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Making Sense of the Votes in the Ramos v. Louisiana Majority (Updated)

Today the Supreme Court decided Ramos v. Louisiana. (Eugene and Jon blogged about it earlier). The votes are very, very complicated:

GORSUCH, J., announced the judgment of the Court, and delivered the opinion of the Court with respect to Parts I, II–A, III, and IV–B–1, in which GINSBURG, BREYER, SOTOMAYOR, and KAVANAUGH, JJ., joined, an opinion with respect to Parts II–B, IV–B–2, and V, in which GINSBURG, BREYER, and SOTOMAYOR, JJ., joined, and an opinion with respect to Part IV–A, in which GINSBURG and BREYER, JJ., joined. SOTOMAYOR, J., filed an opinion concurring as to all but Part IV–A. KAVANAUGH, J., filed an opinion concurring in part. THOMAS, J., filed an opinion concurring in the judgment. ALITO, J., filed a dissenting opinion, in which ROBERTS, C. J., joined, and in which KAGAN, J., joined as to all but Part III–D.

Justice Kavanaugh offered this explanation of the breakdown:

As noted above, I join the introduction and Parts I, II–A, III, and IV–B–1 of JUSTICE GORSUCH‘s opinion for the Court. The remainder of JUSTICE GORSUCH‘s opinion does not command a majority. That point isimportant with respect to Part IV–A, which only three Justices have joined. It appears that six Justices of the Court treat the result in Apodaca as a precedent and therefore do not subscribe to the analysis in PartIV–A of JUSTICE GORSUCH‘s opinion.

This graph (as best as I can tell) charts the votes in the majority.

I will update the post as I make my way through the 87-page opinion.

Update: The remainder of this post explains the complicated breakdown of the Ramos majority.

Part II-B

Justices Gorsuch, Ginsburg, Breyer, and Sotomayor joined Part II-B . This brief section (pp. 9-11 of the slip opinion) tries to make sense of Apodaca v. Oregon:

So what could we possibly describe as the “holding” of Apodaca?

Really, no one has found a way to make sense of it. In later cases, this Court has labeled Apodaca an “exception,” “unusual,” and in any event “not an endorsement” of JusticePowell’s view of incorporation.³⁴At the same time, we have continued to recognize the historical need for unanimity.³⁵We’ve been studiously ambiguous, even inconsistent, about what Apodaca might mean.

Justice Kavanaugh did not join Part II-B.

Part IV-A

Justices Gorsuch, Ginsburg, and Breyer joined Part IV-A (pp. 16-20 of the slip opinion). This section responds to Justice Alito’s dissent. It begins:

If Louisiana’s path to an affirmance is a difficult one, the dissent’s is trickier still. The dissent doesn’t dispute that the Sixth Amendment protects the right to a unanimous jury verdict, or that the Fourteenth Amendment extends this right to state-court trials. But, it insists, we must affirm Mr. Ramos’s conviction anyway. Why? Because the doctrine of stare decisis supposedly commands it. There are two independent reasons why that answer falls short.

Justices Sotomayor and Kavanaugh did not join Part IV-A, for different reasons.

Part IV-B-2

Justices Gorsuch, Ginsburg, Breyer, and Sotomayor joined Part IV-B-2 and Part IV. Justice Kavanaugh did not join Part IV-B-2 and Part IV.

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Making Sense of the Votes in the Ramos v. Louisiana Majority (Updated)

Today the Supreme Court decided Ramos v. Louisiana. (Eugene and Jon blogged about it earlier). The votes are very, very complicated:

GORSUCH, J., announced the judgment of the Court, and delivered the opinion of the Court with respect to Parts I, II–A, III, and IV–B–1, in which GINSBURG, BREYER, SOTOMAYOR, and KAVANAUGH, JJ., joined, an opinion with respect to Parts II–B, IV–B–2, and V, in which GINSBURG, BREYER, and SOTOMAYOR, JJ., joined, and an opinion with respect to Part IV–A, in which GINSBURG and BREYER, JJ., joined. SOTOMAYOR, J., filed an opinion concurring as to all but Part IV–A. KAVANAUGH, J., filed an opinion concurring in part. THOMAS, J., filed an opinion concurring in the judgment. ALITO, J., filed a dissenting opinion, in which ROBERTS, C. J., joined, and in which KAGAN, J., joined as to all but Part III–D.

Justice Kavanaugh offered this explanation of the breakdown:

As noted above, I join the introduction and Parts I, II–A, III, and IV–B–1 of JUSTICE GORSUCH‘s opinion for the Court. The remainder of JUSTICE GORSUCH‘s opinion does not command a majority. That point isimportant with respect to Part IV–A, which only three Justices have joined. It appears that six Justices of the Court treat the result in Apodaca as a precedent and therefore do not subscribe to the analysis in PartIV–A of JUSTICE GORSUCH‘s opinion.

This graph (as best as I can tell) charts the votes in the majority.

I will update the post as I make my way through the 87-page opinion.

Update: The remainder of this post explains the complicated breakdown of the Ramos majority.

Part II-B

Justices Gorsuch, Ginsburg, Breyer, and Sotomayor joined Part II-B . This brief section (pp. 9-11 of the slip opinion) tries to make sense of Apodaca v. Oregon:

So what could we possibly describe as the “holding” of Apodaca?

Really, no one has found a way to make sense of it. In later cases, this Court has labeled Apodaca an “exception,” “unusual,” and in any event “not an endorsement” of JusticePowell’s view of incorporation.³⁴At the same time, we have continued to recognize the historical need for unanimity.³⁵We’ve been studiously ambiguous, even inconsistent, about what Apodaca might mean.

Justice Kavanaugh did not join Part II-B.

Part IV-A

Justices Gorsuch, Ginsburg, and Breyer joined Part IV. Justices Sotomayor and Kavanaugh did not, for different reasons.

Part IV-B-2

Justices Gorsuch, Ginsburg, Breyer, and Sotomayor joined Part IV-B-2 and Part IV. Justice Kavanaugh did not join Part IV-B-2 and Part IV.

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The Extremely-Overvalued & Top-Heavy US Stock Market

Via Global Macro Monitor,

Caveat freaking emptor.

After the Fed effectively fully nationalized the financial markets by bailing out junk bonds on April 9th, turning Wall Street into a Soviet Sausage Factory, almost any type of analysis, which was on its way out anyway, was rendered completely meaningless.

The new rocket scientists on Wall Street are the market Kremlinologists, who try to guess the new ranges where the Politburo will set yields and how many notes and bonds the Kommissar of Free Money is going to buy in order to monetize a $4 trillion-plus deficit and help rollover existing maturities. All good until it isn’t

Stock Picking

That doesn’t mean you can’t make money picking and being in the right stocks. We crossed swords this weekend with a very savvy ex-Morgan Stanley stock picker (she knows exactly who she is) and we had to concede that she has been right.

The market does appear to be looking forward to the other side. The new world looks a few high tech giants in a less mobile (physical), work from home world. Maybe.

Not sure if that is good or sustainable or the body politic will stand for it.

Nevertheless, that world is foreign to us as our background is top-down global macro but always good to have someone like her on the team.

Global Macro

What we are seeing scares the bejeezus out of us, however.

Our favorite (and Warren Buffet’s) valuation metric, is, unbelievably, even without COVID, trading at its 94th valuation percentile while unemployment heads to the worst levels of the Great Depression, more than half of the Los Angeles workforce is unemployed, and uncertainty still reigns. Even more unbelievable the valuation metric sits just 5 points below its dot.com high in Q1 2000.

Of course, there will be some snapback when the economy reopens but there are 2nd, 3rd,……………….nth order effects markets will still have to deal with.

Warren Buffet is apparently having nothing to do with this market,

“I would say basically we’re like the captain of a ship when the worst typhoon that’s ever happened comes. We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing ‘oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves [into buying businesses]”

— Charlie Munger

This also assumes the markets and economy were structurally sound pre-COVID, which, they were not, in our opinion, and we’re in multiple asset bubbles and weakened from the trade wars.

Top Heavy Market

This BofA chart comes to us via the great Kiwi analyst, Callum Thomas @Callum_Thomas. Sure wish the U.S. had his Prime Minister, a strong, decisive leader with brass balls. Have you seen New Zealand’s COVID Curve?

How about a trade, Callum? Four Generals: 2 Four-Stars, General Electric, and General Dynamics for Jacinda? Deal?

The chart is stunning enough but check out the data table.

As of the Friday close, the big five alone make up 17.97% of the value of almost all publicly traded stocks in the United States as measured by the Wilshire 5000. Stunning.

There are an estimated 3500 publicly companies traded and on U.S. exchanges and the pool of public companies is getting smaller even while the population and economy have expanded. This makes our stock market cap-to-GDP chart above a bit distorted and at current levels even more relatively overvalued than past levels. The following WSJ tidbit is a bit dated but still rings true,

In 1996 there were 7,322 domestic companies listed on U.S. stock exchanges. Today there are only 3,671 – WSJ, Nov’17

The Second Great Gift Of The Magi

Unless we are on the road to runaway inflation, not a zero probability with the monetization that is coming, this bounce is an incredible gift to rebalance, take some risk off, go to the virtual beach and wait this thing out.

We talked to a lot of traders over the weekend still trying to time the market and trade the noise. Hard to get out even with your stops with 10 percent daily trapdoor moves, fellas (both feminine and masculine). I would rather surf elevator shafts.

The twenty- somethings in designer Nikes and physics degrees just haven’t learned or have enough context to understand monetary policy is more placebo than economics or that their is a tipping point when the printing presses run to hot.

Moreover, the waters are too rough for us to fish, which we learned as an undergrad working on swordfish boats out of Newport during the summers. Walking the plank with the harpoon, those were the daze!

Waiting For The Shorts To Capitulate

The info we are conveying here is, no doubt, something already know. It is the record short interest that is now driving and holding the market up here, in our opinion.

Short sellers have revived their wagers against the stock market in recent weeks, taking their most aggressive positions in years.

Bets against the SPDR S&P 500 Trust, the biggest exchange-traded fund tracking the broad index, rose to $68.1 billion last week, the highest level in data going back to January 2016, according to financial analytics company S3 Partners. That was up from $41.7 billion at the beginning of 2020 and $41.2 billion a year ago.

– WSJ

If the central banks were all-powerful, by the way, the Nikkei stock index would be at 200,000 instead of around 50 percent below its Dec 1989 high of around 40,000. Over the past 20 years, the Bank of Japan has bought up just about everything and bailed out everyone, probably including all the country’s sperm banks, yet Japan still has a big demographic problem!

When the placebo effect on stocks goes? Yikes!

Upshot

We like to buy low, sell high. Most prices are way too high. It is preservation of capital time until we get to the value zone, folks. Patience, young grasshopper.

Still sitting on the couch with cash and gold. We will let you trade the noise.

Tyler Durden

Mon, 04/20/2020 – 13:25

via ZeroHedge News https://ift.tt/2XQdKTB Tyler Durden

Fauci: No Recovery Possible If Virus Isn’t “Under Control”

President Trump’s top doctor on the White House coronavirus task force has pushed back against protesters demonstrating against stay-at-home orders, warning that the US economy won’t recover until COVID-19 is “under control.”

“This is something that is hurting from the standpoint of economics,” Fauci acknowledged during an appearance on ABC‘s “Good Morning America,” in comments which sharply contrast with those by President Trump, who has encouraged the protests, Bloomberg reports.

“Unless we get the virus under control, the real recovery economically is not going to happen,” Fauci added. “So what you do if you jump the gun and go into a situation where you have a big spike, you’re going to set yourself back.“

“Clearly this is something that this is hurting …. but unless we get the virus under control, the real recovery, economically, is not going to happen.” — NIAID director Dr. Anthony Fauci on protests against stay-at-home orders. pic.twitter.com/n7x3cunEAm

— Good Morning America (@GMA) April 20, 2020

Fauci added that while it can be “painful” to follow federal guidelines regarding a phased re-opening, it will “backfire” if done too soon.

Protests have erupted in Michigan, Minnesota, Texas and other states demanding that governors lift strict social distancing policies that have battered the U.S. economy. Some demonstrators have called for Fauci’s firing.

Trump has encouraged the protests, tweeting that protesters should “liberate” Michigan, Minnesota and Virginia. The president said Sunday he watched footage of the crowded protests, called them “orderly” and said people “were all six feet apart.” –Bloomberg

According to Trump, people on both sides – including state governors, have gone “too far.”

“Some of the things that happened are maybe not so appropriate,” he said.

Tyler Durden

Mon, 04/20/2020 – 13:05

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Investing In The Age Of COVID…

Via AdventuresInCapitalism.com,

Four weeks ago, the stock market was in free-fall and I made the point that “if you aren’t buying stock down here, you’re simply doing it all wrong.” I fortuitously published it on the day that the market bottomed. Looking back at my call to “buy stuff,” the Fed did exactly what I expected by unleashing an alphabet-soup of acronym programs – forcing people to buy stocks. In fact, many of the oversold shares I was buying into the darkest days of March proceeded to bounce dramatically since then. They gave money away and I hope you got some.

As the market has rallied, I’ve had some time to think and put things into perspective. On one hand, “Project Zimbabwe” is in full force. Now that the Federal Reserve has accepted that the US Dollar will be collateral damage in their bailouts, they won’t accept anything less than new highs in the stock market. On the other hand, the global economy has forever changed.

China unleashed a nasty flu on the world. It’s gone mainstream and there’s nothing that we can do to avoid it. We’re all going to get it and most of us are going to be just fine. We can accept that and go on with life (while recommending that those at risk stay quarantined), or we can shut the global economy, cocoon up and wait for the virus to burn itself out. The issue is that the virus won’t burn out because its in every country and will re-emerge almost immediately as soon as people begin to interact. Even if you could eradicate it from any one country, you’d have to ban all trade and travel with every other country to avoid re-transmission. Basically, we’re past the point where quarantines help and we all need to accept that we’ll get this virus. The sooner that happens, the better for everyone.

Unfortunately, politicians want to win elections – not use logic. Therefore, we’re all trapped at home waiting for some germs to die. Depending on who you believe, we’ll be able to emerge from hiding sometime between May and July. The issue is that almost immediately, the virus will make a resurgence – then what?

Do we all go back into hiding? Do we go on with life and ignore the virus? What about the impacts to businesses? Would businesses bother to re-open if they think they’ll be closed again in six weeks? Will anyone re-hire workers only to let them go again? What about mandated “social distancing?” Will anyone fly again for years? What about hotels, restaurants and entertainment? Services are the core of our economy. What about the rest of the economy? Is anyone about to buy a new car anytime soon? What about construction? Will anyone need more space at a time when every business is trying to contract? What about the oil sector?

There are millions of employees in energy and its supply-chain. What happens to them? Services, manufacturing, construction and energy are the pillars of our economy. Despite the stock market’s overweighting, the FAANG+ isn’t representative of the economy.

I am amazingly lucky that I have so many friends in the global business community. Excluding a few niche sectors like tankers, I cannot think of a friend who’s called me up to say, “Kuppy, things are incredible here!”

Instead, they’re calling and crying.

No one has a clue what happens next. Many of my friends literally have no revenue – instead, they have a pile of invoices that they’re refusing to pay so that they can conserve their liquidity. They’re looking to cut costs and survive. No one is doing much else because everyone is in disbelief that they shut the global economy over a bad seasonal flu. If global governments were willing to do that, what else are they willing to do? Will they shut it again when COVID-20 shows up? What about when COVID-19 has a resurgence? Why re-hire? Why spend money? Everyone is confused.

I have this sneaking feeling that they open up the economy sometime in a month or so and no one shows up. Consumers are either scared of germs or scared to spend money because they don’t have job security or jobs at all. Everyone I know in finance assumes that we sort of ignore the period from March until June and then by July, we’re back to normal. What if it turns out that there’s a failure to re-start or the government makes it impossible to restart profitably? Just think of the ripple-effects of a restaurant told to have a third as many seats due to “social distancing.” What happens to revenue per foot? What happens to the amount they can pay in rent? What happens to the landlord who’s rent is cut by two-thirds? What about his ability or desire to pay his mortgage if the property is only worth a third as much? There will be ripple-on effects here that no one can predict. This is the first crisis that flooding the market with liquidity won’t solve. Printing money doesn’t cure the flu and new regulations likely make things worse.

I don’t believe anything I’ve said above is particularly revolutionary. They broke the economy to cure a flu that isn’t cured. Now, no one knows what to do financially or epidemiologically. At some point, we’ll come to the right solution, which is herd immunity.

Oddly, President Trump may turn out to be one of the great leaders in history, not because he understands biology (he doesn’t) or because he understands an effective way to generate herd immunity while protecting those at risk (details aren’t his strong suit), rather, he’s going to just pull the Band-Aid off and give global leaders the cover to let their people get the flu. Trump has always excelled at pointing out the obvious after the fact and taking credit for it, while ignoring everyone who disagreed along the way. This is his moment to “shine.” Left to chart his own path forward, we’d be over with COVID and back to work in a few weeks. He’s going to wake us all from our collective hypochondria and force us to accept that to go forward as a nation, some of us will not make it to the other side. Along the way, we’re going to have a “holy shit moment” when the virus makes a comeback and an even worse moment as we realize just how much the economy has degraded during the two months that we stayed home.

I bring all of these loose threads up because when I was buying “stuff” four weeks ago, it was a “gimme.” Many of the businesses I was buying were down by almost 80% from recent valuations that had seemed reasonable to me. Furthermore, they had minimal debt with termed out maturities. I just didn’t see how I could lose money at the valuations I was paying for “stuff.” There was a global margin call and phenomenal businesses were being given away. Once the forced selling ended, most equity indices bounced dramatically—the QQQ is even green on the year!! As a result, I’ve been a net seller for the past few days and have de-grossed my book quite a bit.

Remember March? Remember how frustrating it was to wake up and see the futures down-limit yet again? If there was anything you wanted to sell but couldn’t bring yourself to sell for a loss, now is likely a good time to get a bit lighter. Part of me says that “Project Zimbabwe” continues to send everything with a CUSIP parabolic while the other part of me says that you cannot fix a flu with money printing.

These two themes will battle for supremacy over the next few quarters, with “Project Zimbabwe” ultimately victorious, but that doesn’t mean we don’t have a whole lot of volatility along the way. While I think the market is going much higher, this is a decent time to stop, take a deep breath and see what you could do without in case the road higher isn’t linear—even Weimar had some nasty pullbacks along the way. On Monday March 23, I said, “I have the most exposure that I’ve had in years,” now after one of the wildest stock market rallies in history, my exposure is back to neutral. More importantly, I’ve pivoted my exposure strongly into those sectors that benefit from COVID-19 and money printing, namely tankers, natural gas and hard assets.

I never intended this site to be about making broad market calls and I don’t feel I have any particular skill in that regard. I got the sell something and the buy something timing perfectly right and the magnitude of the moves surprised even myself. I assume that the third call, this one where I say to cut back a bit, is the one I regret as asset prices power higher. That’s OK with me. I’m about taking low-risk shots on goal. I am stunned to see the stock market almost at prices that existed before they shut the global economy. While I am hopeful that they can figure out how to re-open the economy, no one knows what happens next. In my mind, we’re priced for perfection, but the economy is still broken. If the market is willing to pay me prices as if everything was perfect and I know it isn’t, why not take some exposure off?

Tyler Durden

Mon, 04/20/2020 – 12:30

via ZeroHedge News https://ift.tt/2xAoGKw Tyler Durden

Coronavirus Finally Gets Trump To Admit Americans Pay His Tariffs

President Donald Trump signed an executive order on Saturday that will provide some temporary relief from tariffs for some American businesses—but the order will not apply to tariffs imposed by Trump himself on imported steel, aluminum, or goods from China.

Even the businesses that could benefit from the change will have to find time to fill out additional paperwork before they get any relief. In a statement released Sunday, U.S. Customs and Border Protection (CBP) explained that “this payment flexibility will be available only for importers with significant financial hardship.” As with so much of the Trump administration’s trade policy, it appears this relief will be contingent on federal bureaucrats picking winners and losers.

Even though its scope seems limited, the new tariff policy is roughly akin to the Trump administration’s earlier move to defer the federal income tax deadline from April 15 to July 15: People and businesses will still have to pay, but the delay will keep additional liquidity in the market. It would be better to lift those tariffs permanently, of course, but even a 90-day delay in payments will provide some flexibility to businesses currently facing a coronavirus-induced cash crunch.

“Any tariff relief is good news, but the benefits of this short-term deferral of duties are limited,” says Bryan Riley, director of the free trade initiative at the fiscally conservative National Taxpayers Union Foundation. “At least the executive order seems to acknowledge the reality that tariffs are paid by Americans, not by China or anyone else.”

Coming from the Trump White House, which has insisted for years that tariffs aren’t paid by Americans but that they somehow function as a tax on foreign producers, this is a confusing stance. On one hand, lifting some tariffs as a form of economic stimulus—even if only on a temporary basis—is a welcome sign, and an acknowledgment that it is indeed Americans who pay the cost of those import duties.

On the other hand, if lifting some tariffs is good for American business, why not lift all of them? Trump doesn’t seriously believe that the tariffs he’s imposed on steel, aluminum, and Chinese imports are magically not paid by Americans too, right? But that’s exactly what his latest galaxy brain trade maneuver seems to suggest.

Or, as The Wall Street Journal drolly explains: “The administration’s defense of tariffs has complicated efforts to delay payments, according to people familiar with the debate. Mr. Trump has often said Chinese or other exporters pay the tariffs. In fact, U.S. importers pay them and frequently pass the extra cost on to American retailers, wholesalers, and consumers.”

Indeed, the federal government may have lifted tariffs weeks ago in response to the COVID-19 pandemic if not for Trump’s commitment to the fantasy world where Americans don’t pay his tariffs. In mid-March, more than 100 businesses and trade associations sent a letter to the White House asking the president to immediately lift tariffs as a form of economic stimulus. Days later, a bipartisan group of lawmakers and Treasury Secretary Steve Mnuchin sent a letter to Trump urging the president to approve a 90-day deferral in tariff payments.

By March 28, CBP was reportedly preparing to do exactly that. But when he was asked about those plans at a press conference, Trump called the report “fake news” and then took steps to block the tariff relief, as The New York Times reported earlier this month.

Practically, Trump’s partial deferral of tariff payments will apply to about half of all tariffs charged to American importers. Prior to the Trump administration’s ramping up of American tariffs in a series of steps since March 2018, the federal government collected about $36 billion in annual tariffs. By 2019, that total had doubled to $72 billion, largely thanks to the tariffs on steel, aluminum, and Chinese-made goods that won’t be exempted under the new executive order.

Keeping those tariffs in place, says Dan Ikenson, director of trade policy studies for the Cato Institute, a libertarian think tank, “presumably inoculates Trump from having to concede that his duties on China are actually paid by US importers.”

“The burden on importers, according to this formulation—and, well, if logic’s not your strong suit or your just willfully ignorant—is caused by the [tariffs that predated the Trump administration], but not the China or steel tariffs,” Ikenson tells Reason.

That Trump has finally agreed to offer some tariff relief for American companies is a sign that there might be some limits to the White House’s ability to ignore economic reality. But doing so will force his supporters to warp themselves into ever-more-ridiculous shapes to defend the president’s tariff policy, which now seems to be that some tariffs are paid for by Americans but others are not.

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Kindle Edition of My Forthcoming Book “Free to Move: Foot Voting, Migration, and Political Freedom” Now Available

Many readers have asked when the Kindle version of my forthcoming book Free to Move: Foot Voting, Migration, and Political Freedom, will become available. I am happy to be able to announce that it is now available for preordering, and will be delivered to your device by April 23. Hard copies will likely not be available until sometime in late May, and could be delayed, depending on the situation with coronavirus lockdowns and its impact on Oxford University Press’ delivery facilities. But they too can be preordered on Amazon and other sites.

I have previously pledged to donate 50% of the royalties from Free to Move to charities serving refugees, and I am happy to reiterate that commitment now, as the need has become even greater.

Here is the publisher’s description of the book:

Ballot box voting is often considered the essence of political freedom. But it has two major shortcomings: individual voters have little chance of making a difference, and they also face strong incentives to remain ignorant about the issues at stake. “Voting with your feet,” however, avoids both of these pitfalls and offers a wider range of choices. In Free to Move, Ilya Somin explains how broadening opportunities for foot voting can greatly enhance political liberty for millions of people around the world.

People can vote with their feet through international migration, by choosing where to live within a federal system, and by making decisions in the private sector. These three types of foot voting are rarely considered together, but Somin explains how they have major common virtues and can be mutually reinforcing. He contends that all forms of foot voting should be expanded and shows how both domestic constitutions and international law can be structured to increase opportunities for foot voting while mitigating possible downsides.

Somin addresses a variety of common objections to expanded migration rights, including claims that the “self-determination” of natives requires giving them the power to exclude migrants, and arguments that migration is likely to have harmful side effects, such as undermining political institutions, overburdening the welfare state, increasing crime and terrorism, and spreading undesirable cultural values. While these objections are usually directed at international migration, Somin shows how a consistent commitment to such theories would also justify severe restrictions on domestic freedom of movement. That implication is an additional reason to be skeptical of these rationales for exclusion. By making a systematic case for a more open world, Free to Move challenges conventional wisdom on both the left and the right.

And here are some early endorsements and reviews:

“It is the best book on geographic mobility and exit that has been written to date, and… I am happy to recommend it heartily.”—Tyler Cowen, Marginal Revolution, author of Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals

“In this excellent book, Somin makes a compelling case that migration –or foot voting—provides far more political power than voting. Any one voter has a trivially small chance of altering an election, but any household can choose a new state and local government by simply moving.This insight implies that devolving power to local governments will generate far more political voice than any conceivable reform to national elections. Freer international migration would empower even more people to choose their own government. Somin’s case is strong, his thinking is clear, and his writing is eloquent.”—Edward Glaeser, Fred and Eleanor Glimp Professor of Economics, Harvard University, and author of The Triumph of the City

“Ilya Somin shows that mobility—the freedom to move from here to there—might be the most underrated underpinning of a free society. It is especially important in America, where states can compete with one another to have social policies welcoming to enterprise and liberty.Voting is important; so is what Somin calls ‘foot voting.'”– George F. Will, columnist, Washington Post, and author of The Conservative Sensibility

“This eminently readable, tightly-argued, and compelling book is a model for how empirically-informed democratic theory ought to proceed. Somin shows us that in modern democracies, even when everyone has equal voice, that voice is usually close to worthless. Taking political freedom seriously requires a serious solution: foot voting. We need to ensure everyone has the right and power to move and work where they please. Exit beats voice almost every time, and the competition isn’t even close. Somin deftly considers and rebuts every major objection to his view. In the end, the conclusion is inescapable: the arguments for democracy don’t so much justify participatory democracy; they instead justify real freedom of movement.”– Jason Brennan, Robert J. and Elizabeth Flanagan Family Term Professor of Strategy, Economics, Ethics, and Public Policy, McDonough School of Business, Georgetown University; author of The Ethics of Voting

“Ilya Somin has done it again, producing a compelling new book, rich with insights about democratic theory, law, and economics. Free to Move takes a familiar idea-that people should be allowed and encouraged to choose the entities that govern them by moving between jurisdictions-and shows why it is valuable and how taking it seriously as a form of political choice provides a clear set of answers to some of our most pressing social problems. Those who share Somin’s belief in the value of ‘voting with your feet,’ will see the scope of their commitment pushed by his consistency and range, and those who do not will find themselves challenged and perhaps even convinced.”– David Schleicher, Professor, Yale Law School

“Many find majority voting with ballots to be the highest guarantor of liberty… Ilya Somin brilliantly and accessibly points to the central,additional role of voting with your feet — moving to a place with better policy—in protecting liberty. His book mines a deep vein of law and philosophy, but you’ll find mercifully little jargon here.What you will find is a book that gives to common assumptions a taut and compelling challenge, and might leave you transformed. It offers a new way to think about international migration, but not just that. It is nothing less than a proposal for a higher form of democracy, built on the critical roles of both ballot-voting and foot-voting as guardians of freedom.”— Michael Clemens, Director of Migration, Displacement, and Humanitarian Policy, Center for Global Development, author of The Walls of Nations

The book was obviously written before the coronavirus crisis, so it only briefly mentions the danger of contagious diseases as a possible justification for migration restrictions. But I have addressed this issue in greater detail here. See also this excellent post by economist Bryan Caplan.

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Coronavirus Finally Gets Trump To Admit Americans Pay His Tariffs

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Kindle Edition of My Forthcoming Book “Free to Move: Foot Voting, Migration, and Political Freedom” Now Available

I have previously pledged to donate 50% of the royalties from Free to Move to charities serving refugees, and I am happy to reiterate that commitment now, as the need has become even greater.

Here is the publisher’s description of the book:

Ballot box voting is often considered the essence of political freedom. But it has two major shortcomings: individual voters have little chance of making a difference, and they also face strong incentives to remain ignorant about the issues at stake. “Voting with your feet,” however, avoids both of these pitfalls and offers a wider range of choices. In Free to Move, Ilya Somin explains how broadening opportunities for foot voting can greatly enhance political liberty for millions of people around the world.

People can vote with their feet through international migration, by choosing where to live within a federal system, and by making decisions in the private sector. These three types of foot voting are rarely considered together, but Somin explains how they have major common virtues and can be mutually reinforcing. He contends that all forms of foot voting should be expanded and shows how both domestic constitutions and international law can be structured to increase opportunities for foot voting while mitigating possible downsides.

Somin addresses a variety of common objections to expanded migration rights, including claims that the “self-determination” of natives requires giving them the power to exclude migrants, and arguments that migration is likely to have harmful side effects, such as undermining political institutions, overburdening the welfare state, increasing crime and terrorism, and spreading undesirable cultural values. While these objections are usually directed at international migration, Somin shows how a consistent commitment to such theories would also justify severe restrictions on domestic freedom of movement. That implication is an additional reason to be skeptical of these rationales for exclusion. By making a systematic case for a more open world, Free to Move challenges conventional wisdom on both the left and the right.

And here are some early endorsements and reviews:

“It is the best book on geographic mobility and exit that has been written to date, and… I am happy to recommend it heartily.”—Tyler Cowen, Marginal Revolution, author of Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals

“In this excellent book, Somin makes a compelling case that migration –or foot voting—provides far more political power than voting. Any one voter has a trivially small chance of altering an election, but any household can choose a new state and local government by simply moving.This insight implies that devolving power to local governments will generate far more political voice than any conceivable reform to national elections. Freer international migration would empower even more people to choose their own government. Somin’s case is strong, his thinking is clear, and his writing is eloquent.”—Edward Glaeser, Fred and Eleanor Glimp Professor of Economics, Harvard University, and author of The Triumph of the City

“Ilya Somin shows that mobility—the freedom to move from here to there—might be the most underrated underpinning of a free society. It is especially important in America, where states can compete with one another to have social policies welcoming to enterprise and liberty.Voting is important; so is what Somin calls ‘foot voting.'”– George F. Will, columnist, Washington Post, and author of The Conservative Sensibility

“This eminently readable, tightly-argued, and compelling book is a model for how empirically-informed democratic theory ought to proceed. Somin shows us that in modern democracies, even when everyone has equal voice, that voice is usually close to worthless. Taking political freedom seriously requires a serious solution: foot voting. We need to ensure everyone has the right and power to move and work where they please. Exit beats voice almost every time, and the competition isn’t even close. Somin deftly considers and rebuts every major objection to his view. In the end, the conclusion is inescapable: the arguments for democracy don’t so much justify participatory democracy; they instead justify real freedom of movement.”– Jason Brennan, Robert J. and Elizabeth Flanagan Family Term Professor of Strategy, Economics, Ethics, and Public Policy, McDonough School of Business, Georgetown University; author of The Ethics of Voting

“Ilya Somin has done it again, producing a compelling new book, rich with insights about democratic theory, law, and economics. Free to Move takes a familiar idea-that people should be allowed and encouraged to choose the entities that govern them by moving between jurisdictions-and shows why it is valuable and how taking it seriously as a form of political choice provides a clear set of answers to some of our most pressing social problems. Those who share Somin’s belief in the value of ‘voting with your feet,’ will see the scope of their commitment pushed by his consistency and range, and those who do not will find themselves challenged and perhaps even convinced.”– David Schleicher, Professor, Yale Law School

“Many find majority voting with ballots to be the highest guarantor of liberty… Ilya Somin brilliantly and accessibly points to the central,additional role of voting with your feet — moving to a place with better policy—in protecting liberty. His book mines a deep vein of law and philosophy, but you’ll find mercifully little jargon here.What you will find is a book that gives to common assumptions a taut and compelling challenge, and might leave you transformed. It offers a new way to think about international migration, but not just that. It is nothing less than a proposal for a higher form of democracy, built on the critical roles of both ballot-voting and foot-voting as guardians of freedom.”— Michael Clemens, Director of Migration, Displacement, and Humanitarian Policy, Center for Global Development, author of The Walls of Nations

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Platts: 6 Commodity Charts To Watch This Week

Via S&P Global Platts Insight blog,

A revived agreement from OPEC+ on oil production cuts, China’s gradual restart after lockdown, and power markets in the doldrums are illustrated in charts picked by S&P Global Platts editors, in this week’s selection of trends from energy and raw materials markets.

Oil price wars

1. OPEC+ pulls a deal out of the bag, but will cuts be deep enough?

What’s happening: The 23 oil producing countries that make up OPEC+ have secured historic global support for cuts to remove around 15 million b/d from the market over the next few months. Saudi Arabia and Russia are set to lead by example by taking on a bigger share of the cuts, which come into effect from May 1 and include output reductions from countries outside the pact, including the US and Canada. The North American reductions are likely to be driven by market forces as low prices lead to production shut-ins, while India, China, South Korea and the US could also fill up their strategic reserves to take further crude off the market.

What’s next: Despite the scale of the agreement concerns remain that demand destruction from the spread of the coronavirus pandemic will still be too great to balance fundamentals and prevent global storage being exhausted. Storage could be filled up both on land and on sea by May, with few places for excess crude and oil products to go. However, the agreement could aid a quicker recovery in the second half of the year if lockdowns start easing and demand, especially for jet fuel and gasoline, begins to recover.

China’s economy and demand

2. Historic China GDP drop as country goes back to work

What’s happening ? China released its GDP data for the first quarter of 2020, which showed that the economy shrank by 6.8%, the first time since the mid 1970’s that China has reported negative growth. Higher frequency indicators suggest that the economy is on the rebound, with house sales and coal burn at power plants back to 80-90% of last year’s levels.

What’s next? The question is how long it will take for China to recover from this extreme short-term shock. The SME sector could be an area of concern, as many have gone to the wall over the last few months. Urban unemployment has risen and the cumulative movement of people into major cities is 20% down on last year. With external demand still weak it may be some time before this sector can rebuild itself and the economy is fully back to normal.

3. China provides some respite to crude sellers…

What’s happening: The loss to Chinese oil demand, at around 12% in the first quarter of 2020, outpaced the GDP fall in the same period. Kang Wu, S&P Global Platts Analytics head of Asia, said China’s oil demand took the bigger hit as strict travel restrictions drastically cut demand for transportation fuels like gasoline, gasoil, jet fuel and bunkers.

What’s next: A few key Q1 economic indicators, such as fixed-asset investment, industry production and transportation index, suggested economic activities improved in March from January-February, slightly helping a gasoil demand recovery. And China has in recent weeks emerged to be the only bright spot for crude sellers seeking to offload their cargoes, with Chinese refineries ramping up run rates as travel restrictions are eased. Notable deals include an independent refinery’s 1 million barrel purchase of Liza crude from Guyana for July delivery, and crude from crude from the Saudi-Kuwaiti Neutral Zone, which has only started production in recent months, now on its way to southern China.

4. …and upside for copper market, with caveats

What’s happening? Copper, often cited as a bellwether for the economy, has been recovering from recent lows as production curtailments kick in and China starts to return to work. Copper is currently back above $5,000/mt, having been sold down to almost $4,000/mt earlier in the year. The metal has been moving, at points, in lockstep with global equities, which are currently well bid and offering support. Before the pandemic broke copper fundamentals were starting to look fairly bullish.

What’s next? Uncertainty reigns over the economic outlook. With copper supply starting to come down, albeit at the same time as demand, some voices in the market suggest we have seen the bottom and the metal should be well supported going forward. Recent reports suggest the pandemic has delayed copper concentrate shipments to China, the globe’s largest consumer, which could affect copper smelting in the near term. A counter-argument is that those commentators are ignoring the state of play outside China, and that a world recession could see copper sold back down to recent lows.

Power problems

5. US coal plant files for bankruptcy as lockdown bites…

Chart shows real time power price at plant connection to grid

What’s happening? Power prices at the roughly 700-MW Longview Power coal-fired power plant’s interconnection point with the PJM system have declined steadily each month in 2020. The average April month-to-date price Longview receives for its power is around $15/MWh in 2020, down almost by half compared with nearly $28.40/MWh in 2019. Citing “unprecedented low energy prices” in the PJM Interconnection market along with coronavirus impacts, Longview filed for Chapter 11 bankruptcy protection.

What’s next? Longview is in the process of expanding the power generation facility by adding a 1,270 MW gas-fired plant that will be supplied by Marcellus Shale production, and a 70-MW solar installation occupying 300 acres adjacent to the existing coal plant. Longview expects to continue operating the coal power plant and moving forward with the new projects during the bankruptcy proceeding. However, the economics of US coal-fired power generation have been pressured by lockdown-driven natural gas and power price weakness, so it will be important to watch this space in the coming weeks. PJM is seeing weekday peak power demand down by 8%-10% due to stay-at-home orders.

6. …while French nuclear giant slashes 2020 output target

What’s happening? French nuclear operator EDF cut its 2020 nuclear production target by an unprecedented 70 TWh on April 16 saying that may need to take a number of reactors offline this summer to save fuel for winter, as coronavirus restrictions impact annual refueling and maintenance across its fleet of 56 reactors. French Q3 power prices rebounded 27% last week after hitting record lows before Easter. The news also lifted prices in neighboring markets as the cuts call into question France’s position as Europe’s biggest power exporter, especially during the summer, and coincided with first steps to carefully restart Germany’s economy next month.

What’s next? Skipping annual maintenance and refueling for some French reactors this summer would have knock-on effects for 2021 and 2022. EDF also cut its outlook for those periods sharply, lifting year-ahead power prices across the region. Gas and some remaining coal plants could benefit if the cuts outweigh demand declines from the coronavirus crisis, increasing demand for EUA carbon allowance, and accordingly CO2 prices rose to a five-week high above Eur21/mt. Only last year saw higher carbon prices in Europe over the past decade, helping to stabilize power prices despite record-low gas prices.

Tyler Durden

Mon, 04/20/2020 – 12:10

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