Barred from Participating in Public High School Graduation for Using “Nigger” in a Tweet?

From Castro v. City of Clovis, decided Friday by Judge Dale A. Drozd (E.D. Cal.):

… On June 13, 2019, plaintiff filed this action, alleging violations of his rights to free speech and due process. According to the complaint, plaintiff is a former Clovis High School student who recently turned 18 and finished high school. Plaintiff was scheduled to attend his graduation ceremony on May 30, 2019, when his school “revok[ed] his VIP sitting privilege in the graduation ceremony, remov[ed] him off the school premises, and enjoin[ed] him from participating in his long-awaited graduation ceremony that was by then only 3 hours away,” allegedly as punishment for a tweet that he had posted on Twitter. In that tweet, sent to a Nigerian friend on an unidentified date before his graduation, plaintiff used the words “nigga” and “nigger,” apparently with his friend’s consent and as a form of “intercultural communication.” Another Twitter user saw the tweet and reported it to the school, which, in addition to barring plaintiff from attending his graduation, “order[ed] him to delete the alleged offensive message from his [T]witter account[.]” …

Castro sued on various theories, but the one that survived the motion to dismiss (and the one I’m interested in here) was the claim that the school’s actions violated his free speech rights; and, surprisingly, the defendants’ entire argument as to free speech was,

In his first cause of action, Plaintiff alleges that Defendants violated Plaintiff’s right to Freedom of Speech under the First Amendment of the United States Constitution because Defendants disciplined plaintiff for using language that is almost universally considered to be profane in nature. Although the First Amendment of the United States Constitution guarantees broad speech liberties to persons residing within the United States, it is not without limit. Of note, certain speech activities of pupils at public schools may be limited. The California Education Code § 48907(a) states that “Pupils of the public schools, including charter schools, shall have the right to exercise freedom of speech and of the press including, but not limited to, the use of bulletin boards, the distribution of printed materials or petitions, the wearing of buttons, badges, and other insignia, and the right of expression in official publications, whether or not the publications or other means of expression are supported financially by the school or by use of school facilities, except that expression shall be prohibited which is obscene, libelous, or slanderous.” (Emphasis added.)

In this case, Plaintiff used the word “nigga” and “nigger” which was seen by someone who took offense to the use of Plaintiff s choice of words. So much so, that this (unidentified) person reported Plaintiff s speech activities to Defendants. As noted in California Education Code § 48907(a), pupils of California schools do not have the right to expression which is obscene, libelous, or slanderous. As the words “nigga” and “nigger” are universally considered obscene, Plaintiff does not have Constitutional protection for this expression. Because Plaintiff does not have any First Amendment protection for said obscene language, his First Amendment Right related to this particular expression cannot be violated.

But, as the court points out, this reflects a misunderstanding of what “obscene” means in First Amendment law.

Defendants argue that plaintiff’s free speech claims must fail because the terms “nigga” and “nigger” are obscene and therefore not protected speech. It is true that courts “have long held that obscene speech—sexually explicit material that violates fundamental notions of decency—is not protected by the First Amendment.” However, as plaintiff points out, the terms “nigga” and “nigger,” while offensive to many, are facially not sexually explicit and, thus, cannot be considered obscene under the framework set forth by the U.S. Supreme Court. Thus, defendants’ motion to dismiss on the basis that plaintiff’s tweets are obscene speech not protected by the First Amendment will be denied.

(The California Legislature could define “obscene” differently in in its statute if it wanted, but there’s no indication that it aimed to use a different definition—and in any event, the plaintiff’s claim is that the school’s actions violate the First Amendment, not the state statute.)

I think that the school’s actions (if plaintiff’s factual account is correct) did violate the First Amendment, and couldn’t be upheld on any theory. It’s true that Castro wasn’t expelled from school, or otherwise shortchanged as to his academic activities; but being denied the right to participate in an important public school ceremony—a right that all your classmates have—because of the exercise of one’s free speech rights would itself violate the First Amendment. (The logic of Lee v. Weisman, the graduation prayer case, strongly supports that conclusion, though I think the result would be the same even had the dissent prevailed there.) But in any event, the “obscenity” theory is a nonstarter.

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Trump Is Wrong About the Fed, and the Fed Is Wrong About Economics

Americans are probably accustomed by now to President Donald Trump lashing out against Federal Reserve Chairman Jerome Powell on Twitter. In one recent tweet, Trump asked his followers which man is America’s “bigger enemy”: Powell, or Chinese President Xi Jinping. In another tweet, Trump wrote that “China is not our problem….Our problem is with the Fed” and called Powell “clueless.”

The Fed’s biggest crime, according to Trump, is that Americans would be richer and the economy would grow faster if only Powell would cut interest rates by a full percentage point. After months of resistance, Federal Reserve officials in September announced a reduction of interest rates by a quarter of a point. That wasn’t enough for Trump, who now demands that “The Federal Reserve should get our interest rates down to zero, or less” in response to the European Central Bank cutting its rates.

Following these repeated groundless attacks, libertarians and free market conservatives have found themselves jumping to the institution’s defense. But when it comes to bad economic thinking, there’s plenty of blame to go around.

Take Congress’ 1977 amendment to the Federal Reserve Act, which gives the Fed its dual mandate to achieve both price stability and maximum sustainable employment. The first part gives the Fed control of the money supply with the goal of containing inflation and creating stability in the financial system. By most accounts, the body has done a poor job of it. Research suggests this failure has played a role in producing most of the country’s severe banking crises, including those in the 1920s, the 1930s, the 1980s, and the 2000s.

In the Fed’s defense, the goal itself is ludicrous. Independent or not, the agency has no more ability to determine the correct supply of money than would an agency set up to determine the correct amount of bread or steel. Determining the right supply of money should be left—as it is with other goods—to competitive markets. As F.A. Hayek argued, and as George Mason University economist Larry White and the Cato Institute’s George Selgin have shown, the knowledge necessary to determine the appropriate supply of anything, including money, is discovered and revealed only through the competitive market process.

Then there’s the Fed’s second mandate of boosting employment. This, of course, reflects most politicians’ belief that it is the role of the government to create, control, and maximize the number of jobs. Again, the expectation is unrealistic.

The Fed has long relied on the now academically debunked idea that there is a negative relationship between inflation and unemployment (the so-called “Phillips curve”). Yet the agency’s own experience belies the notion. Since the 2008 financial crisis, its balance sheet has ballooned from $1 trillion to $4 trillion as it pursued policies of quantitative easing and super-low interest rates. At the same time, it pursued “tightened” money by effectively paying banks not to lend. The result of these contradictory policies was to prolong the recession.

Quantitative easing often leads to higher inflation, making the lives of retirees and others who live on fixed incomes harder by reducing their spending power. Luckily, there has been very little inflation this time around, with the Fed undershooting its 2 percent target. (Turns out social engineering is harder than it seems!) What these policies have done is reduce the return seniors earn from their savings (because of low interest rates) and encourage higher risk taking to compensate for the loss. They’ve also discouraged saving and investment, leading to reduced capital expenditures and slowing the growth of labor productivity and real output after the recession. Experts seem unsure of the Fed’s impact on growth since 2017.

The second part of the dual mandate also encourages presidents to think that the Fed’s job is to bail them out when the economy is taking a hit—say, because of destructive trade policies. In a 2014 piece for the Cato Journal, the late Fed historian Allan Meltzer noted that this politicization of the Fed has led it to pursue policies that go against the objective of price stabilization and financial stability.

Milton Friedman once said that “money is much too serious a matter to be left to the central bankers.” He was right. But given that we have a Fed, we should at least work to ensure it’s not being swayed by political interests.

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Trump Is Wrong About the Fed, and the Fed Is Wrong About Economics

Americans are probably accustomed by now to President Donald Trump lashing out against Federal Reserve Chairman Jerome Powell on Twitter. In one recent tweet, Trump asked his followers which man is America’s “bigger enemy”: Powell, or Chinese President Xi Jinping. In another tweet, Trump wrote that “China is not our problem….Our problem is with the Fed” and called Powell “clueless.”

The Fed’s biggest crime, according to Trump, is that Americans would be richer and the economy would grow faster if only Powell would cut interest rates by a full percentage point. After months of resistance, Federal Reserve officials in September announced a reduction of interest rates by a quarter of a point. That wasn’t enough for Trump, who now demands that “The Federal Reserve should get our interest rates down to zero, or less” in response to the European Central Bank cutting its rates.

Following these repeated groundless attacks, libertarians and free market conservatives have found themselves jumping to the institution’s defense. But when it comes to bad economic thinking, there’s plenty of blame to go around.

Take Congress’ 1977 amendment to the Federal Reserve Act, which gives the Fed its dual mandate to achieve both price stability and maximum sustainable employment. The first part gives the Fed control of the money supply with the goal of containing inflation and creating stability in the financial system. By most accounts, the body has done a poor job of it. Research suggests this failure has played a role in producing most of the country’s severe banking crises, including those in the 1920s, the 1930s, the 1980s, and the 2000s.

In the Fed’s defense, the goal itself is ludicrous. Independent or not, the agency has no more ability to determine the correct supply of money than would an agency set up to determine the correct amount of bread or steel. Determining the right supply of money should be left—as it is with other goods—to competitive markets. As F.A. Hayek argued, and as George Mason University economist Larry White and the Cato Institute’s George Selgin have shown, the knowledge necessary to determine the appropriate supply of anything, including money, is discovered and revealed only through the competitive market process.

Then there’s the Fed’s second mandate of boosting employment. This, of course, reflects most politicians’ belief that it is the role of the government to create, control, and maximize the number of jobs. Again, the expectation is unrealistic.

The Fed has long relied on the now academically debunked idea that there is a negative relationship between inflation and unemployment (the so-called “Phillips curve”). Yet the agency’s own experience belies the notion. Since the 2008 financial crisis, its balance sheet has ballooned from $1 trillion to $4 trillion as it pursued policies of quantitative easing and super-low interest rates. At the same time, it pursued “tightened” money by effectively paying banks not to lend. The result of these contradictory policies was to prolong the recession.

Quantitative easing often leads to higher inflation, making the lives of retirees and others who live on fixed incomes harder by reducing their spending power. Luckily, there has been very little inflation this time around, with the Fed undershooting its 2 percent target. (Turns out social engineering is harder than it seems!) What these policies have done is reduce the return seniors earn from their savings (because of low interest rates) and encourage higher risk taking to compensate for the loss. They’ve also discouraged saving and investment, leading to reduced capital expenditures and slowing the growth of labor productivity and real output after the recession. Experts seem unsure of the Fed’s impact on growth since 2017.

The second part of the dual mandate also encourages presidents to think that the Fed’s job is to bail them out when the economy is taking a hit—say, because of destructive trade policies. In a 2014 piece for the Cato Journal, the late Fed historian Allan Meltzer noted that this politicization of the Fed has led it to pursue policies that go against the objective of price stabilization and financial stability.

Milton Friedman once said that “money is much too serious a matter to be left to the central bankers.” He was right. But given that we have a Fed, we should at least work to ensure it’s not being swayed by political interests.

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S&P Futs Hit New All Time High As Tsunami Of Central Bank Liquidity Pushes Everything Higher

S&P Futs Hit New All Time High As Tsunami Of Central Bank Liquidity Pushes Everything Higher

It was not very easy to glean from the disjointed overnight headlines and comments if the prevailing trader mood was one of “optimism” or “not so much optimism” when it comes to the daily US-China trade deal barometer, but one look at stocks which are a sea of green this morning…

… the narrative quickly becomes one of smooth sailing between Washington and Beijing, even though in fact none of that matters, and it’s all been a diagonal line since the start of QE4, pardon, “NOT QE” on Oct. 14.

Meanwhile, Reuters did not disappoint with its regurgitated, stock explanation for the market move, noting that “world shares touched their highest in nearly two years on Tuesday as investors maintained bets that the United States and China can reach a deal to end their damaging trade war.”

It gets better: confirming what we said at the top, Reuters then goes on to state that “A lack of clear news on the progress of talks has not deterred investors emboldened by a growing sense that risks of a recession, a specter through the year, have receded. Looser monetary policy from major central banks like China has also helped bolster expectations for equities.”

In other words, there was no actual news, but because a record burst of central bank liquidity since the financial crisis has pushed risk assets higher, the goalseeked explanation is that, somehow, a deal must be closer. And there you have reflexivity in all its fallacious glory.

So amid this liquidity barrage, it’s hardly a surprise that the MSCI world equity index gained 0.1% to touch its highest since January last year.

European shares stocks rallied again from the open led by miners, autos and financial services in the absence of fresh news or economic data, with the broad Euro STOXX 600 adding 0.4% to move to its highest since July 2015. Indexes in Frankfurt and London gained 0.4% and 0.5% respectively. DAX rose 1% to outperform peers, while S&P futures breached Monday’s highs above 3,130, and not even dismal results from Home Depot or Kohl’s could derail this train.

Earlier in the session, MSCI’s index of Asia-Pacific shares ex-Japan rose 0.6%, with Shanghai blue chips gaining 1% and Hong Kong’s Hang Seng up 1.6% as Hong Kong equities extended a rebound to recoup some of last week’s losses, shrugging off another night of chaos as a university siege continued, following another major reverse-repo liquidity injection to the tune of 120BN yuan by the PBOC. India’s Sensex rose, but many stocks fell as investors mulled a health check of the nation’s shadow banks that pointed to prolonged distress. Outside of Hong Kong, Asia was quiet as investors awaited signs of progress in U.S.-China trade negotiations. Trading volume was below average in markets including Japan, China and India. While the MSCI Asia Pacific Index has gained more than 6% since the rally began less than six weeks ago, it hasn’t had a price swing greater than 1 percentage point. It’s the longest such stretch in a year and a half.

Going back to the ‘imminent’ US-China trade deal, investors said assumptions that an initial trade deal would be reached had outweighed any creeping doubts on progress in talks that stemmed from a lack of clear news, with a growing sense of positive economic fundamentals ahead. “Consensus is assuming that there will be a cyclical upturn,” Stéphane Barbier de la Serre, a strategist at Makor Capital Markets. “It’s like the market lowered its guard on the big risk metrics — and that has triggered a reweighting of funds from bonds to equities.”

Ironically, on Monday markets barely moved, after dipping initially as CNBC reported the mood in Beijing was pessimistic about prospects of sealing a trade agreement with the United States, buffeting the dollar. But signs that suggested growing detente between the sides clouded the picture: a new extension granted by Washington to let U.S. companies keep doing business with Chinese telecoms giant Huawei suggested a possible olive branch.

Still, that lack of clarity did unnerve some investors: “The longer we go on, the more concerns will arise. The reality is the clock is ticking,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

As usual, much of the optimism relied on hopes that Beijing will deliver some economic stimulus in addition to Monday’s surprise cut to a closely watched lending rate provided a boost to sentiment in Asian markets. Alas, as we showed yesterday, that won’t happen, setting up markets for another major disappointment once the Fed’s NOT QE fizzles.

Meanwhile, as we also noted yesterday, a full-blown economic recovery is now fully priced in by the S&P.

In rates, bunds fell, underperforming Treasuries which were unchanged at 1.815% amid lighter-than-average trading volumes as stocks extend gains to fresh highs. The bund curve steepens, with 10-year bond underperforming Treasuries by 0.5bps; bund futures trading volumes are running at around 70% of the 10-day average.  BTPs are little changed with futures trading volumes about 55% of the 10-day average. Gilts traded steady, while curve flattens; 2041 gilt linker size is set at GBP2.25b, with final orderbook over GBP17.5b; compares with orders of GBP20.5b for the prior reopening in October 2018.

In FX, the dollar halted a three-day decline while the yen and the Swiss franc came under pressure as risk appetite gained some traction after the London open. “Trade headlines are dominating sentiment but in terms of the key event risk, the release of the Fed minutes will be a big one for market participants,” said Nordea FX strategist Morten Lund.

The EUR/USD traded in a narrow range, with the 21-DMA seemingly capping the upside. The pound slipped as hedge funds took profit on short-term long positions, ahead of the first election debate between the two main party leaders due later Tuesday. Australia’s dollar recovered from an earlier decline that came after the latest minutes from the central bank suggested it was considering another rate cut in November.

In commodities, Brent crude fell, losing 0.2% to $62.29 a barrel, with a combination of jitters over trade and expectations of a rise in U.S. inventories jangling nerves.

Looking at the day ahead, politics is expected to dominate the agenda as the US impeachment inquiry continues and we have the first head-to-head TV debate ahead of the UK election. Today’s data highlights from Europe include September’s Euro Area construction output, Italian industrial sales and orders, and UK industrial trends survey from the CBI. In the US there is October’s building permits and housing starts data, and we’ll also get Canada’s manufacturing sales for September. From central banks, New York Fed President Williams will be speaking, while Home Depot will be releasing earnings.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,128.75
  • STOXX Europe 600 up 0.6% to 408.29
  • MXAP up 0.2% to 165.44
  • MXAPJ up 0.6% to 530.80
  • Nikkei down 0.5% to 23,292.65
  • Topix down 0.2% to 1,696.73
  • Hang Seng Index up 1.6% to 27,093.80
  • Shanghai Composite up 0.9% to 2,933.99
  • Sensex up 0.4% to 40,430.46
  • Australia S&P/ASX 200 up 0.7% to 6,814.22
  • Kospi down 0.3% to 2,153.24
  • German 10Y yield rose 0.4 bps to -0.332%
  • Euro down 0.05% to $1.1066
  • Brent Futures down 0.8% to $61.95/bbl
  • Italian 10Y yield fell 2.4 bps to 0.862%
  • Spanish 10Y yield fell 0.8 bps to 0.406%
  • Gold spot down 0.3% to $1,467.67
  • U.S. Dollar Index up 0.09% to 97.88

Top Overnight News

  • Federal Reserve Chairman Jerome Powell met with President Donald Trump and Treasury Secretary Steven Mnuchin Monday to discuss the economy, marking a second face-to-face sit-down this year amid relentless White House criticism of the U.S. central bank. President Donald Trump said he “protested” U.S. interest rates that he considers too high relative to other developed countries
  • Boris Johnson and Jeremy Corbyn are preparing for their first head-to-head election debate as the Labour leader seeks to reverse the prime minister’s double-digit lead in the polls. The premier wrote an open letter to Corbyn accusing him of “dither” over Brexit, while Labour said Tories are more committed to the billionaires who fund the party
  • A U.S. chipmaker’s attempt to acquire a peer with a valuable Chinese affiliate has spurred concern in Beijing, as tensions between the world’s two biggest economies threaten to disrupt the global tech supply chain.
  • Options traders are the most bullish on the euro’s short- term prospects in a month, as expectations for further policy easing by the European Central Bank fade and with euro-area yields off their cycle lows
  • Fixed-income investors have lagged in incorporating environmental, social and governance (ESG) factors into their strategies, but BlackRock Inc. says they now have more tools — including benchmark indexes — to bring sustainable debt into their portfolios
  • Australia’s central bank considered cutting interest rates at its latest meeting, but decided instead to hold steady and monitor the impact of earlier easing amid concern that households were being spooked by very low borrowing costs
  • Caught between a Brexit they don’t want and a firebrand socialist they fear, business executives were not impressed after the leading candidates in Britain’s upcoming general election tried to win their support
  • Bank of Japan Governor Haruhiko Kuroda said the bank would consider additional easing including cutting interest rates if risks were to rise
  • Hong Kong leader Carrie Lam has called for a peaceful resolution to a university siege that has transfixed the city and raised fears of a crackdown on scores of protesters who remain trapped in a campus surrounded by police. Lam said she had instructed police to try and resolve the situation at Hong Kong Polytechnic University peacefully
  • Oil dropped for a second day on indications U.S. crude stockpiles and shale output will continue expanding, while investors wait for news on a breakthrough to the prolonged trade war
  • Japan remained the top foreign holder of U.S. Treasuries in September even after reducing its government securities holdings by the most since at least 2000.

Asian equity markets eventually traded mostly higher but with gains capped after an initial lack of commitment due to the ongoing US-China uncertainty triggered by contrasting trade headlines, including reports of a pessimistic mood in Beijing about a deal being passed. ASX 200 (+0.7%) and Nikkei 225 (-0.5%) were mixed with Australia lifted as gains in the defensive sectors and recovery in financials superseded the heavy losses in tech, while Tokyo sentiment was snagged by detrimental currency flows and with SoftBank pressured by further WeWork troubles as the New York Attorney General was said to be investigating the embattled workspace company. Elsewhere, Hang Seng (+1.5%) and Shanghai Comp. (+0.9%) began indecisively but gradually improved as reports of Beijing trade pessimism was offset by a 90-day license extension for US firms to continue doing business with Huawei, while the PBoC also continued its liquidity efforts with another firm injection of CNY 120bln through 7-Day Reverse Repos. Finally, 10yr JGBs were mildly higher as they tracked recent upside in T-notes and amid weakness in Japanese stocks, while demand was also supported by the BoJ’s presence in the market for over JPY 1.1tln of JGBs in 1yr-10yr maturities.

Top Asian News

  • Chain Hated by Hong Kong Protesters Sees Double Digit Drop
  • Alibaba’s H.K. Share Sale Multiple Times Subscribed: DJ
  • China’s State Grid Chooses JD.com to Smarten Up Electric Meters

Major European bourses (Euro Stoxx 50 +0.7%) are on the front foot in another day of quiet trade, following on from a broadly positive APAC handover. A decent liquidity injection from the PBoC, a lack of fresh negative US/China trade negatives (the 90-day Huawei waiver appears to have mostly offset negativity regarding reported pessimism on deal in China), plus a lack of looming risk events appear to be enabling the recent trend in global equities to continue, i.e. a persistent grind higher. Also, possibly acting in support are reports that US President Trump’s Section 232 auto tariff authority (which he could have used to put tariffs on European auto imports) has run out of time, meaning he may have to find other means if he wants to pursue auto tariffs on Europe/Japan, legal experts said. As a reminder, Trump last Thursday took no action to impose or delay national security tariffs on auto imports, despite a deadline to do so by that date. Regardless, US index futures made YTD highs again this morning, with the ES Dec’19 contract reaching highs of 3129, while back in Europe, the Euro Stoxx 50 broke out of last week’s range to make new highs around 3720, with ATHs seemingly now within reach at 3769. In terms of the sectors, things are mostly in the green, with underperformance being seen in the more defensive Utilities (-0.1%), Consumer Stapes (+0.1%) and Health Care (+0.3%) sectors, while Telecoms (unch.) have also been on the back foot, with the news that France’s 5G auction has been delayed until March 2020 doing little to help. Risk sensitive sectors, including Consumer Discretionary (+1.1%) and Financials (+1.1%) are amongst the outperformers. In terms of the standout movers; Halma (+12.0%) tops the Stoxx 600 performance chart, where the Co. posted decent gains in pre-tax profit and increased its interim dividend. Propping up the Stoxx 600 table is SES (-19.4%), after the US FCC chairman voiced support for a public auction to free up space for 5G – SES had been lobbying for a private auction. EasyJet (+3.6%) is higher after the Co. posted earnings which beat on top and bottom line expectations and said bookings are “slightly ahead” of last year. Looking at flow data from EPFR, they show that European equities received inflows averaging USD 9.6bln for a third straight, compared to an average USD 5bln weekly outflow since December last year. Morgan Stanley cited the return of flows as part of the reason why they are overweight European equities, adding that the region has room for a further price-to-earnings re-rating, citing reduced Brexit risk, possible shift from monetary to fiscal stimulus, and tighter peripheral and credit spreads as other catalysts.

Top European News

  • Swiss Watch Exports Stagnate as Shipments to Hong Kong Slump
  • Private Equity Muscles Into Britain’s Booming Pension Market
  • Labour Attacks Tory Billionaires Before TV Showdown: U.K. Votes

In FX, the broad Dollar and Index have rebounded off APAC lows after the latter found a base at the 97.75 mark. DXY resides near the top end of today’s 97.75-88 parameter ahead of another quiet session in terms of scheduled events and with sights still locked on US-Sino trade developments. Meanwhile, USD/CNH trades little changed on the day having earlier tested its 21 DMA to the upside at 7.0320 (vs. intraday low of 7.0230) ahead of its 100 DMA at 7.0415

  • GBP, EUR – Both intially moved sideways and within tight ranges against the Buck amid a lack of fresh catalysts and with eyes on the tonight’s Johnson/Corbyn showdown debate commencing at 2000GMT and the latest YouGov polling at 2100GMT. Upside in Sterling remains somewhat capped in light of comments from EU Trade Chief Weyand who warned of a “bare bones” or no trade deal from Brussels next year, however traders need to steer through domestic political landscape first with election day drawing closer. GBP/USD remains drifted from the 1.2950 mark to around 1.2925, whilst the upside includes reported barriers at 1.3000 and reported stops at 1.3030. EUR/USD resides just north of 1.1050 having earlier tested its 21 DMA at 1.1081 and with eyes on its 100 DMA at 1.1091.
  • AUD, NZD – The antipodeans are flat in early European trade with AUD/USD and NZD/USD around 0.6800 and 0.6400 respectively, but off overnight lows. The pairs were initially pressured (albeit modestly) upon the release of the RBA minutes which noted that a case could be made for a cut at the November meeting and reiterated that the Board is prepared to ease further if needed. However, analysts at Westpac believe that the case for a December cut is heavily downplayed in the minutes and the dismal Aussie labour force figures from last week may not be sufficient enough for a move from its current “monitoring” approach, and thus Westpac maintains its forecast for a 25bps February cut. AUD/USD rebounded from its overnight post-RBA base of 0.6785 back above 0.6800 ahead of its 50 DMA at 0.6814. Similarly, its Kiwi counterpart reclaimed 0.6400+ status from an APAC low of 0.6383 (21 DMA) with the next level to the upside its 50 DMA at 0.6435.
  • JPY, CHF – Little action on the safe-heaven front thus far although prices seem to have a downside bias against the USD, potentially on the latter’s recovery from its APAC trough. Participants will again be eyeing developments on the US-Sino trade front amid mixed/contrasting recent reports. Meanwhile, the situation in Hong Kong seems to feel some reprieve (for now at least) after the number of protesters trapped inside the Polytechnic University fell from around 700 to between 100-200, however sources cite by the SCMP noted of over 8000 petrol bombs at the Chinese University ready for use. USD/JPY tested and resides around 108.75 (21 DMA) ahead of potential resistance at 108.83 (Tenkan line) with a barrage of options expiring with USD 1bln between 108.50-55 and a further USD 1bln between 108.90-109.00. The Franc also awaits further risk-driven action as USD/CHF meanders around 0.9900 in early EU trade and eyes its 21 DMA at 0.9911.
  • RBA Minutes from November meeting stated the board is prepared to ease further if needed and agreed a case could be made for a rate cut at the meeting but decided rates should be held steady. RBA board recognized negative effects of lower rates on savers and confidence as rate cuts could have a different impact on confidence than in the past, while it saw a case to wait and assess impact of its prior substantial stimulus and agreed an extended period of low rates is needed to achieve targets.

In commodities, crude markets are lower, with the complex trading heavy despite this morning’s rally in the equity market and a lack of fresh fundamental catalysts. WTI Dec’ 19 futures fell to lows of USD 56.48/bbl, while Brent Jan’ 19 futures fell as low as USD 61.74/bbl, before losses were somewhat pared. In terms of crude specific news of note; Norwegian oil production stood at 1.519mln bpd in October (prelim) vs. Prev. 1.312mln BPD in September, according to the Norwegian Petroleum Directorate. As a reminder, this Thursday sees the release of the Norwegian oil investment survey, with Q3 oil and gas pipeline/extraction investment seen coming in at NOK 181bln, as estimated by the prior release. Elsewhere, and on the docket today, traders will be eyeing tonight’s API Inventory figure which last week printed a draw of 0.54mln barrels. Finally, gold prices slid back beneath the USD 1470/oz mark and copper has been moving higher, assisted by advancing equity prices with eyes remaining on US-China trade developments.

US Event Calendar

  • 8:30am: Housing Starts, est. 1.32m, prior 1.26m; Housing Starts MoM, est. 5.1%, prior -9.4%
  • 8:30am: Building Permits MoM, est. -0.43%, prior -2.7%; Building Permits, est. 1.39m, prior 1.39m
  • 9am: Fed’s Williams Speaks at Capital Markets Conference

DB’s Jim Reid concludes the overnight wrap

Yesterday I mentioned how twin Eddie locked himself in the toilet for nearly 30 mins on Sunday and became hysterical before eventually calming down and realising he could unlock the same door. Well yesterday twin Jamie apparently got in such a rage that he broke his car seat in a violent protest at not getting a rice cake. That’s what I go home to every day.

In comparison markets were relatively calm yesterday but trade sentiment again drove some volatility, with major indexes bouncing between gains and losses as news dripped out of Beijing and Washington. A reminder from our survey (link here ) last week that only 14% thought the trade war would get worse over the next 12 months. So the vast majority think it will de-escalate in election year. However, things are getting a little tense ahead of the ”phase one” signing. The first catalyst that sent equities lower yesterday was a tweet from CNBC’s Beijing Bureau Chief, who said that the mood in Beijing “is pessimistic”. She also said that China was “troubled after Trump said no tariff rollback” and said “Strategy now to talk but wait due to impeachment, US election. Also prioritize China economic support.” The tweet came before the US open, but the impact in Europe was clear, with the STOXX 600 falling from its intraday high of +0.28% to drop as low as -0.33%. However, it rebounded to end flat (-0.01%) after the newsflow shifted in a more optimistic direction. Fox Business reported that the US will extend its licenses, which allow firms to continue doing business with Huawei for another 90 days, which was better than the two-week extension reported earlier. That apparent olive branch from the US administration to China helped equities rebound, with the S&P 500 (+0.04%), NASDAQ (+0.11%), and DOW (+0.11%) all edging to fresh all-time highs. Energy stocks were the worst hit on both sides of the Atlantic though thanks to the decline in oil prices, with Brent crude oil down -1.39% and the S&P 500 energy group ending the session down -1.33%.

This morning in Asia markets are mixed with the Hang Seng (+1.03%) and Shanghai Comp (+0.46%) up while the Nikkei (-0.41%) and Kospi (-0.46%) are down. Elsewhere, futures on the S&P 500 are up +0.07%.

In other news, Hong Kong Chief Executive Carrie Lam said that she very much wants to resolve the PolyU situation peacefully, after it has been taken over by protestors for the past two days, but she can’t guarantee that would happen. She also said that minors at PolyU would be treated in a “humanitarian” way and stressed the special arrangements being made so that they would not be immediately arrested while adding that, “right now” the city’s government is confident it can handle the unrest without the army’s help. Meanwhile, US Senate Majority Leader Mitch McConnell urged President Trump to speak out on behalf of the protesters as he said, “The world should hear from him directly that the United States stands with these brave women and men”. Further to this, Senator Marco Rubio’s bipartisan bill supporting Hong Kong protestors could pass as soon as today.

10yr USTs are -1bp lower overnight following a firm day yesterday as treasuries rallied even if bunds traded flat. 10-year yields in the US were -1.7bps lower, while other European bonds also gained with OATs and BTPs rallying -0.8bps and -2.3bps. Yield curves flattened, with the US 2s10s -0.3bps to 21.6bps and the German 2s10s also flattening by -0.7bps. Gold also recovered, having been down -0.80% before the initial trade headlines to end the session +0.19%.

Moving away from trade, we got the news yesterday that Fed Chair Powell had a meeting with both President Trump and Treasury Secretary Mnuchin at the White House. In a statement from the Federal Reserve, it said that Powell “did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy.” Afterwards, President Trump tweeted that he’d “finished a very good & cordial meeting at the White House with Jay Powell of the Federal Reserve”, and that the issues discussed included interest rates and trade with China. A few hours later there was another tweet from Mr Trump saying that “At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries. In fact, our rates should be lower than all others (we are the U.S.). Too strong a Dollar hurting manufacturers & growth!’. So tensions still high between the two. The market has made up its mind which way the Fed are going to go for now though as they’ve removed any pricing of another cut until mid-2020, with the odds for a December cut now around zero.

Other Fed speakers included Cleveland’s Mester and Boston’s Rosengren. Mester said that policy is in a good spot, but that she will be “watchfully waiting,” while Rosengren justified his dissent against the most recent rate cut by saying that he is concerned about having available policy space before the next downturn. He also suggested that a future downturn will necessitate a greater role for fiscal policy to provide support. In Europe, the only central bank communication came from ECB Chief Economist Philip Lane, who said that rates are not at their limit and that their current negative levels are “not particularly a super loose policy. If it were super loose, inflation would be higher.” He also suggested that negative rates have been successful in driving corporates to increase their levels of capital spending.

From the UK yesterday, we got the significant announcement from Prime Minister Johnson that planned corporation tax cuts due to take place in April would be scrapped to help fund the NHS. The rate had been due to fall from 19% at present to 17%. This chimes with our Corporate Bank note out last week, An inflection point in global corporate tax? (link here ), where we wrote how 2020 could see the end of a 40 year race to the bottom on corporate tax. Governments have got precarious finances at a time when corporates are in good health. It doesn’t seem politically viable to see this trend continue with the risks that it reverses if certain politicians get elected. The OECD global taxation plan – set to move on to the next stage early next year – is also key.

In terms of the upcoming U.K. election, attention will turn to tonight’s head-to-head debate between Prime Minister Johnson and Labour leader Corbyn. The Lib Dems and the SNP had challenged their exclusion, but two High Court judges dismissed the attempt yesterday, so it’ll just be the Conservative and Labour leaders on stage tonight. Corbyn has to make these events count with Johnson if he wants to catch up so expect a full on attack from the challenger.

In FX markets, sterling was actually the best-performing G10 currency yesterday, up +0.45% against the dollar and to 6+ month highs against the EUR. The pound looks to have benefited from some strong weekend polls (with more of the same yesterday/last night) for the Conservatives, with the logic being that a Conservative majority in the House of Commons will allow for a smooth ratification of the Withdrawal Agreement through Parliament. Finally, we got the news from Prime Minister Johnson that he would keep Sajid Javid as Chancellor of the Exchequer.

There was very little data of note to report on yesterday, though we did see the NAHB housing market index from the US fall to 70 (vs. 71 expected) in November, a slight decline from its 20-month high back in October.

To the day ahead now, and politics is expected to dominate the agenda as the US impeachment inquiry continues and we have the first head-to-head TV debate ahead of the UK election. Today’s data highlights from Europe include September’s Euro Area construction output, Italian industrial sales and orders, while here in the UK we’ll have this month’s industrial trends survey from the CBI. From the US there’ll be October’s building permits and housing starts data, and we’ll also get Canada’s manufacturing sales for September. From central banks, New York Fed President Williams will be speaking, while Home Depot will be releasing earnings.


Tyler Durden

Tue, 11/19/2019 – 07:40

via ZeroHedge News https://ift.tt/35dDkSW Tyler Durden

Home Depot Shares Plunge Most Since 2008 After Slashing Sales Outlook

Home Depot Shares Plunge Most Since 2008 After Slashing Sales Outlook

Home Depot shares slumped more than 7% in premarket trade, putting shares on track for their worst daily drop since 2008, after the company slashed its full-year sales guidance on Tuesday.

The company also posted Q3 sales that slightly missed expectations.

Here’s BBG’s breakdown of the company’s Q3 earnings report…

  • Sees FY comparable sales about +3.5%, saw about +4%
  • Sees FY revenue about +1.8%, saw about +2.30%
  • 3Q comparable sales +3.6% vs. +4.80% y/y, estimate +4.6% (Consensus Metrix, average of 25 estimates)
  • 3Q EPS $2.53 vs. $2.51 y/y, estimate $2.53 (range $2.48 to $2.58) (Bloomberg data)
  • 3Q net sales $27.22 billion, +3.5% y/y, estimate $27.52 billion (range $27.35 billion to $27.72 billion) (BD)
  • 3Q U.S. comparable sales +3.8% vs. +5.40% y/y
  • 3Q average ticket sales $66.36, +1.9% y/y
  • 3Q total location count 2,290, estimate 2,290 (Bloomberg MODL)
  • 3Q customer transactions +1.5%
  • 3Q average ticket +1.9%, estimate +2.41% (MODL)

The action in Home Depot shares weighed on Dow futures ahead of the bell:

Home Depot CEO Craig Menear cited continued lumber deflation for the lower sales forecast.

 

 

Read the company’s press release below:

* * *

ATLANTA, November 19, 2019 — The Home Depot, the world’s largest home improvement retailer, today reported third quarter fiscal 2019 sales of $27.2 billion, an increase of 3.5 percent, or $921 million, compared to the third quarter of fiscal 2018. Comparable sales for the third quarter of fiscal 2019 were positive 3.6 percent, and comparable sales in the U.S. were positive 3.8 percent. Net earnings for the third quarter of fiscal 2019 were $2.8 billion, or $2.53 per diluted share, compared with net earnings of $2.9 billion, or $2.51 per diluted share, in the same period of fiscal 2018.

For the third quarter of fiscal 2019, diluted earnings per share increased 0.8 percent from the same period in the prior year. “Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments,” said Craig Menear, chairman, CEO and president. “We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions. As a result, today we are updating our fiscal 2019 sales guidance, and we are reaffirming our fiscal 2019 earnings-per-share guidance. We are encouraged by the momentum in our business as we invest to extend our competitive advantages. I would like to thank our associates for their hard work and continued dedication to our customers.”

Fiscal 2019 Guidance

The Company updated its guidance for fiscal 2019, a 52-week year compared to fiscal 2018, a 53-week year. The Company expects its fiscal 2019 sales to grow by approximately 1.8 percent and comp sales for the comparable 52-week period to increase approximately 3.5 percent. This compares to the Company’s prior fiscal 2019 sales growth guidance of 2.3 percent and comp sales growth of 4.0 percent. The Company reaffirmed its diluted earningsper-share guidance for the year and expects diluted earnings-per-share growth of approximately 3.1 percent from fiscal 2018 to $10.03. The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at http://ir.homedepot.com/events-and-presentations. At the end of the third quarter, the Company operated a total of 2,290 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot’s stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor’s 500 index.

 


Tyler Durden

Tue, 11/19/2019 – 06:27

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

Last 100 ‘PolyU’ Protesters Resist Hong Kong Police As Dozens Stage Daring Escape

Last 100 ‘PolyU’ Protesters Resist Hong Kong Police As Dozens Stage Daring Escape

It’s like something out of a movie.

After a three-day standoff, roughly 100 students remain trapped inside the campus of Hong Kong’s Polytechnic University. For more than a day, police have had the  campus surrounded, and have warned protesters that there’s only one way out – in handcuffs.

Despite a potential 10-year prison sentence (laws against rioting, which are being applied to the protesters, carry heavy penalties), some 600 students have already walked off campus into the waiting arms of police. Some surrendered because they were in ill-health after hypothermia set in. Of the 600 who left, 400 were above the age of 18 and were immediately arrested, while the 200 minors were stopped, then sent home. They could still face charges pending further investigation, the NYT reported.

The battle over PolyU, which raged all weekend, will be remembered as one of the more intense incidents since the start of the protests. Students hurled hundreds of petrol bombs at police, and police spent hundreds of cannisters of tear gas and thousands of rubber bullets.

Outside the campus, a group of parents continued their vigil, awaiting news from their children while holding up signs that read: “Son, come out safely!” and “Save the kids, don’t kill our children.”

Elsewhere in Hong Kong, the city started to recover from a week of non-stop pro-democracy demonstrations. Some of the damage from those petrol bombs included burnt out cars.

On Tuesday afternoon, a pro-democracy lawmaker who had been holed up on campus with the protesters held a press conference to announce that he and a few dozen protesters would leave the campus, but warned that, should he be arrested, he isn’t “surrendering” to police.

Meanwhile, in video that appears to have been taken late Monday, a group of demonstrators staged a daring getaway when they climbed down off a bridge using ropes and sped away on motorbikes.

As some headed to work for the first time in days, citizens gathered on the street to help clean up bricks and debris left by the protests.

By the looks of it, the entrances to the PolyU campus, and many areas in and around, will probably need to be cleaned after days of skirmishes between police and students.

It’s like something out of a movie.

After a three-day standoff, roughly 100 students remain trapped inside the campus of Hong Kong’s Polytechnic University. For more than a day, police have had the  campus surrounded, and have warned protesters that there’s only one way out – in handcuffs.

Despite a potential 10-year prison sentence (laws against rioting, which are being applied to the protesters, carry heavy penalties), some 600 students have already walked off campus into the waiting arms of police. Some surrendered because they were in ill-health after hypothermia set in. Of the 600 who left, 400 were above the age of 18 and were immediately arrested, while the 200 minors were stopped, then sent home. They could still face charges pending further investigation, the NYT reported.

The battle over PolyU, which raged all weekend, will be remembered as one of the more intense incidents since the start of the protests. Students hurled hundreds of petrol bombs at police, and police spent hundreds of cannisters of tear gas and thousands of rubber bullets.

Outside the campus, a group of parents continued their vigil, awaiting news from their children while holding up signs that read: “Son, come out safely!” and “Save the kids, don’t kill our children.”

Elsewhere in Hong Kong, the city started to recover from a week of non-stop pro-democracy demonstrations. Some of the damage from those petrol bombs included burnt out cars.

On Tuesday afternoon, a pro-democracy lawmaker who has been holed up on campus with the protesters held a press conference to announce that he and a few dozen protesters would leave the campus, but warned that, should he be arrested, he isn’t “surrendering” to police.

Meanwhile, in video that appears to have been taken late Monday, a group of demonstrators staged a daring getaway when they climbed down off a bridge using ropes and sped away on motorbikes.

As some headed to work for the first time in days, citizens gathered on the street to help clean up bricks and debris left by the protests.

Meanwhile, in Beijing, the central government’s Hong Kong affairs office said that a ruling by a Hong Kong court “blatantly challenged the authority” of China’s legislature and of Hong Kong Chief Executive Carrie Lam. The court’s decision to rule that Lam’s anti-mask law was illegal had “severe negative social and political impact,” Beijing said. Legally, the Communists have the authority to interfere with the basic law.


Tyler Durden

Tue, 11/19/2019 – 06:00

via ZeroHedge News https://ift.tt/2CVN6x5 Tyler Durden

Royal Family Biographer Defends Prince Andrew: “Soliciting Sex From Minors Is Not Pedophilia”

Royal Family Biographer Defends Prince Andrew: “Soliciting Sex From Minors Is Not Pedophilia”

Authored by John Vibes via TheMindUnleashed.com,

Biographer for the Royal Family, Lady Colin Campbell, recently appeared on ITV’s Good Morning Britain where she defended Prince Andrew against claims of pedophilia.

In her defense of the disgraced prince, Campbell pointed to the “prostitution” charge that Jeffrey Epstein was convicted of in 2008, and attempted to downplay the fact that the girls were underage by suggesting that he was simply hiring sex workers.

“You all seem to have forgotten that Jeffrey Epstein, the offense for which he was charged and for which he was imprisoned, was for soliciting prostitution from minors. That is not the same thing as pedophilia,” Campbell told a shocked panel Monday morning.

Host Piers Morgan immediately challenged her claims, saying:

If you solicited a 14-year-old for prostitution, you’re a pedophile.

You’re procuring an underage girl for sex. That’s what he was convicted of. I’m sorry, I’m sorry, with respect, that is nonsense.”

Campbell then immediately attempted to backpedal, claiming that a distinction must be made between a minor and a child.

“Was he? 14? Well, I’m not justifying Jeffrey Epstein. Pedophilia, I suspect there’s a difference between a minor and a child,” she said.

“A 14-year-old is a child. Legally, she’s a child,” Morgan replied.

Campbell then admitted that the prince may have “made many mistakes,” but insisted that his only mistake was being too clueless to realize that one of his closest friends was a predator.

“You can’t criticize someone because they aren’t as bright as you would like them to be,” she said.

The controversy surrounding Prince Andrew has grown since his Newsnight interview with Emily Maitlis. In the interview, the prince gave a variety of bizarre excuses and defenses for the accusations against him, including a claim that he could not sweat due to a rare physical condition.

He also denied knowing about the trafficking victim, Virginia Giuffre—formerly known as Virginia Roberts—despite appearing in photos with her when she was under the age of 18. However, he has previously suggested that these photos are “doctored.” Photographic evidence has been uncovered showing that the prince does, in fact, sweat. He also claimed that even though he did not remember meeting the victim on the night that she said, he does vividly remember his alibi, saying he went to a Pizza Express in Woking before returning home that night.

“Going to Pizza Express in Woking is an unusual thing for me to do, a very unusual thing for me to do. I’ve never been… I’ve only been to Woking a couple of times and I remember it weirdly distinctly,” he said.

The interview was so disastrous for the Royal Family that one of Prince Andrew’s PR advisors quit in response to the broadcast. And to make matters even worse, a video clip from 1984 recently resurfaced showing Johnny Carson, then-host of The Tonight Show, making a joke about Prince Andrew being a pedophile.

None of this looks good for the Royal Family.


Tyler Durden

Tue, 11/19/2019 – 05:00

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

Brickbat: The Last Place You Look

Four years ago, Minneapolis police said they had 194 untested rape kits. They now say they have more than 1,700 untested rape kits, some dating back to the 1990s. Police Chief Medaria Arradondo says he does not know why so many rape kits have been left untested. But Mike Sauro, who used to run the sex crimes unit, defended the department, saying that many of the kits uncovered in the 2015 audit were “restricted,” meaning the alleged victim was not cooperating with police. “We reviewed all the kits from the year 2000 all the way up to 2015,” he said. “People have this misconception that all kits have to be and should be tested, and that’s just not true. … If you don’t have an official police report made, we can’t enter them into the national database, so we can’t test them.”

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