have from other sovereign countries with whom they have reached free trade agreements”. One of the key points of contention between the two sides have been EU demands that the UK sign up to a so-called level-playing field, where the UK will commit not to undercut the EU on areas such as workers’ rights or environmental standards. We should hear more on the latest round from the EU’s chief negotiator, Michel Barnier, in a press conference later today.
To the day ahead now, and the data highlights from Europe include the first look at German GDP in Q1, as well as the second estimate of Q1’s Euro Area GDP. Alongside that, from the US we’ll get retail sales, industrial production and capacity utilisation for April, along with May’s Empire State manufacturing survey and the preliminary University of Michigan sentiment indicator.
via ZeroHedge News https://ift.tt/2T5XquA Tyler Durden
I have just uploaded to SSRN a draft of a forthcoming article I have coauthored with Kristen M. Renberg entitled The Paradoxical Impact of Scalia’s Campaign Against Legislative History. As many readers of this blog will know, in the mid-1980s Judge and then Justice Scalia advocated forcefully against the use of legislative history in statutory interpretation. Justice Scalia’s position, in line with his textualism, was that legislative history was irrelevant and judges should not invoke it. As he pithily summarized his long-held views in a 1996 case, “The text’s the thing. We should therefore ignore drafting history without discussing it, instead of after discussing it.”
Reactions to his attacks among other Justices and prominent circuit judges had an ideological quality, with greater support from ideological conservatives. In response, most (mainly liberal) defenders of legislative history did not suggest that courts should freely cite to all legislative history. Instead they advocated what had been the most common approach until the 1970s – treating committee and conference reports as highly reliable and statements on the floor or in committee hearings as among the least reliable forms of legislative history.
Kristen and I investigated the citation practices of circuit court opinion authors. We had two hypotheses: 1) After Scalia began his attacks on legislative history, Republican judges would be more likely to adopt his position (by avoiding citations to legislative history) than their Democratic counterparts. In other words, judges nominated by Republican Presidents would cite legislative history less often than those nominated by Democratic Presidents. 2) Separately, post-Reagan (i.e., Reagan-and-later) judges would be more likely to adopt Scalia’s position than pre-Reagan judges would (so, e.g., H.W. Bush judges would cite legislative history less often than Nixon judges, and Clinton judges would cite legislative history less often than Carter judges).
The first of these hypotheses is a classic political science argument. Those who advocated for textualism and against legislative history were mainly political conservatives, so we might expect Republican judges to be influenced by those attacks more than their Democratic counterparts. The second hypothesis involves the diffusion of ideas and reflects my own experience as someone who went to law school not long after Scalia began his attacks. My experience as a clerk and a young lawyer was that most of the judges who started deciding cases long before Scalia began his attacks were not moved: they had figured out how they wanted to interpret statutes, and they were happy to cite committee reports, floor statements, etc. pretty freely. As Harold Leventhal, a D.C. Circuit judge prominent in the 1970s, famously summarized, “The use of legislative history [was] the equivalent of entering a crowded cocktail party and looking over the heads of the guests for one’s friends.” However, judges who were relatively new to the bench when Scalia began his attacks, or who took the bench after he began his attacks, appeared to be significantly influenced by them. Simply stated, my experience suggested that post-Reagan judges seem to have been affected by his attacks more than pre-Reagan judges.
But those were just our hypotheses. What did the data show?
Using a dataset containing all published federal appellate court majority opinions between 1965 and 2011 (more than 240,000 opinions), we found only partial support for our hypotheses. Instead, our result was much more interesting than what we had hypothesized. Specifically, we found that the judges we expected to be most influenced by Scalia (Republicans and post-Reagan) were less likely to cite floor statements or committee hearings than were their counterparts. But the Republican and post-Reagan judges were more likely to cite to conference and committee reports than were their counterparts. The judges we expected to be influenced by Scalia accepted one element of his critique and rejected another element, even though he conceptualized those elements as part and parcel of a coherent textualist whole. The attacks on legislative history thus seem to have had the effect of pushing judges who might be expected to be influenced to (re)examine their treatment of legislative history but not, as Scalia had advocated, to ignore it. Instead, they adopted what had been the consensus approach for most of the twentieth century. Scalia influenced, but he did not persuade.
What to make of this? Here is most of our conclusion:
One way of looking at the data we present is that Scalia had meaningful success – he got half a loaf, and half a loaf is significant. He attacked a practice he deemed unprincipled, and although circuit judges did not wholly accept his prescription, Republican and post-Reagan circuit judges who might be expected to be more influenced by Scalia did become more careful than their counterparts in their invocation of legislative history. He thus managed to destabilize the prevailing norms and push many judges to think more carefully about their use of legislative history.
On a different view, many judges may have been influenced by Scalia’s critique of the prevailing approach to legislative history, but they rejected his categorical hostility to it. Under Scalia’s approach, judges should treat legislative history as no more relevant than the weather in Washington D.C. the day the legislation was passed. Prominent liberal judges responded that legislative purpose is relevant, and that there is a principled way of invoking legislative history that looks more to committee reports and less to floor debates and statements at committee hearings. This debate led judges, and in particular Republican and post-Reagan judges, to consider these issues, and they sided with the prominent liberal judges: they concluded that text alone was not sufficient, and that committee reports should be invoked. On this view, Scalia largely failed.
Part of the choice between these positions depends on unknowable considerations. For instance, what would have happened if there had been no attacks on the use of legislative history? Perhaps liberal judges and law professors would have been happy for the 1970s pattern to persist, and so absent those attacks they would not have advocated for the pre-1970s consensus. And maybe the legislative history practices of the 1970s would have continued. Under those circumstances, we would say that the Scalia-led attacks on legislative history were fairly successful, because they brought about the rethinking among liberal judges and law professors noted above, and spurred the movement away from the least reliable forms of legislative history. On the other hand, perhaps even in the absence of any attacks on legislative history liberal judges and law professors would have made the same arguments for the pre-1970s consensus, and perhaps those arguments would have been exactly as successful as they turned out to be in reality. In that scenario, Scalia’s arguments against legislative history achieved nothing, as the same result would have occurred had Scalia never launched any attacks.
These scenarios, as counterfactuals, are of course unprovable. Beyond that, a conclusion about the degree to which Scalia succeeded or failed also depends on judgment calls with no obvious metric – notably, how much weight one puts on the influenced judges’ decrease in citations to floor debates or committee hearings versus their increase in citations to committee reports.
Thus the best answer to the question whether Scalia achieved modest success or instead failed is yes.
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On Wednesdays, the Supreme Court heard oral argument in two faithless elector cases. First,Chiafalo v. Washington arose from a criminal prosecution; the state imposed a $1,000 fine against a faithless elector. Second,Colorado Department of State v. Baca arose from a civil suit; the faithless electors sued the state for not counting their votes. (Justice Sotomayor recused from this case.)
The parties disagree about the status of an elector. During oral arguments, Justice Thomas asked several questions about how to characterize presidential electors. First, he asked Lessig, “When you make your federal function argument, does that depend in part on your view that the elector has discretion?” Lessig replied, “The federal function establishes the discretion, Your Honor.” Thomas asked the same question of the Washington Solicitor General: “how you would define the scope of the federal function concept” with respect to presidential electors? Purcell replied, “federal electors are not federal officers.” And Thomas asked the same question of the Colorado Attorney General. Weiser replied, “this Court has made clear multiple times, electors are not federal officials. They are appointed by and overseen and transmit the vote of the states.”
This issue was discussed at length in the briefs. Baca, the elector contended that he performs a “federal function,” and the Supremacy Clause shields that function from state control.
For nearly a century, this Court has made clear that presidential electors perform a “federal function” when they cast, tally, and transmit to the federal government their votes for President and Vice President. Burroughs, 290 U.S. at 545; see also Ray, 343 U.S. at 224 (noting that “presidential electors exercise a federal function in balloting for President and Vice-President” and comparing the “federal function” of a presidential elector to “the state elector who votes for congress[persons]”); Bush, 531 U.S. at 112 (Rehnquist, C.J., concurring) (same, quoting Burroughs, 290 U.S. at 545). It follows that states cannot control the performance of that federal function either directly or indirectly.
Colorado countered that electors are “subordinate state officers,” and cannot challenge state statutes that control their duties.
Based on this structure, this Court has stated on three separate occasions that presidential electors “are not federal officers or agents.” Ray, 343 U.S. at 224; see also Burroughs v. United States, 290 U.S. 534, 545 (1934) (“presidential electors are not officers or agents of the federal government”); Green, 134 U.S. at 379 (presidential electors “are no more officers or agents of the United States than are the members of the state legislatures when acting as electors of federal senators, or the people of the states when acting as electors of representatives in congress”).
Both parties cite page 324 of Ray v. Blair(1952) to reach the opposite conclusion. Here is the relevant section:
The presidential electors exercise a federal function in balloting for President and Vice-President but they are not federal officers or agents any more than the state elector who votes for congressmen. They act by authority of the state that in turn receives its authority from the federal constitution.
While presidential electors are not officers or agents of the federal government (In re Green), they exercise federal functions under, and discharge duties in virtue of authority conferred by, the Constitution of the United States.
Although the electors are appointed and act under and pursuant to the constitution of the United States, they are no more officers or agents of the United States than are the members of the state legislatures when acting as electors of federal senators, or the people of the states when acting as electors of representatives in congress.
We do not think Ray, Burroughs, and Green have definitively resolved the status of electors. The Court has, unequivocally, held that electors are not “federal officers.” But it does not necessarily follow they are “subordinate state officers,” as Colorado contends. You may ask, is there some third choice?
Baca countered that he is not a “subordinate state officer.” Instead, he holds a “position of public trust under the United States.” This is a phrase used in only one provision in the Constitution: the Religious Test Clause in Article VI. It provides, “[N]o religious test shall ever be required as a qualification to any office or public Trust under the United States.”
Baca argues:
Presidential electors are not “subordinate state officers,” Colo. Br. 10, because they are neither subordinate to any executive official nor officers of any state. Presidential electors are “appointed and act under and pursuant to the Constitution of the United States.” Fitzgerald v. Green, 134 U.S. 377, 379 (1890). As such, presidential electors have a status equivalent to U.S. Senators or Representatives: individuals who hold positions of “public trust” under the United States but who are not “Officers” under the United States or any single state.1
Footnote 1 cites to, among other sources, an article by Tillman:
The text of the Constitution makes this point clear. The Elector Ineligibility Clause says that “no Senator or Representative, or Person holding an Office of Trust or Profit under the United States, shall be appointed an Elector.” U.S. Const. art. II, § 1. From this passage, we know that neither Senator nor Representative nor Elector is considered an “Office of Trust or Profit under the United States.” Yet in virtue of their exercise of sovereign powers delegated by the Constitution, all must hold a “public trust” under the Constitution and so cannot, for instance, be subjected to religious tests. See U.S. Const. art. VI, § 3 (“[N]o religious test shall ever be required as a qualification to any office or public Trust under the United States.”); Vasan Kesavan, The Very Faithless Elector?, 104 W. Va. L. Rev. 123, 133 (2001) (“Electors, like Members of Congress, hold a ‘public Trust under the United States.'”); Seth Barrett Tillman, Interpreting Precise Constitutional Text, 61 Clev. St. L. Rev. 285, 346 (2013) (the “public trust language accommodated the presidency, vice presidency, and members of Congress (and, perhaps, federal electors)”).
Later, the brief cites Tillman’s work in a related context:
First, if Colorado means to suggest that Senators and Representatives hold offices “under the United States,” it is wrong, just like it is wrong that electors hold “offices under any State.” This Court has held that Senators and Representatives are not “Officers of the United States.” See Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 497–98 (2010). (“The people do not vote for the ‘Officers of the United States.'”); United States v. Mouat, 124 U.S. 303, 307 (1888) (an elected official is not, “strictly speaking, an officer of the United States.”); see also U.S. Const. art. I, § 6 (providing that “no Person holding any Office under the United States, shall be a Member of either House during his Continuance in Office,” which makes it impossible for a Member of Congress to hold any “Office under the United States”); Tillman, supra, at 313 n.48 (noting that “Officers of the United States” and “Officers under the United States” are “related terms of art,” and neither extends to Members of Congress).
There was one other reference to the Constitution’s office– and officer-language. Justice Kavanaugh read the Elector Incompatibility Clause. It provides, “no Senator or Representative, or Person holding an Office of Trust or Profit under the United States, shall be appointed an Elector.” He asked the Washington Solicitor General, “What is the purpose you see of that provision if your theory of the electors is correct?” Purcell replied, the Framers “specifically prohibited members of Congress from serving in that role.” Purcell is, in part, correct. The Elector Incompatibility Clause excludes members of Congress from being electors. But it also excludes others; it also excludes any “Person holding an Office of Trust or Profit under the United States.” Purcell didn’t address these other positions–or the possibility that there are other important categories, such as Article VI “public trusts under the United States.”
We are very pleased that Lessig’s legal team has favorably cited Tillman’s 2013 article. We have developed these themes at some length in the Emoluments Clause litigation. And we are working on a comprehensive article that discusses the different types of offices and officers of the Constitution. We have dedicated an entire section to the status of electors. We explain why electors are best viewed as holders of “public trusts.” Here is a preview:
The status of electors who vote in the electoral college poses some [interpretive] difficulties. Several courts have concluded that electors are state officers. We take no position on whether these decisions are correct as a matter of original public meaning. Recently, several legal historians took the position that presidential electors are “holders of an office ‘of trust’ under the United States,” and would thus “be subject to the [Foreign Emoluments] [C]lause.” We think this position is incorrect. The Electoral Incompatibility bars those holding an “office . . . under the United States” from serving as electors. If the legal historians were correct, then electors (who hold, ex hypothesi, an “office . . . under the United States”) could not serve as electors. Electors may best be viewed as holders of “public trust under the United States.”
We will share this paper in due course.
We do not know how the Court will resolve these complicated cases. There are a lot of overlapping issues that cloud any resolution. But the Court should not simply assume that electors are “subordinate state officials.” The Constitution offers a textured and intricate approach to different kinds of offices and officers. There is no reason to unnecessarily decide the status of electors–a novel constitutional question–if the Court rules against the electors on other grounds.
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